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Securities and Exchange Commission

Washington, D.C. 20549




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FORM 10-K



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|                                                            |  |                                                                                                     
|----------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------
|x                                                           |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR
    15(d)
    OF THE SECURITIES AND EXCHANGE ACT OF 1934.   
|                                                           
|For the fiscal year ended December 31,
    2002            
|                                                           
|OR                                                         
|                                                           
|o                                                           |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR
    15(d)
    OF THE SECURITIES AND EXCHANGE ACT OF 1934
|                                                           
|For the transition period
    from           to           .

Commission File Number 1-12193

ARDEN REALTY, INC.

(Exact name of registrant as specified in its
charter)


|                                                                   |  |                           
|------------------------------------------------------------------ |  | --------------------------
|Maryland                                                           |  | 95-4578533                
|(State or other jurisdiction of
    incorporation or organization) |  | (IRS Employer I.D. Number)

11601 Wilshire Boulevard Fourth
Floor

Los Angeles, California 90025-1740


(address of principal executive
office)


Registrants telephone number, including
area code: (310) 966-2600

Securities registered pursuant to Section
12(b) of the Act:

|                                |  |                                          
|------------------------------- |  | -----------------------------------------
|Title of each class             |  | Name of each exchange on which registered
|                                |  |                                          
|Common Stock, $0.01 par value   |  | New York Stock Exchange                  
|Preferred Stock Purchase Rights |  | New York Stock Exchange                  

Securities registered pursuant to
Section 12(g) of the Act: None

Indicate by check mark whether the Registrant
(1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and
(2) has been subject to such filing requirements for the
past 90 days.  Yes
x  No
o

Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be
contained to the best of the Registrants knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K, or any amendment
to this
Form 10-K.  o

Indicate by check mark whether the registrant is
an accelerated filer (as defined in Rule 12b-2 of the
Act).  Yes
x  No
o

The aggregate market value of the shares of
common stock held by non-affiliates was approximately
$1.8 billion based on the closing price on the New York
Stock Exchange for such shares on June 28, 2002.

The number of the Registrants shares of
common stock outstanding was 63,066,851 as of March 21,
2003.

DOCUMENTS INCORPORATED BY REFERENCE

Part III of this report incorporates information
by reference from the definitive Proxy Statement for the 2003
Annual Meeting of Stockholders.



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TABLE OF CONTENTS



|                                                              |                                                                                             |  |  |  |  |  |  | 
|------------------------------------------------------------- | ------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                                                       
|                                                              | ITEM 2.Properties                                                                          
|                                                              | ITEM 8.Financial Statements and Supplementary Data                                         
|                                                              | ITEM 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|PART III                                                     
|                                                              | ITEM 10.Directors and Executive Officers of the Registrant                                 
|                                                              | ITEM 11.Executive Compensation                                                             
|                                                              | ITEM 12.Security Ownership of Certain Beneficial Owners and Management                     
|                                                              | ITEM 13.Certain Relationships and Related Transactions                                     
|                                                              | ITEM 14.Controls and Procedures                                                            
|PART IV                                                      
|                                                              | ITEM 15.Exhibits, Financial Statements, and Reports on Form 8-K                            
|ARDEN REALTY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|ARDEN REALTY, INC.                                           
|EXHIBIT 12.1                                                 
|EXHIBIT 23.1                                                 
|EXHIBIT 99.1                                                 



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##### Table of Contents



ARDEN REALTY, INC.

TABLE OF CONTENTS

|         |     |  |  |                                                                                           |  |  |    | 
|-------- | --- |  |  | ----------------------------------------------------------------------------------------- |  |  | -- | 
|Item     |     |  |  | Page                                                                                     
|No.      |     |  |  | No.                                                                                      
|         |     |  |  |                                                                                          
|PART I  
|         | 1.  |  |  | Business                                                                                  |  |  | 1  | 
|         | 2.  |  |  | Properties                                                                                |  |  | 6  | 
|         | 3.  |  |  | Legal Proceedings                                                                         |  |  | 17 | 
|         | 4.  |  |  | Submission of Matters to a Vote of Security
    Holders                                   |  |  | 18 | 
|PART II 
|         | 5.  |  |  | Market for Registrants Common Equity and
    Related Stockholder Matters                 |  |  | 18 | 
|         | 6.  |  |  | Selected Financial Data                                                                   |  |  | 18 | 
|         | 7.  |  |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations |  |  | 21 | 
|         | 7A. |  |  | Quantitative and Qualitative Disclosure about
    Market Risk                             |  |  | 39 | 
|         | 8.  |  |  | Financial Statements and Supplementary Data                                               |  |  | 48 | 
|         | 9.  |  |  | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure  |  |  | 49 | 
|PART III
|         | 10. |  |  | Directors and Executive Officers of the Registrant                                        |  |  | 49 | 
|         | 11. |  |  | Executive Compensation                                                                    |  |  | 49 | 
|         | 12. |  |  | Security Ownership of Certain Beneficial Owners
    and Management                        |  |  | 49 | 
|         | 13. |  |  | Certain Relationships and Related Transactions                                            |  |  | 49 | 
|         | 14. |  |  | Controls and Procedures                                                                   |  |  | 49 | 
|PART IV 
|         | 15. |  |  | Exhibits, Financial Statements and Reports on
    Form 8-K                                |  |  | 50 | 
|         |     |  |  | Signatures                                                                                |  |  | 56 | 
|         |     |  |  | Certifications                                                                            |  |  | 57 | 

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PART I

ITEM 1. Business

(a) GENERAL

The terms Arden Realty,
us, we and our as used in
this report refer to Arden Realty, Inc. We were incorporated in
Maryland in May 1996 and completed our initial public offering
in October 1996. Commencing with our taxable year ended
December 31, 1996, we have operated and qualified as a real
estate investment trust, or REIT, for federal income tax
purposes. We are a self-administered and self-managed REIT that
owns, manages, leases, develops, renovates and acquires
commercial properties located in Southern California. We are the
sole general partner of Arden Realty Limited Partnership, or the
operating partnership, and as of December 31, 2002, we
owned approximately 97.3% of the operating partnerships
common partnership units. We conduct substantially all of our
operations through the operating partnership and its
consolidated subsidiaries.

(b) INDUSTRY SEGMENTS

We are currently involved in only one industry
segment, namely the operation of commercial real estate located
in Southern California. All of the financial information
contained in this report relates to this industry segment.

(c) DESCRIPTION OF BUSINESS

We are a full-service real estate organization
managed by 8 senior executive officers who have experience in
the real estate industry ranging from 11 to 33 years and
who collectively have an average of 19 years of experience.
We perform all property management, construction management,
accounting, finance and acquisition activities and a majority of
our leasing transactions for our portfolio with our staff of
approximately 300 employees.

As of December 31, 2002, we were Southern
Californias largest publicly traded office landlord as
measured by total net rentable square feet owned. As of
December 31, 2002, our portfolio of primarily suburban
office properties consisted of 137 properties and 223 buildings
containing approximately 19.4 million net rentable square
feet including one development property with approximately
283,000 net rentable square feet under lease-up. As of
December 31, 2002, our properties were 90.1% occupied.

Portfolio
Management

We perform all portfolio management activities,
including management of all lease negotiations, construction
management of tenant improvements or tenant build-outs, property
renovations, capital expenditures and on-site property
management for our portfolio. We directly manage these
activities from approximately 44 management offices located
throughout our portfolio. The activities of these management
offices are supervised by four regional offices with oversight
by our corporate office to ensure consistency of the application
of our operating policies and procedures. Each regional office
is strategically located within the Southern California
submarkets where our properties are located and is managed by a
regional First Vice President who is responsible for supervising
the day-to-day activities of our management offices. Each
regional office is staffed with leasing, property management,
building engineering, construction and information systems
specialists, our Regional Service Teams. By maintaining a
regionally focused organizational structure led by seasoned
managers, we are able to quickly respond to our tenants
needs and market opportunities.

All of our management and regional offices are
networked with our corporate office and have access to the
Internet and our e-mail, accounting and lease management
systems. Our accounting and lease management systems employ the
latest technology and allow both corporate and field personnel
access to tenant and prospective tenant-related information to
enhance responsiveness and communication of marketing and
leasing activity for each property.

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We currently lease approximately 70% of our
portfolios net rentable space using our in-house staff. We
employ outside brokers who are monitored by our Regional Service
Teams for the remainder of our net rentable space. Our in-house
leasing program allows us to closely monitor rental rates and
lease terms for new and renewal leases and reduce third-party
leasing commissions.

Business Strategies

Our primary business strategy is to actively
manage our portfolio to seek to achieve gains in rental rates
and occupancy, control operating expenses and to maximize income
from ancillary operations and services. When market conditions
permit, we may also selectively develop or acquire new
properties in submarkets that add value and fit strategically
into our portfolio. We may also sell existing properties and
deploy the proceeds into investments that we believe will
generate higher long-term value.

Through our corporate office and regional
offices, we implement our business strategies by:



| |   |                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | using integrated decision making to provide
    proactive solutions to the space needs of users in the markets
    where we have extensive real estate and technical expertise;             
|
| |  | emphasizing quality service, tenant satisfaction
    and retention;                                                                                                                         
|
| |  | employing intensive property marketing and
    leasing programs; and                                                                                                                        
|
| |  | implementing cost control management techniques
    and systems that capitalize on economies of scale and
    concentration arising from the size and geographic focus of our
    portfolio.

We believe the implementation of these operating
practices has been instrumental in maximizing the operating
results of our portfolio.

Integrated Decision Making

We use a multidisciplinary approach to our
decision making by having our regional management, leasing,
construction management, acquisition, disposition and finance
teams coordinate their activities to enhance responsiveness to
market opportunities and to provide proactive solutions to the
space needs of users in the submarkets where we have extensive
real estate and technical expertise. This integrated approach
permits us to analyze the specific requirements of existing and
prospective tenants and the economic terms and costs for each
transaction on a timely and efficient basis. We are therefore
able to commit to leasing, development, acquisition or
disposition terms quickly, which facilitates an efficient
completion of lease negotiation and tenant build-out, shorter
vacancy periods after lease expirations and the timely
completion of development, acquisition or disposition
transactions.

Quality Service and Tenant
Satisfaction

We strive to provide quality service through our
multidisciplinary operating approach resulting in timely
responses to our tenants needs. Our seasoned Regional
Service Teams interact and resolve issues relating to tenant
satisfaction and day-to-day operations. For portfolio-wide
operational and administrative functions, our corporate office
provides support to all regional offices and provides immediate
response for critical operational issues.

Proactive Leasing

The concentration of many of our properties
within particular office submarkets and our relationships with a
broad array of businesses and outside brokers enables us to
pursue proactive leasing strategies, to effectively monitor the
demand of office space in our existing submarkets, to
efficiently examine the office space requirements of existing
and prospective tenants and to offer tenants a variety of space
alternatives across our portfolio.

Cost Control and Operating
Efficiencies

The size and geographic focus of our portfolio
permits us to enhance portfolio value by controlling operating
costs. We seek to capitalize on the economies of scale and
concentration which result from the

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geographic focus of our portfolio through the
ownership and management of multiple properties within
particular submarkets and the maintenance of standardized
processes and systems for cost control at each of our
properties. These cost controls and operating efficiencies
allowed us to achieve a 68.5% ratio of property operating
results to total property revenues in 2002.


Operating Strategies

Based on our geographic focus in Southern
California, experience in the local real estate markets and our
evaluation of current market conditions, we believe the
following key factors provide us with opportunities to maximize
returns:



| |   |                                                                                                                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the broad diversification and balance of the
    Southern California economy and our tenant base minimizes our
    dependence on any one industry segment or small group of tenants;                                                                                                                                                                   
|
| |  | the relative resiliency of the Southern
    California real estate market, as measured by lower vacancy
    rates compared to the national average and a lower decline in
    rental rates in our key submarkets than the average decreases in
    rates reported for the nation since the beginning of the current
    national economic downturn; and
|
| |  | the limited construction of new office properties
    in the Southern California region due to substantial building
    construction limitations and a minimal amount of developable
    land in most key submarkets.                                                                                                                                  

Internal
Operating Strategy

We believe that opportunities exist to increase
cash flow from our existing portfolio. We intend to pursue
internal growth by:



| |   |                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------
| |  | stabilizing occupancy throughout our portfolio;                                                                    
|
| |  | capitalizing on economies of scale and
    concentration due to the size and geographic focus of our
    portfolio;
|
| |  | controlling operating expenses through active
    cost control management and systems; and                         
|
| |  | sourcing new and innovative revenue streams while
    providing high quality services to our tenants.              

Stabilizing Portfolio Occupancy

Although our overall occupancy declined during
2002 by approximately 2.1% as a result of a continued downturn
in the national and Southern California economic activity, we
believe that we have been successful in attracting and retaining
a diverse tenant base by actively managing our properties with
an emphasis on tenant satisfaction and retention. Our in-house
leasing teams, working with outside leasing brokers,
continuously monitor each market to identify strong prospective
tenants who are in need of new or additional space. We also
strive to be responsive to the needs of existing tenants through
our on-site professional management staff and by providing them
with alternative space within our portfolio to accommodate their
changing space requirements.

Cost Control Management and Systems

We plan to continue controlling our operating
expenses through active management at all of our properties. We
focus on cost control in various areas of our operations. We
continuously monitor the operating performance of our properties
and employ energy-enhancing and expense recovery technologies
when appropriate. These system enhancements include:



| |   |                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------
| |  | lighting retrofits;                                                                                                            
|
| |  | replacement of inefficient heating, ventilation
    and air conditioning systems;                                              
|
| |  | computer-driven energy management systems that
    monitor and react to the climatic requirements of individual
    properties;
|
| |  | automated security systems that allow us to
    provide security services to our tenants at a lower cost;                      

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| |   |                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------
| |  | enhancement of billing systems, which enable us
    to more efficiently recover operating expenses from our tenants;
    and   
|
| |  | on-going preventive maintenance programs to
    operate our building systems efficiently, thereby reducing
    operating costs.

Capitalizing on Economies of Scale and
Concentration

In order to capitalize on economies of scale and
concentration arising from the size and geographic focus of our
portfolio, each of our Regional Service Teams is responsible for
several properties, which spreads administrative and maintenance
costs over those properties and reduces per square foot
expenses. In addition, contracting in bulk for parking
operations, building services and supplies on a portfolio-wide
basis also reduces our overall operating expenses.

Sourcing Additional Revenue While Providing
High Quality Services to Tenants

We have invested in energy enhancement programs
within our portfolio with the aim of reducing energy
consumption, enhancing efficiency and lowering operating costs.
Over the past three years, we have been recognized by the
Environmental Protection Agency with the national Commercial
Real Estate Partner of the Yearaward for our performance in
the Energy Star Program. The competition involves top commercial
real estate landlords throughout the United States and rigorous
bench-marking procedures that track individual building energy
efficiency. Of the 673 total Energy Star designated office
buildings awarded nationally, 309 were awarded in California; of
those, we had 83 award-winning buildings and were cited for
having the most energy efficient buildings within a single
portfolio in the nation.

In 2001, we formed our taxable REIT subsidiary,
Next>edge, to market our expertise in energy solutions and
facilities management. In 2002, Next>edge began to assist
companies to increase their energy efficiency and reduce costs
by employing the latest technologies and the most
energy-efficient operational strategies developed to date. These
technologies include lighting, heating, ventilation and air
conditioning retrofits, energy management system installations,
on-site distributed generation and cogeneration projects and
solar energy systems.

External
Operating Strategy

We believe in the diversity and balance of the
Southern California commercial real estate market, and we intend
to continue to focus our resources primarily in this region. We
have assembled a management team that has extensive experience
and knowledge in this market that we believe provides us with a
competitive advantage in identifying and capitalizing on
selective development, renovation and acquisition opportunities.

Subject to capital availability and market
conditions, our approach is to seek development, renovation and
acquisition opportunities in markets where we have an existing
presence and where the following conditions exist:



| |   |                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | low vacancy rates;                                                                                                                                                                          
|
| |  | opportunities for rising rents due to employment
    growth and population movements;                                                                                                       
|
| |  | a minimal amount of developable land; and                                                                                                                                                   
|
| |  | significant barriers to entry due to constraints
    on new development, including strict entitlement processes,
    height and density restrictions or other governmental
    requirements.

Competition

We compete with other owners and developers of
office properties to attract tenants to our properties and to
obtain suitable land for development. Ownership of competing
properties is currently diversified among many different types,
from publicly traded companies and institutional investors,
including other REITs, to small enterprises and individual
owners. No one owner or group of owners currently dominate or
significantly

4



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influence the markets in which we operate. See
Risk Factors  Competition affects occupancy
levels, rents and the cost of land which could adversely affect
our revenues.


California Electric Utility
Deregulation

Problems associated with deregulation of the
electric industry in California have resulted in significantly
higher costs in some areas. All of our properties are currently
located in areas served by utilities that either produce their
own electricity, or that have procured long-term, fixed-rate
contracts with commercial electrical providers. While we have no
information suggesting that any future service interruptions are
expected we believe that higher utility costs may continue as
price increases are allowed by the California Public Utility
Commission or other regulatory agencies.

Approximately 28% of our properties and 21% of
the total rentable square footage of our portfolio are subject
to leases that require our tenants to pay all utility costs and
the remainder provide that our tenants will reimburse us for
utility costs in excess of a base year amount. See Risk
Factors  Rising energy costs and power outages in
California may have an adverse effect on our operations and
revenue.

We are also working with other companies to
provide our properties with new applications of distributed
generation, or on-site energy systems, such as solar
microturbines, natural gas reciprocating engines, fuel cells and
other green power alternatives. Lastly, we maintain
ongoing communication with our tenants to assist them in ways to
lower consumption in their workplace.

Employees

As of December 31, 2002, we had
approximately 300 full-time employees that perform all of our
property management, construction management, accounting,
finance and acquisition activities and a majority of our leasing
transactions.

Available Information

This annual report on Form 10-K and other
periodic and current reports filed with the Securities and
Exchange Commission, or SEC, are available, free of charge, by
viewing the SEC Filings available in the Investor Information
section of our website at www.ardenrealty.com as soon as
reasonably practicable after we file them with the SEC.

(d) FOREIGN OPERATIONS

We do not engage in any foreign operations or
derive any revenue from foreign sources.

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ITEM 2. Properties

Existing Portfolio

Our portfolio consists of 136 primarily office
properties, containing approximately 19.1 million net
rentable square feet, excluding a newly developed property with
approximately 283,000 net rentable square feet currently under
lease-up, that individually range from approximately 12,000 to
600,000 net rentable square feet. Of the 136 properties
currently in service in our portfolio, 134 or 99% are office
properties. All of our properties are located in Southern
California and most are in suburban areas in close proximity to
main thoroughfares. We believe that our properties are located
within desirable and established business communities and are
well maintained. Our properties offer an array of amenities
including high-speed internet access, security, parking,
conference facilities, on-site management, food services and
health clubs.

Following is a summary of our property portfolio
as of December 31, 2002:

|                                      |         |               |       |              |    |                 |     |                    |    |       |    |       |     |                    |     |       |    |     |           |           |            |            |     |    |    |     |        |         |         |         |    |    |    |     |  
|------------------------------------- | ------- | ------------- | ----- | ------------ | -- | --------------- | --- | ------------------ | -- | ----- | -- | ----- | --- | ------------------ | --- | ----- | -- | --- | --------- | --------- | ---------- | ---------- | --- | -- | -- | --- | ------ | ------- | ------- | ------- | -- | -- | -- | --- | -
|                                      |         |               |       |              |    |                 |     |                    |    |       |    |       |     |                   
|                                      |         |               |       |              |    |                 |     |                    |    |       |    |       |     | Property Operating
|                                      |         |               |       |              |    |                 |     |                    |    |       |    |       |     | Results(2),(3)    
|                                      |         |               |       |              |    |                 |     |                    |    |       |    |      
|                                      |         |               |       |              |    | Approximate Net |     |                   
|                                      |         | Number of     |       | Number of    |    | Rentable Square |     | For the Year Ended
|                                      |         | Properties(1) |       | Buildings(1) |    | Feet(1)         |     | December 31, 2002 
|                                      |         |               |       |              |    |                 |     |                   
|                                      |         |               |       | % of         |    |                 |     | % of               |    |       |    | % of  |     |                    |     | % of 
|Location                              |         | Total         |       | Total        |    | Total           |     | Total              |    | Total |    | Total |     | Total              |     | Total
|                                      |         |               |       |              |    |                 |     |                    |    |       |    |       |     |                    |     |      
|                                      |         |               |       |              |    |                 |     |                    |    |       |    |       |     |                   
|                                      |         |               |       |              |    |                 |     |                    |    |       |    |       |     | ($000s and       
|                                      |         |               |       |              |    |                 |     |                    |    |       |    |       |     | unaudited)        
|                                      |         |               |       |              |    |                 |     |                    |    |       |    |       |     |                   
|Los Angeles County                    |         |               |       |              |    |                 |     |                    |    |       |    |       |     |                    |     |       |    |     |           |           |            |            |     |    |    |     |        |         |         |         |    |   
|                                      | West(4) |               |       | 31           |    |                 |     | 23                 | %  |       |    | 33    |     |                    |     | 15    | %  |     |           | 5,021,715 |            |            |     | 26 | %  |     | $      | 108,411 |         |         |    | 38 | % 
|                                      | North   |               |       | 29           |    |                 |     | 21                 | %  |       |    | 46    |     |                    |     | 21    | %  |     |           | 3,231,591 |            |            |     | 17 | %  |     |        | 45,407  |         |         |    | 16 | % 
|                                      | South   |               |       | 16           |    |                 |     | 12                 | %  |       |    | 21    |     |                    |     | 9     | %  |     |           | 3,057,925 |            |            |     | 16 | %  |     |        | 33,181  |         |         |    | 12 | % 
|                                      |         |               |       |              |    |                 |     |                    |    |       |    |       |     |                    |     |       |    |     |           |           |            |            |     |    |    |     |        |         |         |         |    |   
|                                      |         | Subtotal      |       |              | 76 |                 |     |                    | 56 | %     |    |       | 100 |                    |     |       | 45 | %   |           |           | 11,311,231 |            |     |    | 59 | %   |        |         | 186,999 |         |    |    | 66 | %  
|Orange County                         |         |               | 24    |              |    |                 | 18  | %                  |    |       | 57 |       |     |                    | 25  | %     |    |     | 3,708,926 |           |            |            | 19  | %  |    |     | 47,722 |         |         |         | 17 | % 
|San Diego County                      |         |               | 25    |              |    |                 | 18  | %                  |    |       | 40 |       |     |                    | 18  | %     |    |     | 2,857,195 |           |            |            | 15  | %  |    |     | 33,384 |         |         |         | 12 | % 
|Ventura/ Kern Counties                |         |               | 6     |              |    |                 | 4   | %                  |    |       | 17 |       |     |                    | 8   | %     |    |     | 778,363   |           |            |            | 4   | %  |    |     | 9,240  |         |         |         | 3  | % 
|Riverside/ San Bernardino Counties(5) |         |               | 5     |              |    |                 | 4   | %                  |    |       | 8  |       |     |                    | 4   | %     |    |     | 476,461   |           |            |            | 3   | %  |    |     | 4,986  |         |         |         | 2  | % 
|                                      |         |               |       |              |    |                 |     |                    |    |       |    |       |     |                    |     |       |    |     |           |           |            |            |     |    |    |     |        |         |         |         |    |   
|                                      |         |               | Total |              |    | 136             | (6) |                    |    | 100   | %  |       |     | 222                | (6) |       |    | 100 | %         |           |            | 19,132,176 | (6) |    |    | 100 | %      |         | $       | 282,331 |    |    |    | 100 | %
|                                      |         |               |       |              |    |                 |     |                    |    |       |    |       |     |                    |     |       |    |     |           |           |            |            |     |    |    |     |        |         |         |         |    |   




|    |                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------
|(1) | Includes one property with approximately 140,000
    net rentable square feet held for disposition.



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | We define Property Operating Results as revenue
    (including rent, tenant reimbursements, parking income and all
    other property specific revenues) less property operating
    expenses (including property taxes, insurance, utilities,
    repairs and maintenance and all other property specific
    operating expenses but excluding depreciation and financing
    costs). This measure is commonly used by investors to evaluate
    the performance of REITs, to determine trends in earnings and to
    compute the fair value of properties as it is not affected by
    (1) the cost of funds of the property owner or (2) the
    impact of depreciation and amortization expenses as well as
    gains or losses from the sale of operating real estate assets
    that are included in net income computed in accordance with
    GAAP. The first factor is commonly eliminated from net income
    because it is specific to the particular financing capabilities
    and constraints of the owner. The second factor is commonly
    eliminated because it may not accurately represent the actual
    change in value in real estate properties that results from use
    or changes in market conditions. We believe that eliminating
    these costs from net income gives investors an additional
    measure of operating performance that, when used as an adjunct
    to net income computed in accordance with GAAP, can be a useful
    measure of our operating results.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Property Operating Results captures trends in
    occupancy rates, rental rates and operating costs. However,
    Property Operating Results excludes general and administrative
    costs, interest expense, interest income, depreciation and
    amortization expense and gains or losses from the sale of
    properties, changes in value in our real estate properties that
    result from use or permanent impairment to carrying costs as
    stipulated by GAAP or the level of capital expenditures and
    leasing costs necessary to maintain the operating performance of
    our properties, all of which are significant economic costs.
    Therefore, Property Operating Results may fail to capture
    significant trends which limits its usefulness.     
|
| | Property Operating Results is a non-GAAP measure
    of performance. Property Operating Results is not a substitute
    for net income as computed in accordance with GAAP. It excludes
    significant expense components such as depreciation and
    amortization expense and financing costs. This measure should be
    analyzed in conjunction with net income and cash flow from
    operating activities as computed in accordance with GAAP. Other
    companies may use different methods for calculating Property
    Operating Results or similarly entitled measures and
    accordingly, our Property Operating Results may not be
    comparable to similarly entitled measures reported by other
    companies that do not define the measure exactly as we do.

6



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##### Table of Contents





| |                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The following is a reconciliation of income from
    continuing operations before gain on sale of properties and
    minority interest to Property Operating Results (in thousands):

|                                                                                              |                                    |                         |         |         |   |      |         |         |   |   |         |        |  
|--------------------------------------------------------------------------------------------- | ---------------------------------- | ----------------------- | ------- | ------- | - | ---- | ------- | ------- | - | - | ------- | ------ | -
|                                                                                              |                                    |                        
|                                                                                              |                                    | Year Ended December 31,
|                                                                                              |                                    |                        
|                                                                                              |                                    | 2002                    |         | 2001    |   | 2000
|                                                                                              |                                    |                         |         |         |   |     
|Income from continuing operations before gain on
    sale of properties and minority interest |                                    | $                       | 72,989  |         |   | $    | 99,227  |         |   | $ | 100,948 |       
|Add:                                                                                          |                                    |                         |         |         |   |      |         |         |   |   |         |       
|                                                                                              | General and administrative expense |                         |         | 13,166  |   |      |         | 12,143  |   |   |         | 9,336  |  
|                                                                                              | Interest expense                   |                         |         | 88,516  |   |      |         | 84,195  |   |   |         | 78,406 |  
|                                                                                              | Depreciation and amortization      |                         |         | 110,202 |   |      |         | 100,775 |   |   |         | 85,947 |  
|Less:                                                                                         |                                    |                         |         |         |   |      |         |         |   |   |         |       
|                                                                                              | Interest and other income          |                         |         | (2,542  | ) |      |         | (2,941  | ) |   |         | (3,527 | )
|                                                                                              |                                    |                         |         |         |   |      |         |         |   |   |         |       
|Property Operating Results                                                                    |                                    | $                       | 282,331 |         |   | $    | 293,399 |         |   | $ | 271,110 |       
|                                                                                              |                                    |                         |         |         |   |      |         |         |   |   |         |       



|    |                                                                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | Excludes the operating results of one property
    classified as held for disposition. The operating results for
    this property are reported as part of discontinued operations in
    our consolidated statements of income.
|   
|(4) | Includes a retail property with approximately
    37,000 net rentable square feet.                                                                                                                                              
|   
|(5) | Includes a retail property with approximately
    133,000 net rentable square feet.                                                                                                                                             
|   
|(6) | Including one development property currently
    under lease-up, our total portfolio consists of 137 properties
    with 223 buildings and approximately 19.4 million rentable
    square feet.                                 

The following is a summary of our occupancy and
in-place rents as of December 31, 2002:

|                                   |       |                         |      |                |      |                           |      |                 |      |   |       |       |       |  |       |       |       | 
|---------------------------------- | ----- | ----------------------- | ---- | -------------- | ---- | ------------------------- | ---- | --------------- | ---- | - | ----- | ----- | ----- |  | ----- | ----- | ----- | 
|                                   |       |                         |      |                |      |                          
|                                   |       |                         |      |                |      | Annualized Base Rent     
|                                   |       |                         |      |                |      | Per Leased Square Foot(1)
|                                   |       |                         |      |                |      |                          
|                                   |       |                         |      |                |      |                           |      | Full Service   
|Location                           |       | Percent Occupied        |      | Percent Leased |      | Portfolio Total           |      | Gross Leases(2)
|                                   |       |                         |      |                |      |                           |      |                
|Los Angeles County                 |       |                         |      |                |      |                           |      |                 |      |   |       |       |       |  |       |      
|                                   | West  |                         |      | 90.2           | %    |                           |      | 91.4            | %    |   | $     | 28.46 |       |  | $     | 28.60 |      
|                                   | North |                         |      | 86.1           | %    |                           |      | 89.1            | %    |   |       | 21.48 |       |  |       | 22.32 |      
|                                   | South |                         |      | 87.7           | %    |                           |      | 89.3            | %    |   |       | 19.34 |       |  |       | 20.43 |      
|Orange County                      |       |                         | 94.8 | %              |      |                           | 95.4 | %               |      |   | 18.28 |       |       |  | 21.46 |      
|San Diego County                   |       |                         | 88.9 | %              |      |                           | 88.9 | %               |      |   | 18.54 |       |       |  | 22.91 |      
|Ventura/ Kern Counties             |       |                         | 96.2 | %              |      |                           | 96.7 | %               |      |   | 18.46 |       |       |  | 18.70 |      
|Riverside/ San Bernardino Counties |       |                         | 93.9 | %              |      |                           | 94.6 | %               |      |   | 17.29 |       |       |  | 19.85 |      
|                                   |       |                         |      |                |      |                           |      |                 |      |   |       |       |       |  |       |      
|                                   |       | Total/ Weighted Average |      |                | 90.1 | %                         |      |                 | 91.4 | % |       | $     | 21.67 |  |       | $     | 23.68 | 
|                                   |       |                         |      |                |      |                           |      |                 |      |   |       |       |       |  |       |      




|    |                                                                                                                                                                                                                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Based on monthly contractual base rent under
    existing leases as of December 31, 2002, multiplied by 12
    and divided by leased net rentable square feet; for those leases
    where rent has not yet commenced or which are in a free rent
    period, the first month in which rent is to be received is used
    to determine annualized base rent.



|    |                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------
|(2) | Excludes 38 properties and approximately
    3.9 million square feet under triple net and modified gross
    leases.

Development
Properties

In addition to the properties listed above, we
currently have one development property containing approximately
283,000 net rentable square feet under lease-up. This property
is located in the Howard Hughes Center, a 70-acre commercial
development located two miles north of Los Angeles International
Airport and immediately adjacent to the San Diego Freeway
(I-405), with on- and off-ramps that directly serve the site.

7



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##### Table of Contents



The following table summarizes information about
this property as of December 31, 2002:

|                      |                   |          |   |           |  |         |   |            |  |               |  |               |  |           |  |              |  |  |  |              |  |  |   |       |  |  |  |     |   |  |  |     |  
|--------------------- | ----------------- | -------- | - | --------- |  | ------- | - | ---------- |  | ------------- |  | ------------- |  | --------- |  | ------------ |  |  |  | ------------ |  |  | - | ----- |  |  |  | --- | - |  |  | --- | -
|                      |                   |          |   |           |  |         |   |            |  |               |  | Estimated     |  |           |  |             
|                      |                   |          |   |           |  |         |   |            |  |               |  | Year 1        |  | Estimated |  | Estimated   
|                      |                   |          |   |           |  | Percent |   |            |  |               |  | Stabilized    |  | Year 1    |  | Year 1      
|                      |                   | Costs    |   | Estimated |  | Leased  |   | Shell      |  | Estimated     |  | Cash Property |  | Annual    |  | Annual      
|                      |                   | Incurred |   | Total     |  | at      |   | Completion |  | Stabilization |  | Operating     |  | Cash      |  | GAAP        
|Property              |                   | To Date  |   | Cost(1)   |  | 3/24/03 |   | Date       |  | Date(2)       |  | Results(3)    |  | Yield     |  | Yield(4)    
|                      |                   |          |   |           |  |         |   |            |  |               |  |               |  |           |  |             
|                      |                   | ($000s) |   | ($000s)  |  |         |   |            |  |               |  | ($000s)      |  |           |  |             
|Howard Hughes Center: |                   |          |   |           |  |         |   |            |  |               |  |               |  |           |  |              |  |  |  |              |  |  |   |       |  |  |  |     |   |  |  |    
|                      | 6100 Center Drive |          | $ | 65,296    |  |         | $ | 81,500     |  |               |  |              |  |           |  | 2nd Qtr 2002 |  |  |  | 4th Qtr 2003 |  |  | $ | 6,450 |  |  |  | 7.9 | % |  |  | 8.9 | %
|                      |                   |          |   |           |  |         |   |            |  |               |  |               |  |           |  |              |  |  |  |              |  |  |   |       |  |  |  |     |   |  |  |    






|    |                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Estimated total cost includes purchase and
    closing costs, capital expenditures, tenant improvements,
    leasing commissions and carrying costs during development, as
    well as an allocation of land and master plan costs.                                                                                                                                                                                       
|   
|(2) | We consider a property to be stabilized in the
    quarter when the property is at least 95% leased.                                                                                                                                                                                                                                                                                                                      
|   
|(3) | We consider stabilized Cash Property Operating
    Results to be the rental revenues from the property less the
    operating expenses of the property on a cash basis before
    deducting financing costs (interest and principle payments)
    after the property is at least 95% leased. Property Operating
    Results are discussed in greater detail in Note (2) to the
    Existing Portfolio summary table above.
|   
|(4) | Estimated Year 1 Annual GAAP Yield includes
    an adjustment for straight-line rents.                                                                                                                                                                                                                                                                                                                                    

In addition to the property above, we have
entitlements and preliminary architectural designs completed for
additional build-to-suit buildings at the Howard Hughes Center
totaling an additional 425,000 net rentable square feet. We also
have construction entitlements at the Howard Hughes Center for
up to 600 hotel rooms. Build-to-suit buildings consist of
properties constructed to the tenants specifications in
return for the tenants long-term commitment to the
property. We do not intend to commence construction on any
additional build-to-suit buildings or hotels at the Howard
Hughes Center until development plans and budgets are finalized
and build-to-suit tenant leases are signed with terms allowing
us to achieve yields commensurate with each projects
development risk.

In addition to our development at the Howard
Hughes Center, we have completed preliminary designs and are
marketing an approximately 170,000 net rentable square foot
build-to-suit office building at our Long Beach Airport Business
Park. Also, as part of our Gateway Towers acquisition in August
2002, we acquired a 5-acre developable land parcel in Torrance,
California that we are also marketing for a build-to-suit
building. We do not intend to commence construction on these
projects until build-to-suit tenant leases are signed with terms
allowing us to achieve yields commensurate with each
projects development risk.

We expect to finance our development activities
over the next 24 months through net cash provided by
operating activities, proceeds from asset sales or proceeds from
our lines of credit.

Acquisitions

The following table summarizes our acquisition
activity during 2002:

|                            |  |        |             |           |  |                  |                 |               |  |             |               |                |  |  |                  |  |  |  |         |  |  |   |         | 
|--------------------------- |  | ------ | ----------- | --------- |  | ---------------- | --------------- | ------------- |  | ----------- | ------------- | -------------- |  |  | ---------------- |  |  |  | ------- |  |  | - | ------- | 
|Property                    |  | County |             | Submarket |  | Date of Purchase |                 | Property Type |  | Square Feet |               | Purchase Price
|                            |  |        |             |           |  |                  |                 |               |  |             |               |               
|                            |  |        |             |           |  |                  |                 |               |  |             |               | ($000s)      
|Gateway Towers              |  |        | Los Angeles |           |  |                  | Torrance        |               |  |             | Aug. 7, 2002  |                |  |  | Office           |  |  |  | 432,894 |  |  | $ | 62,500  | 
|Gateway Land Parcel         |  |        | Los Angeles |           |  |                  | Torrance        |               |  |             | Aug. 7, 2002  |                |  |  | Developable Land |  |  |  | N/ A    |  |  |   | 3,500   | 
|Crossroads                  |  |        | San Diego   |           |  |                  | Mission Valley  |               |  |             | Aug. 16, 2002 |                |  |  | Office           |  |  |  | 133,566 |  |  |   | 16,900  | 
|Governor Executive Center   |  |        | San Diego   |           |  |                  | Governor Park   |               |  |             | Aug. 16, 2002 |                |  |  | Office           |  |  |  | 52,195  |  |  |   | 11,200  | 
|Carmel Valley Center I & II |  |        | San Diego   |           |  |                  | Del Mar Heights |               |  |             | Aug. 30, 2002 |                |  |  | Office           |  |  |  | 107,197 |  |  |   | 28,400  | 
|Carmel View Office Plaza    |  |        | San Diego   |           |  |                  | Rancho Bernardo |               |  |             | Aug. 30, 2002 |                |  |  | Office           |  |  |  | 77,460  |  |  |   | 12,500  | 
|                            |  |        |             |           |  |                  |                 |               |  |             |               |                |  |  |                  |  |  |  |         |  |  |   |         | 
|Total                       |  |        |             |           |  |                  |                 |               |  |             |               |                |  |  |                  |  |  |  | 803,312 |  |  | $ | 135,000 | 
|                            |  |        |             |           |  |                  |                 |               |  |             |               |                |  |  |                  |  |  |  |         |  |  |   |         | 

8



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##### Table of Contents



Dispositions

The following table summarizes our disposition
activity during 2002:

|                         |  |        |             |           |  |                          |                    |               |             |             |                |             |        |  |           |  |        |  |         |     |       |   |        | 
|------------------------ |  | ------ | ----------- | --------- |  | ------------------------ | ------------------ | ------------- | ----------- | ----------- | -------------- | ----------- | ------ |  | --------- |  | ------ |  | ------- | --- | ----- | - | ------ | 
|Property                 |  | County |             | Submarket |  | Date of Sale             |                    | Property Type |             | Square Feet |                | Sales Price
|                         |  |        |             |           |  |                          |                    |               |             |             |                |            
|                         |  |        |             |           |  |                          |                    |               |             |             |                | ($000s)   
|Harbor Corporate Center  |  |        | Los Angeles |           |  |                          | Torrance           |               |             |             | Mar. 7, 2002   |             |        |  | Office    |  |        |  | 63,925  |     |       | $ | 6,900  | 
|Renaissance Court        |  |        | Los Angeles |           |  |                          | Simi/Conejo Valley |               |             |             | April 16, 2002 |             |        |  | Office    |  |        |  | 61,245  |     |       |   | 8,300  | 
|6800 Owensmouth          |  |        | Los Angeles |           |  | West San Fernando Valley |                    |               | May 1, 2002 |             |                |             | Office |  |           |  | 80,014 |  |         |     | 8,400 |  
|2730 Wilshire Apartments |  |        | Los Angeles |           |  |                          | Santa Monica       |               |             |             | Nov. 1, 2002   |             |        |  | Apartment |  |        |  |        | (1) |       |   | 2,300  | 
|                         |  |        |             |           |  |                          |                    |               |             |             |                |             |        |  |           |  |        |  |         |     |       |   |        | 
|Total                    |  |        |             |           |  |                          |                    |               |             |             |                |             |        |  |           |  |        |  | 205,184 |     |       | $ | 25,900 | 
|                         |  |        |             |           |  |                          |                    |               |             |             |                |             |        |  |           |  |        |  |         |     |       |   |        | 



---



|    |                                
|--- | -------------------------------
|(1) | Consists of 16 apartment units.

9



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##### Table of Contents



The following table presents specific information
regarding our 136 stabilized properties as of December 31,
2002:

|                                |                                                   |                               |  |               |  |            |  |              |         |           | 
|------------------------------- | ------------------------------------------------- | ----------------------------- |  | ------------- |  | ---------- |  | ------------ | ------- | --------- | 
|                                |                                                   |                               |  |               |  | Year(s)    |  | Approximate 
|Property                        |                                                   |                               |  |               |  | Built/     |  | Net Rentable
|Name                            |                                                   | Submarket                     |  | Location      |  | Renovated  |  | Square Feet 
|                                |                                                   |                               |  |               |  |            |  |             
|Los Angeles County              |                                                   |                               |  |               |  |            |  |              |         |          
|Los Angeles West                |                                                   |                               |  |               |  |            |  |              |         |          
|9665 Wilshire                   |                                                   | Beverly Hills/ Century City   |  | Beverly Hills |  | 1972/92-93 |  |              | 158,684 |          
|Beverly Atrium                  |                                                   | Beverly Hills/ Century City   |  | Beverly Hills |  | 1989       |  |              | 59,650  |          
|8383 Wilshire                   |                                                   | Beverly Hills/ Century City   |  | Beverly Hills |  | 1971/93    |  |              | 417,463 |          
|120 S. Spalding                 |                                                   | Beverly Hills/ Century City   |  | Beverly Hills |  | 1984       |  |              | 60,656  |          
|9100 Wilshire Blvd              |                                                   | Beverly Hills/ Century City   |  | Beverly Hills |  | 1971/90    |  |              | 326,227 |          
|Century Park Center             |                                                   | Beverly Hills/ Century City   |  | Los Angeles   |  | 1972/94    |  |              | 243,404 |          
|10350 Santa Monica              |                                                   | Beverly Hills/ Century City   |  | Los Angeles   |  | 1979       |  |              | 42,292  |          
|10351 Santa Monica              |                                                   | Beverly Hills/ Century City   |  | Los Angeles   |  | 1984       |  |              | 96,251  |          
|Westwood Terrace                |                                                   | Westwood/ West Los Angeles    |  | Los Angeles   |  | 1988       |  |              | 135,943 |          
|1950 Sawtelle                   |                                                   | Westwood/ West Los Angeles    |  | Los Angeles   |  | 1988/95    |  |              | 103,106 |          
|10780 Santa Monica              |                                                   | Westwood/ West Los Angeles    |  | Los Angeles   |  | 1984       |  |              | 92,486  |          
|Wilshire Pacific Plaza          |                                                   | Westwood/ West Los Angeles    |  | Los Angeles   |  | 1976/87    |  |              | 100,122 |          
|World Savings Center(2)         |                                                   | Westwood/ West Los Angeles    |  | Los Angeles   |  | 1983       |  |              | 469,115 |          
|11075 Santa Monica              |                                                   | Westwood/ West Los Angeles    |  | Los Angeles   |  | 1983       |  |              | 35,696  |          
|2730 Wilshire                   |                                                   | Westwood/ West Los Angeles    |  | Santa Monica  |  | 1985       |  |              | 55,080  |          
|2800 28th Street                |                                                   | Westwood/ West Los Angeles    |  | Santa Monica  |  | 1979       |  |              | 103,506 |          
|1919 Santa Monica               |                                                   | Westwood/ West Los Angeles    |  | Santa Monica  |  | 1991       |  |              | 43,796  |          
|2001 Wilshire Blvd              |                                                   | Westwood/ West Los Angeles    |  | Santa Monica  |  | 1980       |  |              | 101,125 |          
|Westwood Center                 |                                                   | Westwood/ West Los Angeles    |  | Santa Monica  |  | 1965/2000  |  |              | 313,000 |          
|400 Corporate Pointe            |                                                   | Marina Area/ Culver City/ LAX |  | Culver City   |  | 1987       |  |              | 164,598 |          
|600 Corporate Pointe            |                                                   | Marina Area/ Culver City/ LAX |  | Culver City   |  | 1989       |  |              | 273,339 |          
|Bristol Plaza                   |                                                   | Marina Area/ Culver City/ LAX |  | Culver City   |  | 1982       |  |              | 84,014  |          
|Northpoint                      |                                                   | Marina Area/ Culver City/ LAX |  | Los Angeles   |  | 1991       |  |              | 104,235 |          
|Howard Hughes Spectrum Club     |                                                   | Marina Area/ Culver City/ LAX |  | Los Angeles   |  | 1993       |  |              | 36,959  |          
|Howard Hughes Tower             |                                                   | Marina Area/ Culver City/ LAX |  | Los Angeles   |  | 1987       |  |              | 313,833 |          
|6060 Center Drive               |                                                   | Marina Area/ Culver City/ LAX |  | Los Angeles   |  | 2000       |  |              | 241,928 |          
|6080 Center Drive               |                                                   | Marina Area/ Culver City/ LAX |  | Los Angeles   |  | 2002       |  |              | 287,148 |          
|Univision-5999 Center Drive     |                                                   | Marina Area/ Culver City/ LAX |  | Los Angeles   |  | 2001       |  |              | 161,650 |          
|6100 Wilshire                   |                                                   | Park Mile/ West Hollywood     |  | Los Angeles   |  | 1986       |  |              | 202,704 |          
|145 South Fairfax               |                                                   | Park Mile/ West Hollywood     |  | Los Angeles   |  | 1984       |  |              | 53,994  |          
|Beverly Sunset Medical Plaza(3) |                                                   | Park Mile/ West Hollywood     |  | Los Angeles   |  | 1963/92-95 |  |              | 139,711 |          
|                                |                                                   |                               |  |               |  |            |  |              |         |          
|                                | Subtotal/ Weighted Average  Los
    Angeles West |                               |  |               |  |            |  |              |         | 5,021,715 | 

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                |                                                   |               |     |         |   |            |       |           |   |              |        |         |  |  |     |     |  |   |       |       | 
|------------------------------- | ------------------------------------------------- | ------------- | --- | ------- | - | ---------- | ----- | --------- | - | ------------ | ------ | ------- |  |  | --- | --- |  | - | ----- | ----- | 
|                                |                                                   |               |     |         |   |            |       |           |   | Annualized  
|                                |                                                   | Percentage of |     |         |   |            |       |           |   | Base Rent   
|                                |                                                   | Total         |     |         |   |            |       |           |   | per Leased  
|                                |                                                   | Portfolio Net |     |         |   | Annualized |       |           |   | Net Rentable
|Property                        |                                                   | Rentable      |     | Percent |   | Base Rent  |       | Number of |   | Square      
|Name                            |                                                   | Square Feet   |     | Leased  |   | ($000s)    |       | Leases    |   | Feet(1)     
|                                |                                                   |               |     |         |   |            |       |           |   |             
|Los Angeles County              |                                                   |               |     |         |   |            |       |           |   |              |        |         |  |  |     |     |  |   |       |      
|Los Angeles West                |                                                   |               |     |         |   |            |       |           |   |              |        |         |  |  |     |     |  |   |       |      
|9665 Wilshire                   |                                                   |               | 0.8 | %       |   |            | 99.3  | %         |   | $            | 5,900  |         |  |  | 21  |     |  | $ | 37.44 |      
|Beverly Atrium                  |                                                   |               | 0.3 |         |   |            | 94.1  |           |   |              | 1,578  |         |  |  | 14  |     |  |   | 28.10 |      
|8383 Wilshire                   |                                                   |               | 2.2 |         |   |            | 90.2  |           |   |              | 9,700  |         |  |  | 124 |     |  |   | 25.75 |      
|120 S. Spalding                 |                                                   |               | 0.3 |         |   |            | 100.0 |           |   |              | 2,408  |         |  |  | 14  |     |  |   | 38.27 |      
|9100 Wilshire Blvd              |                                                   |               | 1.7 |         |   |            | 91.7  |           |   |              | 8,160  |         |  |  | 71  |     |  |   | 27.26 |      
|Century Park Center             |                                                   |               | 1.3 |         |   |            | 91.3  |           |   |              | 5,131  |         |  |  | 92  |     |  |   | 23.08 |      
|10350 Santa Monica              |                                                   |               | 0.2 |         |   |            | 83.9  |           |   |              | 828    |         |  |  | 15  |     |  |   | 23.32 |      
|10351 Santa Monica              |                                                   |               | 0.5 |         |   |            | 87.7  |           |   |              | 1,929  |         |  |  | 15  |     |  |   | 22.86 |      
|Westwood Terrace                |                                                   |               | 0.7 |         |   |            | 98.5  |           |   |              | 3,726  |         |  |  | 26  |     |  |   | 27.82 |      
|1950 Sawtelle                   |                                                   |               | 0.5 |         |   |            | 88.1  |           |   |              | 2,266  |         |  |  | 35  |     |  |   | 24.96 |      
|10780 Santa Monica              |                                                   |               | 0.5 |         |   |            | 95.4  |           |   |              | 2,135  |         |  |  | 34  |     |  |   | 24.21 |      
|Wilshire Pacific Plaza          |                                                   |               | 0.5 |         |   |            | 92.2  |           |   |              | 2,434  |         |  |  | 39  |     |  |   | 26.37 |      
|World Savings Center(2)         |                                                   |               | 2.5 |         |   |            | 94.2  |           |   |              | 13,468 |         |  |  | 55  |     |  |   | 30.49 |      
|11075 Santa Monica              |                                                   |               | 0.2 |         |   |            | 91.3  |           |   |              | 799    |         |  |  | 6   |     |  |   | 24.53 |      
|2730 Wilshire                   |                                                   |               | 0.3 |         |   |            | 100.0 |           |   |              | 1,496  |         |  |  | 32  |     |  |   | 26.57 |      
|2800 28th Street                |                                                   |               | 0.5 |         |   |            | 82.3  |           |   |              | 2,328  |         |  |  | 37  |     |  |   | 27.32 |      
|1919 Santa Monica               |                                                   |               | 0.2 |         |   |            | 70.9  |           |   |              | 910    |         |  |  | 3   |     |  |   | 29.32 |      
|2001 Wilshire Blvd              |                                                   |               | 0.5 |         |   |            | 93.2  |           |   |              | 2,626  |         |  |  | 19  |     |  |   | 27.87 |      
|Westwood Center                 |                                                   |               | 1.7 |         |   |            | 83.1  |           |   |              | 9,818  |         |  |  | 36  |     |  |   | 37.75 |      
|400 Corporate Pointe            |                                                   |               | 0.9 |         |   |            | 100.0 |           |   |              | 3,179  |         |  |  | 21  |     |  |   | 19.32 |      
|600 Corporate Pointe            |                                                   |               | 1.4 |         |   |            | 91.1  |           |   |              | 5,736  |         |  |  | 21  |     |  |   | 23.05 |      
|Bristol Plaza                   |                                                   |               | 0.4 |         |   |            | 97.7  |           |   |              | 1,687  |         |  |  | 28  |     |  |   | 20.55 |      
|Northpoint                      |                                                   |               | 0.5 |         |   |            | 78.4  |           |   |              | 2,569  |         |  |  | 7   |     |  |   | 31.43 |      
|Howard Hughes Spectrum Club     |                                                   |               | 0.2 |         |   |            | 100.0 |           |   |              | 909    |         |  |  | 1   |     |  |   | 24.60 |      
|Howard Hughes Tower             |                                                   |               | 1.6 |         |   |            | 74.3  |           |   |              | 6,922  |         |  |  | 30  |     |  |   | 29.70 |      
|6060 Center Drive               |                                                   |               | 1.3 |         |   |            | 100.0 |           |   |              | 8,473  |         |  |  | 8   |     |  |   | 34.14 |      
|6080 Center Drive               |                                                   |               | 1.5 |         |   |            | 96.0  |           |   |              | 9,684  |         |  |  | 14  |     |  |   | 36.26 |      
|Univision-5999 Center Drive     |                                                   |               | 0.9 |         |   |            | 100.0 |           |   |              | 4,247  |         |  |  | 2   |     |  |   | 25.53 |      
|6100 Wilshire                   |                                                   |               | 1.1 |         |   |            | 100.0 |           |   |              | 5,397  |         |  |  | 55  |     |  |   | 26.03 |      
|145 South Fairfax               |                                                   |               | 0.3 |         |   |            | 90.0  |           |   |              | 1,066  |         |  |  | 13  |     |  |   | 21.92 |      
|Beverly Sunset Medical Plaza(3) |                                                   |               | 0.7 |         |   |            | 74.7  |           |   |              | 3,137  |         |  |  | 55  |     |  |   | 30.06 |      
|                                |                                                   |               |     |         |   |            |       |           |   |              |        |         |  |  |     |     |  |   |       |      
|                                | Subtotal/ Weighted Average  Los
    Angeles West |               |     | 26.2    | % |            |       | 91.4      | % |              | $      | 130,646 |  |  |     | 943 |  |   | $     | 28.46 | 

10



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##### Table of Contents



|                                 |                                                    |                                      |  |                 |  |              |  |              |         |           | 
|-------------------------------- | -------------------------------------------------- | ------------------------------------ |  | --------------- |  | ------------ |  | ------------ | ------- | --------- | 
|                                 |                                                    |                                      |  |                 |  | Year(s)      |  | Approximate 
|Property                         |                                                    |                                      |  |                 |  | Built/       |  | Net Rentable
|Name                             |                                                    | Submarket                            |  | Location        |  | Renovated    |  | Square Feet 
|                                 |                                                    |                                      |  |                 |  |              |  |             
|Los Angeles North                |                                                    |                                      |  |                 |  |              |  |              |         |          
|Calabasas Commerce Center        |                                                    | Simi/ Conejo Valley                  |  | Calabasas       |  | 1990         |  |              | 126,771 |          
|Calabasas Tech                   |                                                    | Simi/ Conejo Valley                  |  | Calabasas       |  | 1990/2001    |  |              | 273,526 |          
|Pennsfield Plaza                 |                                                    | Simi/ Conejo Valley                  |  | Thousand Oaks   |  | 1989         |  |              | 21,202  |          
|Conejo Business Center           |                                                    | Simi/ Conejo Valley                  |  | Thousand Oaks   |  | 1991         |  |              | 69,017  |          
|Marin Corporate Center           |                                                    | Simi/ Conejo Valley                  |  | Thousand Oaks   |  | 1986         |  |              | 51,360  |          
|Hillside Corporate Center        |                                                    | Simi/ Conejo Valley                  |  | Westlake        |  | 1998         |  |              | 59,876  |          
|Westlake  5601 Lindero          |                                                    | Simi/ Conejo Valley                  |  | Westlake        |  | 1989         |  |              | 105,830 |          
|Westlake Gardens                 |                                                    | Simi/ Conejo Valley                  |  | Westlake        |  | 1998         |  |              | 49,639  |          
|Westlake Gardens II              |                                                    | Simi/ Conejo Valley                  |  | Westlake        |  | 1999         |  |              | 48,874  |          
|Woodland Hills                   |                                                    | West San Fernando Valley             |  | Woodland Hills  |  | 1972/95      |  |              | 224,955 |          
|Los Angeles Corporate Center     |                                                    | San Gabriel Valley                   |  | Monterey Park   |  | 1984/86      |  |              | 389,293 |          
|Clarendon Crest                  |                                                    | West San Fernando Valley             |  | Woodland Hills  |  | 1990         |  |              | 43,063  |          
|Lyons Plaza                      |                                                    | Santa Clarita Valley                 |  | Santa Clarita   |  | 1990         |  |              | 61,203  |          
|Tourney Pointe                   |                                                    | Santa Clarita Valley                 |  | Santa Clarita   |  | 1985/98-2000 |  |              | 219,991 |          
|16000 Ventura                    |                                                    | Central San Fernando Valley          |  | Encino          |  | 1980/96      |  |              | 174,841 |          
|15250 Ventura                    |                                                    | Central San Fernando Valley          |  | Sherman Oaks    |  | 1970/90-91   |  |              | 110,641 |          
|Noble Professional Center        |                                                    | Central San Fernando Valley          |  | Sherman Oaks    |  | 1985/93      |  |              | 51,828  |          
|Sunset Point Plaza               |                                                    | Valencia                             |  | Newhall         |  | 1988         |  |              | 58,105  |          
|303 Glenoaks                     |                                                    | East San Fernando Valley/ Tri-Cities |  | Burbank         |  | 1983/96      |  |              | 175,289 |          
|601 S. Glenoaks                  |                                                    | East San Fernando Valley/ Tri-Cities |  | Burbank         |  | 1990         |  |              | 72,524  |          
|Burbank Executive Plaza          |                                                    | East San Fernando Valley/ Tri-Cities |  | Burbank         |  | 1983         |  |              | 60,395  |          
|California Federal Building      |                                                    | East San Fernando Valley/ Tri-Cities |  | Burbank         |  | 1978         |  |              | 81,243  |          
|425 West Broadway                |                                                    | East San Fernando Valley/ Tri-Cities |  | Glendale        |  | 1984         |  |              | 71,589  |          
|Glendale Corporate Center        |                                                    | East San Fernando Valley/ Tri-Cities |  | Glendale        |  | 1985         |  |              | 108,209 |          
|70 South Lake                    |                                                    | East San Fernando Valley/ Tri-Cities |  | Pasadena        |  | 1982/94      |  |              | 100,133 |          
|150 East Colorado Boulevard      |                                                    | East San Fernando Valley/ Tri-Cities |  | Pasadena        |  | 1979/97      |  |              | 61,168  |          
|299 N. Euclid                    |                                                    | East San Fernando Valley/ Tri-Cities |  | Pasadena        |  | 1983         |  |              | 73,522  |          
|5161 Lankershim                  |                                                    | East San Fernando Valley/ Tri-Cities |  | North Hollywood |  | 1985/97      |  |              | 178,317 |          
|535 N. Brand Blvd                |                                                    | East San Fernando Valley/ Tri-Cities |  | North Hollywood |  | 1973/92/99   |  |              | 109,187 |          
|                                 |                                                    |                                      |  |                 |  |              |  |              |         |          
|                                 | Subtotal/ Weighted Average  Los
    Angeles North |                                      |  |                 |  |              |  |              |         | 3,231,591 | 
|Los Angeles South                |                                                    |                                      |  |                 |  |              |  |              |         |          
|Long Beach Airport Bldg D(2)     |                                                    | Long Beach                           |  | Long Beach      |  | 1987/95      |  |              | 121,610 |          
|Long Beach Airport Bldg F & G(2) |                                                    | Long Beach                           |  | Long Beach      |  | 1987/95      |  |              | 150,403 |          
|5000 East Spring(2)              |                                                    | Long Beach                           |  | Long Beach      |  | 1989/95      |  |              | 163,358 |          
|100 Broadway                     |                                                    | Long Beach                           |  | Long Beach      |  | 1987/96      |  |              | 191,727 |          

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                 |                                                    |               |     |         |   |            |       |           |   |              |       |        |  |  |    |     |  |   |       |       | 
|-------------------------------- | -------------------------------------------------- | ------------- | --- | ------- | - | ---------- | ----- | --------- | - | ------------ | ----- | ------ |  |  | -- | --- |  | - | ----- | ----- | 
|                                 |                                                    |               |     |         |   |            |       |           |   | Annualized  
|                                 |                                                    | Percentage of |     |         |   |            |       |           |   | Base Rent   
|                                 |                                                    | Total         |     |         |   |            |       |           |   | per Leased  
|                                 |                                                    | Portfolio Net |     |         |   | Annualized |       |           |   | Net Rentable
|Property                         |                                                    | Rentable      |     | Percent |   | Base Rent  |       | Number of |   | Square      
|Name                             |                                                    | Square Feet   |     | Leased  |   | ($000s)    |       | Leases    |   | Feet(1)     
|                                 |                                                    |               |     |         |   |            |       |           |   |             
|Los Angeles North                |                                                    |               |     |         |   |            |       |           |   |              |       |        |  |  |    |     |  |   |       |      
|Calabasas Commerce Center        |                                                    |               | 0.7 | %       |   |            | 89.9  | %         |   | $            | 2,089 |        |  |  | 11 |     |  | $ | 18.33 |      
|Calabasas Tech                   |                                                    |               | 1.3 |         |   |            | 100.0 |           |   |              | 4,846 |        |  |  | 16 |     |  |   | 17.31 |      
|Pennsfield Plaza                 |                                                    |               | 0.1 |         |   |            | 95.2  |           |   |              | 382   |        |  |  | 12 |     |  |   | 18.94 |      
|Conejo Business Center           |                                                    |               | 0.4 |         |   |            | 80.5  |           |   |              | 1,131 |        |  |  | 25 |     |  |   | 20.34 |      
|Marin Corporate Center           |                                                    |               | 0.3 |         |   |            | 97.7  |           |   |              | 1,101 |        |  |  | 31 |     |  |   | 21.96 |      
|Hillside Corporate Center        |                                                    |               | 0.3 |         |   |            | 87.7  |           |   |              | 1,342 |        |  |  | 9  |     |  |   | 25.55 |      
|Westlake  5601 Lindero          |                                                    |               | 0.6 |         |   |            | 78.1  |           |   |              | 1,468 |        |  |  | 2  |     |  |   | 17.75 |      
|Westlake Gardens                 |                                                    |               | 0.3 |         |   |            | 87.6  |           |   |              | 1,204 |        |  |  | 16 |     |  |   | 27.69 |      
|Westlake Gardens II              |                                                    |               | 0.3 |         |   |            | 100.0 |           |   |              | 1,243 |        |  |  | 4  |     |  |   | 25.44 |      
|Woodland Hills                   |                                                    |               | 1.2 |         |   |            | 87.5  |           |   |              | 4,616 |        |  |  | 68 |     |  |   | 23.45 |      
|Los Angeles Corporate Center     |                                                    |               | 2.0 |         |   |            | 97.9  |           |   |              | 7,889 |        |  |  | 45 |     |  |   | 20.70 |      
|Clarendon Crest                  |                                                    |               | 0.2 |         |   |            | 89.5  |           |   |              | 801   |        |  |  | 16 |     |  |   | 20.76 |      
|Lyons Plaza                      |                                                    |               | 0.3 |         |   |            | 68.3  |           |   |              | 1,001 |        |  |  | 23 |     |  |   | 23.95 |      
|Tourney Pointe                   |                                                    |               | 1.1 |         |   |            | 84.8  |           |   |              | 3,638 |        |  |  | 32 |     |  |   | 19.51 |      
|16000 Ventura                    |                                                    |               | 0.9 |         |   |            | 95.7  |           |   |              | 3,746 |        |  |  | 46 |     |  |   | 22.39 |      
|15250 Ventura                    |                                                    |               | 0.6 |         |   |            | 89.9  |           |   |              | 2,271 |        |  |  | 39 |     |  |   | 22.83 |      
|Noble Professional Center        |                                                    |               | 0.3 |         |   |            | 96.9  |           |   |              | 1,126 |        |  |  | 19 |     |  |   | 22.41 |      
|Sunset Point Plaza               |                                                    |               | 0.3 |         |   |            | 97.6  |           |   |              | 1,436 |        |  |  | 27 |     |  |   | 25.31 |      
|303 Glenoaks                     |                                                    |               | 0.9 |         |   |            | 59.0  |           |   |              | 2,450 |        |  |  | 23 |     |  |   | 23.68 |      
|                                
|601 S. Glenoaks                  |                                                    |               | 0.4 |         |   |            | 83.6  |           |   |              | 1,307 |        |  |  | 14 |     |  |   | 21.56 |      
|                                
|Burbank Executive Plaza          |                                                    |               | 0.3 |         |   |            | 74.3  |           |   |              | 1,112 |        |  |  | 13 |     |  |   | 24.80 |      
|California Federal Building      |                                                    |               | 0.4 |         |   |            | 84.2  |           |   |              | 1,297 |        |  |  | 12 |     |  |   | 18.96 |      
|425 West Broadway                |                                                    |               | 0.4 |         |   |            | 96.0  |           |   |              | 1,472 |        |  |  | 13 |     |  |   | 21.41 |      
|                                
|Glendale Corporate Center        |                                                    |               | 0.6 |         |   |            | 85.6  |           |   |              | 1,926 |        |  |  | 19 |     |  |   | 20.79 |      
|70 South Lake                    |                                                    |               | 0.5 |         |   |            | 97.3  |           |   |              | 2,480 |        |  |  | 17 |     |  |   | 25.47 |      
|                                
|150 East Colorado Boulevard      |                                                    |               | 0.3 |         |   |            | 94.0  |           |   |              | 1,306 |        |  |  | 19 |     |  |   | 22.71 |      
|299 N. Euclid                    |                                                    |               | 0.4 |         |   |            | 100.0 |           |   |              | 1,688 |        |  |  | 5  |     |  |   | 22.92 |      
|                                
|5161 Lankershim                  |                                                    |               | 0.9 |         |   |            | 83.6  |           |   |              | 3,358 |        |  |  | 7  |     |  |   | 22.53 |      
|                                
|535 N. Brand Blvd                |                                                    |               | 0.6 |         |   |            | 88.1  |           |   |              | 2,113 |        |  |  | 40 |     |  |   | 21.96 |      
|                                 |                                                    |               |     |         |   |            |       |           |   |              |       |        |  |  |    |     |  |   |       |      
|                                 | Subtotal/ Weighted Average  Los
    Angeles North |               |     | 16.9    | % |            |       | 89.1      | % |              | $     | 61,839 |  |  |    | 623 |  |   | $     | 21.48 | 
|Los Angeles South                |                                                    |               |     |         |   |            |       |           |   |              |       |        |  |  |    |     |  |   |       |      
|Long Beach Airport Bldg D(2)     |                                                    |               | 0.6 | %       |   |            | 100.0 | %         |   | $            | 1,211 |        |  |  | 1  |     |  | $ | 9.96  |      
|Long Beach Airport Bldg F & G(2) |                                                    |               | 0.8 |         |   |            | 100.0 |           |   |              | 1,354 |        |  |  | 1  |     |  |   | 9.00  |      
|5000 East Spring(2)              |                                                    |               | 0.9 |         |   |            | 85.4  |           |   |              | 3,407 |        |  |  | 33 |     |  |   | 24.43 |      
|100 Broadway                     |                                                    |               | 1.0 |         |   |            | 91.5  |           |   |              | 4,009 |        |  |  | 35 |     |  |   | 22.87 |      

11



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##### Table of Contents



|                            |                                                    |                               |  |                  |  |            |  |              |         |           | 
|--------------------------- | -------------------------------------------------- | ----------------------------- |  | ---------------- |  | ---------- |  | ------------ | ------- | --------- | 
|                            |                                                    |                               |  |                  |  | Year(s)    |  | Approximate 
|Property                    |                                                    |                               |  |                  |  | Built/     |  | Net Rentable
|Name                        |                                                    | Submarket                     |  | Location         |  | Renovated  |  | Square Feet 
|                            |                                                    |                               |  |                  |  |            |  |             
|1501 Hughes Way             |                                                    | Long Beach                    |  | Long Beach       |  | 1983/97    |  |              | 77,060  |          
|3901 Via Oro                |                                                    | Long Beach                    |  | Long Beach       |  | 1986/97    |  |              | 53,195  |          
|Oceangate Tower             |                                                    | Long Beach                    |  | Long Beach       |  | 1971/93-94 |  |              | 210,907 |          
|Continental Grand Plaza     |                                                    | El Segundo                    |  | El Segundo       |  | 1986       |  |              | 235,926 |          
|Grand Avenue Plaza (1970)   |                                                    | El Segundo                    |  | El Segundo       |  | 1980       |  |              | 81,448  |          
|5200 West Century           |                                                    | Marina Area/ Culver City/ LAX |  | Culver City      |  | 1982/98-99 |  |              | 310,910 |          
|Skyview Center              |                                                    | Marina Area/ Culver City/ LAX |  | Los Angeles      |  | 1981/87/95 |  |              | 391,675 |          
|South Bay Centre            |                                                    | Torrance                      |  | Gardena          |  | 1984       |  |              | 202,830 |          
|Pacific Gateway             |                                                    | Torrance                      |  | Torrance         |  | 1982/90    |  |              | 223,731 |          
|Mariner Court               |                                                    | Torrance                      |  | Torrance         |  | 1989       |  |              | 105,436 |          
|South Bay Tech              |                                                    | Torrance                      |  | Torrance         |  | 1984       |  |              | 104,815 |          
|Gateway Towers              |                                                    | Torrance                      |  | Torrance         |  | 1984/86    |  |              | 432,894 |          
|                            |                                                    |                               |  |                  |  |            |  |              |         |          
|                            | Subtotal/ Weighted Average  Los
    Angeles South |                               |  |                  |  |            |  |              |         | 3,057,925 | 
|Orange County               |                                                    |                               |  |                  |  |            |  |              |         |          
|Whittier                    |                                                    | San Gabriel Valley            |  | Whittier         |  | 1982       |  |              | 135,415 |          
|1370 Valley Vista           |                                                    | San Gabriel Valley            |  | Diamond Bar      |  | 1988       |  |              | 84,081  |          
|5832 Bolsa                  |                                                    | West County                   |  | Huntington Beach |  | 1985       |  |              | 49,355  |          
|Huntington Beach Plaza      |                                                    | West County                   |  | Huntington Beach |  | 1984/96    |  |              | 52,186  |          
|5702 Bolsa                  |                                                    | West County                   |  | Huntington Beach |  | 1987/97    |  |              | 27,731  |          
|5672 Bolsa                  |                                                    | West County                   |  | Huntington Beach |  | 1987       |  |              | 11,968  |          
|5632 Bolsa                  |                                                    | West County                   |  | Huntington Beach |  | 1987       |  |              | 21,568  |          
|Huntington Commerce Center  |                                                    | West County                   |  | Huntington Beach |  | 1987       |  |              | 67,551  |          
|City Centre                 |                                                    | West County                   |  | Fountain Valley  |  | 1982       |  |              | 302,519 |          
|Fountain Valley Plaza       |                                                    | West County                   |  | Fountain Valley  |  | 1982       |  |              | 107,252 |          
|3300 Irvine Avenue          |                                                    | Greater Airport Area          |  | Newport Beach    |  | 1981/97    |  |              | 74,224  |          
|1821 Dyer                   |                                                    | Greater Airport Area          |  | Irvine           |  | 1980/88    |  |              | 115,061 |          
|Von Karman Corporate Center |                                                    | Greater Airport Area          |  | Irvine           |  | 1981/84    |  |              | 451,477 |          
|Norwalk                     |                                                    | Long Beach                    |  | Norwalk          |  | 1978/94    |  |              | 122,175 |          
|91 Freeway Center           |                                                    | Mid-Cities                    |  | Artesia          |  | 1986/97    |  |              | 93,277  |          
|1503 South Coast            |                                                    | Greater Airport Area          |  | Costa Mesa       |  | 1979/97    |  |              | 60,605  |          
|222 South Harbor(2)         |                                                    | Tri-Freeway Area              |  | Anaheim          |  | 1986/91    |  |              | 175,391 |          
|Crown Cabot Financial       |                                                    | South County                  |  | Laguna Niguel    |  | 1989       |  |              | 172,900 |          
|625 The City                |                                                    | Tri-Freeway Area              |  | Orange           |  | 1985/97    |  |              | 139,806 |          
|Orange Financial Center     |                                                    | Central County                |  | Orange           |  | 1985/95    |  |              | 305,439 |          
|Centerpointe La Palma       |                                                    | North County                  |  | La Palma         |  | 1986/88/90 |  |              | 597,550 |          
|Lambert Office Plaza        |                                                    | North County                  |  | Brea             |  | 1986/97    |  |              | 32,807  |          

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                            |                                                    |               |     |         |   |            |       |           |   |              |        |        |  |  |    |     |  |   |       |       | 
|--------------------------- | -------------------------------------------------- | ------------- | --- | ------- | - | ---------- | ----- | --------- | - | ------------ | ------ | ------ |  |  | -- | --- |  | - | ----- | ----- | 
|                            |                                                    |               |     |         |   |            |       |           |   | Annualized  
|                            |                                                    | Percentage of |     |         |   |            |       |           |   | Base Rent   
|                            |                                                    | Total         |     |         |   |            |       |           |   | per Leased  
|                            |                                                    | Portfolio Net |     |         |   | Annualized |       |           |   | Net Rentable
|Property                    |                                                    | Rentable      |     | Percent |   | Base Rent  |       | Number of |   | Square      
|Name                        |                                                    | Square Feet   |     | Leased  |   | ($000s)    |       | Leases    |   | Feet(1)     
|                            |                                                    |               |     |         |   |            |       |           |   |             
|1501 Hughes Way             |                                                    |               | 0.4 |         |   |            | 79.0  |           |   |              | 1,123  |        |  |  | 4  |     |  |   | 18.45 |      
|3901 Via Oro                |                                                    |               | 0.3 |         |   |            | 90.1  |           |   |              | 868    |        |  |  | 4  |     |  |   | 18.12 |      
|Oceangate Tower             |                                                    |               | 1.1 |         |   |            | 91.1  |           |   |              | 3,457  |        |  |  | 40 |     |  |   | 17.99 |      
|Continental Grand Plaza     |                                                    |               | 1.2 |         |   |            | 73.4  |           |   |              | 4,679  |        |  |  | 29 |     |  |   | 27.01 |      
|Grand Avenue Plaza (1970)   |                                                    |               | 0.4 |         |   |            | 82.6  |           |   |              | 1,225  |        |  |  | 4  |     |  |   | 18.20 |      
|5200 West Century           |                                                    |               | 1.6 |         |   |            | 100.0 |           |   |              | 5,698  |        |  |  | 40 |     |  |   | 17.85 |      
|Skyview Center              |                                                    |               | 2.0 |         |   |            | 77.3  |           |   |              | 5,182  |        |  |  | 53 |     |  |   | 17.12 |      
|South Bay Centre            |                                                    |               | 1.1 |         |   |            | 94.9  |           |   |              | 3,594  |        |  |  | 35 |     |  |   | 18.67 |      
|Pacific Gateway             |                                                    |               | 1.2 |         |   |            | 98.7  |           |   |              | 4,608  |        |  |  | 41 |     |  |   | 20.87 |      
|Mariner Court               |                                                    |               | 0.6 |         |   |            | 96.7  |           |   |              | 2,017  |        |  |  | 37 |     |  |   | 19.78 |      
|South Bay Tech              |                                                    |               | 0.5 |         |   |            | 68.0  |           |   |              | 1,228  |        |  |  | 8  |     |  |   | 17.22 |      
|Gateway Towers              |                                                    |               | 2.3 |         |   |            | 91.1  |           |   |              | 9,144  |        |  |  | 66 |     |  |   | 23.19 |      
|                            |                                                    |               |     |         |   |            |       |           |   |              |        |        |  |  |    |     |  |   |       |      
|                            | Subtotal/ Weighted Average  Los
    Angeles South |               |     | 16.0    | % |            |       | 89.3      | % |              | $      | 52,804 |  |  |    | 431 |  |   | $     | 19.34 | 
|Orange County               |                                                    |               |     |         |   |            |       |           |   |              |        |        |  |  |    |     |  |   |       |      
|Whittier                    |                                                    |               | 0.7 | %       |   |            | 97.4  | %         |   | $            | 3,014  |        |  |  | 45 |     |  | $ | 22.85 |      
|1370 Valley Vista           |                                                    |               | 0.4 |         |   |            | 100.0 |           |   |              | 1,735  |        |  |  | 15 |     |  |   | 20.44 |      
|5832 Bolsa                  |                                                    |               | 0.3 |         |   |            | 100.0 |           |   |              | 740    |        |  |  | 1  |     |  |   | 15.00 |      
|Huntington Beach Plaza      |                                                    |               | 0.3 |         |   |            | 73.5  |           |   |              | 644    |        |  |  | 15 |     |  |   | 16.79 |      
|5702 Bolsa                  |                                                    |               | 0.1 |         |   |            | 100.0 |           |   |              | 220    |        |  |  | 2  |     |  |   | 7.92  |      
|5672 Bolsa                  |                                                    |               | 0.1 |         |   |            | 100.0 |           |   |              | 98     |        |  |  | 1  |     |  |   | 8.16  |      
|5632 Bolsa                  |                                                    |               | 0.1 |         |   |            | 100.0 |           |   |              | 181    |        |  |  | 1  |     |  |   | 8.40  |      
|Huntington Commerce Center  |                                                    |               | 0.4 |         |   |            | 81.2  |           |   |              | 500    |        |  |  | 20 |     |  |   | 9.11  |      
|City Centre                 |                                                    |               | 1.6 |         |   |            | 97.1  |           |   |              | 5,772  |        |  |  | 20 |     |  |   | 19.65 |      
|Fountain Valley Plaza       |                                                    |               | 0.6 |         |   |            | 100.0 |           |   |              | 2,254  |        |  |  | 9  |     |  |   | 20.91 |      
|3300 Irvine Avenue          |                                                    |               | 0.4 |         |   |            | 91.2  |           |   |              | 1,680  |        |  |  | 27 |     |  |   | 24.83 |      
|1821 Dyer                   |                                                    |               | 0.6 |         |   |            | 94.3  |           |   |              | 1,246  |        |  |  | 3  |     |  |   | 11.49 |      
|Von Karman Corporate Center |                                                    |               | 2.4 |         |   |            | 97.7  |           |   |              | 9,240  |        |  |  | 32 |     |  |   | 20.95 |      
|Norwalk                     |                                                    |               | 0.6 |         |   |            | 97.8  |           |   |              | 2,142  |        |  |  | 9  |     |  |   | 17.92 |      
|91 Freeway Center           |                                                    |               | 0.5 |         |   |            | 93.3  |           |   |              | 1,763  |        |  |  | 29 |     |  |   | 20.25 |      
|1503 South Coast            |                                                    |               | 0.3 |         |   |            | 79.2  |           |   |              | 899    |        |  |  | 21 |     |  |   | 18.74 |      
|222 South Harbor(2)         |                                                    |               | 0.9 |         |   |            | 84.9  |           |   |              | 3,034  |        |  |  | 20 |     |  |   | 20.38 |      
|Crown Cabot Financial       |                                                    |               | 0.9 |         |   |            | 94.9  |           |   |              | 4,699  |        |  |  | 39 |     |  |   | 28.65 |      
|625 The City                |                                                    |               | 0.7 |         |   |            | 87.6  |           |   |              | 2,540  |        |  |  | 31 |     |  |   | 20.75 |      
|Orange Financial Center     |                                                    |               | 1.6 |         |   |            | 98.1  |           |   |              | 6,506  |        |  |  | 37 |     |  |   | 21.72 |      
|Centerpointe La Palma       |                                                    |               | 3.1 |         |   |            | 95.6  |           |   |              | 10,533 |        |  |  | 89 |     |  |   | 18.44 |      
|Lambert Office Plaza        |                                                    |               | 0.2 |         |   |            | 95.3  |           |   |              | 677    |        |  |  | 11 |     |  |   | 21.64 |      

12



---



##### Table of Contents



|                            |                                                   |                             |  |                   |  |           |  |              |         |           | 
|--------------------------- | ------------------------------------------------- | --------------------------- |  | ----------------- |  | --------- |  | ------------ | ------- | --------- | 
|                            |                                                   |                             |  |                   |  | Year(s)   |  | Approximate 
|Property                    |                                                   |                             |  |                   |  | Built/    |  | Net Rentable
|Name                        |                                                   | Submarket                   |  | Location          |  | Renovated |  | Square Feet 
|                            |                                                   |                             |  |                   |  |           |  |             
|Savi Tech Center            |                                                   | North County                |  | Yorba Linda       |  | 1989      |  |              | 341,446 |          
|Yorba Linda Business Park   |                                                   | North County                |  | Yorba Linda       |  | 1988      |  |              | 167,142 |          
|                            |                                                   |                             |  |                   |  |           |  |              |         |          
|                            | Subtotal/ Weighted Average  Orange County        |                             |  |                   |  |           |  |              |         | 3,708,926 | 
|San Diego County            |                                                   |                             |  |                   |  |           |  |              |         |          
|701 B Street(2)             |                                                   | Downtown                    |  | San Diego         |  | 1982/96   |  |              | 540,413 |          
|Foremost Professional Plaza |                                                   | I-15 Corridor               |  | San Diego         |  | 1992      |  |              | 60,534  |          
|Activity Business Center    |                                                   | I-15 Corridor               |  | San Diego         |  | 1987      |  |              | 167,045 |          
|Bernardo Regency            |                                                   | I-15 Corridor               |  | San Diego         |  | 1986      |  |              | 47,916  |          
|Carlsbad Corporate Center   |                                                   | North Coast                 |  | Carlsbad          |  | 1996      |  |              | 125,000 |          
|10180 Scripps Ranch         |                                                   | I-15 Corridor               |  | San Diego         |  | 1978/96   |  |              | 43,560  |          
|Cymer Technology Center     |                                                   | I-15 Corridor               |  | Rancho Bernardino |  | 1986      |  |              | 155,612 |          
|Via Frontera                |                                                   | I-15 Corridor               |  | Rancho Bernardino |  | 1982/97   |  |              | 77,920  |          
|Poway Industrial            |                                                   | I-15 Corridor               |  | Poway             |  | 1991/96   |  |              | 112,000 |          
|Balboa Corporate Center     |                                                   | Mission Valley/ Kearny Mesa |  | San Diego         |  | 1990      |  |              | 69,890  |          
|Panorama Corporate Center   |                                                   | Mission Valley/ Kearny Mesa |  | San Diego         |  | 1991      |  |              | 133,149 |          
|Ruffin Corporate Center     |                                                   | Mission Valley/ Kearny Mesa |  | San Diego         |  | 1990      |  |              | 45,059  |          
|Skypark Office Plaza        |                                                   | Mission Valley/ Kearny Mesa |  | San Diego         |  | 1986      |  |              | 202,164 |          
|Governor Park Plaza         |                                                   | North City                  |  | San Diego         |  | 1986      |  |              | 104,065 |          
|Westridge                   |                                                   | North City                  |  | San Diego         |  | 1984/96   |  |              | 48,955  |          
|5120 Shoreham               |                                                   | North City                  |  | San Diego         |  | 1984      |  |              | 37,759  |          
|Morehouse Tech Center       |                                                   | North City                  |  | San Diego         |  | 1984      |  |              | 181,207 |          
|Torreyana Science Park      |                                                   | North City                  |  | La Jolla          |  | 1980/97   |  |              | 81,204  |          
|Waples Tech Center          |                                                   | North City                  |  | San Diego         |  | 1990      |  |              | 28,119  |          
|Genesee Executive Plaza     |                                                   | North City                  |  | San Diego         |  | 1984      |  |              | 155,820 |          
|10251 Vista Sorrento        |                                                   | North City                  |  | San Diego         |  | 1981/95   |  |              | 69,386  |          
|Carmel Valley Centre        |                                                   | Del Mar Heights             |  | San Diego         |  | 1987/89   |  |              | 107,197 |          
|Governor Executive Center   |                                                   | Governor Park               |  | San Diego         |  | 1988      |  |              | 52,195  |          
|Crossroads                  |                                                   | Mission Valley              |  | San Diego         |  | 1979      |  |              | 133,566 |          
|Carmel View Office Plaza    |                                                   | Rancho Bernardo/ Poway      |  | San Diego         |  | 1985      |  |              | 77,460  |          
|                            |                                                   |                             |  |                   |  |           |  |              |         |          
|                            | Subtotal/ Weighted Average  San Diego
    County |                             |  |                   |  |           |  |              |         | 2,857,195 | 

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                            |                                                   |               |     |         |   |            |       |           |   |              |        |        |  |  |    |     |  |   |       |       | 
|--------------------------- | ------------------------------------------------- | ------------- | --- | ------- | - | ---------- | ----- | --------- | - | ------------ | ------ | ------ |  |  | -- | --- |  | - | ----- | ----- | 
|                            |                                                   |               |     |         |   |            |       |           |   | Annualized  
|                            |                                                   | Percentage of |     |         |   |            |       |           |   | Base Rent   
|                            |                                                   | Total         |     |         |   |            |       |           |   | per Leased  
|                            |                                                   | Portfolio Net |     |         |   | Annualized |       |           |   | Net Rentable
|Property                    |                                                   | Rentable      |     | Percent |   | Base Rent  |       | Number of |   | Square      
|Name                        |                                                   | Square Feet   |     | Leased  |   | ($000s)    |       | Leases    |   | Feet(1)     
|                            |                                                   |               |     |         |   |            |       |           |   |             
|Savi Tech Center            |                                                   |               | 1.8 |         |   |            | 100.0 |           |   |              | 3,130  |        |  |  | 4  |     |  |   | 9.17  |      
|Yorba Linda Business Park   |                                                   |               | 0.8 |         |   |            | 98.6  |           |   |              | 1,435  |        |  |  | 61 |     |  |   | 8.70  |      
|                            |                                                   |               |     |         |   |            |       |           |   |              |        |        |  |  |    |     |  |   |       |      
|                            | Subtotal/ Weighted Average  Orange County        |               |     | 19.4    | % |            |       | 95.4      | % |              | $      | 64,682 |  |  |    | 542 |  |   | $     | 18.28 | 
|San Diego County            |                                                   |               |     |         |   |            |       |           |   |              |        |        |  |  |    |     |  |   |       |      
|701 B Street(2)             |                                                   |               | 2.8 | %       |   |            | 86.8  | %         |   | $            | 10,110 |        |  |  | 78 |     |  | $ | 21.56 |      
|Foremost Professional Plaza |                                                   |               | 0.3 |         |   |            | 88.5  |           |   |              | 1,373  |        |  |  | 30 |     |  |   | 25.62 |      
|Activity Business Center    |                                                   |               | 0.8 |         |   |            | 92.8  |           |   |              | 2,217  |        |  |  | 40 |     |  |   | 14.30 |      
|Bernardo Regency            |                                                   |               | 0.3 |         |   |            | 64.4  |           |   |              | 780    |        |  |  | 14 |     |  |   | 25.30 |      
|Carlsbad Corporate Center   |                                                   |               | 0.7 |         |   |            | 100.0 |           |   |              | 1,207  |        |  |  | 1  |     |  |   | 9.36  |      
|10180 Scripps Ranch         |                                                   |               | 0.2 |         |   |            | 100.0 |           |   |              | 445    |        |  |  | 1  |     |  |   | 10.22 |      
|Cymer Technology Center     |                                                   |               | 0.8 |         |   |            | 100.0 |           |   |              | 1,813  |        |  |  | 2  |     |  |   | 11.65 |      
|Via Frontera                |                                                   |               | 0.4 |         |   |            | 100.0 |           |   |              | 834    |        |  |  | 6  |     |  |   | 10.58 |      
|Poway Industrial            |                                                   |               | 0.6 |         |   |            | 100.0 |           |   |              | 672    |        |  |  | 1  |     |  |   | 6.00  |      
|Balboa Corporate Center     |                                                   |               | 0.4 |         |   |            | 100.0 |           |   |              | 843    |        |  |  | 1  |     |  |   | 12.06 |      
|Panorama Corporate Center   |                                                   |               | 0.7 |         |   |            |      |           |   |              |       |        |  |  |   |     |  |   |      |      
|Ruffin Corporate Center     |                                                   |               | 0.2 |         |   |            | 100.0 |           |   |              | 495    |        |  |  | 1  |     |  |   | 10.98 |      
|Skypark Office Plaza        |                                                   |               | 1.1 |         |   |            | 99.6  |           |   |              | 4,023  |        |  |  | 19 |     |  |   | 19.98 |      
|Governor Park Plaza         |                                                   |               | 0.5 |         |   |            | 93.1  |           |   |              | 2,334  |        |  |  | 20 |     |  |   | 24.10 |      
|Westridge                   |                                                   |               | 0.3 |         |   |            | 100.0 |           |   |              | 752    |        |  |  | 4  |     |  |   | 15.37 |      
|5120 Shoreham               |                                                   |               | 0.2 |         |   |            | 94.9  |           |   |              | 750    |        |  |  | 6  |     |  |   | 20.94 |      
|Morehouse Tech Center       |                                                   |               | 0.9 |         |   |            | 89.3  |           |   |              | 2,908  |        |  |  | 7  |     |  |   | 17.97 |      
|Torreyana Science Park      |                                                   |               | 0.4 |         |   |            | 100.0 |           |   |              | 1,894  |        |  |  | 1  |     |  |   | 23.32 |      
|Waples Tech Center          |                                                   |               | 0.1 |         |   |            | 91.9  |           |   |              | 364    |        |  |  | 3  |     |  |   | 14.07 |      
|Genesee Executive Plaza     |                                                   |               | 0.8 |         |   |            | 75.1  |           |   |              | 3,178  |        |  |  | 18 |     |  |   | 27.17 |      
|10251 Vista Sorrento        |                                                   |               | 0.4 |         |   |            | 100.0 |           |   |              | 1,193  |        |  |  | 1  |     |  |   | 17.20 |      
|Carmel Valley Centre        |                                                   |               | 0.6 |         |   |            | 94.1  |           |   |              | 3,153  |        |  |  | 15 |     |  |   | 31.25 |      
|Governor Executive Center   |                                                   |               | 0.3 |         |   |            | 97.0  |           |   |              | 1,291  |        |  |  | 11 |     |  |   | 25.50 |      
|Crossroads                  |                                                   |               | 0.7 |         |   |            | 100.0 |           |   |              | 2,680  |        |  |  | 12 |     |  |   | 20.07 |      
|Carmel View Office Plaza    |                                                   |               | 0.4 |         |   |            | 95.5  |           |   |              | 1,785  |        |  |  | 14 |     |  |   | 24.11 |      
|                            |                                                   |               |     |         |   |            |       |           |   |              |        |        |  |  |    |     |  |   |       |      
|                            | Subtotal/ Weighted Average  San Diego
    County |               |     | 14.9    | % |            |       | 88.9      | % |              | $      | 47,094 |  |  |    | 306 |  |   | $     | 18.54 | 

13



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##### Table of Contents



|                                          |                                                                        |                    |  |                  |  |           |  |              |         |            | 
|----------------------------------------- | ---------------------------------------------------------------------- | ------------------ |  | ---------------- |  | --------- |  | ------------ | ------- | ---------- | 
|                                          |                                                                        |                    |  |                  |  | Year(s)   |  | Approximate 
|Property                                  |                                                                        |                    |  |                  |  | Built/    |  | Net Rentable
|Name                                      |                                                                        | Submarket          |  | Location         |  | Renovated |  | Square Feet 
|                                          |                                                                        |                    |  |                  |  |           |  |             
|Ventura & Kern Counties                   |                                                                        |                    |  |                  |  |           |  |              |         |           
|Parkway Center I                          |                                                                        | Bakersfield        |  | Bakersfield      |  | 1992/95   |  |              | 61,333  |           
|4900 California                           |                                                                        | Bakersfield        |  | Bakersfield      |  | 1983      |  |              | 155,189 |           
|Center Promenade                          |                                                                        | West County        |  | Ventura          |  | 1982      |  |              | 174,837 |           
|1000 Town Center                          |                                                                        | West County        |  | Oxnard           |  | 1989      |  |              | 107,656 |           
|Solar Drive Business Center               |                                                                        | West County        |  | Oxnard           |  | 1982      |  |              | 125,132 |           
|Camarillo Business Park                   |                                                                        | West County        |  | Camarillo        |  | 1984/97   |  |              | 154,216 |           
|                                          |                                                                        |                    |  |                  |  |           |  |              |         |           
|                                          | Subtotal/ Weighted Average  Ventura
    & Kern Counties               |                    |  |                  |  |           |  |              |         | 778,363    | 
|Riverside and San Bernardino
    Counties |                                                                        |                    |  |                  |  |           |  |              |         |           
|Centrelake Plaza                          |                                                                        | Inland Empire West |  | Ontario          |  | 1989      |  |              | 110,763 |           
|Tower Plaza Retail                        |                                                                        | Temecula           |  | Temecula         |  | 1970/97   |  |              | 133,481 |           
|Chicago Avenue Business Park              |                                                                        | Inland Empire East |  | Riverside        |  | 1986      |  |              | 47,482  |           
|Havengate Center                          |                                                                        | Inland Empire East |  | Rancho Cucamonga |  | 1985      |  |              | 80,557  |           
|HDS Plaza                                 |                                                                        | Inland Empire East |  | San Bernardino   |  | 1987      |  |              | 104,178 |           
|                                          |                                                                        |                    |  |                  |  |           |  |              |         |           
|                                          | Subtotal/ Weighted Average  Riverside
    and San Bernardino Counties |                    |  |                  |  |           |  |              |         | 476,461    | 
|                                          |                                                                        |                    |  |                  |  |           |  |              |         |           
|                                          | Portfolio Total/
    Weighted Average                                  |                    |  |                  |  |           |  |              |         | 19,132,176 | 
|                                          |                                                                        |                    |  |                  |  |           |  |              |         |           

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                          |                                                                        |               |     |         |   |            |       |           |   |              |       |         |  |  |    |       |  |   |       |       | 
|----------------------------------------- | ---------------------------------------------------------------------- | ------------- | --- | ------- | - | ---------- | ----- | --------- | - | ------------ | ----- | ------- |  |  | -- | ----- |  | - | ----- | ----- | 
|                                          |                                                                        |               |     |         |   |            |       |           |   | Annualized  
|                                          |                                                                        | Percentage of |     |         |   |            |       |           |   | Base Rent   
|                                          |                                                                        | Total         |     |         |   |            |       |           |   | per Leased  
|                                          |                                                                        | Portfolio Net |     |         |   | Annualized |       |           |   | Net Rentable
|Property                                  |                                                                        | Rentable      |     | Percent |   | Base Rent  |       | Number of |   | Square      
|Name                                      |                                                                        | Square Feet   |     | Leased  |   | ($000s)    |       | Leases    |   | Feet(1)     
|                                          |                                                                        |               |     |         |   |            |       |           |   |             
|Ventura & Kern Counties                   |                                                                        |               |     |         |   |            |       |           |   |              |       |         |  |  |    |       |  |   |       |      
|Parkway Center I                          |                                                                        |               | 0.3 | %       |   |            | 95.6  | %         |   | $            | 1,099 |         |  |  | 13 |       |  | $ | 18.74 |      
|4900 California                           |                                                                        |               | 0.8 |         |   |            | 95.5  |           |   |              | 2,583 |         |  |  | 18 |       |  |   | 17.43 |      
|Center Promenade                          |                                                                        |               | 0.9 |         |   |            | 98.3  |           |   |              | 2,988 |         |  |  | 64 |       |  |   | 17.38 |      
|1000 Town Center                          |                                                                        |               | 0.6 |         |   |            | 94.8  |           |   |              | 2,119 |         |  |  | 9  |       |  |   | 20.76 |      
|Solar Drive Business Center               |                                                                        |               | 0.7 |         |   |            | 100.0 |           |   |              | 2,300 |         |  |  | 37 |       |  |   | 17.64 |      
|Camarillo Business Park                   |                                                                        |               | 0.8 |         |   |            | 91.9  |           |   |              | 2,809 |         |  |  | 24 |       |  |   | 19.82 |      
|                                          |                                                                        |               |     |         |   |            |       |           |   |              |       |         |  |  |    |       |  |   |       |      
|                                          | Subtotal/ Weighted Average  Ventura
    & Kern Counties               |               |     | 4.1     | % |            |       | 96.7      | % |              | $     | 13,898  |  |  |    | 165   |  |   | $     | 18.46 | 
|Riverside and San Bernardino
    Counties |                                                                        |               |     |         |   |            |       |           |   |              |       |         |  |  |    |       |  |   |       |      
|Centrelake Plaza                          |                                                                        |               | 0.6 | %       |   |            | 98.5  | %         |   | $            | 2,530 |         |  |  | 22 |       |  | $ | 23.21 |      
|Tower Plaza Retail                        |                                                                        |               | 0.7 |         |   |            | 91.2  |           |   |              | 1,475 |         |  |  | 24 |       |  |   | 12.12 |      
|Chicago Avenue Business Park              |                                                                        |               | 0.3 |         |   |            | 92.7  |           |   |              | 660   |         |  |  | 8  |       |  |   | 14.99 |      
|Havengate Center                          |                                                                        |               | 0.4 |         |   |            | 94.5  |           |   |              | 1,303 |         |  |  | 18 |       |  |   | 17.11 |      
|HDS Plaza                                 |                                                                        |               | 0.5 |         |   |            | 95.8  |           |   |              | 1,824 |         |  |  | 13 |       |  |   | 18.28 |      
|                                          |                                                                        |               |     |         |   |            |       |           |   |              |       |         |  |  |    |       |  |   |       |      
|                                          | Subtotal/ Weighted Average  Riverside
    and San Bernardino Counties |               |     | 2.5     | % |            |       | 94.6      | % |              | $     | 7,792   |  |  |    | 85    |  |   | $     | 17.29 | 
|                                          |                                                                        |               |     |         |   |            |       |           |   |              |       |         |  |  |    |       |  |   |       |      
|                                          | Portfolio Total/
    Weighted Average                                  |               |     | 100     | % |            |       | 91.4      | % |              | $     | 378,755 |  |  |    | 3,095 |  |   | $     | 21.67 | 
|                                          |                                                                        |               |     |         |   |            |       |           |   |              |       |         |  |  |    |       |  |   |       |      




|    |                                                                                                                                                                                                                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Calculated as monthly contractual base rent under
    existing leases as of December 31, 2002, multiplied by 12
    and divided by leased net rentable square feet, for those leases
    where rent has not yet commenced or which are in a free rent
    period, the first month in which rent is to be received is used
    to determine annualized base rent.
|   
|(2) | We lease the land underlying these properties or
    their parking structures pursuant to long term ground leases.                                                                                                                                                                                                                                              
|   
|(3) | This property was sold on March 11, 2003 for
    approximately $32.5 million.                                                                                                                                                                                                                                                                                   

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Tenant Information

As of December 31, 2002, we had over 3,000
tenants, with no one tenant representing more than 2.2% of the
aggregate annualized base rent of our properties, and only 4
tenants individually representing more than 1.0% of our
aggregate annualized base rent. Our properties are leased to
local, national and foreign companies engaged in a variety of
businesses including financial services, entertainment, health
care services, accounting, law, education, publishing and local,
state and federal government entities.

Our leases are typically structured for terms of
three to ten years. Leases typically contain provisions
permitting tenants to renew expiring leases at prevailing market
rates. Approximately 79% of our total rentable square footage is
under full service gross leases under which tenants typically
pay for all real estate taxes and operating expenses above those
for an established base year or expense stop. Our remaining
square footage is under triple net and modified gross leases.
Triple net and modified gross leases are those where tenants pay
not only base rent, but also some or all real estate taxes and
operating expenses of the leased property. Tenants generally
reimburse us the full direct cost, without regard to a base year
or expense stop, for use of lighting, heating and air
conditioning during non-business hours, and for on-site monthly
employee and visitor parking. We are generally responsible for
structural repairs.

The following table presents information as of
December 31, 2002 derived from our ten largest tenants
based on the percentage of aggregate portfolio annualized base
rent:

|                                 |                            |           |    |            |  |               |     |               |  |              |      |            |   |  |      |       |   |  |         |           |  |   |       |        | 
|-------------------------------- | -------------------------- | --------- | -- | ---------- |  | ------------- | --- | ------------- |  | ------------ | ---- | ---------- | - |  | ---- | ----- | - |  | ------- | --------- |  | - | ----- | ------ | 
|                                 |                            |           |    | Weighted   |  | Percentage of |     | Percentage of |  |              |      |           
|                                 |                            |           |    | Average    |  | Aggregate     |     | Aggregate     |  |              |      |           
|                                 |                            |           |    | Remaining  |  | Portfolio     |     | Portfolio     |  |              |      | Annualized
|                                 |                            | Number of |    | Lease Term |  | Leased        |     | Annualized    |  | Net Rentable |      | Base Rent 
|Tenant                           |                            | Leases    |    | in Months  |  | Square Feet   |     | Base Rent(1)  |  | Square Feet  |      | ($000s)  
|                                 |                            |           |    |            |  |               |     |               |  |              |      |           
|Vivendi Universal                |                            |           | 4  |            |  |               | 88  |               |  |              | 1.32 | %          |   |  | 2.14 | %     |   |  | 231,681 |           |  | $ | 8,111 |       
|State of California              |                            |           | 41 |            |  |               | 46  |               |  |              | 1.99 |            |   |  | 1.93 |       |   |  | 347,626 |           |  |   | 7,322 |       
|University of Phoenix            |                            |           | 20 |            |  |               | 22  |               |  |              | 1.44 |            |   |  | 1.32 |       |   |  | 251,293 |           |  |   | 4,982 |       
|Univision Television Group, Inc. |                            |           | 2  |            |  |               | 226 |               |  |              | 0.95 |            |   |  | 1.12 |       |   |  | 166,363 |           |  |   | 4,247 |       
|Ceridian Corporation             |                            |           | 5  |            |  |               | 80  |               |  |              | 0.92 |            |   |  | 0.95 |       |   |  | 160,805 |           |  |   | 3,589 |       
|U.S. Government                  |                            |           | 24 |            |  |               | 43  |               |  |              | 0.78 |            |   |  | 0.84 |       |   |  | 136,158 |           |  |   | 3,192 |       
|SBC Communications, Inc.         |                            |           | 8  |            |  |               | 28  |               |  |              | 0.83 |            |   |  | 0.83 |       |   |  | 144,927 |           |  |   | 3,140 |       
|Verizon Communications, Inc.     |                            |           | 8  |            |  |               | 20  |               |  |              | 0.90 |            |   |  | 0.70 |       |   |  | 156,612 |           |  |   | 2,659 |       
|Atlantic Richfield               |                            |           | 13 |            |  |               | 44  |               |  |              | 0.72 |            |   |  | 0.70 |       |   |  | 126,830 |           |  |   | 2,659 |       
|Boeing                           |                            |           | 2  |            |  |               | 34  |               |  |              | 1.56 |            |   |  | 0.68 |       |   |  | 272,013 |           |  |   | 2,565 |       
|                                 |                            |           |    |            |  |               |     |               |  |              |      |            |   |  |      |       |   |  |         |           |  |   |       |       
|                                 | Total/ Weighted Average(2) |           |    | 127        |  |               |     | 60            |  |              |      | 11.41      | % |  |      | 11.21 | % |  |         | 1,994,308 |  |   | $     | 42,466 | 
|                                 |                            |           |    |            |  |               |     |               |  |              |      |            |   |  |      |       |   |  |         |           |  |   |       |       




|    |                                                                                                                                                                                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Annualized base rent is calculated as monthly
    contractual base rent under existing leases as of
    December 31, 2002, multiplied by 12; for those leases where
    rent has not yet commenced or which are in a free rent period,
    the first month in which rent is to be received is used to
    determine annualized base rent.
|   
|(2) | The weighted average calculation is based on net
    rentable square footage leased by each tenant.                                                                                                                                                                                                                                      

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##### Table of Contents



The following table presents the diversification
of the tenants occupying space in our portfolio by industry as
of December 31, 2002:

|                                                                             |                                                                    |                            |         |          |     |               |           |           |            |  |       |       |        |  
|---------------------------------------------------------------------------- | ------------------------------------------------------------------ | -------------------------- | ------- | -------- | --- | ------------- | --------- | --------- | ---------- |  | ----- | ----- | ------ | -
|                                                                             |                                                                    |                            |         |          |     | Percentage of
|                                                                             |                                                                    |                            |         | Occupied |     | Total        
|                                                                             |                                                                    | NAICS                      |         | Square   |     | Occupied     
|North American Industrial Classification System Description                  |                                                                    | Code                       |         | Feet     |     | Portfolio    
|                                                                             |                                                                    |                            |         |          |     |              
|Professional, Scientific, and Technical Services:                            |                                                                    |                            |         |          |     |               |           |           |            |  |       |      
|                                                                             | Legal Services                                                     |                            |         | 5411     |     |               |           | 1,232,234 |            |  |       | 7.15  | %     
|                                                                             | Accounting & Tax Preparation, Bookkeeping and
    Payroll Services |                            |         | 5412     |     |               |           | 665,891   |            |  |       | 3.86  |       
|                                                                             | Management, Scientific and Technical Consulting
    Services       |                            |         | 5416     |     |               |           | 716,168   |            |  |       | 4.15  |       
|                                                                             | Other Services                                                     |                            |         |          |     |               |           | 1,792,026 |            |  |       | 10.40 |       
|                                                                             |                                                                    |                            |         |          |     |               |           |           |            |  |       |      
|                                                                             |                                                                    | Subtotal                   |         |          | 541 |               |           |           | 4,406,319  |  |       |       | 25.56  |  
|Finance and Insurance                                                        |                                                                    |                            | 521-525 |          |     |               | 2,740,244 |           |            |  | 15.90 |      
|Information                                                                  |                                                                    |                            | 511-519 |          |     |               | 2,156,850 |           |            |  | 12.51 |      
|Manufacturing                                                                |                                                                    |                            | 311-339 |          |     |               | 1,446,481 |           |            |  | 8.39  |      
|Health Care and Social Assistance                                            |                                                                    |                            | 621-624 |          |     |               | 1,296,418 |           |            |  | 7.52  |      
|Administrative and Support and Waste Management
    and Remediation Services |                                                                    |                            | 561-562 |          |     |               | 799,288   |           |            |  | 4.64  |      
|Public Administration                                                        |                                                                    |                            | 921-928 |          |     |               | 747,784   |           |            |  | 4.34  |      
|Educational Services                                                         |                                                                    |                            | 611     |          |     |               | 700,114   |           |            |  | 4.06  |      
|Real Estate, Rental and Leasing                                              |                                                                    |                            | 531-533 |          |     |               | 715,417   |           |            |  | 4.15  |      
|Wholesale Trade                                                              |                                                                    |                            | 423-425 |          |     |               | 531,102   |           |            |  | 3.08  |      
|Transportation and Warehousing                                               |                                                                    |                            | 481-493 |          |     |               | 388,299   |           |            |  | 2.25  |      
|Arts, Entertainment, and Recreation                                          |                                                                    |                            | 711-713 |          |     |               | 327,520   |           |            |  | 1.90  |      
|Construction                                                                 |                                                                    |                            | 236-238 |          |     |               | 236,908   |           |            |  | 1.37  |      
|Accommodation and Food Services                                              |                                                                    |                            | 721-722 |          |     |               | 195,362   |           |            |  | 1.13  |      
|Other Services (except Public Administration)                                |                                                                    |                            | 811-814 |          |     |               | 171,012   |           |            |  | 0.99  |      
|Retail Trade                                                                 |                                                                    |                            | 441-454 |          |     |               | 131,117   |           |            |  | 0.76  |      
|Mining                                                                       |                                                                    |                            | 211-213 |          |     |               | 85,272    |           |            |  | 0.49  |      
|Management of Companies and Enterprises                                      |                                                                    |                            | 551     |          |     |               | 21,970    |           |            |  | 0.13  |      
|Utilities                                                                    |                                                                    |                            | 221     |          |     |               | 8,795     |           |            |  | 0.05  |      
|Agriculture, Forestry, Fishing and Hunting                                   |                                                                    |                            | 111-115 |          |     |               | 6,065     |           |            |  | 0.04  |      
|Non-classified                                                               |                                                                    |                            | Other   |          |     |               | 125,754   |           |            |  | 0.74  |      
|                                                                             |                                                                    |                            |         |          |     |               |           |           |            |  |       |      
|                                                                             |                                                                    | Total Square Feet Occupied |         |          |     |               |           |           | 17,238,091 |  |       |       | 100.00 | %
|                                                                             |                                                                    |                            |         |          |     |               |           |           |            |  |       |      

Lease
Distribution

The following table presents information relating
to the distribution of the leases for our 136 stabilized
properties, based on leased net rentable square feet, as of
December 31, 2002:

|                        |                 |                         |     |         |       |        |      |             |        |            |           |             |            |            |       |       |        |   |        |        |         |  |       |       |       |  |       |       |        |  
|----------------------- | --------------- | ----------------------- | --- | ------- | ----- | ------ | ---- | ----------- | ------ | ---------- | --------- | ----------- | ---------- | ---------- | ----- | ----- | ------ | - | ------ | ------ | ------- |  | ----- | ----- | ----- |  | ----- | ----- | ------ | -
|                        |                 |                         |     |         |       |        |      | Percent     |        |            |           |             |            | Percentage
|                        |                 |                         |     |         |       |        |      | of          |        | Annualized |           | Average     |            | of        
|                        |                 |                         |     |         |       | Total  |      | Aggregate   |        | Base Rent  |           | Annualized  |            | Aggregate 
|                        |                 | Number                  |     | Percent |       | Leased |      | Portfolio   |        | of         |           | Base Rent   |            | Portfolio 
|                        |                 | of                      |     | of All  |       | Square |      | Leased      |        | Leases(1)  |           | per Leased  |            | Annualized
|Square Feet Under Lease |                 | Leases                  |     | Leases  |       | Feet   |      | Square Feet |        | ($000s)    |           | Square Foot |            | Base Rent 
|                        |                 |                         |     |         |       |        |      |             |        |            |           |             |            |           
|                        | 2,500 and under |                         |     | 1,558   |       |        |      | 50.34       | %      |            |           | 2,154,167   |            |            |       | 12.32 | %      |   | $      | 51,758 |         |  | $     | 24.03 |       |  |       | 12.68 | %     
|                        | 2,501  5,000   |                         |     | 716     |       |        |      | 23.13       |        |            |           | 2,508,078   |            |            |       | 14.35 |        |   |        | 61,364 |         |  |       | 24.47 |       |  |       | 15.03 |       
|                        | 5,001  7,500   |                         |     | 274     |       |        |      | 8.85        |        |            |           | 1,668,800   |            |            |       | 9.55  |        |   |        | 41,384 |         |  |       | 24.80 |       |  |       | 10.14 |       
|                        | 7,501  10,000  |                         |     | 176     |       |        |      | 5.69        |        |            |           | 1,535,484   |            |            |       | 8.78  |        |   |        | 36,982 |         |  |       | 24.08 |       |  |       | 9.06  |       
|10,001  20,000         |                 |                         | 234 |         |       |        | 7.56 |             |        |            | 3,289,906 |             |            |            | 18.82 |       |        |   | 79,717 |        |         |  | 24.23 |       |       |  | 19.52 |      
|20,001  40,000         |                 |                         | 76  |         |       |        | 2.46 |             |        |            | 2,103,724 |             |            |            | 12.03 |       |        |   | 47,149 |        |         |  | 22.41 |       |       |  | 11.55 |      
|40,001 and over         |                 |                         | 61  |         |       |        | 1.97 |             |        |            | 4,220,717 |             |            |            | 24.15 |       |        |   | 89,948 |        |         |  | 21.31 |       |       |  | 22.02 |      
|                        |                 |                         |     |         |       |        |      |             |        |            |           |             |            |            |       |       |        |   |        |        |         |  |       |       |       |  |       |      
|                        |                 | Total/ Weighted Average |     |         | 3,095 |        |      |             | 100.00 | %          |           |             | 17,480,876 |            |       |       | 100.00 | % |        | $      | 408,302 |  |       | $     | 23.36 |  |       |       | 100.00 | %
|                        |                 |                         |     |         |       |        |      |             |        |            |           |             |            |            |       |       |        |   |        |        |         |  |       |       |       |  |       |      

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|    |                                                                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Base rent is determined as of the date of lease
    expiration, including all fixed contractual base rent increases;
    increases tied to indices such as the Consumer Price Index are
    not included.

Lease
Expirations

The following table presents a summary schedule
of the total lease expirations for our 136 stabilized properties
for leases in place at December 31, 2002. This table assumes
that none of the tenants exercise renewal options or termination
rights, if any, at or prior to the scheduled expirations:

|                         |                   |                         |     |            |       |               |           |              |            |            |       |              |        |   |        |        |         |   |       |       |       |  |       |       |        |  
|------------------------ | ----------------- | ----------------------- | --- | ---------- | ----- | ------------- | --------- | ------------ | ---------- | ---------- | ----- | ------------ | ------ | - | ------ | ------ | ------- | - | ----- | ----- | ----- |  | ----- | ----- | ------ | -
|                         |                   |                         |     |            |       |               |           |              |            | Average    |       |             
|                         |                   |                         |     |            |       |               |           |              |            | Annualized |       |             
|                         |                   |                         |     |            |       | Percentage of |           | Annualized   |            | Base Rent  |       | Percentage  
|                         |                   |                         |     | Square     |       | Aggregate     |           | Base Rent of |            | Per Square |       | of Aggregate
|                         |                   | Number of               |     | Footage of |       | Portfolio     |           | Expiring     |            | Foot of    |       | Portfolio   
|                         |                   | Leases                  |     | Expiring   |       | Leased        |           | Leases(1)    |            | Expiring   |       | Annualized  
|Year of Lease Expiration |                   | Expiring                |     | Leases     |       | Square Feet   |           | ($000s)      |            | Leases     |       | Base Rent   
|                         |                   |                         |     |            |       |               |           |              |            |            |       |             
|Month-to-Month           |                   |                         | 123 |            |       |               | 285,197   |              |            |            | 1.63  | %            |        |   | 5,069  |        |         | $ | 17.77 |       |       |  | 1.24  | %    
|Q1 2003                  |                   |                         | 147 |            |       |               | 545,036   |              |            |            | 3.12  |              |        |   | 11,182 |        |         |   | 20.52 |       |       |  | 2.74  |      
|Q2 2003                  |                   |                         | 150 |            |       |               | 557,627   |              |            |            | 3.19  |              |        |   | 11,075 |        |         |   | 19.86 |       |       |  | 2.71  |      
|Q3 2003                  |                   |                         | 175 |            |       |               | 782,242   |              |            |            | 4.47  |              |        |   | 16,032 |        |         |   | 20.50 |       |       |  | 3.93  |      
|Q4 2003                  |                   |                         | 168 |            |       |               | 792,008   |              |            |            | 4.53  |              |        |   | 17,269 |        |         |   | 21.80 |       |       |  | 4.23  |      
|                         |                   |                         |     |            |       |               |           |              |            |            |       |              |        |   |        |        |         |   |       |       |       |  |       |      
|                         | 2003 Sub-Total(2) |                         |     | 640        |       |               |           | 2,676,913    |            |            |       | 15.31        |        |   |        | 55,558 |         |   |       | 20.75 |       |  |       | 13.61 |       
|2004                     |                   |                         | 665 |            |       |               | 3,487,812 |              |            |            | 19.96 |              |        |   | 73,346 |        |         |   | 21.03 |       |       |  | 17.96 |      
|2005                     |                   |                         | 618 |            |       |               | 3,251,717 |              |            |            | 18.60 |              |        |   | 70,907 |        |         |   | 21.81 |       |       |  | 17.37 |      
|2006                     |                   |                         | 368 |            |       |               | 2,203,854 |              |            |            | 12.61 |              |        |   | 51,955 |        |         |   | 23.57 |       |       |  | 12.72 |      
|2007                     |                   |                         | 328 |            |       |               | 1,792,555 |              |            |            | 10.26 |              |        |   | 44,098 |        |         |   | 24.60 |       |       |  | 10.80 |      
|2008                     |                   |                         | 114 |            |       |               | 1,149,101 |              |            |            | 6.57  |              |        |   | 29,789 |        |         |   | 25.92 |       |       |  | 7.30  |      
|2009                     |                   |                         | 52  |            |       |               | 517,603   |              |            |            | 2.96  |              |        |   | 13,211 |        |         |   | 25.52 |       |       |  | 3.24  |      
|2010                     |                   |                         | 58  |            |       |               | 741,905   |              |            |            | 4.24  |              |        |   | 20,010 |        |         |   | 26.97 |       |       |  | 4.90  |      
|2011                     |                   |                         | 28  |            |       |               | 458,249   |              |            |            | 2.62  |              |        |   | 18,148 |        |         |   | 39.60 |       |       |  | 4.44  |      
|2012                     |                   |                         | 33  |            |       |               | 457,171   |              |            |            | 2.62  |              |        |   | 12,958 |        |         |   | 28.34 |       |       |  | 3.17  |      
|2013+                    |                   |                         | 68  |            |       |               | 458,799   |              |            |            | 2.62  |              |        |   | 13,253 |        |         |   | 28.89 |       |       |  | 3.25  |      
|                         |                   |                         |     |            |       |               |           |              |            |            |       |              |        |   |        |        |         |   |       |       |       |  |       |      
|                         |                   | Total/ Weighted Average |     |            | 3,095 |               |           |              | 17,480,876 |            |       |              | 100.00 | % |        |        | 408,302 |   |       | $     | 23.36 |  |       |       | 100.00 | %
|                         |                   |                         |     |            |       |               |           |              |            |            |       |              |        |   |        |        |         |   |       |       |       |  |       |      




|    |                                                                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Base rent is determined as of the date of lease
    expiration, including all fixed contractual base rent increases;
    increases tied to indices such as the Consumer Price Index are
    not included.
|   
|(2) | Excludes month-to-month leases.                                                                                                                                                                          

ITEM 3.     Legal
Proceedings

We are presently subject to various lawsuits,
claims and proceedings arising in the ordinary course of
business none of which if determined unfavorably to us is
expected to have a material adverse effect on our cash flows,
financial condition or results of operations except as described
below.

In December 2001, the owner of the entertainment
center at our Howard Hughes Center project asserted a claim
against us for indemnification arising out of a Los Angeles
Superior Court judgment against them which invalidated a
transfer of in-lieu credits that Arden Realty made in August of
1999 as part of our sale of the land for the entertainment
center. The value of these in-lieu credits was approximately
$6.0 million and were transferred to satisfy certain
Transportation Impact Assessment fees related to the
entertainment center. On January 17, 2003, the California
Court of Appeal reversed the Superior Courts judgment,
rendering the indemnification claim moot. On January 23,
2003, the plaintiff in the original lawsuit filed a petition for
rehearing with the California Court of Appeal. On
February 8, 2003, the California Court of Appeal denied the
petition for rehearing.

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Based on our review of the current facts and
circumstances and advice of our outside counsel, we are not able
to express an opinion as to the ultimate outcome of this matter.
However, we do not believe that the resolution of this matter or
any of our ongoing legal proceedings will have a material
adverse effect on our consolidated results of operations, cash
flows or financial position.

ITEM
4.     Submission of Matters to a
Vote of Security Holders

No matters were submitted to a vote of our
stockholders during the fourth quarter of the year ended
December 31, 2002.

PART II

ITEM 5.     Market
for Registrants Common Equity and Related Stockholder
Matters

Our common stock is traded on the New York Stock
Exchange, or NYSE, under the symbol ARI. On
March 21, 2003, the last reported sales price per share of
common stock on the NYSE was $24.20 and there were approximately
193 registered holders of record of our common stock. The table
below sets forth the quarterly high and low closing sales price
per share of our common stock as reported on the NYSE and the
cash dividends per share we declared with respect to each period.

|               |  |      |       |     |  |           |       |  |  |   |       | 
|-------------- |  | ---- | ----- | --- |  | --------- | ----- |  |  | - | ----- | 
|               |  |      |       |     |  | Dividends
|               |  | High |       | Low |  | Declared 
|               |  |      |       |     |  |          
|2001           |  |      |       |     |  |           |       |  |  |   |       | 
|First Quarter  |  | $    | 23.38 |     |  | $         | 21.39 |  |  | $ | 0.49  | 
|Second Quarter |  | $    | 25.87 |     |  | $         | 21.68 |  |  | $ | 0.49  | 
|Third Quarter  |  | $    | 26.83 |     |  | $         | 23.73 |  |  | $ | 0.49  | 
|Fourth Quarter |  | $    | 26.50 |     |  | $         | 23.55 |  |  | $ | 0.49  | 
|2002           |  |      |       |     |  |           |       |  |  |   |       | 
|First Quarter  |  | $    | 28.75 |     |  | $         | 25.47 |  |  | $ | 0.505 | 
|Second Quarter |  | $    | 29.56 |     |  | $         | 26.04 |  |  | $ | 0.505 | 
|Third Quarter  |  | $    | 27.23 |     |  | $         | 22.22 |  |  | $ | 0.505 | 
|Fourth Quarter |  | $    | 22.99 |     |  | $         | 20.52 |  |  | $ | 0.505 | 

We pay quarterly cash dividends to common
stockholders at the discretion of our Board of Directors. The
amount of each quarterly cash dividend depends on our funds from
operations, financial condition and capital requirements, annual
distribution requirements under the REIT provisions of the
Internal Revenue Code and such other factors our Board of
Directors deems relevant.

ITEM
6.     Selected Financial
Data

You should read the following consolidated
financial and operating data for Arden Realty together with our
Managements Discussion and Analysis of Financial
Condition and Results of Operations and our consolidated
financial statements included elsewhere in this Form 10-K.

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##### Table of Contents



|                                                                                              |                                     |                                                    |          |      |  |      |          |      |  |      |          |      |  |   |          |      |  |   |            |      | 
|--------------------------------------------------------------------------------------------- | ----------------------------------- | -------------------------------------------------- | -------- | ---- |  | ---- | -------- | ---- |  | ---- | -------- | ---- |  | - | -------- | ---- |  | - | ---------- | ---- | 
|                                                                                              |                                     |                                                   
|                                                                                              |                                     | Year Ended December 31,                           
|                                                                                              |                                     |                                                   
|                                                                                              |                                     | 2002                                               |          | 2001 |  | 2000 |          | 1999 |  | 1998
|                                                                                              |                                     |                                                    |          |      |  |      |          |      |  |     
|                                                                                              |                                     |                                                   
|                                                                                              |                                     | (in thousands, except ratio and per share amounts)
|Operating Data:                                                                               |                                     |                                                    |          |      |  |      |          |      |  |      |          |      |  |   |          |      |  |   |            |     
|Revenues                                                                                      |                                     | $                                                  | 414,596  |      |  | $    | 417,426  |      |  | $    | 384,149  |      |  | $ | 336,514  |      |  | $ | 280,497    |     
|Property operating expenses                                                                   |                                     |                                                    | 129,723  |      |  |      | 121,086  |      |  |      | 109,512  |      |  |   | 100,303  |      |  |   | 85,622     |     
|General and administrative expense                                                            |                                     |                                                    | 13,166   |      |  |      | 12,143   |      |  |      | 9,336    |      |  |   | 7,393    |      |  |   | 6,665      |     
|Depreciation and amortization                                                                 |                                     |                                                    | 110,202  |      |  |      | 100,775  |      |  |      | 85,947   |      |  |   | 69,215   |      |  |   | 51,420     |     
|                                                                                              |                                     |                                                    |          |      |  |      |          |      |  |      |          |      |  |   |          |      |  |   |            |     
|                                                                                              |                                     |                                                    | 161,505  |      |  |      | 183,422  |      |  |      | 179,354  |      |  |   | 159,603  |      |  |   | 136,790    |     
|Interest expense                                                                              |                                     |                                                    | (88,516  | )    |  |      | (84,195  | )    |  |      | (78,406  | )    |  |   | (60,239  | )    |  |   | (43,403    | )   
|                                                                                              |                                     |                                                    |          |      |  |      |          |      |  |      |          |      |  |   |          |      |  |   |            |     
|Income from continuing operations before gain on
    sale of properties and minority interest |                                     |                                                    | 72,989   |      |  |      | 99,227   |      |  |      | 100,948  |      |  |   | 99,364   |      |  |   | 93,387     |     
|Gain on sale of properties                                                                    |                                     |                                                    | 1,967    |      |  |      | 4,591    |      |  |      | 2,132    |      |  |   |         |      |  |   |           |     
|                                                                                              |                                     |                                                    |          |      |  |      |          |      |  |      |          |      |  |   |          |      |  |   |            |     
|Income from continuing operations before minority
    interest                                |                                     |                                                    | 74,956   |      |  |      | 103,818  |      |  |      | 103,080  |      |  |   | 99,364   |      |  |   | 93,387     |     
|Minority interest                                                                             |                                     |                                                    | (6,198   | )    |  |      | (7,517   | )    |  |      | (7,572   | )    |  |   | (5,179   | )    |  |   | (5,256     | )   
|                                                                                              |                                     |                                                    |          |      |  |      |          |      |  |      |          |      |  |   |          |      |  |   |            |     
|Income from continuing operations                                                             |                                     |                                                    | 68,758   |      |  |      | 96,301   |      |  |      | 95,508   |      |  |   | 94,185   |      |  |   | 88,131     |     
|Discontinued operations, net of minority interest                                             |                                     |                                                    | 1,417    |      |  |      | 1,458    |      |  |      | 1,202    |      |  |   | 2,441    |      |  |   | 2,544      |     
|                                                                                              |                                     |                                                    |          |      |  |      |          |      |  |      |          |      |  |   |          |      |  |   |            |     
|Net income                                                                                    |                                     | $                                                  | 70,175   |      |  | $    | 97,759   |      |  | $    | 96,710   |      |  | $ | 96,626   |      |  | $ | 90,675     |     
|                                                                                              |                                     |                                                    |          |      |  |      |          |      |  |      |          |      |  |   |          |      |  |   |            |     
|Basic net income per common share:                                                            |                                     |                                                    |          |      |  |      |          |      |  |      |          |      |  |   |          |      |  |   |            |     
|                                                                                              | Income from continuing operations   |                                                    | $        | 1.07 |  |      | $        | 1.51 |  |      | $        | 1.51 |  |   | $        | 1.49 |  |   | $          | 1.50 | 
|                                                                                              | Income from discontinued operations |                                                    |          | 0.02 |  |      |          | 0.02 |  |      |          | 0.02 |  |   | $        | 0.04 |  |   | $          | 0.05 | 
|                                                                                              |                                     |                                                    |          |      |  |      |          |      |  |      |          |      |  |   |          |      |  |   |            |     
|Net income per common share-basic                                                             |                                     | $                                                  | 1.09     |      |  | $    | 1.53     |      |  | $    | 1.53     |      |  | $ | 1.53     |      |  | $ | 1.55       |     
|                                                                                              |                                     |                                                    |          |      |  |      |          |      |  |      |          |      |  |   |          |      |  |   |            |     
|Weighed average number of common shares- basic                                                |                                     |                                                    | 64,151   |      |  |      | 63,754   |      |  |      | 63,408   |      |  |   | 63,016   |      |  |   | 58,660     |     
|                                                                                              |                                     |                                                    |          |      |  |      |          |      |  |      |          |      |  |   |          |      |  |   |            |     
|Diluted net income per common share:                                                          |                                     |                                                    |          |      |  |      |          |      |  |      |          |      |  |   |          |      |  |   |            |     
|                                                                                              | Income from continuing operations   |                                                    | $        | 1.07 |  |      | $        | 1.51 |  |      | $        | 1.50 |  |   | $        | 1.49 |  |   | $          | 1.50 | 
|                                                                                              | Income from discontinue operations  |                                                    |          | 0.02 |  |      |          | 0.02 |  |      |          | 0.02 |  |   | $        | 0.04 |  |   | $          | 0.04 | 
|                                                                                              |                                     |                                                    |          |      |  |      |          |      |  |      |          |      |  |   |          |      |  |   |            |     
|Net income per common share-diluted                                                           |                                     | $                                                  | 1.09     |      |  | $    | 1.53     |      |  | $    | 1.52     |      |  | $ | 1.53     |      |  | $ | 1.54       |     
|                                                                                              |                                     |                                                    |          |      |  |      |          |      |  |      |          |      |  |   |          |      |  |   |            |     
|Weighed average number of common shares- diluted                                              |                                     | $                                                  | 64,351   |      |  | $    | 64,014   |      |  | $    | 63,598   |      |  | $ | 63,072   |      |  | $ | 58,814     |     
|                                                                                              |                                     |                                                    |          |      |  |      |          |      |  |      |          |      |  |   |          |      |  |   |            |     
|Cash dividends declared per common share                                                      |                                     | $                                                  | 2.02     |      |  | $    | 1.96     |      |  | $    | 1.86     |      |  | $ | 1.78     |      |  | $ | 1.68       |     
|                                                                                              |                                     |                                                    |          |      |  |      |          |      |  |      |          |      |  |   |          |      |  |   |            |     
|Other Data:                                                                                   |                                     |                                                    |          |      |  |      |          |      |  |      |          |      |  |   |          |      |  |   |            |     
|Cash provided by operating activities                                                         |                                     | $                                                  | 214,167  |      |  | $    | 204,667  |      |  | $    | 192,152  |      |  | $ | 170,354  |      |  | $ | 152,273    |     
|Cash used in investing activities                                                             |                                     |                                                    | (227,247 | )    |  |      | (115,854 | )    |  |      | (216,024 | )    |  |   | (283,574 | )    |  |   | (1,099,833 | )   
|Cash (used in) provided by financing activities                                               |                                     |                                                    | (19,898  | )    |  |      | (57,204  | )    |  |      | 22,248   |      |  |   | 115,698  |      |  |   | 946,838    |     
|Funds from Operations(1)                                                                      |                                     |                                                    | 181,549  |      |  |      | 198,240  |      |  |      | 185,146  |      |  |   | 170,405  |      |  |   | 147,369    |     
|EBITDA(2)                                                                                     |                                     |                                                    | 274,377  |      |  |      | 286,747  |      |  |      | 267,864  |      |  |   | 231,998  |      |  |   | 191,347    |     
|Ratio of earnings to fixed charges(3)(4)                                                      |                                     |                                                    | 1.61     |      |  |      | 1.86     |      |  |      | 1.84     |      |  |   | 2.20     |      |  |   | 2.56       |     
|Ratio of EBITDA to interest expense(2)                                                        |                                     |                                                    | 3.10     |      |  |      | 3.41     |      |  |      | 3.42     |      |  |   | 3.85     |      |  |   | 4.41       |     
|Ratio of EBITDA to fixed charges(2)(3)                                                        |                                     |                                                    | 2.79     |      |  |      | 2.94     |      |  |      | 2.81     |      |  |   | 3.26     |      |  |   | 3.66       |     




| |                                                   
| | --------------------------------------------------
| | Selected financial data continues on next
    page

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|                              |  |              |           |      |  |      |           |      |  |      |           |  |  |   |           |  |  |   |           | 
|----------------------------- |  | ------------ | --------- | ---- |  | ---- | --------- | ---- |  | ---- | --------- |  |  | - | --------- |  |  | - | --------- | 
|                              |  |             
|                              |  | December 31,
|                              |  |             
|                              |  | 2002         |           | 2001 |  | 2000 |           | 1999 |  | 1998
|                              |  |              |           |      |  |      |           |      |  |     
|Balance Sheet Data:           |  |              |           |      |  |      |           |      |  |      |           |  |  |   |           |  |  |   |           | 
|Net investment in real estate |  | $            | 2,741,624 |      |  | $    | 2,622,980 |      |  | $    | 2,603,566 |  |  | $ | 2,479,111 |  |  | $ | 2,260,433 | 
|Total assets                  |  |              | 2,832,409 |      |  |      | 2,761,443 |      |  |      | 2,705,597 |  |  |   | 2,570,458 |  |  |   | 2,331,919 | 
|Total indebtedness            |  |              | 1,402,304 |      |  |      | 1,251,483 |      |  |      | 1,177,769 |  |  |   | 1,029,656 |  |  |   | 840,377   | 
|Other liabilities (5)         |  |              | 76,350    |      |  |      | 62,685    |      |  |      | 56,885    |  |  |   | 50,555    |  |  |   | 35,720    | 
|Minority interests            |  |              | 74,791    |      |  |      | 78,661    |      |  |      | 86,176    |  |  |   | 86,294    |  |  |   | 56,222    | 
|Total Stockholders Equity    |  |              | 1,247,377 |      |  |      | 1,337,206 |      |  |      | 1,355,171 |  |  |   | 1,375,758 |  |  |   | 1,373,390 | 




|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | We believe that funds from operations, or FFO, is
    a useful supplemental measure of our operating performance. We
    compute FFO in accordance with standards established by the
    White Paper on FFO approved by the Board of Governors of the
    National Association of Real Estate Investment Trusts, or
    NARIET, in April 2002. The white paper defines FFO as net income
    or loss computed in accordance with generally accepted
    accounting principles, or GAAP, excluding extraordinary items,
    as defined by GAAP, and gains and losses from sales of
    depreciable operating property plus real estate-related
    depreciation and amortization and after adjustments for
    unconsolidated partnerships and joint ventures.                                                                                                                                                                                                                   
|   
|    | We believe that FFO, by excluding depreciation
    costs, the gains or losses from the sale of operating real
    estate properties and extraordinary items as defined by GAAP,
    provides an additional perspective on our operating results.
    However, because these items have real economic effect, FFO is a
    limited measure of performance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|    | FFO captures trends in occupancy rates, rental
    rates and operating costs. FFO excludes depreciation and
    amortization costs and it does not capture the changes in value
    in our properties that result from use or changes in market
    conditions or the level of capital expenditures and leasing
    costs necessary to maintain the operating performance of our
    properties, all of which are significant economic costs.
    Therefore, its ability to measure performance is limited.                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|    | Because FFO excludes significant economic
    components of net income determined in accordance with GAAP, FFO
    should be used as an adjunct to net income and not as an
    alternative to net income. FFO should also not be used as an
    indicator of our financial performance, or as a substitute for
    cash flow from operating activities determined in accordance
    with GAAP or as a measure of our liquidity. FFO is not by itself
    indicative of funds available to fund our cash needs, including
    our ability to pay dividends or service or debt. Therefore, FFO
    only provides investors with additional performance measure that
    when combined with measures computed in accordance with GAAP
    such as net income, cash flow from operating activities,
    investing activities and financing activities provides investors
    with an indication of our ability to service debt and to fund
    acquisitions and other expenditures.
|   
|    | FFO is used by investors to compare our
    performance with other REITs. Other REITs may use different
    methodologies for calculating FFO and, accordingly, our FFO may
    not be comparable to other REITs. See reconciliation of FFO to
    Net income in Item 7 Managements Discussion and
    Analysis of Financial Condition and Results of Operations of
    this report.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|(2) | Earnings before interest, taxes, depreciation and
    amortization, or EBITDA, is a non-GAAP measurement. EBITDA is
    presented because we believe this data is used by investors as
    an indication of our ability to meet our debt service
    requirements. We consider that EBITDA, when combined with other
    measures, can be a useful measure to determine our ability to
    service debt and fund future capital expenditure requirements.
    However, due to the significance of the net income components
    excluded from EBITDA, it should not be considered an alternative
    to net income, cash flow from operations, or any other operating
    or liquidity performance measure prescribed by GAAP.                                                                                                                                                                                                                                                  
|   
|    | Because interest expense, taxes, gains or losses
    on sales of property, losses on valuations of derivatives, asset
    impairment losses, cumulative effect of a change in accounting
    principle, extraordinary items as defined by GAAP and
    depreciation and amortization costs, which are not reflected in
    EBITDA, have been, will be or may be incurred by us, investors
    are cautioned to reflect our ability to finance our investments
    at competitive borrowing costs, successfully maintain our REIT
    status, acquire and dispose of real estate properties at
    favorable prices to us and also reflect changes in value in our
    properties that result from use or changes in market conditions
    and the level of capital expenditures and leasing costs
    necessary to maintain the operating performance of our
    properties.                                                                                                    
|   
|    | We present the ratio of EBITDA to interest
    expense and the ratio of EBITDA to fixed charges because these
    ratios are used in several financial covenants contained in our
    principal loan agreements. We are required to satisfy these
    financial covenants each fiscal quarter. We believe this
    information is useful to investors because investors can use
    this data to (1) confirm that we are in compliance with the
    ratio covenants of our principal loan agreements,
    (2) evaluate our ability to service our debt,
    (3) evaluate our ability to fund future capital
    expenditures, and (4) compare our ratios to other real
    estate companies that present similar ratios, including other
    REITs. These ratios should not be considered as alternatives to
    the ratio of earnings to fixed charges.                                                                                                                        
|   
|    | The reader is cautioned that EBITDA, as
    calculated by us, may not be comparable to EBITDA as reported by
    other companies that do not define EBITDA exactly the same as we
    do.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

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| |                                
| | -------------------------------
| | We calculate EBITDA as follows:

|                                                                                              |                                                |                         |         |         |  |      |         |         |  |      |         |        |  |   |         |        |  |   |         |        | 
|--------------------------------------------------------------------------------------------- | ---------------------------------------------- | ----------------------- | ------- | ------- |  | ---- | ------- | ------- |  | ---- | ------- | ------ |  | - | ------- | ------ |  | - | ------- | ------ | 
|                                                                                              |                                                |                        
|                                                                                              |                                                | Year Ended December 31,
|                                                                                              |                                                |                        
|                                                                                              |                                                | 2002                    |         | 2001    |  | 2000 |         | 1999    |  | 1998
|                                                                                              |                                                |                         |         |         |  |      |         |         |  |     
|Income from continuing operations before gain on
    sale of properties and minority interest |                                                | $                       | 72,989  |         |  | $    | 99,227  |         |  | $    | 100,948 |        |  | $ | 99,364  |        |  | $ | 93,387  |       
|Add:                                                                                          |                                                |                         |         |         |  |      |         |         |  |      |         |        |  |   |         |        |  |   |         |       
|                                                                                              | Interest expense                               |                         |         | 88,516  |  |      |         | 84,195  |  |      |         | 78,406 |  |   |         | 60,239 |  |   |         | 43,403 | 
|                                                                                              | Depreciation and amortization                  |                         |         | 110,202 |  |      |         | 100,775 |  |      |         | 85,947 |  |   |         | 69,215 |  |   |         | 51,420 | 
|                                                                                              | Discontinued operations                        |                         |         | 1,417   |  |      |         | 1,458   |  |      |         | 1,202  |  |   |         | 2,441  |  |   |         | 2,544  | 
|                                                                                              | Minority interest from discontinued operations |                         |         | 38      |  |      |         | 48      |  |      |         | 41     |  |   |         | 117    |  |   |         | 191    | 
|                                                                                              | Depreciation from discontinued operations      |                         |         | 1,215   |  |      |         | 1,044   |  |      |         | 1,320  |  |   |         | 622    |  |   |         | 402    | 
|                                                                                              |                                                |                         |         |         |  |      |         |         |  |      |         |        |  |   |         |        |  |   |         |       
|EBITDA                                                                                        |                                                | $                       | 274,377 |         |  | $    | 286,747 |         |  | $    | 267,864 |        |  | $ | 231,998 |        |  | $ | 191,347 |       
|                                                                                              |                                                |                         |         |         |  |      |         |         |  |      |         |        |  |   |         |        |  |   |         |       




|    |                                                                                                                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | Fixed charges consist of interest costs, whether
    expensed or capitalized, amortization of deferred financing
    costs, amortization of discounts or premiums related to
    indebtedness and preferred unit distributions.                                                                        
|   
|(4) | The ratios of earnings to fixed charges were
    computed by dividing earnings by fixed charges. For this
    purpose, earnings have been calculated by adding fixed charges,
    excluding capitalization interest and preferred unit
    distributions, to income or loss before extraordinary items.
|   
|(5) | Excludes dividends payable.                                                                                                                                                                                                                                                                            



|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|ITEM 7. | Managements Discussion and Analysis
    of Financial Condition and Results of Operations

Overview

The following discussion should be read in
conjunction with Item 6, Selected Financial Data, and our
historical consolidated financial statements and related notes
thereto included elsewhere in this Form 10-K.

We are a self-administered and self-managed real
estate investment trust that owns, manages, leases, develops,
renovates and acquires commercial properties located in Southern
California. We are a full-service real estate organization
managed by 8 senior executive officers who have experience in
the real estate industry ranging from 11 to 33 years and
who collectively have an average of 19 years of experience.
We perform all property management, construction management,
accounting, finance and acquisition activities and a majority of
our leasing transactions with our staff of approximately 300
employees.

As of December 31, 2002, we were Southern
Californias largest publicly traded office landlord as
measured by total net rentable square feet owned. As of that
date, our portfolio consisted of 137 primarily suburban office
properties and 223 buildings containing approximately
19.4 million net rentable square feet including one
development property with approximately 283,000 net rentable
square feet under lease-up. As of December 31, 2002, our
properties were 90.1% occupied.

Our primary business strategy is to actively
manage our portfolio to seek to achieve gains in rental rates
and occupancy, control operating expenses and to maximize income
from ancillary operations and services. When market conditions
permit, we may also selectively develop or acquire new
properties that add value and fit strategically into our
portfolio. We may also sell existing properties and redeploy the
proceeds into investments that we believe will generate higher
long-term value.

Critical
Accounting Policies

Revenue Recognition

Minimum rent, including rental abatements and
contractual fixed increases attributable to operating leases, is
recognized on a straight-line basis over the term of the related
lease.

Allowance for Rents and Other
Receivables

We periodically evaluate the collectibility of
amounts due from tenants and maintain an allowance for doubtful
accounts for estimated losses resulting from the inability of
tenants to make required payments under

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lease agreements. We also maintain an allowance
for deferred rent receivable that arises from the
straight-lining of rents. We exercise judgment in establishing
these allowances and consider payment history and current credit
status in developing these estimates. If estimates differ from
actual results this could impact our operating results.


Commercial Properties

Our properties are stated at depreciated cost.
Write-downs to estimated fair value are recognized whenever a
propertys estimated undiscounted future cash flows are
less than its book value. We carry properties held for
disposition at the lower of their depreciated cost or fair value
less cost to sell. Based on our assessment, no write-downs to
estimated fair value were necessary as of December 31, 2002
and 2001, respectively.

Upon acquisition of real estate, we assess the
fair value of the acquired assets (including land, buildings,
tenant improvements and operating leases adjusted for
origination costs) and allocate purchase price based on these
assessments.

Costs related to the acquisition, development,
construction and improvement of properties are capitalized.
Interest, real estate taxes, insurance and other development
related costs incurred during construction periods are
capitalized and depreciated on the same basis as the related
asset.

Repair and maintenance costs are charged to
expenses as incurred and significant replacements and
betterments are capitalized. Repairs and maintenance costs
include all costs that do not extend the useful life of an asset
or increase its operating efficiency. Significant replacements
and betterments represent costs that extend an assets
useful life or increase its operating efficiency.

Depreciation

Depreciation is calculated under the
straight-line method using depreciable lives of ten to forty
seven years for building and building improvements and five-year
lives for furniture, fixtures and equipment. Amortization of
tenant improvements is calculated using the straight-line method
over the term of the related lease.

Qualification as a REIT

Since our taxable year ended December 31,
1996, we have been organized and operated, and intend to
continue to operate, so as to qualify for taxation as a REIT
under the Internal Revenue Code. Our qualification and taxation
as a REIT depends on our ability to meet, through actual annual
operating results, asset diversification, distribution levels
and diversity of stock ownership, numerous requirements
established under highly technical and complex Internal Revenue
Code provisions subject to interpretation.

If we failed to qualify as a REIT in any taxable
year, we would be subject to federal income tax, including any
applicable alternative minimum tax, on our taxable income at
regular corporate rates. Moreover, unless entitled to relief
under specific statutory provisions, we also would be
disqualified as a REIT for the four taxable years following the
year during which qualification was lost. For additional
information see Risk Factors  We may suffer
adverse tax consequences and be unable to attract capital if we
fail to qualify as a REIT, and Our operating
partnership intends to qualify as a partnership, but we cannot
guarantee that it will qualify, elsewhere in this
Form 10-K.

Results Of Operations

Our financial position and operating results are
primarily comprised of our portfolio of properties and income
derived from those properties. Therefore, the comparability of
financial data from period to period will be affected by the
timing of significant property development, acquisitions and
dispositions.

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Comparison of the year ended December 31,
2002 to the year ended December 31, 2001

(in thousands, except number of properties and
percentages)


|                                |                                                                                               |                                               |                                      |         |        |           |   |         |        |         |   |         |   |         |   |     |    |    |  
|------------------------------- | --------------------------------------------------------------------------------------------- | --------------------------------------------- | ------------------------------------ | ------- | ------ | --------- | - | ------- | ------ | ------- | - | ------- | - | ------- | - | --- | -- | -- | -
|                                |                                                                                               |                                               |                                      |         |        |          
|                                |                                                                                               | Year Ended December 31,                       |                                      |         |        |          
|                                |                                                                                               |                                               |                                      |         |        | Percent  
|                                |                                                                                               | 2002                                          |                                      | 2001    |        | Change(1) |   | Change 
|                                |                                                                                               |                                               |                                      |         |        |           |   |        
|Revenue from rental operations: |                                                                                               |                                               |                                      |         |        |           |   |         |        |         |   |         |   |         |   |    
|                                | Scheduled cash rents                                                                          |                                               | $                                    | 352,682 |        |           | $ | 343,224 |        |         | $ | 9,458   |   |         |   | 3   | % 
|                                | Straight-line rents                                                                           |                                               |                                      | 5,348   |        |           |   | 9,120   |        |         |   | (3,772  | ) |         |   | (41 | ) 
|                                | Tenant reimbursements                                                                         |                                               |                                      | 24,968  |        |           |   | 22,683  |        |         |   | 2,285   |   |         |   | 10  |   
|                                | Parking, net of expense                                                                       |                                               |                                      | 20,814  |        |           |   | 21,256  |        |         |   | (442    | ) |         |   | (2  | ) 
|                                | Other rental operations                                                                       |                                               |                                      | 8,242   |        |           |   | 18,202  |        |         |   | (9,960  | ) |         |   | (55 | ) 
|                                |                                                                                               |                                               |                                      |         |        |           |   |         |        |         |   |         |   |         |   |    
|                                |                                                                                               |                                               | Total revenue from rental operations |         |        | 412,054   |   |         |        | 414,485 |   |         |   | (2,431  | ) |     |    | (1 | )
|                                |                                                                                               |                                               |                                      |         |        |           |   |         |        |         |   |         |   |         |   |    
|Property expenses:              |                                                                                               |                                               |                                      |         |        |           |   |         |        |         |   |         |   |         |   |    
|                                | Repairs and maintenance                                                                       |                                               |                                      | 39,422  |        |           |   | 36,151  |        |         |   | 3,271   |   |         |   | 9   |   
|                                | Utilities                                                                                     |                                               |                                      | 35,726  |        |           |   | 33,579  |        |         |   | 2,147   |   |         |   | 6   |   
|                                | Real estate taxes                                                                             |                                               |                                      | 29,921  |        |           |   | 29,089  |        |         |   | 832     |   |         |   | 3   |   
|                                | Insurance                                                                                     |                                               |                                      | 8,116   |        |           |   | 5,685   |        |         |   | 2,431   |   |         |   | 43  |   
|                                | Ground rent                                                                                   |                                               |                                      | 895     |        |           |   | 1,885   |        |         |   | (990    | ) |         |   | (53 | ) 
|                                | Administrative                                                                                |                                               |                                      | 15,643  |        |           |   | 14,697  |        |         |   | 946     |   |         |   | 6   |   
|                                |                                                                                               |                                               |                                      |         |        |           |   |         |        |         |   |         |   |         |   |    
|                                |                                                                                               |                                               | Total property expenses              |         |        | 129,723   |   |         |        | 121,086 |   |         |   | 8,637   |   |     |    | 7  |  
|                                |                                                                                               |                                               |                                      |         |        |           |   |         |        |         |   |         |   |         |   |    
|                                |                                                                                               |                                               | Property operating results(2)        |         |        | 282,331   |   |         |        | 293,399 |   |         |   | (11,068 | ) |     |    | (4 | )
|                                | General and administrative                                                                    |                                               |                                      | 13,166  |        |           |   | 12,143  |        |         |   | 1,023   |   |         |   | 8   |   
|                                | Interest                                                                                      |                                               |                                      | 88,516  |        |           |   | 84,195  |        |         |   | 4,321   |   |         |   | 5   |   
|                                | Depreciation and amortization                                                                 |                                               |                                      | 110,202 |        |           |   | 100,775 |        |         |   | 9,427   |   |         |   | 9   |   
|                                | Interest and other income                                                                     |                                               |                                      | (2,542  | )      |           |   | (2,941  | )      |         |   | (399    | ) |         |   | (14 | ) 
|                                |                                                                                               |                                               |                                      |         |        |           |   |         |        |         |   |         |   |         |   |    
|                                | Income from continuing operations before gain on
    sale of properties and minority interest |                                               | $                                    | 72,989  |        |           | $ | 99,227  |        |         | $ | (26,238 | ) |         |   | (26 | )%
|                                |                                                                                               |                                               |                                      |         |        |           |   |         |        |         |   |         |   |         |   |    
|                                | Discontinued operations, net of minority
    interest(3)                                      |                                               | $                                    | 1,417   |        |           | $ | 1,458   |        |         | $ | (41     | ) |         |   | (3  | )%
|                                |                                                                                               |                                               |                                      |         |        |           |   |         |        |         |   |         |   |         |   |    
|Other Data:                     |                                                                                               |                                               |                                      |         |        |           |   |         |        |         |   |         |   |         |   |    
|                                | Number of properties:                                                                         |                                               |                                      |         |        |           |   |         |        |         |   |         |   |         |   |     |   
|                                |                                                                                               | Acquired during period                        |                                      |         | 5      |           |   |         |       |         |   |         |   |         |   |     |    |   
|                                |                                                                                               | Completed and placed in service during period |                                      |         | 1      |           |   |         | 1      |         |   |         |   |         |   |     |    |   
|                                |                                                                                               | Disposed of during period                     |                                      |         | (3     | )         |   |         | (10    | )       |   |         |   |         |   |     |    |   
|                                |                                                                                               | Owned at end of period                        |                                      |         | 136    | (4)       |   |         | 133    |         |   |         |   |         |   |     |    |   
|                                | Net rentable square feet:                                                                     |                                               |                                      |         |        |           |   |         |        |         |   |         |   |         |   |     |   
|                                |                                                                                               | Acquired during period                        |                                      |         | 803    |           |   |         |       |         |   |         |   |         |   |     |    |   
|                                |                                                                                               | Completed and placed in service during period |                                      |         | 287    |           |   |         | 162    |         |   |         |   |         |   |     |    |   
|                                |                                                                                               | Disposed of during period                     |                                      |         | (205   | )         |   |         | (573   | )       |   |         |   |         |   |     |    |   
|                                |                                                                                               | Owned at end of period                        |                                      |         | 19,132 | (4)       |   |         | 18,247 |         |   |         |   |         |   |     |    |   




|    |                                                                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Variances for Revenue from Rental Operations and
    Property Operating Expenses are discussed as part of Properties
    Owned for all of 2001 and 2002 below.
|   
|(2) | Property Operating Results are discussed as part
    of Variances for Revenue from Rental Operations and Property
    Operating Expenses below.               
|   
|(3) | Discontinued operations for 2001 and 2002 are
    discussed below.                                                                                            
|   
|(4) | Excludes one development property containing
    approximately 283,000 net rentable square feet currently under
    lease-up.                                 

Interest and other income decreased by
approximately $399,000 or 14%, in 2002 as compared to 2001,
primarily due to lower interest income earned in 2002 from our
restricted cash balances required by mortgage loans on lower
effective interest rates in 2002. The decrease in interest
income was partially offset by the early repayment of our
mortgage notes receivable in October 2002 which resulted in
approximately $375,000 higher net interest income from these
notes.

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##### Table of Contents



General and administrative expenses increased
approximately $1.0 million or 8%, in 2002 as compared to
2001. This increase was primarily due to non-recurring costs
resulting from employee separation costs and higher external
legal and accounting costs.

Interest expense increased approximately
$4.3 million or 5%, in 2002 as compared to 2001. This
increase was primarily due to an increase in borrowings in 2002
for property acquisitions and lower interest capitalized in
2002. Capitalized interest in 2002 was lower as we ceased
capitalizing interest on our 6080 Center Drive property in May
2002. The increase in interest expense was partially offset by
lower effective interest rates in 2002.

Depreciation and amortization expense increased
by approximately $9.4 million or 9%, in 2002 as compared to
2001. The increase was primarily due to depreciation related to
two newly developed properties placed in service since the
fourth quarter of 2001, five properties acquired during 2002 and
depreciation expense recorded in 2002 related to properties
previously held for sale in 2001 for which no depreciation
expense was recorded in 2001 while classified as held for sale.

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##### Table of Contents



Variances for Revenue from Rental Operations
and Property Operating Expenses

The decrease in revenue from rental operations
and increase in property operating expenses in 2002 as compared
to 2001 was primarily due to a 2.2% reduction in the average
occupancy and the timing of lease termination settlements and
other non-recurring items in our portfolio of
128 properties that we owned as part of continuing
operations for all of 2001 and 2002.

Following is a summary of the increase in revenue
from rental operations and property operating expenses that
relates to the 20 properties that were either sold,
acquired or placed in service after January 1, 2001, and
for the 128 non-development properties we owned for all of
2001 and 2002 (in thousands, except number of properties).

|                                |                          |                   |        |                       |   |                  |       |        |   |   |        |        |  
|------------------------------- | ------------------------ | ----------------- | ------ | --------------------- | - | ---------------- | ----- | ------ | - | - | ------ | ------ | -
|                                |                          |                   |        | Properties Sold,      |   |                 
|                                |                          |                   |        | Acquired,             |   | Non-Development 
|                                |                          |                   |        | Placed in Service or  |   | Properties Owned
|                                |                          |                   |        | Under Development     |   | for all of      
|                                |                          | Total Variance(1) |        | after January 1, 2001 |   | 2001 and 2002(2)
|                                |                          |                   |        |                       |   |                 
|Revenue from Rental Operations: |                          |                   |        |                       |   |                  |       |        |   |   |        |       
|                                | Scheduled cash rents     |                   | $      | 9,458                 |   |                  | $     | 7,729  |   |   | $      | 1,729  |  
|                                | Straight-line rents      |                   |        | (3,772                | ) |                  |       | 919    |   |   |        | (4,691 | )
|                                | Tenant reimbursements    |                   |        | 2,285                 |   |                  |       | 1,829  |   |   |        | 456    |  
|                                | Parking, net of expense  |                   |        | (442                  | ) |                  |       | (76    | ) |   |        | (366   | )
|                                | Other rental operations  |                   |        | (9,960                | ) |                  |       | (3,014 | ) |   |        | (6,946 | )
|                                |                          |                   |        |                       |   |                  |       |        |   |   |        |       
|                                |                          | $                 | (2,431 | )                     |   | $                | 7,387 |        |   | $ | (9,818 | )     
|                                |                          |                   |        |                       |   |                  |       |        |   |   |        |       
|Property Expenses:              |                          |                   |        |                       |   |                  |       |        |   |   |        |       
|                                | Repairs and maintenance  |                   |        | 3,271                 |   |                  |       | 1,551  |   |   |        | 1,720  |  
|                                | Utilities                |                   |        | 2,147                 |   |                  |       | 581    |   |   |        | 1,566  |  
|                                | Real estate taxes        |                   |        | 832                   |   |                  |       | 1,273  |   |   |        | (441   | )
|                                | Insurance                |                   |        | 2,431                 |   |                  |       | 168    |   |   |        | 2,263  |  
|                                | Ground rent              |                   |        | (990                  | ) |                  |       |       |   |   |        | (990   | )
|                                | Administrative           |                   |        | 946                   |   |                  |       | 130    |   |   |        | 816    |  
|                                |                          |                   |        |                       |   |                  |       |        |   |   |        |       
|                                |                          | $                 | 8,637  |                       |   | $                | 3,703 |        |   | $ | 4,934  |       
|                                |                          |                   |        |                       |   |                  |       |        |   |   |        |       
|Other Data:                     |                          |                   |        |                       |   |                  |       |        |   |   |        |       
|                                | Number of properties     |                   |        |                       |   |                  |       | 20     |   |   |        | 128    |  
|                                | Net rentable square feet |                   |        |                       |   |                  |       | 2,030  |   |   |        | 17,740 |  




|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The components outlined above comprise our
    Property Operating Results. This measure is commonly used by
    investors to evaluate the performance of REITs, to determine
    trends in earnings and to compute the fair value of properties
    as it is not affected by (1) the cost of funds of the
    property owner or (2) the impact of depreciation and
    amortization expenses as well as gains or losses from the sale
    of operating real estate assets that are included in net income
    computed in accordance with GAAP. The first factor is commonly
    eliminated from net income because it is specific to the
    particular financing capabilities and constraints of the owner.
    The second factor is commonly eliminated because it may not
    accurately represent the actual change in value in real estate
    properties that result from use or changes in market conditions.
    We believe that eliminating these costs from net income gives
    investors an additional measure of operating performance that,
    when used as an adjunct to net income computed in accordance
    with GAAP, can be a useful measure of our operating results.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Property Operating Results captures trends in
    occupancy rates, rental rates and operating costs. However,
    Property Operating Results excludes general and administrative
    costs, interest expense, interest income, depreciation and
    amortization expense and gains or losses from the sale of
    properties, changes in value in our real estate properties that
    result from use or permanent impairment to carrying costs as
    stipulated by GAAP, the level of capital expenditures and
    leasing costs necessary to maintain the operating performance of
    our properties, all of which are significant economic costs.
    Therefore, Property Operating Results may fail to capture
    significant trends which limits its usefulness.
|
| | Property Operating Results is a non-GAAP measure
    of performance. Property Operating Results is not a substitute
    for net income as computed in accordance with GAAP. It excludes
    significant expense components such as depreciation and
    amortization expense and financing costs. This measure should be
    analyzed in conjunction with net income and cash flow from
    operating activities as computed in accordance with GAAP. Other
    companies may use different methods for calculating Property
    Operating Results or similarly                                                                                                                                                                                                         

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| |                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | entitled measures and accordingly, our Property
    Operating Results may not be comparable to similarly entitled
    measures reported by other companies that do not define the
    measure exactly as we do.
|
| | The following is a reconciliation of income from
    continuing operations before gain on sale of properties and
    minority interest to Property Operating Results:                                          

|                                                                                     |                                    |                         |         |         |   |      |         |         |   |   |         |        |  
|------------------------------------------------------------------------------------ | ---------------------------------- | ----------------------- | ------- | ------- | - | ---- | ------- | ------- | - | - | ------- | ------ | -
|                                                                                     |                                    |                        
|                                                                                     |                                    | Year Ended December 31,
|                                                                                     |                                    |                        
|                                                                                     |                                    | 2002                    |         | 2001    |   | 2000
|                                                                                     |                                    |                         |         |         |   |     
|                                                                                     |                                    |                        
|                                                                                     |                                    | ($000s)               
|Income from continuing operations before gain on
    sale of properties and interest |                                    | $                       | 72,989  |         |   | $    | 99,227  |         |   | $ | 100,948 |       
|Add:                                                                                 |                                    |                         |         |         |   |      |         |         |   |   |         |       
|                                                                                     | General and administrative expense |                         |         | 13,166  |   |      |         | 12,143  |   |   |         | 9,336  |  
|                                                                                     | Interest expense                   |                         |         | 88,516  |   |      |         | 84,195  |   |   |         | 78,406 |  
|                                                                                     | Depreciation and amortization      |                         |         | 110,202 |   |      |         | 100,775 |   |   |         | 85,947 |  
|Less:                                                                                |                                    |                         |         |         |   |      |         |         |   |   |         |       
|                                                                                     | Interest and other income          |                         |         | (2,542  | ) |      |         | (2,941  | ) |   |         | (3,527 | )
|                                                                                     |                                    |                         |         |         |   |      |         |         |   |   |         |       
|Property Operating Results                                                           |                                    | $                       | 282,331 |         |   | $    | 293,399 |         |   | $ | 271,110 |       
|                                                                                     |                                    |                         |         |         |   |      |         |         |   |   |         |       



|    |                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | The operating results for properties included in
    continuing and discontinued operations that were owned for all
    of 2001 and 2002 are discussed below.

Discontinued Operations

We adopted Statement of Financial Accounting
Standards No. 144, (SFAS 144), effective
January 1, 2002, which requires, among other things, that
the operating results of real estate properties classified as
held for disposition subsequent to January 1, 2002 be
included in discontinued operations in the statements of income
for all periods presented. The table below summarizes the
operating results of our one property currently classified as
discontinued operations.

The results of operations for one property held
for disposition as of December 31, 2002 and classified as
discontinued operations for the years ended December 31,
2002 and 2001 are as follows (in thousands, except number of
properties):

|                         |                                                   |              |       |       |  |         |       |        |  |  |     |     |   |  |   |     |   
|------------------------ | ------------------------------------------------- | ------------ | ----- | ----- |  | ------- | ----- | ------ |  |  | --- | --- | - |  | - | --- | --
|                         |                                                   |              |       |       |  |        
|                         |                                                   | Year Ended   |       |       |  |        
|                         |                                                   | December 31, |       |       |  |        
|                         |                                                   |              |       |       |  | Percent
|                         |                                                   | 2002         |       | 2001  |  | Change  |       | Change
|                         |                                                   |              |       |       |  |         |       |       
|Discontinued Operations: |                                                   |              |       |       |  |         |       |        |  |  |     |     |   |  |   |    
|                         | Revenues                                          |              | $     | 4,165 |  |         | $     | 4,040  |  |  | $   | 125 |   |  |   | 3   | % 
|                         | Property operating expenses                       |              |       | 1,495 |  |         |       | 1,490  |  |  |     | 5   |   |  |   |    |   
|                         |                                                   |              |       |       |  |         |       |        |  |  |     |     |   |  |   |    
|                         |                                                   |              | 2,670 |       |  |         | 2,550 |        |  |  | 120 |     |   |  | 5 |    
|                         | Depreciation and amortization                     |              |       | 1,215 |  |         |       | 1,044  |  |  |     | 171 |   |  |   | 16  |   
|                         | Minority interest                                 |              |       | 38    |  |         |       | 48     |  |  |     | (10 | ) |  |   | (21 | ) 
|                         |                                                   |              |       |       |  |         |       |        |  |  |     |     |   |  |   |    
|                         | Discontinued operations, net of minority interest |              | $     | 1,417 |  |         | $     | 1,458  |  |  | $   | (41 | ) |  |   | (3  | )%
|                         |                                                   |              |       |       |  |         |       |        |  |  |     |     |   |  |   |    
|Other Data:              |                                                   |              |       |       |  |         |       |        |  |  |     |     |   |  |   |    
|                         | Number of properties                              |              |       | 1     |  |         |       | 1      |  |  |     |     |   |  |   |     |   
|                         | Net rentable square feet                          |              |       | 140   |  |         |       | 140    |  |  |     |     |   |  |   |     |   

The operating results for discontinued operations
are discussed as part of Properties Owned for all of 2001 and
2002 below.

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##### Table of Contents



Properties Owned for all of 2001 and
2002

Following is a comparison of property operating
data for the 129 non-development properties we owned for all of
2001 and 2002 reported in continuing and discontinued operations
(in thousands, except number of properties and percentages):

|                               |  |              |         |        |  |         |         |        |  |   |         |   |  |  |    |   
|------------------------------ |  | ------------ | ------- | ------ |  | ------- | ------- | ------ |  | - | ------- | - |  |  | -- | --
|                               |  |              |         |        |  |        
|                               |  | Year Ended   |         |        |  |        
|                               |  | December 31, |         |        |  |        
|                               |  |              |         | Dollar |  | Percent
|                               |  | 2002         |         | 2001   |  | Change  |         | Change
|                               |  |              |         |        |  |         |         |       
|Revenue from rental operations |  | $            | 391,893 |        |  | $       | 401,586 |        |  | $ | (9,693  | ) |  |  | (2 | )%
|Property expenses              |  |              | 123,700 |        |  |         | 118,761 |        |  |   | 4,939   |   |  |  | 4  |   
|                               |  |              |         |        |  |         |         |        |  |   |         |   |  |  |    |   
|                               |  | $            | 268,193 |        |  | $       | 282,825 |        |  | $ | (14,632 | ) |  |  | (5 | )%
|                               |  |              |         |        |  |         |         |        |  |   |         |   |  |  |    |   
|Straight-line rents            |  | $            | 3,412   |        |  | $       | 8,074   |        |  |   |         |   |  |  |    |   
|                               |  |              |         |        |  |         |         |        |  |   |         |   |  |  |    |   
|Number of properties           |  |              | 129     |        |  |         | 129     |        |  |   |         |   |  |  |    |   
|Average occupancy              |  |              | 91.1    | %      |  |         | 93.3    | %      |  |   |         |   |  |  |    |   
|Net rentable square feet       |  |              | 17,880  |        |  |         | 17,880  |        |  |   |         |   |  |  |    |   

Revenue from rental operations for these
properties decreased by approximately $9.7 million, or 2%,
in 2002 as compared to 2001. The decrease was due to a
$6.8 million decrease in revenue from other rental
operations, a $4.7 million decrease in straight-line rents
and a $390,000 decrease in parking income that was partially
offset by an approximate $1.7 million increase in scheduled
cash rents and a $471,000 increase in tenant reimbursements. The
decrease in revenue from other rental operations was primarily
attributable to decreases in lease termination settlements in
2002, while straight-line rents decreased primarily due to the
turning over of straight-line rents for older leases throughout
our same store portfolio. Parking income decreased due to the
2.2% decline in average occupancy. Scheduled cash rents
increased primarily due to scheduled rent increases and rental
rate growth attained on new and renewed leases which were
partially offset by the decline in average occupancy. Tenant
reimbursements increased primarily due to recovery billings for
higher operating expenses in 2002 as discussed below.

Property expenses for these properties increased
by approximately $4.9 million, or 4%, in 2002 as compared to
2001. The increase was primarily due to a $2.3 million
increase in insurance expense in 2002, a $1.7 million
increase in repairs and maintenance and a $1.6 million
increase in utility expenses which were partially offset by a
$990,000 decrease in ground rent expense. The increase in
insurance expense was due to increases in industry-wide rates in
2002 and premiums related to a $100 million terrorism
insurance policy entered into in the second quarter of 2002.
Repairs and maintenance expense increased in 2002 primarily due
to higher janitorial costs while utility costs increased due to
rate increases enacted in May 2001. Ground rent expense
decreased in 2002 due to lower operating income from one of our
properties with a participating ground lease.

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##### Table of Contents



Comparison of the year ended December 31,
2001 to the year ended December 31, 2000

(in thousands, except number of properties and
percentages)


|                                |                                                                                               |                                               |                                      |         |        |           |   |         |        |         |   |        |   |        |  |     |    |    | 
|------------------------------- | --------------------------------------------------------------------------------------------- | --------------------------------------------- | ------------------------------------ | ------- | ------ | --------- | - | ------- | ------ | ------- | - | ------ | - | ------ |  | --- | -- | -- | 
|                                |                                                                                               |                                               |                                      |         |        |          
|                                |                                                                                               | Year Ended December 31,                       |                                      |         |        |          
|                                |                                                                                               |                                               |                                      |         |        | Percent  
|                                |                                                                                               | 2001                                          |                                      | 2000    |        | Change(1) |   | Change 
|                                |                                                                                               |                                               |                                      |         |        |           |   |        
|Revenue from rental operations: |                                                                                               |                                               |                                      |         |        |           |   |         |        |         |   |        |   |        |  |    
|                                | Scheduled cash rents                                                                          |                                               | $                                    | 343,224 |        |           | $ | 317,413 |        |         | $ | 25,811 |   |        |  | 8   | % 
|                                | Straight-line rents                                                                           |                                               |                                      | 9,120   |        |           |   | 7,920   |        |         |   | 1,200  |   |        |  | 15  |   
|                                | Tenant reimbursements                                                                         |                                               |                                      | 22,683  |        |           |   | 16,454  |        |         |   | 6,229  |   |        |  | 38  |   
|                                | Parking, net of expense                                                                       |                                               |                                      | 21,256  |        |           |   | 17,575  |        |         |   | 3,681  |   |        |  | 21  |   
|                                | Other rental operations                                                                       |                                               |                                      | 18,202  |        |           |   | 21,260  |        |         |   | (3,058 | ) |        |  | (14 | ) 
|                                |                                                                                               |                                               |                                      |         |        |           |   |         |        |         |   |        |   |        |  |    
|                                |                                                                                               |                                               | Total revenue from rental operations |         |        | 414,485   |   |         |        | 380,622 |   |        |   | 33,863 |  |     |    | 9  | 
|                                |                                                                                               |                                               |                                      |         |        |           |   |         |        |         |   |        |   |        |  |    
|Property expenses:              |                                                                                               |                                               |                                      |         |        |           |   |         |        |         |   |        |   |        |  |    
|                                | Repairs and maintenance                                                                       |                                               |                                      | 36,151  |        |           |   | 34,874  |        |         |   | 1,277  |   |        |  | 4   |   
|                                | Utilities                                                                                     |                                               |                                      | 33,579  |        |           |   | 29,598  |        |         |   | 3,981  |   |        |  | 13  |   
|                                | Real estate taxes                                                                             |                                               |                                      | 29,089  |        |           |   | 26,362  |        |         |   | 2,727  |   |        |  | 10  |   
|                                | Insurance                                                                                     |                                               |                                      | 5,685   |        |           |   | 4,171   |        |         |   | 1,514  |   |        |  | 36  |   
|                                | Ground rent                                                                                   |                                               |                                      | 1,885   |        |           |   | 1,214   |        |         |   | 671    |   |        |  | 55  |   
|                                | Administrative                                                                                |                                               |                                      | 14,697  |        |           |   | 13,293  |        |         |   | 1,404  |   |        |  | 11  |   
|                                |                                                                                               |                                               |                                      |         |        |           |   |         |        |         |   |        |   |        |  |    
|                                |                                                                                               |                                               | Total property expenses              |         |        | 121,086   |   |         |        | 109,512 |   |        |   | 11,574 |  |     |    | 11 | 
|                                |                                                                                               |                                               |                                      |         |        |           |   |         |        |         |   |        |   |        |  |    
|                                |                                                                                               |                                               | Property operating results           |         |        | 293,399   |   |         |        | 271,110 |   |        |   | 22,289 |  |     |    | 8  | 
|                                | General and administrative                                                                    |                                               |                                      | 12,143  |        |           |   | 9,336   |        |         |   | 2,807  |   |        |  | 30  |   
|                                | Interest                                                                                      |                                               |                                      | 84,195  |        |           |   | 78,406  |        |         |   | 5,789  |   |        |  | 7   |   
|                                | Depreciation and amortization                                                                 |                                               |                                      | 100,775 |        |           |   | 85,947  |        |         |   | 14,828 |   |        |  | 17  |   
|                                | Interest and other income                                                                     |                                               |                                      | (2,941  | )      |           |   | (3,527  | )      |         |   | (586   | ) |        |  | (17 | ) 
|                                |                                                                                               |                                               |                                      |         |        |           |   |         |        |         |   |        |   |        |  |    
|                                | Income from continuing operations before gain on
    sale of properties and minority interest |                                               | $                                    | 99,227  |        |           | $ | 100,948 |        |         | $ | (1,721 | ) |        |  | (2  | )%
|                                |                                                                                               |                                               |                                      |         |        |           |   |         |        |         |   |        |   |        |  |    
|                                | Discontinued operations, net of minority
    interest(2)                                      |                                               | $                                    | 1,458   |        |           | $ | 1,202   |        |         | $ | 256    |   |        |  | 21  | % 
|                                |                                                                                               |                                               |                                      |         |        |           |   |         |        |         |   |        |   |        |  |    
|Other Data:                     |                                                                                               |                                               |                                      |         |        |           |   |         |        |         |   |        |   |        |  |    
|                                | Number of properties:                                                                         |                                               |                                      |         |        |           |   |         |        |         |   |        |   |        |  |     |   
|                                |                                                                                               | Acquired during period                        |                                      |         |       |           |   |         |       |         |   |        |   |        |  |     |    |   
|                                |                                                                                               | Completed and placed in service during period |                                      |         | 1      |           |   |         | 1      |         |   |        |   |        |  |     |    |   
|                                |                                                                                               | Disposed of during period                     |                                      |         | (10    | )         |   |         | (1     | )       |   |        |   |        |  |     |    |   
|                                |                                                                                               | Owned at end of period                        |                                      |         | 133    | (3)       |   |         | 142    |         |   |        |   |        |  |     |    |   
|                                | Net rentable square feet:                                                                     |                                               |                                      |         |        |           |   |         |        |         |   |        |   |        |  |     |   
|                                |                                                                                               | Acquired during period                        |                                      |         |       |           |   |         |       |         |   |        |   |        |  |     |    |   
|                                |                                                                                               | Completed and placed in service during period |                                      |         | 162    |           |   |         | 242    |         |   |        |   |        |  |     |    |   
|                                |                                                                                               | Disposed of during period                     |                                      |         | (573   | )         |   |         | (76    | )       |   |        |   |        |  |     |    |   
|                                |                                                                                               | Owned at end of period                        |                                      |         | 18,247 | (3)       |   |         | 18,658 |         |   |        |   |        |  |     |    |   




|    |                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Variances for Revenues from Rental Operations and
    Property Operating Expenses are discussed as part of Properties
    Owned for all of 2000 and 2001 below.
|   
|(2) | Discontinued operations for 2000 and 2001 are
    discussed below.                                                                                             
|   
|(3) | Excludes two development properties containing
    approximately 586,000 net rentable square feet.                                                             

Interest and other income decreased by
approximately $586,000 or 17%, in 2001 as compared to 2000,
primarily due to lower interest income earned in 2001 from our
restricted cash balances required by mortgage loans on lower
effective interest rates in 2001.

28



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General and administrative expenses increased
approximately $2.8 million or 30%, in 2001 as compared to
2000. This increase was primarily related to higher personnel
costs in 2001, including approximately $1.3 million in
non-cash compensation expense from restricted stock awards
granted to key executives in July and December of 2000 and July
of 2001 and approximately $850,000 in salaries for employees
hired after January 1, 2001.

Interest expense increased approximately
$5.8 million or 7%, in 2001 as compared to 2000. This
increase was primarily due to higher outstanding balances in
2001, resulting from the funding of development, tenant
improvements and leasing commission costs which was partially
offset by lower effective interest rates in 2001.

Depreciation and amortization expense increased
by approximately $14.8 million or 17%, in 2001 as compared to
2000, primarily due to depreciation related to newly developed
and renovated properties, capital expenditures, tenant
improvements and leasing commissions placed in service
subsequent to January 1, 2000, net of a decrease of
approximately $10.1 million in 2001 due to a change in the
estimated useful lives of certain building and building
improvements.

Variances for Revenue from Rental Operations
and Property Operating Expenses

The increase in revenue from rental operations
and property operating expenses in 2001 as compared to 2000 was
partially due to a development project placed in service in
2000, a development project placed in service in 2001, a
property sold in 2000, five properties sold in 2001 and three
properties under renovation for all or a portion of the periods
presented. Operating results for properties under renovation may
significantly vary from period to period depending on the status
of the renovation and occupancy levels maintained during the
renovation.

Following is a summary of the increase in revenue
from rental operations and property operating expenses that
relates to the eleven properties that were either acquired, sold
or placed in service after January 1, 2000 or were under
renovation for all or a portion of the period beginning after
January 1, 2000 and for the 132 non-

29



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##### Table of Contents



renovation/non-development properties we owned as
part of continuing operations for all of 2000 and 2001 (in
thousands, except number of properties).


|                                |                          |                |        |                            |   |                  |        |        |   |   |        |        |  
|------------------------------- | ------------------------ | -------------- | ------ | -------------------------- | - | ---------------- | ------ | ------ | - | - | ------ | ------ | -
|                                |                          |                |        |                            |   | Non-Renovation/ 
|                                |                          |                |        | Properties Sold, Acquired, |   | Non-Development 
|                                |                          |                |        | Placed in Service or       |   | Properties Owned
|                                |                          |                |        | Under                      |   | for all of      
|                                |                          |                |        | Renovation/Development     |   | 1999 and        
|                                |                          | Total Variance |        | after January 1, 2000      |   | 2000(1)         
|                                |                          |                |        |                            |   |                 
|Revenue from Rental Operations: |                          |                |        |                            |   |                  |        |        |   |   |        |       
|                                | Scheduled cash rents     |                | $      | 25,811                     |   |                  | $      | 11,504 |   |   | $      | 14,307 |  
|                                | Straight-line rents      |                |        | 1,200                      |   |                  |        | 2,067  |   |   |        | (867   | )
|                                | Tenant reimbursements    |                |        | 6,229                      |   |                  |        | 480    |   |   |        | 5,749  |  
|                                | Parking, net of expense  |                |        | 3,681                      |   |                  |        | 1,017  |   |   |        | 2,664  |  
|                                | Other rental operations  |                |        | (3,058                     | ) |                  |        | (991   | ) |   |        | (2,067 | )
|                                |                          |                |        |                            |   |                  |        |        |   |   |        |       
|                                |                          | $              | 33,863 |                            |   | $                | 14,077 |        |   | $ | 19,786 |       
|                                |                          |                |        |                            |   |                  |        |        |   |   |        |       
|Property Expenses:              |                          |                |        |                            |   |                  |        |        |   |   |        |       
|                                | Repairs and maintenance  |                |        | 1,277                      |   |                  |        | 1,157  |   |   |        | 120    |  
|                                | Utilities                |                |        | 3,981                      |   |                  |        | 837    |   |   |        | 3,144  |  
|                                | Real estate taxes        |                |        | 2,727                      |   |                  |        | 1,253  |   |   |        | 1,474  |  
|                                | Insurance                |                |        | 1,514                      |   |                  |        | 156    |   |   |        | 1,358  |  
|                                | Ground rent              |                |        | 671                        |   |                  |        | 386    |   |   |        | 285    |  
|                                | Administrative           |                |        | 1,404                      |   |                  |        | 302    |   |   |        | 1,102  |  
|                                |                          |                |        |                            |   |                  |        |        |   |   |        |       
|                                |                          | $              | 11,574 |                            |   | $                | 4,091  |        |   | $ | 7,483  |       
|                                |                          |                |        |                            |   |                  |        |        |   |   |        |       
|Other Data:                     |                          |                |        |                            |   |                  |        |        |   |   |        |       
|                                | Number of properties     |                |        |                            |   |                  |        | 11     |   |   |        | 132    |  
|                                | Net rentable square feet |                |        |                            |   |                  |        | 1,447  |   |   |        | 17,233 |  




|    |                                                                                                                                                                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The operating results for the properties included
    in continuing and discontinued operations that were owned for
    all of 2000 and 2001 are discussed below. These results also
    include the Temecula portfolio of five properties sold at the
    end of 2001 since these properties were owned for all of 2000
    and 2001.

Discontinued Operations

We adopted SFAS 144 effective January 1,
2002, which requires, among other things, that the operating
results of real estate properties classified as held for
disposition subsequent to January 1, 2002 be included in
discontinued operations in the statements of income for all
periods presented. The table below summarizes the operating
results of our one property currently classified as discontinued
operations.

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The results of operations for the property held
for disposition as of December 31, 2002 classified as
discontinued operations for the years ended December 31,
2001 and 2000 are as follows (in thousands, except number of
properties):

|                         |                                                   |              |       |       |  |         |       |        |  |  |     |      |   |  |    |     |  
|------------------------ | ------------------------------------------------- | ------------ | ----- | ----- |  | ------- | ----- | ------ |  |  | --- | ---- | - |  | -- | --- | -
|                         |                                                   |              |       |       |  |        
|                         |                                                   | Year Ended   |       |       |  |        
|                         |                                                   | December 31, |       |       |  |        
|                         |                                                   |              |       |       |  | Percent
|                         |                                                   | 2001         |       | 2000  |  | Change  |       | Change
|                         |                                                   |              |       |       |  |         |       |       
|Discontinued Operations: |                                                   |              |       |       |  |         |       |        |  |  |     |      |   |  |    |    
|                         | Revenues                                          |              | $     | 4,040 |  |         | $     | 3,968  |  |  | $   | 72   |   |  |    | 2   | %
|                         | Property operating expenses                       |              |       | 1,490 |  |         |       | 1,405  |  |  |     | 85   |   |  |    | 6   |  
|                         |                                                   |              |       |       |  |         |       |        |  |  |     |      |   |  |    |    
|                         |                                                   |              | 2,550 |       |  |         | 2,563 |        |  |  | (13 | )    |   |  | (1 | )  
|                         | Depreciation and amortization                     |              |       | 1,044 |  |         |       | 1,320  |  |  |     | (276 | ) |  |    | (21 | )
|                         | Minority interest                                 |              |       | 48    |  |         |       | 41     |  |  |     | 7    |   |  |    | 17  |  
|                         |                                                   |              |       |       |  |         |       |        |  |  |     |      |   |  |    |    
|                         | Discontinued operations, net of minority interest |              | $     | 1,458 |  |         | $     | 1,202  |  |  | $   | 256  |   |  |    | 21  | %
|                         |                                                   |              |       |       |  |         |       |        |  |  |     |      |   |  |    |    
|Other Data:              |                                                   |              |       |       |  |         |       |        |  |  |     |      |   |  |    |    
|                         | Number of properties                              |              |       | 1     |  |         |       | 1      |  |  |     |      |   |  |    |     |  
|                         | Net rentable square feet                          |              |       | 140   |  |         |       | 140    |  |  |     |      |   |  |    |     |  

The operating results for discontinued operations
are discussed as part of Properties Owned for all of 2000 and
2001 below.

Properties Owned for all of 2000 and
2001

Following is a comparison of property operating
data for the 133 non-renovation/non-development properties we
owned for all of 2000 and 2001 reported in continuing and
discontinued operations (in thousands, except number of
properties and percentages):

|                               |  |                         |         |        |  |         |         |        |  |   |        |  |  |  |   |  
|------------------------------ |  | ----------------------- | ------- | ------ |  | ------- | ------- | ------ |  | - | ------ |  |  |  | - | -
|                               |  |                         |         |        |  |        
|                               |  | Year Ended December 31, |         |        |  |        
|                               |  |                         |         | Dollar |  | Percent
|                               |  | 2001                    |         | 2000   |  | Change  |         | Change
|                               |  |                         |         |        |  |         |         |       
|Revenue from rental operations |  | $                       | 378,137 |        |  | $       | 358,279 |        |  | $ | 19,858 |  |  |  | 6 | %
|Property expenses              |  |                         | 113,619 |        |  |         | 106,051 |        |  |   | 7,568  |  |  |  | 7 |  
|                               |  |                         |         |        |  |         |         |        |  |   |        |  |  |  |   |  
|                               |  | $                       | 264,518 |        |  | $       | 252,228 |        |  | $ | 12,290 |  |  |  | 5 | %
|                               |  |                         |         |        |  |         |         |        |  |   |        |  |  |  |   |  
|Straight-line rents            |  | $                       | 6,107   |        |  | $       | 7,044   |        |  |   |        |  |  |  |   |  
|                               |  |                         |         |        |  |         |         |        |  |   |        |  |  |  |   |  
|Number of properties           |  |                         | 133     |        |  |         | 133     |        |  |   |        |  |  |  |   |  
|Average occupancy              |  |                         | 93.8    | %      |  |         | 94.5    | %      |  |   |        |  |  |  |   |  
|Net rentable square feet       |  |                         | 17,373  |        |  |         | 17,373  |        |  |   |        |  |  |  |   |  

Revenue from rental operations for these
properties increased by approximately $19.9 million, or 6%,
in 2001 as compared to 2000. Approximately $14.5 million of
this difference was related to higher rental revenue in 2001.
The increase in rental revenue was primarily attributable to
increases in rental rates in 2001. Revenue from rental
operations was also higher due to an approximate
$5.9 million increase in tenant reimbursements and an
approximate $2.7 million increase in parking income offset
by an approximate $2.3 million decrease in revenue from
other rental operations. Tenant reimbursements increased
primarily due to higher operating expenses in 2001, as discussed
below. Parking income increased in 2001 primarily due to
increases in parking rates, while revenue from other rental
operations decreased due to the timing of revenues from
non-scheduled sources. Revenue from other rental operations
includes after-hour utility billings, signage and lease
termination settlements.

Property expenses for these properties increased
by approximately $7.6 million, or 7%, in 2001 as compared to
2000, primarily due to $3.2 million increase in utility
expenses, a $1.3 million increase in real estate taxes, a
$1.4 million increase in insurance expense and a
$1.2 million increase in administrative expenses in 2001.
The increase in utility expenses was primarily due to rate
increases in 2001. Real estate taxes

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increased in 2001 due to normal annual increases
and final assessments on certain properties. Insurance expense
increased due to increase in industry-wide insurance rates in
2001, while administrative expenses increased primarily due to
higher personnel costs in 2001. As noted above, the increase in
operating expenses was the primary reason for the
$5.9 million increase in tenant reimbursements.


Liquidity and Capital Resources

Cash
Flows

Cash provided by operating activities increased
by approximately $9.5 million to $214.2 million in 2002 as
compared to $204.7 million in 2001. This increase was
primarily due to the increased cash flows on five properties
acquired in the third quarter of 2002, a reduction in tenant
receivables in 2002 as a result of our collection efforts and
cash flows for two development properties placed in service
subsequent to January 1, 2001, all of which were partially
offset by the loss of operating cash flows on ten properties
sold in 2001 and three office properties sold in 2002.

Cash used in investing activities increased by
approximately $111.3 million to $227.2 million in 2002 as
compared to $115.9 million in 2001. The increase was
primarily due to the acquisition of five properties for
approximately $135 million in the third quarter of 2002
which was partially offset by the decrease in our development
activity in 2002.

Cash used in financing activities decreased by
approximately $37.3 million to an outflow of
$19.9 million in 2002 as compared to an outflow of $57.2
million in 2001. This decrease in outflow was primarily due to
added borrowings in 2002 under the Wells Fargo unsecured line of
credit made for purposes of funding our 2002 property
acquisitions, which were partially offset by the decline in
funds used in 2002 in our development activity.

Capital
Commitments

As of December 31, 2002, we had
approximately $3.9 million outstanding in capital
commitments related to tenant improvements, development and
property-related capital expenditures. We expect to fund short
term capital commitments through cash flow generated by
operating activities, proceeds from asset sales or our unsecured
lines of credit.

Available
Borrowings, Cash Balances and Capital Resources

We have an unsecured line of credit with a total
commitment of $10 million from City National Bank. This
line of credit accrues interest at the City National Bank Prime
Rate less 0.875% and is scheduled to mature on August 1,
2003. Proceeds from this line of credit are used, among other
things, to provide funds for tenant improvements and capital
expenditures and provide for working capital and other corporate
purposes. As of December 31, 2002, there was no outstanding
balance on this line of credit and $10 million was
available for additional borrowings.

Financing Activities

On June 13, 2002, our operating partnership
closed on a $75 million unsecured term loan with
Wells Fargo. This loan matures in June 2004, has a two year
extension option and bears interest at LIBOR + 1.25%
during the initial term and LIBOR + 1.45% during the extension
period. The proceeds from this loan were used to repay the
outstanding balance on the Lehman Brothers unsecured line of
credit that was scheduled to mature in July 2002. On
September 25, 2002, our operating partnership increased its
$75 million unsecured term loan with Wells Fargo by an
additional $50 million and repaid $50 million on the
Wells Fargo unsecured line of credit.

On August 9, 2002, our operating partnership
renewed and increased its unsecured line of credit with a group
of banks led by Wells Fargo. The renewed line of credit provides
for borrowings up to $310 million with an option to
increase the amount to $350 million and bears interest at a
rate ranging between LIBOR + 0.80% and LIBOR + 1.25% (including
an annual facility fee ranging from 0.15% to 0.40% based on the
aggregate

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##### Table of Contents



amount of the line of credit) depending on the
operating partnerships unsecured debt rating. This new
line of credit amends the previous $275 million unsecured
line of credit that was scheduled to mature in April 2003. This
line of credit matures in April 2006. In addition, as long as
the operating partnership maintains an unsecured debt rating of
BBB-/ Baa3 or better, the agreement contains a competitive bid
option, whereby the lenders may bid on the interest rate to be
charged for up to $150 million of the unsecured line of
credit. The operating partnership also has the option to convert
the interest rate on this line of credit to the higher of Wells
Fargos prime rate or the Federal Funds rate plus 0.5%.


During the fourth quarter of 2002, our operating
partnership entered into interest rate swap agreements totaling
$175 million that fixed the floating interest rates on
$50 million of its unsecured line of credit and all of its
$125 million unsecured term loan. As a result of these
transactions, $50 million of our operating partnerships
line of credit will now bear fixed interest at 4.06% through the
maturity of the line in April of 2006 and the $125 million
term loan will now bear interest at 3.64% in 2003, 4.18% in
2004, 4.75% in 2005 and 4.9% from January through June of 2006.
As of December 31, 2002, we have an accrued liability
related to the mark-to-market adjustment for these swap
agreements totaling approximately $2.8 million.

Capital Recycling Program

On March 7, 2002, we sold an approximate
64,000 square foot office property located in Torrance,
California for $6.9 million. On April 16, 2002, we
sold an approximate 61,000 square foot office building located
in Westlake, California for $8.3 million. On May 1,
2002 we also completed the sale of an approximate 80,000 square
foot office property located in Canoga Park, California for
$8.4 million. The net proceeds from these dispositions were
used to reduce the outstanding balance on our Wells Fargo
unsecured line of credit.

On August 6, 2002, we acquired Gateway
Towers, an office property located in Torrance, California
containing approximately 433,000 net rentable square feet for
approximately $66 million. Gateway Towers consists of two
buildings that are approximately 93% leased and includes an
additional 5-acre development parcel. The funds for this
acquisition were attained from borrowing under the Wells Fargo
unsecured line of credit.

On August 16, 2002, we acquired Governor
Executive Center and Crossroads, two office properties located
in San Diego County containing approximately 186,000 square feet
for approximately $28 million. Governor Executive Center is
a three story, 52,195 square foot, 97% leased office building
located in the Governor Park submarket. Crossroads is a seven
story, 133,566 square foot, 100% leased multi-tenant office
building located in the Mission Valley submarket. On
August 30, 2002, we acquired Carmel Valley Center
I & II and Carmel View Office Plaza, two office
properties located in San Diego County containing approximately
185,000 square feet for approximately $41 million. Carmel
Valley Center is a three story, 77,460 square foot, 94% leased
office building located in the master planned development of
Camel Mountain Ranch within the Rancho Bernardo submarket. The
funds for these acquisitions were attained from borrowings under
the Wells Fargo unsecured line of credit.

On October 17, 2002, the borrower of our
mortgage notes receivable repaid the outstanding balance on the
notes totaling approximately $13.7 million. As a result of
this redemption, we recognized as income the unamortized
purchase discount on these notes at the time of repayment
totaling approximately $750,000. The proceeds from this
repayment were used to partially fund our stock repurchases
described below.

Stock Repurchase Program

On July 24, 2002, our Board of Directors
authorized a common stock repurchase program which authorized us
to purchase up to $75 million of our common stock over the
following 12 months. As part of this repurchase program, we
have acquired a total of 1,796,000 shares as of the date of this
report at an average price of approximately $22.66 per share.
The funds for these repurchases were attained from the proceeds
received from the repayment of the mortgage notes receivable
described above and borrowings under the Wells Fargo unsecured
line of credit.

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##### Table of Contents



Following is a summary of scheduled principal
payments for our total outstanding indebtedness as of
December 31, 2002 (in thousands):

|           |  |        |           |    
|---------- |  | ------ | --------- | ---
|Year       |  | Amount
|           |  |       
|2003       |  | $      | 5,461     |    
|2004       |  |        | 307,062   | (1)
|2005       |  |        | 207,678   |    
|2006       |  |        | 223,649   | (2)
|2007       |  |        | 158,681   |    
|2008       |  |        | 230,305   |    
|2009       |  |        | 111,980   |    
|2010       |  |        | 150,565   |    
|2011       |  |        | 710       |    
|2012       |  |        | 768       |    
|Thereafter |  |        | 5,445     |    
|           |  |        |           |    
|Total      |  | $      | 1,402,304 |    
|           |  |        |           |    




|    |                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------
|(1) | Includes $125 million outstanding on the
    Wells Fargo term loan which has a two year extension option.
|   
|(2) | Consists primarily of $208.6 million
    outstanding on the Wells Fargo unsecured line of credit.        

The following is other information related to our
indebtedness as of December 31, 2002 (in thousands, except
percentage and interest rate data):

Unsecured
and Secured Debt:

|               |  |         |           |         |  |                  |     |   |  |  |      |  
|-------------- |  | ------- | --------- | ------- |  | ---------------- | --- | - |  |  | ---- | -
|               |  |         |           |         |  | Weighted Average
|               |  | Balance |           | Percent |  | Interest Rate(1)
|               |  |         |           |         |  |                 
|Unsecured Debt |  | $       | 831,650   |         |  |                  | 59  | % |  |  | 6.56 | %
|Secured Debt   |  |         | 570,654   |         |  |                  | 41  | % |  |  | 7.37 | %
|               |  |         |           |         |  |                  |     |   |  |  |      |  
|Total Debt     |  | $       | 1,402,304 |         |  |                  | 100 | % |  |  | 6.89 | %
|               |  |         |           |         |  |                  |     |   |  |  |      |  

Floating
and Fixed Rate Debt:

|                   |  |         |           |         |  |                  |     |   |  |  |      |  
|------------------ |  | ------- | --------- | ------- |  | ---------------- | --- | - |  |  | ---- | -
|                   |  |         |           |         |  | Weighted Average
|                   |  | Balance |           | Percent |  | Interest Rate(1)
|                   |  |         |           |         |  |                 
|Floating Rate Debt |  | $       | 158,587   |         |  |                  | 11  | % |  |  | 3.42 | %
|Fixed Rate Debt(2) |  |         | 1,243,717 |         |  |                  | 89  | % |  |  | 7.33 | %
|                   |  |         |           |         |  |                  |     |   |  |  |      |  
|Total Debt         |  | $       | 1,402,304 |         |  |                  | 100 | % |  |  | 6.89 | %
|                   |  |         |           |         |  |                  |     |   |  |  |      |  




|    |                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------
|(1) | Includes amortization of prepaid financing costs.                                                         
|   
|(2) | Includes $175 million of floating rate debt
    that has been fixed through interest rate swap agreements.

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The following table summarizes our senior
unsecured notes covenant compliance ratios as of
December 31, 2002 (in thousands, except percentage and
covenant ratio data):

|                                             |                           |   |           |           | 
|-------------------------------------------- | ------------------------- | - | --------- | --------- | 
|Net investment in real estate                |                           | $ | 2,741,624 |          
|Cash and cash equivalents                    |                           |   | 4,063     |          
|Restricted Cash                              |                           |   | 20,498    |          
|Accumulated depreciation and amortization(1) |                           |   | 392,611   |          
|                                             |                           |   |           |          
|                                             | Total Assets              |   | $         | 3,158,796 | 
|                                             |                           |   |           |          
|                                             | Total unencumbered assets |   | $         | 1,839,187 | 
|                                             |                           |   |           |          
|Mortgage loans payable                       |                           | $ | 570,654   |          
|Unsecured lines of credit                    |                           |   | 208,587   |          
|Unsecured term loan                          |                           |   | 125,000   |          
|Unsecured senior notes, net of discount      |                           |   | 498,063   |          
|                                             |                           |   |           |          
|                                             | Total Outstanding Debt    |   | $         | 1,402,304 | 
|                                             |                           |   |           |          
|Consolidated EBITDA(2)                       |                           | $ | 274,377   |          
|                                             |                           |   |           |          
|Interest incurred(2)                         |                           | $ | 94,162    |          
|Loan fee amortization(2)                     |                           |   | 3,807     |          
|                                             |                           |   |           |          
|Debt Service(2)                              |                           | $ | 97,969    |          
|                                             |                           |   |           |          

|                                     |  |                   |  |        |     |  
|------------------------------------ |  | ----------------- |  | ------ | --- | -
|Covenant Ratios                      |  | Test              |  | Actual
|                                     |  |                   |  |       
|Total Outstanding Debt/ Total Assets |  | Less than 60%     |  |        | 44  | %
|Secured Debt/ Total Assets           |  | Less than 40%     |  |        | 18  | %
|EBITDA to Debt Service               |  | Greater than 1.5  |  |        | 2.8 |  
|Unencumbered Assets/ Unsecured Debt  |  | Greater than 150% |  |        | 221 | %




|    |                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes accumulated depreciation related to a
    property currently held for disposition.                                                                             
|   
|(2) | Represent amounts for the most recent four
    consecutive quarters. See EBITDA discussion on our Selected
    Financial Data section included elsewhere in this report.

Total interest incurred and the amount
capitalized was as follows (unaudited and in thousands):

|                        |  |                         |        |      |  |      |        |   |  |   |         |  
|----------------------- |  | ----------------------- | ------ | ---- |  | ---- | ------ | - |  | - | ------- | -
|                        |  |                        
|                        |  | Year Ended December 31,
|                        |  |                        
|                        |  | 2002                    |        | 2001 |  | 2000
|                        |  |                         |        |      |  |     
|Total interest incurred |  | $                       | 94,162 |      |  | $    | 93,290 |   |  | $ | 91,052  |  
|Amount capitalized      |  |                         | (5,646 | )    |  |      | (9,095 | ) |  |   | (12,646 | )
|                        |  |                         |        |      |  |      |        |   |  |   |         |  
|Amount expensed         |  | $                       | 88,516 |      |  | $    | 84,195 |   |  | $ | 78,406  |  
|                        |  |                         |        |      |  |      |        |   |  |   |         |  

As of December 31, 2002, we had
approximately $24.6 million in cash and cash equivalents,
including $20.5 million in restricted cash. Restricted cash
includes $13.7 million in interest-bearing cash deposits
required by some of our mortgage loans payable and
$6.8 million in cash impound accounts for real estate taxes
and insurance as required by several of our mortgage loans
payable.

We may sell assets over the next twelve to
twenty-four months. Due to market conditions beyond our control,
it is difficult to predict the actual period and amount of these
asset sales. Also depending on market conditions, at the time
any such sales proceeds are realized, we expect to redeploy such
amounts into investments that we believe will generate higher
long-term value, which may include development or redevelopment
of office buildings, acquisitions of existing buildings or
repurchase of our common stock. In

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addition, we expect to use a portion of any
proceeds to pay down portions of our debt in order to maintain
our conservative leverage and coverage ratios.


We expect to continue meeting our short-term
liquidity and capital requirements generally through net cash
provided by operating activities, proceeds from our lines of
credit or from asset sales. We believe that the net cash
provided by operating activities will continue to be sufficient
to pay any distributions necessary to enable us to continue
qualifying as a REIT. We also believe the foregoing sources of
liquidity will be sufficient to fund our short-terms liquidity
needs over the next twelve months, including recurring
non-revenue enhancing capital expenditures, tenant improvements
and leasing commissions.

We expect to meet our long-term liquidity and
capital requirements such as scheduled principal repayments,
development costs, property acquisitions, if any, and other
non-recurring capital expenditures through net cash provided by
operations, refinancing of existing indebtedness, proceeds from
asset sales and/or the issuance of long-term debt and equity
securities.

Recurring non-revenue enhancing capital
expenditures represent building improvements and leasing costs
required to maintain current revenue. Recurring capital
expenditures do not include immediate building improvements that
were taken into consideration when underwriting the purchase of
a building or which are being incurred to bring a building up to
our operating standards or reach stabilization. We consider a
property to be stabilized in the quarter when the property is at
least 95% leased. Recurring capital expenditures consist
primarily of replacement components such as new elevators, roof
replacements and upgrade requirements required by new safety
codes such as new fire-life-emergency systems.

Non-recurring capital expenditures represent
improvement costs incurred to improve a property to our
operating standards or reach stabilization. These costs are
normally taken into consideration during the underwriting
process for a given propertys acquisition. Non-recurring
capital expenditures include improvements such as new building
expansion and some renovation costs.

We capitalize both recurring capital expenditures
and non-recurring capital expenditures due to the probable
benefit derived in future years from both non-recurring as well
as recurring capital expenditures.

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Funds From Operations and Funds Available for
Distribution

The following table reflects the calculation of
our funds from operations and funds available for distribution
for the years ended December 31, 2002, 2001, 2000, 1999 and
1998 (in thousands, except percentages):

|                                     |                                               |                                                                                 |         |         |         |        |         |         |         |        |         |         |         |        |         |         |         |        |         |         |         |        | 
|------------------------------------ | --------------------------------------------- | ------------------------------------------------------------------------------- | ------- | ------- | ------- | ------ | ------- | ------- | ------- | ------ | ------- | ------- | ------- | ------ | ------- | ------- | ------- | ------ | ------- | ------- | ------- | ------ | 
|                                     |                                               |                                                                                
|                                     |                                               | Year Ended December 31,                                                        
|                                     |                                               |                                                                                
|                                     |                                               | 2002                                                                            |         | 2001    |         | 2000   |         | 1999    |         | 1998  
|                                     |                                               |                                                                                 |         |         |         |        |         |         |         |       
|Funds from Operations(1):            |                                               |                                                                                 |         |         |         |        |         |         |         |        |         |         |         |        |         |         |         |        |         |        
|                                     |                                               | Income from continuing operations                                               |         | $       | 68,758  |        |         | $       | 96,301  |        |         | $       | 95,508  |        |         | $       | 93,738  |        |         | $       | 87,510  |       
|                                     |                                               | FFO from discontinued operations                                                |         |         | 2,670   |        |         |         | 2,550   |        |         |         | 2,563   |        |         |         | 3,627   |        |         |         | 3,758   |       
|                                     |                                               | Depreciation and amortization                                                   |         |         | 110,202 |        |         |         | 100,775 |        |         |         | 85,947  |        |         |         | 69,215  |        |         |         | 51,420  |       
|                                     |                                               | Minority interest                                                               |         |         | 6,198   |        |         |         | 7,517   |        |         |         | 7,572   |        |         |         | 5,179   |        |         |         | 4,681   | (2)   
|                                     |                                               | Gain on sale of properties                                                      |         |         | (1,967  | )      |         |         | (4,591  | )      |         |         | (2,132  | )      |         |         |        |        |         |         |        |       
|                                     |                                               | Distributions on Preferred Operating Partnership
    Units                      |         |         | (4,312  | )      |         |         | (4,312  | )      |         |         | (4,312  | )      |         |         | (1,354  | )      |         |         |        |       
|                                     |                                               |                                                                                 |         |         |         |        |         |         |         |        |         |         |         |        |         |         |         |        |         |        
|Funds from Operations(3)             |                                               |                                                                                 | 181,549 |         |         |        | 198,240 |         |         |        | 185,146 |         |         |        | 170,405 |         |         |        | 147,369 |        
|                                     |                                               | Arden Realtys percentage share(4)                                              |         |         | 97.3    | %      |         |         | 96.8    | %      |         |         | 96.7    | %      |         |         | 96.2    | %      |         |         | 95.3    | %     
|                                     |                                               |                                                                                 |         |         |         |        |         |         |         |        |         |         |         |        |         |         |         |        |         |        
|                                     | Arden Realtys share of Funds from Operations |                                                                                 | $       | 176,647 |         |        | $       | 191,896 |         |        | $       | 179,036 |         |        | $       | 163,930 |         |        | $       | 140,443 |        
|                                     |                                               |                                                                                 |         |         |         |        |         |         |         |        |         |         |         |        |         |         |         |        |         |        
|Funds Available for Distribution(5): |                                               |                                                                                 |         |         |         |        |         |         |         |        |         |         |         |        |         |         |         |        |         |        
|                                     |                                               | Funds From Operations                                                           |         | $       | 181,549 |        |         | $       | 198,240 |        |         | $       | 185,146 |        |         | $       | 170,405 |        |         | $       | 147,369 |       
|                                     |                                               | Non-cash compensation expense                                                   |         |         | 1,199   |        |         |         | 1,938   |        |         |         |        |        |         |         |        |        |         |         |        |       
|                                     |                                               | Amortization of prepaid financing costs                                         |         |         | 3,807   |        |         |         | 3,568   |        |         |         |        |        |         |         |        |        |         |         |        |       
|                                     |                                               | Straight-line rent                                                              |         |         | (5,465  | )      |         |         | (9,208  | )      |         |         | (8,078  | )      |         |         | (7,680  | )      |         |         | (8,193  | )     
|                                     |                                               | Recurring capital expenditures                                                  |         |         | (3,747  | )      |         |         | (2,184  | )      |         |         | (7,437  | )      |         |         | (2,608  | )      |         |         | (1,481  | )     
|                                     |                                               | Second generation tenant improvements and leasing
    commissions               |         |         | (24,711 | )      |         |         | (19,276 | )      |         |         | (23,057 | )      |         |         | (24,664 | )      |         |         | (20,006 | )     
|                                     |                                               |                                                                                 |         |         |         |        |         |         |         |        |         |         |         |        |         |         |         |        |         |        
|Funds Available for Distribution     |                                               | $                                                                               | 152,632 |         |         | $      | 173,078 |         |         | $      | 146,574 |         |         | $      | 135.453 |         |         | $      | 117,689 |        
|                                     |                                               |                                                                                 |         |         |         |        |         |         |         |        |         |         |         |        |         |         |         |        |         |        
|                                     |                                               | Weighted average common shares and operating
    partnership units outstanding- |         |         |         |        |         |         |         |        |         |         |         |        |         |         |         |        |         |         |         |       
|                                     |                                               |                                                                                 | Diluted |         |         | 66,098 |         |         |         | 66,132 |         |         |         | 65,759 |         |         |         | 65,566 |         |         |         | 61,999 | 
|                                     |                                               |                                                                                 |         |         |         |        |         |         |         |        |         |         |         |        |         |         |         |        |         |        




|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | We believe that funds from operations, or FFO, is
    a useful supplemental measure of our operating performance. We
    compute FFO in accordance with standards established by the
    White Paper on FFO approved by the Board of Governors of the
    National Association of Real Estate Investment Trusts, or
    NARIET, in April 2002. The White Paper defines FFO as net income
    or loss computed in accordance with generally accepted
    accounting principles, or GAAP, excluding extraordinary items,
    as defined by GAAP, and gains and losses from sales of
    depreciable operating property plus real estate-related
    depreciation and amortization and after adjustments for
    unconsolidated partnerships and joint ventures.
|   
|    | We believe that FFO, by excluding depreciation
    costs, the gains or losses from the sale of operating real
    estate properties and the extraordinary items as defined by
    GAAP, provides an additional perspective on our operating
    results. However, because these excluded items have a real
    economic effect, FFO is a limited measure of performance.                                                                                                                                                                                                                                                                                                                                                                                     
|   
|    | FFO captures trends in occupancy rates, rental
    rates and operating costs. FFO excludes depreciation and
    amortization costs and it does not capture the changes in value
    in our properties that result from use or changes in market
    conditions or the level of capital expenditures and leasing
    costs necessary to maintain the operating performance of our
    properties, all of which are significant economic costs.
    Therefore, its ability to measure performance is limited.                                                                                                                                                                                                                                                  

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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | Because FFO excludes significant economic
    components of net income determined in accordance with GAAP, FFO
    should be used as an adjunct to net income and not as an
    alternative to net income. FFO should also not be used as an
    indicator of our financial performance, or as a substitute for
    cash flow from operating activities determined in accordance
    with GAAP or as a measure of our liquidity. FFO is not by itself
    indicative of funds available to fund our cash needs, including
    our ability to pay dividends or service our debt. Therefore, FFO
    only provides investors with an additional performance measure
    that when combined with measures computed in accordance with
    GAAP such as net income, cash flow from operating activities,
    investing activities and financing activities provides investors
    with an indication of our ability to service debt and to fund
    acquisitions and other expenditures.
|   
|    | FFO is used by investors to compare our
    performance with other REITs. Other REITs may use different
    methods for calculating FFO and, accordingly, our FFO may not be
    comparable to other REITs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|(2) | Excludes $575,000 in distributions made to the
    former minority interest partners in the World Savings office
    property.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(3) | Includes approximately $1.2 million,
    $1.9 million and $586,000 in non-cash compensation expense
    for the years ended December 31, 2002, 2001 and 2000,
    respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(4) | Represents Arden Realtys weighted average
    ownership percentage during the respective twelve month period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(5) | Consists of FFO excluding non-cash compensation
    expense, amortization of prepaid financing costs, straight-line
    rents and less costs incurred for recurring capital
    expenditures, second generation tenant improvements and leasing
    commissions. Beginning in 2001, we revised our funds available
    for distribution presentation to adjust the calculation for
    non-cash items in FFO, including non-cash compensation expense
    and the amortization of prepaid financing costs. In addition, we
    adjusted our deduction for capital expenditures and second
    generation tenant improvements and leasing commissions for
    amounts spent during the period. Prior to 2001, our adjustment
    for capital expenditures, tenant improvements and leasing
    commissions was a reserve for first and second generation space
    based on expected leasing volume, transaction costs and capital
    expenditures.                                 

Current Economic Climate

Our short and long-term liquidity, ability to
refinance existing indebtedness, ability to issue long-term debt
and equity securities at favorable rates and our dividend policy
are significantly impacted by the operating results of our
properties, all of which are located in Southern California. Our
ability to lease available space is largely dependent on the
demand for office space in the markets where our properties are
located. We believe current uncertainty over the national and
Southern California economic environment is exerting downward
pressures on the demand for Southern California commercial
office space. We are expecting continued downward pressures for
office demand due to several factors as follows:



| |   |                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Job growth in Southern California was negative in
    2002 and is largely dependent on improved economic activity;                                                                                      
|
| |  | Occupancy and rental rates have decreased in
    recent months, are expected to decrease further due to the state
    of the national and local economy and competition from other
    office landlords;
|
| |  | Larger tenants are taking more time to make their
    leasing decisions reflecting the uncertainty in the economy;                                                                                      
|
| |  | Some tenants are under-utilizing their existing
    space and can therefore expand internally before they need new
    space;                                                                           
|
| |  | Sublease space, although stabilizing, stands at
    about 2.5% of total inventory throughout Southern California; and                                                                                   
|
| |  | Over-building has increased vacancy rates in some
    submarkets.                                                                                                                                       

These factors have contributed to a decrease in
the occupancy of our portfolio from 92.2% as of
December 31, 2001 to 90.1% as of December 31, 2002.

Overall market rental rates in Southern
California declined 3 to 4% during 2002. Given the current
trends, including the expected continued occupancy pressures and
more aggressive pricing for sublease space, we expect market
rates will decline by up to an additional 5% in 2003.
Concessions also rose during 2002. As occupancy pressures
continue, we expect concessions in either free rent or higher
tenant improvement allowances to rise.

The timing and extent of future changes in the
national and local economy and their effects on our properties
and results of operations are difficult to accurately predict.
It is possible, however, that these national and regional issues
may more directly affect us and our operating results in the
future, making it more

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difficult for us to lease and renew available
space, to increase or maintain rental rates as leases expire and
to collect amounts due from our tenants. For additional
information, see Risk Factors  Further declines in
the economic activity of Southern California will adversely
affect our operating results,  The
financial condition and solvency of our tenants may reduce our
cash flow, and  Rising energy costs and
power outages in California may have an adverse effect on our
operations and revenue.


Forward-Looking Statements

This Form 10-K, including the documents
incorporated herein by reference, contains forward-looking
statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act
pertaining to, among other things, our future results of
operations, cash available for distribution, acquisitions, lease
renewals, property development, property renovation, capital
requirements and general business, industry and economic
conditions applicable to us. Also, documents we subsequently
file with the SEC and incorporated herein by reference will
contain forward-looking statements. Actual results could differ
materially from those projected in the forward-looking
statements as a result of the risk factors set forth below and
the matters set forth or incorporated in this Form 10-K
generally. We caution you, however, that this list of factors
may not be exhaustive, particularly with respect to future
filings.

ITEM
7A.     Quantitative and Qualitative
Disclosure About Market Risk

Market risk is the exposure or loss resulting
from changes in interest rates, foreign currency exchange rates,
commodity prices and equity prices. The primary market risk to
which we are exposed is interest rate risk, which is sensitive
to many factors, including governmental monetary and tax
policies, domestic and international economic and political
considerations and other factors that are beyond our control.

Interest
Rate Risk

In order to modify and manage the interest
characteristics of our outstanding debt and limit the effects of
interest rates on our operations, we may use a variety of
financial instruments, including interest rate swaps, caps,
floors and other interest rate exchange contracts. The use of
these types of instruments to hedge our exposure to changes in
interest rates carries additional risks such as counter-party
credit risk and legal enforceability of hedging contracts. We do
not enter into any transactions for speculative or trading
purposes. During 2002, we entered into interest rate swap
agreements, fixing the interest rates on variable rate debt with
notional amounts totaling $175.0 million.

Some of our future earnings, cash flows and fair
values relating to financial instruments are dependent upon
prevailing market rates of interest, such as LIBOR. Based on
interest rates and outstanding balances as of December 31, 2002,
a 1% increase in interest rates on our $158.6 million of
floating rate debt would decrease annual future earnings and
cash flows by approximately $1.6 million and would not have
an impact on the fair value of the floating rate debt. A 1%
decrease in interest rates on our $158.6 million of
floating rate debt would increase annual future earnings and
cash flows by approximately $1.6 million and would not have
an impact on the fair value of the floating rate debt. The
weighted average interest rate on our floating debt as of
December 31, 2002 was 3.42%.

Our fixed rate debt, including
$175.0 million in floating rate debt swapped to fixed
through interest rate swaps, totaled $1,243.7 million as of
December 31, 2002 with a weighted average interest rate of
7.33% and a total fair value of approximately
$1,320.2 million. A 1% decrease in interest rates on our
$1,243.7 million of fixed rate debt would increase its fair
value by approximately $38.1 million and would not have an
impact on annual future earnings and cash flows. A 1% increase
in interest rates on our $1,243.7 million of fixed rate debt
would decrease its fair value by approximately $36.2 million and
would not have an impact of annual future earnings and cash
flows.

These amounts are determined by considering the
impact of hypothetical interest rates on our borrowing cost.
These analyses do not consider the effects of the reduced level
of overall economic activity that could exist in that
environment. Further, in the event of a change of this
magnitude, we would consider taking actions to further mitigate
our exposure to the change. Due to the uncertainty of the
specific actions that

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would be taken and their possible effects,
however, this sensitivity analysis assumes no changes in our
capital structure.


RISK FACTORS

In addition to the other information contained or
incorporated by reference in this Form 10-K readers should
carefully consider the following risk factors.

Real Estate Investment Risks



| |                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------
| | An inability to retain tenants or rent space
    upon lease expirations may adversely affect our ability to
    service our debt.

Through 2007, 2,742 leases, including
month-to-month leases, comprising approximately 78% of our
leased net rentable square footage and approximately 74% of our
annualized base rents at December 31, 2002 will expire as
follows:

|     |  |           |     |                     |  |                      |      |   |  |  |      |  
|---- |  | --------- | --- | ------------------- |  | -------------------- | ---- | - |  |  | ---- | -
|     |  | Number    |     | Percentage of       |  | Percentage of       
|     |  | of Leases |     | Aggregate Portfolio |  | Aggregate Portfolio 
|Year |  | Expiring  |     | Leased Square Feet  |  | Annualized Base Rent
|     |  |           |     |                     |  |                     
|2003 |  |           | 763 |                     |  |                      | 16.9 | % |  |  | 14.9 | %
|2004 |  |           | 665 |                     |  |                      | 20.0 | % |  |  | 18.0 | %
|2005 |  |           | 618 |                     |  |                      | 18.6 | % |  |  | 17.4 | %
|2006 |  |           | 368 |                     |  |                      | 12.6 | % |  |  | 12.7 | %
|2007 |  |           | 328 |                     |  |                      | 10.3 | % |  |  | 10.8 | %

If we are unable to promptly relet or renew
leases for all or a substantial portion of this space, or if the
rent upon renewal or reletting are significantly lower than
expected, our cash flow and business could be adversely affected.



| |                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------
| | Further declines in the economic activity of
    Southern California will adversely affect our operating
    results.

All of our properties are located in Southern
California. In 2002, many sectors of the California economy as
well as the rest of the country experienced a slowdown or
contraction in economic activity. As a result, in 2002, there
was a decrease in occupancy in the majority of our sub-markets
as well as a decrease in rental rates. At December 31, 2002
our portfolio was 90.1% occupied as compared to 92.2% occupied
at December 31, 2001. During 2003, a total of approximately
3.0 million square feet of occupied space, representing
approximately 16.9% of our total net rentable space, including
month-to-month leases, will expire. Further deterioration of the
local and national economy may result in further erosion of
occupancy and rental rates and would most likely negatively
affect our operating performance and property values.



| |                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------
| | Competition affects occupancy levels, rents
    and cost of land which could adversely affect our
    revenues.

Many office properties compete with our
properties in attracting tenants to lease space. Some of the
competing properties may be newer, better located or owned by
parties better capitalized than we are. Although ownership of
these competing properties is currently diversified among many
different types of owners, from publicly traded companies and
institutional investors to small enterprises and individual
owners, and no one or group of owners currently dominate or
significantly influence the market, consolidation of owners
could create efficiencies and marketing advantages for the
consolidated group that could adversely affect us. These
competitive advantages, the number of competitors and the number
of competitive commercial properties in a particular area could
have a material adverse effect on the rents we can charge, our
ability to lease space in our existing properties or at newly
acquired or developed properties and the prices we have to pay
for developable land.

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The financial condition and
solvency of our tenants may reduce our cash flow.

Tenants may experience a downturn in their
business which may cause them to miss rental payments when due
or to seek the protection of bankruptcy laws, which could result
in rejection and termination of their leases or a delay in
recovering possession of their premises. Although we have not
experienced material losses from tenant bankruptcies, we cannot
assure you that tenants will not file for bankruptcy protection
in the future or, if any tenants file, that they will affirm
their leases and continue to make rental payments in a timely
manner.



| |                                                                                                              
| | -------------------------------------------------------------------------------------------------------------
| | Because real estate investments are illiquid,
    we may not be able to sell properties when
    appropriate.

Equity real estate investments are relatively
illiquid. That illiquidity will tend to limit our ability to
vary our portfolio promptly in response to changes in economic
or other conditions. In addition, the Internal Revenue Code of
1986, as amended, may under specified circumstances impose a
100% prohibited transaction tax on the profits derived from our
sale of properties held for fewer than four years, which could
affect our ability to sell our properties.



| |                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------
| | Rising energy costs and power outages in
    California may have an adverse effect on our operations and
    revenue.

Problems associated with deregulation of the
electric industry in California have resulted in significantly
higher costs in some areas. All of our properties are currently
located in areas served by utilities that either produce their
own electricity, or that have procured long-term, fixed rate
contracts with commercial electrical providers. While we have no
information suggesting that any future service interruptions are
expected we believe that higher utility costs may continue as
price increases are allowed by the California Public Utility
Commission or other regulatory agencies.

Approximately 28% of our buildings and 21% of the
total rentable square footage of our portfolio are subject to
leases that require our tenants to pay all utility costs. The
remainder of our leases provide that tenants will reimburse us
for utility costs in excess of a base year amount.

Although we have not experienced any material
losses resulting from electric deregulation, it is possible that
some of our tenants will not fulfill their lease obligations and
reimburse us for their share of any significant electric rate
increases and that we will not be able to retain or replace our
tenants if energy problems in California continue.



| |                                                                               
| | ------------------------------------------------------------------------------
| | Increases in taxes and regulatory compliance
    costs may reduce our revenue.

Except for our triple net leases, we may not be
able to pass all real estate tax increases through to some of
our tenants. Therefore, any tax increases may adversely affect
our cash flow and our ability to pay or refinance our debt
obligations. Our properties are also subject to various federal,
California and local regulatory requirements, such as
requirements of the Americans with Disabilities Act, and
California and local fire and life safety requirements. Failure
to comply with these requirements could result in the imposition
of fines by governmental authorities or awards of damages to
private litigants. We believe that our properties are currently
in substantial compliance with these regulatory requirements. We
cannot assure you, however, that these requirements will not be
changed or that new requirements will not be imposed that would
require significant unanticipated expenditures by us and could
have an adverse effect on our cash flow and the amounts
available for distributions and to our business.



| |                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We may acquire properties through partnerships
    or joint ventures with third parties that could result in
    financial dependency and management conflicts.

We may participate with other entities in
property ownership through joint ventures or partnerships in the
future. Depending on the characteristics and business objectives
of the joint venture or partnership, we may not have voting
control over the joint venture or partnership. Partnership or
joint venture investments may, under certain circumstances,
involve risks not otherwise present, including:

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| |   |                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our partners or co-venturers might become
    bankrupt;                                                                                                                   
|
| |  | our partners or co-venturers might at any time
    have economic or other business interests or goals which are
    inconsistent with our business interests or goals; and
|
| |  | our partners or co-venturers may be in a position
    to take action contrary to our instructions or requests contrary
    to our policies or objectives.                 

Neither the partnership agreement of our
operating partnership nor our governing documents prevent us
from participating in joint ventures with our affiliates.
Because a joint venture with an affiliate may not be negotiated
in a traditional arms length transaction, terms of the
joint venture may not be as favorable to us as we could obtain
if we entered into a joint venture with an outside third party.



| |                                                                 
| | ----------------------------------------------------------------
| | We may not be able to integrate or finance our
    acquisitions.

As we acquire additional properties, we will be
subject to risks associated with managing new properties,
including building systems not operating as expected, delay in
or failure to lease vacant space and tenants failing to renew
leases as they expire. In addition, our ability to manage our
growth effectively will require us to successfully integrate our
new acquisitions into our existing accounting systems and
property management structure. We cannot assure you that we will
be able to succeed with that integration or effectively manage
additional properties or that newly acquired properties will
perform as expected. Changing market conditions, including
competition from other purchasers of suburban office properties,
may diminish our opportunities for attractive additional
acquisitions. Moreover, acquisition costs of a property may
exceed original estimates, possibly making the property
uneconomical.



| |                                                                  
| | -----------------------------------------------------------------
| | Our acquisitions and renovations may not
    perform as expected.

Although we currently have no plans to
significantly expand or renovate our properties, we may do so in
the future. Expansion and renovation projects may inconvenience
and displace existing tenants, require us to engage in time
consuming up-front planning and engineering activities and
expend capital, and require us to obtain various government and
other approvals, the receipt of which cannot be assured. While
our policies with respect to expansion and renovation activities
are intended to limit some of the risks otherwise associated
with these activities, we will nevertheless incur risks,
including expenditures of funds on, and devotion of our time to,
projects that may not be completed.



| |                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------
| | Our development activities may be more
    expensive than anticipated and may not yield our anticipated
    results.

We currently have one development property under
lease-up at the Howard Hughes Center in Los Angeles, California.
The estimated total costs for this property is approximately
$81.5 million. In addition, we have preliminary
architectural designs completed for additional build-to-suit
buildings at the Howard Hughes Center and have completed
preliminary designs on a build-to-suit office building at our
Long Beach Airport Business Park. We have entitlements for an
additional 425,000 net rentable square feet of office space and
up to 600 hotel rooms at the Howard Hughes Center. Also, as part
of our Gateway Towers acquisition in August 2002, we acquired a
5-acre developable land parcel in Torrance, California that we
are also marketing for a build-to-suit building. We do not
intend to commence construction on any of these projects until
development plans and budgets are finalized and build-to-suit
tenant leases are signed with terms allowing us to achieve
yields commensurate with each projects development risk.
We also intend to review, from time to time, other opportunities
for developing and constructing office buildings and other
commercial properties in accordance with our development and
underwriting policies.

We expect to finance our development activities
over the next 24 months through net cash provided by
operating activities, proceeds from asset sales or proceeds from
our lines of credit.

Risks associated with our development activities
may include:



| |   |                                                                                          
| | - | -----------------------------------------------------------------------------------------
| |  | abandonment of development opportunities due to a
    lack of financing or other reasons;

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| |   |                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | construction costs of a property exceeding
    original estimates, possibly making the property uneconomical;                                                                                                                                 
|
| |  | occupancy rates and rents at a newly completed
    property may not be sufficient to make the property profitable;                                                                                                                            
|
| |  | construction and lease-up may not be completed on
    schedule, resulting in increased debt service expense and
    construction costs; and                                                                                                   
|
| |  | development activities would also be subject to
    risks relating to the inability to obtain, or delays in
    obtaining, all necessary zoning, land-use, building, occupancy
    and other required governmental permits and authorizations.



| |                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We are not subject to any limit on the amount
    or percentage of our assets that may be invested in any single
    property or any single geographic area.

Our governing documents do not restrict the
amount or percentage of our assets that we may invest in a
single property or geographic area. All of our properties are
currently in Southern California and we have no immediate plans
to invest outside of Southern California. This lack of
diversification in our investments makes us more highly
susceptible to changes affecting the Southern California economy
and real estate markets or damages from regional events such as
earthquakes.



| |                                                                
| | ---------------------------------------------------------------
| | We may not be able to expand into new markets
    successfully.

While our business is currently limited to the
Southern California market, it is possible that we will in the
future expand our business to new geographic markets. We will
not initially possess the same level of familiarity with new
markets outside of Southern California, which could adversely
affect our ability to manage, lease, develop or acquire
properties in new localities.

Financing Risks



| |                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------
| | Our significant amount of debt could limit our
    operational flexibility or otherwise adversely affect our
    financial condition.

As of December 31, 2002, we had total debt
of approximately $1.4 billion, consisting of approximately
$570.7 million in secured debt and approximately
$831.7 million of unsecured debt. See
Managements Discussion and Analysis of Financial
Condition and Results of Operations  Liquidity and
Capital Resources.

Our substantial indebtedness could:



| |   |                                                                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | require us to dedicate a substantial portion of
    our cash flow to pay our debt, thereby reducing the availability
    of our cash flow to fund distributions, working capital, capital
    expenditures, acquisition and development activity and other
    business purposes;
|
| |  | make it more difficult for us to satisfy our debt
    obligations;                                                                                                                                                                                                               
|
| |  | limit our ability to refinance our debt and
    obtain additional debt financing; and                                                                                                                                                                                            
|
| |  | increase our vulnerability to general adverse
    economic and real estate industry conditions and limit our
    flexibility in planning for, or reacting to, changes in our
    business and the real estate industry.                                                          



| |                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------
| | We may be able to incur substantially more
    debt which would increase the risks associated with our
    substantial leverage.

Despite current indebtedness levels, we may still
be able to incur substantially more debt in the future. Neither
the partnership agreement of our operating partnership nor our
governing documents limit the amount or the percentage of
indebtedness that we may incur. We may borrow up to a maximum of
$320 million under our two lines of credit. As of
December 31, 2002, we had the ability to borrow an
additional approximately

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$111.4 million under these two lines of
credit. If new debt is added to our current debt levels, the
related risks that we now face could intensify and could
increase the risk of default on our indebtedness.




| |                                                                            
| | ---------------------------------------------------------------------------
| | Scheduled debt payments could adversely affect
    our financial condition.

Our cash flow could be insufficient to meet
required payments of principal and interest when due. In
addition, we may not be able to refinance existing indebtedness,
which in virtually all cases requires substantial principal
payments at maturity, and, if we can refinance, the terms of the
refinancing might not be as favorable as the terms of our
existing indebtedness. As of December 31, 2002,
approximately $5.5 million of principal will be coming due
over the next twelve months. If principal payments cannot be
refinanced, extended or paid with proceeds of other capital
transactions, such as new equity capital, our cash flow will not
be sufficient in all years to repay all maturing debt and
continue to service and repay our debt obligations.



| |                                                                            
| | ---------------------------------------------------------------------------
| | Rises in interest rates could adversely affect
    our financial condition.

An increase in prevailing interest rates would
have an immediate effect on the interest rates charged on our
variable rate debt which rise and fall upon changes in interest
rates. At December 31, 2002, approximately 11% of our debt
was variable rate debt. Increases in interest rates would also
impact the refinancing of our fixed rate debt. If interest rates
are higher when our fixed debt becomes due, we may be forced to
borrow at the higher rates. If prevailing interest rates or
other factors result in higher interest rates, the increased
interest expense would adversely affect our cash flow and our
ability to service our debt, including the exchange notes. As a
protection against rising interest rates, we may enter into
agreements such as interest rate swaps, caps, floors and other
interest rate exchange contracts. These agreements, however,
increase our risks as to the other parties to the agreements not
performing or that the agreements could be unenforceable. During
the fourth quarter of 2002 we entered into interest rate lock
agreements totaling $175 million that fixed the floating
interest rates on $50 million of our unsecured line of
credit and all of our $125 million unsecured term loan.



| |                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Many of our properties are subject to mortgage
    financing which could result in foreclosure if we are unable to
    pay or refinance the mortgages when due.

We currently have outstanding five mortgage
financings totaling $552.3 million that are secured by 67 of our
properties. The properties in each of these financings are fully
cross-collateralized and cross-defaulted. To the extent two or
more mortgages are cross-defaulted, a default in one mortgage
will trigger a default in the other mortgages. The
cross-defaults can give the lender a number of remedies
depending on the circumstances such as the right to increase the
interest rate, demand additional collateral, accelerate the
maturity date of the mortgages or foreclose on and sell the
properties. To the extent two or more mortgages are
cross-collateralized, a default in one mortgage will allow the
mortgage lender to foreclose upon and sell the properties that
are not the primary collateral for the loan in default. Four
additional properties are subject to single property mortgages
totaling approximately $18.4 million at December 31,
2002. If we are unable to meet our obligations under these
mortgages, we could be forced to pay higher interest rates or
provide additional collateral or the properties subject to the
mortgages could be foreclosed upon and sold, which could have a
material adverse effect on us and our ability to pay or
refinance our debt obligations.

Tax Risks



| |                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our desire to qualify as a REIT restricts our
    ability to accumulate cash that might be used in future periods
    to make debt payments or to fund future growth.

In order to qualify as a REIT and avoid federal
income tax liability, we must distribute to our stockholders at
least 90% of our net taxable income, excluding net capital gain,
and to avoid income taxation, our distributions must not be less
than 100% of our net taxable income, including capital gains. To
avoid excise tax liability, our distributions to our
stockholders for the year must exceed the sum of 85% of its
ordinary income, 95% of its capital gain net income, and any
undistributed taxable income from prior years. As a result of
these distribution requirements, we do not expect to accumulate
significant amounts of cash. Accordingly,

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these distributions could significantly reduce
the cash available to us in subsequent periods to make payments
on our debt obligations and to fund future growth.




| |                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------
| | Our operating partnership intends to qualify
    as a partnership, but we cannot guarantee that it will
    qualify.

Our operating partnership intends to qualify as a
partnership for federal income tax purposes. However, if the
operating partnership were a publicly traded
partnership, it would be treated as a corporation instead
of a partnership for federal income tax purposes unless at least
90% of its income is qualifying income as defined in the
Internal Revenue Code. The income requirements applicable to
REITs and the definition of qualifying income for
purposes of this 90% test are similar in most respects.
Qualifying income for the 90% test generally includes passive
income, such as specified types of real property rents,
dividends and interest. We believe that the operating
partnership would meet this 90% test, but we cannot guarantee
that it would. If the operating partnership were to be taxed as
a corporation, it would incur substantial tax liabilities and we
would fail to qualify as a REIT for federal income tax purposes.



| |                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------
| | We may suffer adverse tax consequences and be
    unable to attract capital if we fail to qualify as a
    REIT.

We believe that since our taxable year ended
December 31, 1996, we have been organized and operated, and
intend to continue to operate, so as to qualify for taxation as
a REIT under the Internal Revenue Code. Although we believe that
we have been and will continue to be organized and have operated
and will continue to operate so as to qualify for taxation as a
REIT, we cannot assure you that we have been or will continue to
be organized or operated in a manner so as to qualify or remain
so qualified. For us to qualify as a REIT, we must satisfy
numerous requirements established under highly technical and
complex Internal Revenue Code provisions for which there are
only limited judicial and administrative interpretations and
tests regarding various factual matters and circumstances not
entirely within our control. The complexity of these provisions
and of the applicable Treasury Regulations that have been
promulgated under the Internal Revenue Code is greater in the
case of a REIT, like us, that holds its assets through an
investment in a partnership. No assurance can be given that
legislation, new regulations, administrative interpretations or
court decisions will not significantly change the tax laws with
respect to our qualification as a REIT or the federal income tax
consequences of qualification. We are, however, not aware of any
pending legislation that would adversely affect our ability to
qualify as a REIT. Our qualification and taxation as a REIT
depends on our ability to meet, through actual annual operating
results, asset diversification, distribution levels and
diversity of stock ownership, the various qualification tests
imposed under the Internal Revenue Code, the results of which
have not been and will not be reviewed by our tax counsel.

If we failed to qualify as a REIT in any taxable
year, we would be subject to federal income tax, including any
applicable alternative minimum tax, on our taxable income at
regular corporate rates. Moreover, unless entitled to relief
under specific statutory provisions, we also would be
disqualified as a REIT for the four taxable years following the
year during which qualification was lost. If we were
disqualified as a REIT, our ability to raise additional capital
could be significantly impaired. This could reduce the funds we
would have available to pay distributions to our stockholders
and to service our debt.

Even if we qualify for and maintain our REIT
status, we will be subject to certain federal, state and local
taxes on our income and property. For example, if we have net
income from a prohibited transaction, specifically sales or
other taxable dispositions of property held primarily for sale
to customers in the ordinary course of business, that income
will be subject to a 100% tax.

Other Risks



| |                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------
| | We are subject to agreements and policies that
    may deter change in control offers that might be attractive to
    our stockholders.

Certain provisions of our charter and bylaws as
well as our stockholder rights plan, which is described below,
may delay, defer or prevent a third party from making offers to
acquire us or control over us. For example, such provisions may:

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| |   |                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | deter tender offers for our common stock, which
    offers may be attractive to the stockholders; and                                                                                         
|
| |  | deter purchases of large blocks of common stock,
    thereby limiting the opportunity for stockholders to receive a
    premium for their common stock over then-prevailing market
    prices.

Our charter contains a provision designed to
prevent a concentration of ownership among our stockholders that
would cause us to fail to qualify as a REIT. Under the Internal
Revenue Code, not more than 50% in value of our outstanding
shares of common stock may be owned, actually or constructively,
by five or fewer individuals, including specific kinds of
entities, at any time during the last half of our taxable year.
In addition, if we, or an owner of 10% or more of our common
stock, actually or constructively owns 10% or more of a tenant
of ours, or a tenant of any partnership in which we are a
partner, the rent received by us from that tenant will not be
qualifying income for purposes of the REIT gross income tests.
In order to protect us against the risk of losing REIT status,
the ownership limit included in our charter limits actual or
constructive ownership of our outstanding shares of common stock
by any single stockholder to 9.0%, by value or by number of
shares, whichever is more restrictive, of the then outstanding
shares of common stock. Actual or constructive ownership of
shares of common stock in excess of the ownership limit will
cause the violative transfer or ownership to be void with
respect to the transferee or owner as to that number of shares
in excess of the ownership limit and such shares will be
automatically transferred to a trust for the exclusive benefit
of one or more qualified charitable organizations. That
transferee or owner will have no right to vote such shares or be
entitled to dividends or other distributions with respect to
such shares.

Although our Board of Directors presently has no
intention of doing so, except as described below, our Board of
Directors could waive this restriction with respect to a
particular stockholder if it were satisfied, based upon the
advice of counsel or a ruling from the Internal Revenue Service,
that ownership by such stockholder in excess of the ownership
limit would not jeopardize our status as a REIT and our Board of
Directors otherwise decided such action would be in our best
interests. Our Board of Directors has waived our ownership limit
with respect to Mr. Ziman and certain family members and
affiliates and has permitted these parties to actually and
constructively own up to 13.0% of the outstanding shares of
common stock.

Our charter authorizes our Board of Directors to
cause us to issue authorized but unissued shares of common stock
or preferred stock and to reclassify any unissued shares of
common stock or classify any unissued and reclassify any
previously classified but unissued shares of preferred stock
and, with respect to the preferred stock, to set the
preferences, rights and other terms of such classified or
unclassified shares. Although our Board of Directors has no such
intention at the present time, it could establish a series of
preferred stock that could, depending on the terms of such
series, delay, defer or prevent a transaction or a change in
control that might involve a premium price for the common stock
or otherwise be in the best interest of our stockholders.

Our Board of Directors is divided into three
classes of directors. Directors of each class are chosen for
three-year terms upon the expiration of their current terms and
each year one class of directors will be elected by the
stockholders. The staggered terms of directors may reduce the
possibility of a tender offer or an attempt to change control
even though a tender offer or change in control might be in the
best interest of our stockholders.

In August 1998, we declared a dividend
distribution of one preferred share purchase right on each
outstanding share of our common stock pursuant to a stockholder
plan. Subject to limited exceptions, these rights will be
exercisable if a person or group acquires 15% or more of our
common stock or announces a tender offer for 15% or more of our
common stock. Under certain circumstances, each right will
entitle stockholders to buy one one-hundredth of a share of our
newly created Class A Junior Participating Preferred Stock
at an exercise price of $75. Our Board of Directors will be
entitled to redeem the rights at $.01 per right at any time
before a person has acquired 15% or more of the outstanding
common stock. The rights plan will expire in August 2008.

Each right entitles its holder to purchase, at
the rights then-current exercise price, a number of our
common shares having a market value at that time of twice the
rights exercise price. Rights held by the person or group
seeking to acquire 15% or more of our common stock will become
void and will not be

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exercisable to purchase shares at the bargain
purchase price. If we are acquired in a merger or other business
combination transaction which has not been approved by our Board
of Directors, each right will entitle its holder to purchase, at
the rights then-current exercise price, a number of the
acquiring companys common shares having a market value at
that time of twice the rights exercise price.




| |                                                                                                         
| | --------------------------------------------------------------------------------------------------------
| | Losses in excess of our insurance coverage or
    uninsured losses could adversely affect our cash flow.

We carry comprehensive liability, fire, extended
coverage, terrorism and rental loss insurance policies which
currently cover all of our properties with specifications and
insured limits that we believe are adequate and appropriate
under the circumstances. Some losses, however, are generally not
insured against because it is not economically feasible to do
so. Should an uninsured loss or a loss in excess of insured
limits occur, we could lose our capital invested in the
property, as well as the anticipated future revenue from the
property and, in the case of debt which is recourse to us, we
would remain obligated for any mortgage debt or other financial
obligations related to the property. Any loss would adversely
affect our cash flow with respect to the property subject to the
loss. Moreover, we would generally be liable for any unsatisfied
obligations other than non-recourse obligations with respect to
the property subject to the loss.



| |                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------
| | Lack of availability of insurance coverage for
    biological, chemical or nuclear terrorist attacks could
    adversely affect our financial condition.

Our current terrorism insurance policy, that
expires in April 2003, specifically excludes biological,
chemical or nuclear terrorist acts. We have been notified by our
insurance broker that in the aftermath of September 11th
attacks, insurance carriers will continue to exclude these types
of attacks from terrorism insurance policies or offer coverage
for biological, chemical or nuclear attacks coverages at
prohibitive costs. Although we did not derive more than 4.3% of
our 2002 net operating income from any one of the properties in
our portfolio, a biological, chemical or nuclear terrorist
attack damaging several of our properties or negatively
impacting the financial condition of our tenants could
materially deteriorate our operating results and overall
financial condition.

An
earthquake could adversely affect our business.

All of our properties are located in Southern
California which is a high risk geographical area for
earthquakes. Depending upon its magnitude, an earthquake could
severely damage our properties which would adversely affect our
business. We maintain earthquake insurance for our properties
and the resulting business interruption. We cannot assure you
that our insurance will be sufficient if there is a major
earthquake.

Our
properties may be subject to environmental
liabilities.

Under federal, state and local environmental
laws, a current or previous owner or operator of real estate may
be required to investigate and clean up hazardous or toxic
substances or petroleum product releases at the property and may
be held liable to a governmental entity or to third parties for
property damage and for investigation and clean-up costs in
connection with the contamination. These laws typically impose
clean-up responsibility and liability without regard to whether
the owner knew of or caused the presence of the contaminants,
and the liability under these laws has been interpreted to be
joint and several unless the harm is divisible and there is a
reasonable basis for allocation of responsibility. These costs
may be substantial, and the presence of these substances, or the
failure to remediate the contamination on the property, may
adversely affect the owners ability to sell or rent the
property or to borrow against the property. Persons who arrange
for the disposal or treatment of hazardous or toxic substances
at a disposal or treatment facility also may be liable for the
costs of removal or remediation of a release of hazardous or
toxic substances at the disposal or treatment facility, whether
or not the facility is owned or operated by that person. Some
laws create a lien on the contaminated site in favor of the
government for damages and costs incurred in connection with the
contamination. Finally, third parties may have claims against
the owner of the site based on damages and costs resulting from
environmental contamination emanating from that site.

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Specific federal, state and local laws,
regulations and ordinances govern the removal, encapsulation or
disturbance of asbestos-containing materials when those
materials are in poor condition or in the event of construction,
remodeling, renovation or demolition of a building. These laws
may impose liability for release of asbestos-containing material
and may provide for third parties to seek recovery from owners
or operators of real properties for personal injury associated
with asbestos-containing materials. In connection with the
ownership and operation of our properties, we may be potentially
liable for those costs.

In the past few years, independent environmental
consultants have conducted or updated Phase I environmental
assessments and other environmental investigations as
appropriate at some of our properties. The environmental site
assessments and investigations have identified a total of 32
properties in our portfolio, representing approximately 32.5% of
the total rentable square feet in the portfolio, affected by
environmental concerns. These environmental concerns include
properties that may be impacted by known or suspected (a)
contamination caused by third party sources or (b) soil
and/or groundwater contamination which has been remediated, and
(c) those containing underground storage tanks or asbestos.

Of these properties, two (2) are believed to
be affected by contamination caused by third party sources and
also houses an underground storage tank, four (4) contain
friable asbestos, thirteen (13) contain non-friable
asbestos, and thirteen (13) house underground storage tanks
only. The properties affected by contamination are primarily
affected by petroleum and solvent substances, and in each case a
third party has indemnified us for any and all problems
associated with this contamination. With regard to those
properties affected by asbestos, asbestos does not pose a health
hazard if it is not disturbed in such a way to cause an airborne
release of asbestos. Asbestos is friable when it can be
crumbled, pulverized or reduced to powder by hand pressure, and
non-friable when hand pressure cannot release encapsulated
asbestos fibers. Friable asbestos is more likely to be released
into the air than no-friable asbestos. We manage all asbestos in
ways that minimize its potential to become airborne or otherwise
threaten human health. Regarding underground storage tanks,
subsurface leakage of the materials contained within the tank
constitutes the primary risk posed by these devices. We comply
with all applicable laws, including double-wall construction,
testing protocols, placement of tanks within bermed areas, and
the installation of leak and spill detection equipment, to
minimize the risks posed by underground storage tanks.

The environmental site assessments and
investigations have not, however, revealed any environmental
liability that we believe would have a material adverse effect
on our business, assets or results of operations taken as a
whole, nor are we aware of any material environmental liability.
Nevertheless, it is possible that our environmental site
assessments do not reveal all environmental liabilities or that
there are material environmental liabilities of which we are
unaware.

We believe that our properties are in compliance
in all material respects with all federal, state and local laws
regarding hazardous or toxic substances or petroleum products,
except as noted above. We have not been notified by any
governmental authority, and are not otherwise aware, of any
material noncompliance, liability or claim relating to hazardous
or toxic substances or petroleum products in connection with any
of our present properties, other than as noted above. It is
possible that future laws will impose material environmental
liabilities on us and that the current environmental condition
of our properties will be affected by tenants, by the condition
of land or operations in the vicinity of our properties, such as
the presence of underground storage tanks, or by third parties
unrelated to us.




ITEM 8.Financial Statements and
Supplementary Data

The financial statements and supplementary data
required by Regulation S-X are included in this Report on
Form 10-K commencing on page F-1.

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|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|ITEM 9. | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure

None.




PART III

The information required by Part III is
incorporated by reference from our definitive proxy statement
for our 2003 Annual Meeting of Stockholders.




ITEM 10. Directors and Executive
Officers of the Registrant

The information contained in the sections
captioned Proposal I; Election of Directors and
Section 16(a) Beneficial ownership Reporting
Compliance of the definitive proxy statement is
incorporated herein by reference.




ITEM 11. Executive
Compensation

The information contained in the section
captioned Executive Compensation of the definitive
proxy statement is incorporated herein by reference.




ITEM 12. Security Ownership of Certain
Beneficial Owners and Management

Equity Compensation Plan Information

The following table provides information as of
December 31, 2002 with respect to shares of our common
stock that may be issued under our existing equity compensation
plans (in thousands, except per share amounts):

|                                                           |  |                           |       |                           |  |                                      |       |  |  |  |       | 
|---------------------------------------------------------- |  | ------------------------- | ----- | ------------------------- |  | ------------------------------------ | ----- |  |  |  | ----- | 
|                                                           |  | Number of shares of       |       |                           |  | Number of shares of common stock    
|                                                           |  | common stock to be issued |       | Weighted-average exercise |  | remaining available for future      
|                                                           |  | upon exercise of          |       | price of outstanding      |  | issuance under equity compensation  
|                                                           |  | outstanding options,      |       | options, warrants and     |  | plans (excluding shares reflected in
|Plan Category                                              |  | warrants and rights       |       | rights                    |  | column(a))(1)                       
|                                                           |  |                           |       |                           |  |                                     
|                                                           |  | (a)                       |       | (b)                       |  | (c)                                 
|Equity Compensation plans approved by shareholders         |  |                           | 4,189 |                           |  | $                                    | 24.33 |  |  |  | 1,115 | 
|Equity Compensation plans not approved by
    shareholders |  |                           |      |                           |  |                                      |      |  |  |  |      | 
|                                                           |  |                           |       |                           |  |                                      |       |  |  |  |       | 
|Total                                                      |  |                           | 4,189 |                           |  | $                                    | 24.33 |  |  |  | 1,115 | 
|                                                           |  |                           |       |                           |  |                                      |       |  |  |  |       | 




|    |                                                                          
|--- | -------------------------------------------------------------------------
|(1) | Includes shares available for issuance under
    restricted stock grants.

The other information contained in the section
captioned Security Ownership of Principal Stockholders and
Management of the definitive proxy statement is
incorporated herein by reference.




ITEM 13. Certain Relationships and Related
Transactions

The information contained in the section
captioned Certain Relationships and Related
Transactions of the definitive proxy statement is
incorporated herein by reference.




ITEM 14. Controls and
Procedures

We maintain disclosure controls and procedures
that are designed to ensure that information required to be
disclosed in our Securities Exchange Act of 1934 reports is
recorded, processed, summarized and reported within the time
periods specified in the SECs rules and forms, and that
such information is accumulated and communicated to our
management, including our Chief Executive Officer and our Chief
Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure. In designing and evaluating the
disclosure

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controls and procedures, our management
recognized that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of
achieving the desired control objectives, and our management
necessarily was required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures.
Also, we have an investment in an unconsolidated entity. Because
we do not control or manage this entity, our disclosure controls
and procedures with respect to such an entity is necessarily
substantially more limited than those we maintain with respect
to our consolidated subsidiaries.


Within 90 days prior to the date of this
report, we carried out an evaluation, under the supervision and
with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure
controls and procedures. Based on the foregoing, our Chief
Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures were effective.

There have been no significant changes in our
internal controls or in other factors that could significantly
affect the internal controls subsequent to the date we completed
our evaluation.




PART IV




ITEM 15. Exhibits, Financial Statements,
and Reports on Form 8-K

(a) Financial Statements

The following consolidated financial information
is included as a separate section of this Annual Report on
Form 10-K:

|                                                                                                             |  |      |     | 
|------------------------------------------------------------------------------------------------------------ |  | ---- | --- | 
|                                                                                                             |  | Page
|                                                                                                             |  |     
|Report of Independent Auditors                                                                               |  |      | F-1 | 
|Consolidated Balance Sheets as of
    December 31, 2002 and 2001                                             |  |      | F-2 | 
|Consolidated Statements of Income for the years
    ended December 31, 2002, 2001 and 2000                   |  |      | F-3 | 
|Consolidated Statements of Stockholders
    Equity for the years ended December 31, 2002, 2001
    and 2000 |  |      | F-4 | 
|Consolidated Statements of Cash Flows for the
    years ended December 31, 2002, 2001 and 2000               |  |      | F-5 | 
|Notes to Financial Statements                                                                                |  |      | F-6 | 

All other schedules are omitted since the
required information is not present in amounts sufficient to
require submission of the schedule or because the information
required is included in the financial statements and notes
thereto.

(b) Reports on Form 8-K

None.

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(c) Exhibits

|        |      |             |  |                                                                                                                                                                                                                                                                                       |  |  |  | 
|------- | ---- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | 
|Exhibit |      |             |  |                                                                                                                                                                                                                                                                                      
|Number  |      | Description |  |                                                                                                                                                                                                                                                                                      
|        |      |             |  |                                                                                                                                                                                                                                                                                      
|        | 3.1  | *           |  | Amended and Restated Articles of Incorporation as
    filed as an exhibit to Arden Realty Registration Statement on
    Form S-11 (No. 333-8163).                                                                                                                                     |  |  |  | 
|        | 3.2  | *           |  | Articles Supplementary of Class A Junior
    Participating Preferred Stock as filed as an exhibit to the
    current report on Form 8-K, dated August 26, 1998.                                                                                                                       |  |  |  | 
|        | 3.3  | *           |  | Articles Supplementary of the 8 5/8
    Series B Cumulative Redeemable Preferred Stock dated
    September 7, 1999, filed as an exhibit to Arden
    Realtys 10-K dated March 27, 2000.                                                                                              |  |  |  | 
|        | 3.4  | *           |  | By-laws of Registrant as filed as an exhibit to
    Arden Realtys on Form S-11 (No. 333-8163).                                                                                                                                                                                       |  |  |  | 
|        | 3.5  | *           |  | Certificate of Amendment of the By-laws of Arden
    Realty dated July 14, 1998, filed as an exhibit to Arden
    Realtys quarterly report on Form 10-Q dated
    August 14, 1998.                                                                                                   |  |  |  | 
|        | 3.6  | *           |  | Certificate of Amendment of the Bylaws of Arden
    Realty dated March 17, 2000, filed as an exhibit on
    Form 10-Q dated May 11, 2000.                                                                                                                                             |  |  |  | 
|        | 4.1  | *           |  | Rights Agreement, dated August 14, 1998,
    between Arden Realty and The Bank of New York, as filed as an
    exhibit to Arden Realtys current report on Form 8-K
    dated August 26, 1998.                                                                                        |  |  |  | 
|        | 4.2  | *           |  | Indenture between Arden Realty Limited
    Partnership and The Bank of New York, as trustee, dated
    March 14, 2000 as filed as an exhibit to Arden Realty
    Limited Partnerships registration statement on
    Form S-4 (No. 333-35406).                                        |  |  |  | 
|        | 4.3  | *           |  | Form of Arden Realty Limited Partnerships
    unsecured 8.875% senior note due 2005, dated March 17, 2000
    filed as an exhibit to Arden Realty Limited Partnerships
    registration statement on Form S-4 (No. 333-35406).                                                      |  |  |  | 
|        | 4.4  | *           |  | Form of Arden Realty Limited Partnerships
    unsecured 9.150% senior note due 2010, dated March 17, 2000
    filed as an exhibit to Arden Realty Limited Partnerships
    registration statement on Form S-4 (No. 333-35406).                                                      |  |  |  | 
|        | 4.5  | *           |  | Form of Arden Realty Limited Partnerships
    unsecured 8.50% senior note due 2010, dated November 20,
    2000 as filed as an exhibit to Arden Realty Limited
    Partnerships registration statement on Form S-4
    (No. 333-53376).                                             |  |  |  | 
|        | 4.6  | *           |  | Form of Arden Realty Limited Partnerships
    7.00% Note due 2007, dated November 9, 2002 as filed as an
    exhibit to Arden Realty Limited Partnerships current
    report on Form 8-K filed with the Commission on
    November 9, 2001.                                         |  |  |  | 
|        | 4.7  | *           |  | Officers certificate dated March 17,
    2000 with respect to the terms of Arden Realty Limited
    Partnerships 8.875% senior note due 2005 and 9.150% Senior
    Notes due 2010 as filed as an exhibit to Arden Realty, Inc. 10-K
    filed with the Commission on April 1, 2002. |  |  |  | 
|        | 4.8  | *           |  | Officers certificate dated
    November 20, 2000 with respect to the terms of Arden Realty
    Limited Partnerships 8.50% Senior Notes due 2010 as filed
    as an exhibit to Arden Realty, Inc. 10-K filed with the
    Commission on April 1, 2002.                               |  |  |  | 
|        | 4.9  | *           |  | Officers certificate dated November 9,
    2001 with respect to the terms of Arden Realty Limited
    Partnerships 7.00% Note due 2007, filed as an exhibit to
    Arden Realty Limited Partnerships current report on
    Form 8-K filed with the Commission on November 9, 2001. |  |  |  | 
|        | 10.1 | *          |  | 1996 Stock Option and Incentive Plan of Arden
    Realty, Inc. and Arden Realty Limited Partnership as filed as an
    exhibit to Arden Realtys registration statement on
    Form S-11 (No. 333-8163).                                                                              |  |  |  | 

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|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |  |  | 
|------- | ----- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | 
|Exhibit |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Number  |       | Description |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        | 10.2  | *          |  | Amendment Number 1 to the 1996 Stock Option and
    Incentive Plan of Arden Realty, Inc. and Arden Realty Limited
    Partnership as filed as an exhibit to Arden Realtys
    Schedule 14A filed with the Commission on June 23,
    1998.                                                                                                                                                                                                                                                               |  |  |  | 
|        | 10.3  | *          |  | Form of Officers and Directors Indemnification
    Agreement as filed as an exhibit to Arden Realtys
    registration statement on Form S-11 (No. 333-8163).                                                                                                                                                                                                                                                                                                                                             |  |  |  | 
|        | 10.4  | *           |  | Loan Agreement dated June 8, 1998 by and
    between Arden Realty Finance III, L.L.C., a Delaware limited
    liability company and Lehman Brothers Realty Corporation, a
    Delaware corporation filed as an exhibit to Arden Realtys
    quarterly report of Form 10-Q filed with the Commission on
    August 14, 1998.                                                                                                                                                                              |  |  |  | 
|        | 10.5  | *           |  | Mortgage Note, dated June 8, 1998 for
    $136,100,000 by and between Arden Realty Finance III, L.L.C., a
    Delaware limited liability company, and Lehman Brothers Realty
    Corporation, a Delaware corporation. (Exhibit B. to
    Exhibit 10.4 above).                                                                                                                                                                                                                                             |  |  |  | 
|        | 10.6  | *           |  | Tenant Estoppel Certificate (Exhibit C. to
    Exhibit 10.4 above).                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |  |  | 
|        | 10.7  | *           |  | Subordination, Non-Disturbance and Attornment
    Agreement (Exhibit D. to Exhibit 10.4 above).                                                                                                                                                                                                                                                                                                                                                                                                           |  |  |  | 
|        | 10.8  | *           |  | Deed of Trust, Assignment of Rents and Leases,
    Security Agreement, and Fixture Filing dated as of June 8,
    1998 made by Arden Realty Finance III, L.L.C. as Grantor, to
    Commonwealth Land Title Company as Trustee for the benefit of
    Lehman Brothers Realty Corporation as Beneficiary, filed as an
    exhibit to Arden Realtys quarterly report on
    Form 10-Q filed with the Commission on August 14, 1998.                                                                         |  |  |  | 
|        | 10.9  | *           |  | Assignment of Leases and Rents dated June 8,
    1998, by and between Arden Realty Finance III, L.L.C., a
    Delaware limited liability company and Lehman Brothers Realty
    Corporation, a Delaware corporation, its successors and assigns
    filed as an exhibit to Arden Realtys quarterly report on
    Form 10-Q filed with the Commission on August 14, 1998.                                                                                                                                 |  |  |  | 
|        | 10.10 | *           |  | Collateral Assignment of Management Agreement and
    Subordination Agreement dated as of June 8, 1998 among
    Arden Realty Finance III, L.L.C., a Delaware limited liability
    company (Borrower), Lehman Brothers Realty
    Corporation, a Delaware corporation, (Lender), and
    Arden Realty Limited Partnership, a Maryland limited partnership
    (Manager), filed as an exhibit to Arden
    Realtys quarterly report on Form 10-Q filed with the
    Commission on August 14, 1998. |  |  |  | 
|        | 10.11 | *           |  | Security Agreement is entered into as of
    June 8, 1998 by and between Arden Realty Finance III,
    L.L.C., a Delaware limited liability company and Lehman Brothers
    Realty Corporation, a Delaware corporation, filed as an exhibit
    to Arden Realtys quarterly report on Form 10-Q filed
    with the Commission on August 14, 1998.                                                                                                                                                         |  |  |  | 
|        | 10.12 | *           |  | Environmental Indemnity Agreement dated
    June 8, 1998 by Arden Realty Finance III, L.L.C., a
    Delaware limited liability company, in favor of Lehman Brothers
    Realty Corporation, a Delaware corporation, filed as an exhibit
    to Arden Realtys quarterly report on Form 10-Q filed
    with the Commission on August 14, 1998.                                                                                                                                                             |  |  |  | 
|        | 10.13 | *           |  | Letter agreement between Lehman Brothers Realty
    Corporation, Arden Realty Finance III, L.L.C., Arden Realty and
    Arden Realty Limited Partnership, filed as an exhibit to Arden
    Realtys quarterly report on Form 10-Q filed with the
    Commission on August 14, 1998.                                                                                                                                                                                                                       |  |  |  | 
|        | 10.14 | *           |  | Loan Agreement by and between Arden Realty
    Finance IV, LLC, a Delaware limited liability company and Lehman
    Brothers Realty Corporation, a Delaware corporation, filed as an
    exhibit to Arden Realtys quarterly report on
    Form 10-Q filed with the Commission on August 14, 1998.                                                                                                                                                                                                        |  |  |  | 

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|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |  |  | 
|------- | ----- | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | 
|Exhibit |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Number  |       | Description |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 10.15 | *           |  | Mortgage Note, dated June 8, 1998 for
    $100,600,000 by and between Arden Realty Finance IV, L.L.C., a
    Delaware limited liability company (Maker), and
    Lehman Brothers Realty Corporation, a Delaware corporation
    (Exhibit B to Exhibit 10.14 above).                                                                                                                                                                                    |  |  |  | 
|        | 10.16 | *           |  | Tenant Estoppel Certificate (Exhibit C. to
    Exhibit 10.14 above).                                                                                                                                                                                                                                                                                                                                                                                     |  |  |  | 
|        | 10.17 | *           |  | Subordination, Non-Disturbance and Attornment
    Agreement (Exhibit D. to Exhibit 10.14 above).                                                                                                                                                                                                                                                                                                                                                         |  |  |  | 
|        | 10.18 | *           |  | Deed of Trust, Assignment of Rents and Leases,
    Security Agreement, and Fixture Filing dated as of June 8,
    1998 made by Arden Realty Finance IV, L.L.C. as Grantor, to
    Commonwealth Land Title Company as Trustee for the benefit of
    Lehman Brothers Realty Corporation as Beneficiary, filed as an
    exhibit to Arden Realtys quarterly report on
    Form 10-Q filed with the Commission on August 14, 1998.                         |  |  |  | 
|        | 10.19 | *           |  | Assignment of Leases and Rents dated June 8,
    1998, by and between Arden Realty Finance IV, L.L.C., a Delaware
    limited liability company (Assignor), and Lehman
    Brothers Realty Corporation, a Delaware corporation, its
    successors and assigns (Assignee), filed as an
    exhibit to Arden Realtys quarterly report on
    Form 10-Q filed with the Commission on August 14, 1998.                                                 |  |  |  | 
|        | 10.20 | *           |  | Collateral Assignment of Management Agreement and
    Subordination Agreement dated as of June 8, 1998 among
    Arden Realty Finance IV, L.L.C., a Delaware limited liability
    company (Borrower), Lehman Brothers Realty
    Corporation, a Delaware corporation, (Lender), and
    Arden Realty Limited Partnership, filed as an exhibit to Arden
    Realtys quarterly report on Form 10-Q filed with the
    Commission on August 14, 1998. |  |  |  | 
|        | 10.21 | *           |  | Security Agreement is entered into as of
    June 8, 1998 by and between Arden Realty Finance IV,
    L.L.C., a Delaware limited liability company
    (Debtor), and Lehman Brothers Realty Corporation, a
    Delaware corporation (Secured Party), filed as an
    exhibit to Arden Realtys quarterly report on
    Form 10-Q filed with the Commission on August 14, 1998.                                                                       |  |  |  | 
|        | 10.22 | *           |  | Environmental Indemnity Agreement dated
    June 8, 1998 by Arden Realty Finance IV, L.L.C., a
    Delaware limited liability company (Indemnitor), in
    favor of Lehman Brothers Realty Corporation, a Delaware
    corporation (Lender), filed as an exhibit to Arden
    Realtys quarterly report on Form 10-Q filed with the
    Commission on August 14, 1998.                                                                               |  |  |  | 
|        | 10.23 | *           |  | Letter agreement between Lehman Brothers Realty
    Corporation, Arden Realty Finance IV, L.L.C., Arden Realty
    and Arden Realty Limited Partnership, filed as an exhibit to
    Arden Realtys quarterly report on Form 10-Q filed
    with the Commission on August 14, 1998.                                                                                                                                                                       |  |  |  | 
|        | 10.24 | *          |  | Amended and Restated Employment Agreement dated
    January 1, 1999, between Arden Realty and Mr. Robert
    Peddicord, filed as a exhibit to Arden Realtys quarterly
    report on Form 10-Q filed with the Commission on
    August 8, 2000.                                                                                                                                                                                                          |  |  |  | 
|        | 10.25 | *           |  | Miscellaneous Rights Agreement among Arden
    Realty, Arden Realty Limited Partnership, NAMIZ, Inc. and
    Mr. Ziman, filed as an exhibit to Arden Realtys
    registration statement on Form S- II
    (No. 333-8163).                                                                                                                                                                                                                               |  |  |  | 
|        | 10.26 | *           |  | Credit Facility documentation consisting of
    Second Amended and Restated Revolving Credit Agreement by and
    among Arden Realty Limited Partnership and a group of banks led
    by Wells Fargo Bank as filed as an exhibit to Arden
    Realtys quarterly report on Form 10-Q filed with the
    Commission on May 12, 2000.                                                                                                                      |  |  |  | 

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|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |  |  | 
|------- | ----- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | 
|Exhibit |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                
|Number  |       | Description |  |                                                                                                                                                                                                                                                                                                                                                                                                                                
|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 10.27 | *           |  | Mortgage Financing documentation consisting of
    Loan Agreement by and between Arden Realtys special
    purpose financing subsidiary and Lehman Brothers Realty
    Corporation (the Loan Agreement includes the Mortgage Note, Deed
    of Trust, and form of Tenant Estoppel Certificate and Agreement
    as exhibits) as filed as an exhibit to Arden Realtys
    registration statement of Form S-11 (No. 333-30059). |  |  |  | 
|        | 10.28 | *           |  | Promissory Note, dated as of March 30, 1999,
    between Massachusetts Mutual Life Insurance Company and Arden
    Realty Finance V, L.L.C. filed as an exhibit to Arden
    Realtys current report Form 8-K filed with the
    Commission on April 20, 1999.                                                                                                                                                                  |  |  |  | 
|        | 10.29 | *           |  | Deed of Trust and Security Agreement, dated as of
    March 30, 1999, with Arden Realty Finance V, L.L.C. as
    the Trustor and Massachusetts Mutual Life Insurance Company as
    the Beneficiary filed as an exhibit to Arden Realtys
    current report on Form 8-K filed with the Commission on
    April 20, 1999.                                                                                                       |  |  |  | 
|        | 10.30 | *           |  | Assignment of Leases and Rents, dated as of
    March 30, 1999, between Massachusetts Mutual Life Insurance
    Company and Arden Realty Finance V, L.L.C. filed as an
    exhibit to Arden Realtys current report on Form 8-K
    filed with the Commission on April 20, 1999.                                                                                                                                                |  |  |  | 
|        | 10.31 | *           |  | Subordination of Management Agreement, dated as
    of March 30, 1999, between Massachusetts Mutual Life
    Insurance Company and Arden Realty Finance V. L.L.C. filed
    as an exhibit to Arden Realtys current report on
    Form 8-K filed with the Commission on April 20, 1999.                                                                                                                                         |  |  |  | 
|        | 10.32 | *           |  | Environmental Indemnification and Hold Harmless
    Agreement, dated as of March 30, 1999, between
    Massachusetts Mutual Life Insurance Company and Arden Realty
    Finance V, L.L.C. filed as an exhibit to Arden
    Realtys current report on Form 8-K filed with the
    Commission on April 20, 1999.                                                                                                                 |  |  |  | 
|        | 10.33 | *          |  | Amended and Restated Employment Agreement dated
    May 27, 1999, between Arden Realty and
    Mr. Randy J. Noblitt as filed as an exhibit to Arden
    Realty Limited Partnerships registration statement on
    Form S-4 (No. 333-53376).                                                                                                                                                                                    |  |  |  | 
|        | 10.34 | *          |  | Amended and Restated Employment Agreement dated
    July 27, 2000, by and between Arden Realty and
    Mr. Richard S. Ziman as filed as an exhibit to Arden
    Realty Limited Partnerships registration statement on
    Form S-4 (No. 333-53376).                                                                                                                                                                            |  |  |  | 
|        | 10.35 | *          |  | Amended and Restated Employment Agreement dated
    July 27, 2000, by and between Arden Realty and
    Mr. Victor J. Coleman as filed as an exhibit to Arden
    Realty Limited Partnerships registration statement on
    Form S-4 (No. 333-53376).                                                                                                                                                                           |  |  |  | 
|        | 1036  | *          |  | Amendment to the 1996 Stock Option and Incentive
    Plan of Arden Realty, Inc. and Arden Realty Limited Partnership
    as filed as an exhibit to Arden Realtys Schedule 14A
    filed with the Commission on April 25, 2000.                                                                                                                                                                                                 |  |  |  | 
|        | 10.37 | *          |  | Second Amended and Restated 1996 Stock Option and
    Incentive Plan of Arden Realty, Inc. and Arden Realty Limited
    Partnership dated September 20, 2001 as filed as an exhibit
    to Arden Realty, Inc.s quarterly report on Form 10-Q
    filed with the Commission on November 14, 2001.                                                                                                                               |  |  |  | 
|        | 10.38 | *          |  | Form of Promissory Note entered on July 19,
    2001 and September 28, 2001 between Arden Realty Limited
    Partnership and Richard Ziman, Victor Coleman, Andrew Sobel and
    Robert Peddicord, respectively, as filed as an exhibit to Arden
    Realty Limited Partnerships quarterly report on
    Form 10-Q filed with the Commission on November 14,
    2001.                                                         |  |  |  | 
|        | 10.39 | *          |  | Amended and Restated Employment Agreement dated
    June 2, 1999, by and between Arden Realty and
    Mr. Richard S. Davis as filed as an exhibit to Arden Realty
    Limited Partnerships annual report on Form 10-K filed
    with the Commission on April 1, 2002.                                                                                                                                                          |  |  |  | 

54



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##### Table of Contents



|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                   |  |  |  | 
|------- | ----- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | 
|Exhibit |       |             |  |                                                                                                                                                                                                                                                                                                                                                  
|Number  |       | Description |  |                                                                                                                                                                                                                                                                                                                                                  
|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                  
|        | 10.40 | *          |  | Amended and Restated Employment Agreement dated
    March 29, 2002, between Mr. Andrew Sobel and Arden
    Realty, Inc. as filed as an exhibit to Arden Realty, Inc.s
    quarterly report on Form 10-Q filed with the Commission on
    August 14, 2002.                                                                                        |  |  |  | 
|        | 10.41 | *          |  | Form of Promissory Note entered into on
    February 18, 2002 between Arden Realty, Inc. and
    Mr. Andrew Sobel as filed as on exhibit to Arden Realty,
    Inc.s quarterly report on Form 10-Q filed with the
    Commission on August 14, 2002.                                                                                              |  |  |  | 
|        | 10.42 | *           |  | Term Loan Agreement between Arden Realty Limited
    Partnership and Wells Fargo Bank, National Association dated as
    of June 12, 2002 as filed as an exhibit to Arden Realty
    Limited Partnerships quarterly report on Form 10-Q
    filed with the Commission on August 14, 2002.                                                        |  |  |  | 
|        | 10.43 | *           |  | Third Amended and Restated Revolving Credit
    Agreement between Arden Realty Limited Partnership and a group
    of lenders led by Wells Fargo Bank dated as of August 9,
    2002 as filed as an exhibit to Arden Realty Limited
    Partnerships quarterly report on Form 10-Q filed with
    the Commission on November 12, 2002.           |  |  |  | 
|        | 10.44 | *           |  | Amendment to Term Loan Agreement between Arden
    Realty Limited Partnership and Wells Fargo Bank, National
    Association dated as of September 19, 2002 as filed as an
    exhibit to Arden Realty Limited Partnerships quarterly
    report on Form 10-Q filed with the Commission on
    November 12, 2002.                                |  |  |  | 
|        | 10.45 | *          |  | Amended and Restated Employment Agreement dated
    May 27, 1999, by and between Arden Realty Limited
    Partnership and Mr. David Swartz as filed as an exhibit to
    Arden Realty Limited Partnerships annual report on
    Form 10-K filed with the Commission on March 28, 2003.                                                           |  |  |  | 
|        | 12.1  |             |  | Statement regarding computation of ratios.                                                                                                                                                                                                                                                                                                        |  |  |  | 
|        | 21.1  | *           |  | Subsidiaries of Arden Realty Limited Partnership
    as filed as an exhibit to Arden Realty Limited
    Partnerships annual report on Form 10-K filed with
    the Commission on March 28, 2003 are incorporated by
    reference and in addition, Arden Realty Limited Partnership is
    included herein as a subsidiary of Arden Realty, Inc. |  |  |  | 
|        | 23.1  |             |  | Consent of independent auditors.                                                                                                                                                                                                                                                                                                                  |  |  |  | 
|        | 99.1  |             |  | Officers certifications pursuant to
    Section 906 off the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                          |  |  |  | 




(*) Incorporated by reference.




|    |                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------
|() | Management contract or compensatory plan or
    arrangement required to be identified by Item 15(a)3.

55



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##### Table of Contents



SIGNATURES

Pursuant to the requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized on March 25, 2003.



| |                   
| | ------------------
| | ARDEN REALTY, INC.



| |     |                     
| | --- | --------------------
| | By: | /s/ RICHARD S. ZIMAN

| |                            
| | ---------------------------
| |                            
| | Richard S. Ziman           
| | Chairman of the Board      
| | and Chief Executive Officer

Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the
capacities and on the dates indicated.

|                                       |  |                                                                 |  |               
|-------------------------------------- |  | --------------------------------------------------------------- |  | --------------
|Name                                   |  | Title                                                           |  | Date          
|                                       |  |                                                                 |  |               
|/s/ RICHARD S. ZIMANRichard S. Ziman   |  | Chairman of the Board, Chief Executive
    Officer and Director |  | March 25, 2003
|                                      
|/s/ VICTOR J. COLEMANVictor J. Coleman |  | President, Chief Operating Officer
    and Director             |  | March 25, 2003
|                                      
|/s/ ANDREW J. SOBELAndrew J. Sobel     |  | Executive Vice President Strategic Planning and
    Operations  |  | March 25, 2003
|                                      
|/s/ RICHARD S. DAVISRichard S. Davis   |  | Senior Vice President, and Chief Financial Officer              |  | March 25, 2003
|                                      
|/s/ LARRY S. FLAXLarry S. Flax         |  | Director                                                        |  | March 20, 2003
|                                      
|/s/ CARL D. COVITZCarl D. Covitz       |  | Director                                                        |  | March 20, 2003
|                                      
|/s/ PETER S. GOLDPeter S. Gold         |  | Director                                                        |  | March 19, 2003
|                                      
|/s/ STEVEN C. GOODSteven C. Good       |  | Director                                                        |  | March 20, 2003

56



---



##### Table of Contents



OFFICERS CERTIFICATIONS

CERTIFICATION OF CHIEF EXECUTIVE
OFFICER

I, Richard S. Ziman, certify that:



|   |                                                                                                                                                                                                                                                                                                                                             
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1. | I have reviewed this annual report on
    Form 10-K of Arden Realty, Inc.;                                                                                                                                                                                                                                                                  
|  
|2. | Based on my knowledge, this annual report does
    not contain any untrue statement of a material fact or omit to
    state a material fact necessary to make the statements made, in
    light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    annual report;
|  
|3. | Based on my knowledge, the financial statements,
    and other financial information included in this annual report,
    fairly present in all material respects the financial condition,
    results of operations and cash flows of the registrant as of,
    and for, the periods presented in this annual report;                       
|  
|4. | The registrants other certifying officers
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the registrant and we have:                                                                                                       



| |    |                                                                                                                                                                                                                                                                                                             
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | designed such disclosure controls and procedures
    to ensure that material information relating to the registrant,
    including its consolidated subsidiaries, is made known to us by
    others within those entities, particularly during the period in
    which this annual report is being prepared;
|
| | b) | evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c) | presented in this annual report our conclusions
    about the effectiveness of the disclosure controls and
    procedures based on our evaluation as of the Evaluation Date;                                                                                                                                



|   |                                                                                                                                                                                                                                                                   
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|5. | The registrants other certifying officers
    and I have disclosed, based on our most recent evaluation, to
    the registrants auditors and the audit committee of the
    registrants board of directors (or persons performing the
    equivalent function):



| |    |                                                                                                                                                                                                                                                                                                                   
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | all significant deficiencies in the design or
    operation of internal controls which could adversely affect the
    registrants ability to record, process, summarize and
    report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) | any fraud, whether or not material, that involves
    management or other employees who have a significant role in the
    registrants internal controls; and                                                                                                                                                    



|   |                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|6. | The registrants other certifying officers
    and I have indicated in this annual report whether or not there
    were significant changes in internal controls or in other
    factors that could significantly affect internal controls
    subsequent to the date of our most recent evaluation, including
    any corrective actions with regard to significant deficiencies
    and material weaknesses.

Date: March 25, 2003

| |                                                  
| | -------------------------------------------------
| | /s/ RICHARD S. ZIMAN                             
| |                                                  
| | Richard S. Ziman                                 
| | Chairman of the Board and Chief Executive Officer
| | Arden Realty, Inc.                               

57



---



##### Table of Contents



CERTIFICATION OF CHIEF FINANCIAL
OFFICER

I, Richard S. Davis, certify that:



|   |                                                                                                                                                                                                                                                                                                                                             
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1. | I have reviewed this annual report on
    Form 10-K of Arden Realty, Inc.;                                                                                                                                                                                                                                                                  
|  
|2. | Based on my knowledge, this annual report does
    not contain any untrue statement of a material fact or omit to
    state a material fact necessary to make the statements made, in
    light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    annual report;
|  
|3. | Based on my knowledge, the financial statements,
    and other financial information included in this annual report,
    fairly present in all material respects the financial condition,
    results of operations and cash flows of the registrant as of,
    and for, the periods presented in this annual report;                       
|  
|4. | The registrants other certifying officers
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the registrant and we have:                                                                                                       



| |    |                                                                                                                                                                                                                                                                                                             
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | designed such disclosure controls and procedures
    to ensure that material information relating to the registrant,
    including its consolidated subsidiaries, is made known to us by
    others within those entities, particularly during the period in
    which this annual report is being prepared;



| |    |                                                                                                                                                                                                       
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) | evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and



| |    |                                                                                                                                                                             
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | c) | presented in this annual report our conclusions
    about the effectiveness of the disclosure controls and
    procedures based on our evaluation as of the Evaluation Date;



|   |                                                                                                                                                                                                                                                                   
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|5. | The registrants other certifying officers
    and I have disclosed, based on our most recent evaluation, to
    the registrants auditors and the audit committee of the
    registrants board of directors (or persons performing the
    equivalent function):



| |    |                                                                                                                                                                                                                                                                                                                   
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | all significant deficiencies in the design or
    operation of internal controls which could adversely affect the
    registrants ability to record, process, summarize and
    report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) | any fraud, whether or not material, that involves
    management or other employees who have a significant role in the
    registrants internal controls; and                                                                                                                                                    



|   |                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|6. | The registrants other certifying officers
    and I have indicated in this annual report whether or not there
    were significant changes in internal controls or in other
    factors that could significantly affect internal controls
    subsequent to the date of our most recent evaluation, including
    any corrective actions with regard to significant deficiencies
    and material weaknesses.

Date: March 25, 2003

| |                                                  
| | -------------------------------------------------
| | /s/RICHARD S. DAVIS                              
| |                                                  
| | Richard S. Davis                                 
| | Senior Vice President and Chief Financial Officer
| | Arden Realty, Inc.                               

58



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##### Table of Contents



CERTIFICATION OF CHIEF OPERATING
OFFICER

I, Victor J. Coleman, certify that:



|   |                                                                                                                                                                                                                                                                                                                                             
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1. | I have reviewed this annual report on
    Form 10-K of Arden Realty, Inc.;                                                                                                                                                                                                                                                                  
|  
|2. | Based on my knowledge, this annual report does
    not contain any untrue statement of a material fact or omit to
    state a material fact necessary to make the statements made, in
    light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    annual report;
|  
|3. | Based on my knowledge, the financial statements,
    and other financial information included in this annual report,
    fairly present in all material respects the financial condition,
    results of operations and cash flows of the registrant as of,
    and for, the periods presented in this annual report;                       
|  
|4. | The registrants other certifying officers
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the registrant and we have:                                                                                                       



| |    |                                                                                                                                                                                                                                                                                                             
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | designed such disclosure controls and procedures
    to ensure that material information relating to the registrant,
    including its consolidated subsidiaries, is made known to us by
    others within those entities, particularly during the period in
    which this annual report is being prepared;
|
| | b) | evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c) | presented in this annual report our conclusions
    about the effectiveness of the disclosure controls and
    procedures based on our evaluation as of the Evaluation Date;                                                                                                                                



|   |                                                                                                                                                                                                                                                                   
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|5. | The registrants other certifying officers
    and I have disclosed, based on our most recent evaluation, to
    the registrants auditors and the audit committee of the
    registrants board of directors (or persons performing the
    equivalent function):



| |    |                                                                                                                                                                                                                                                                                                                   
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | all significant deficiencies in the design or
    operation of internal controls which could adversely affect the
    registrants ability to record, process, summarize and
    report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) | any fraud, whether or not material, that involves
    management or other employees who have a significant role in the
    registrants internal controls; and                                                                                                                                                    



|   |                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|6. | The registrants other certifying officers
    and I have indicated in this annual report whether or not there
    were significant changes in internal controls or in other
    factors that could significantly affect internal controls
    subsequent to the date of our most recent evaluation, including
    any corrective actions with regard to significant deficiencies
    and material weaknesses.

Date: March 25, 2003

| |                                      
| | -------------------------------------
| | /s/ VICTOR J. COLEMAN                
| |                                      
| | Victor J. Coleman                    
| | President and Chief Operating Officer
| | Arden Realty, Inc.                   

59



---



##### Table of Contents



CERTIFICATION OF EXECUTIVE VICE
PRESIDENT

I, Andrew J. Sobel, certify that:



|   |                                                                                                                                                                                                                                                                                                                                             
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1. | I have reviewed this annual report on
    Form 10-K of Arden Realty, Inc.;                                                                                                                                                                                                                                                                  
|  
|2. | Based on my knowledge, this annual report does
    not contain any untrue statement of a material fact or omit to
    state a material fact necessary to make the statements made, in
    light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    annual report;
|  
|3. | Based on my knowledge, the financial statements,
    and other financial information included in this annual report,
    fairly present in all material respects the financial condition,
    results of operations and cash flows of the registrant as of,
    and for, the periods presented in this annual report;                       
|  
|4. | The registrants other certifying officers
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the registrant and we have:                                                                                                       



| |    |                                                                                                                                                                                                                                                                                                             
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | designed such disclosure controls and procedures
    to ensure that material information relating to the registrant,
    including its consolidated subsidiaries, is made known to us by
    others within those entities, particularly during the period in
    which this annual report is being prepared;
|
| | b) | evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c) | presented in this annual report our conclusions
    about the effectiveness of the disclosure controls and
    procedures based on our evaluation as of the Evaluation Date;                                                                                                                                



|   |                                                                                                                                                                                                                                                                   
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|5. | The registrants other certifying officers
    and I have disclosed, based on our most recent evaluation, to
    the registrants auditors and the audit committee of the
    registrants board of directors (or persons performing
    the equivalent function):



| |    |                                                                                                                                                                                                                                                                                                                   
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | all significant deficiencies in the design or
    operation of internal controls which could adversely affect the
    registrants ability to record, process, summarize and
    report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) | any fraud, whether or not material, that involves
    management or other employees who have a significant role in the
    registrants internal controls; and                                                                                                                                                    



|   |                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|6. | The registrants other certifying officers
    and I have indicated in this annual report whether or not there
    were significant changes in internal controls or in other
    factors that could significantly affect internal controls
    subsequent to the date of our most recent evaluation, including
    any corrective actions with regard to significant deficiencies
    and material weaknesses.

Date: March 25, 2003

| |                                                  
| | -------------------------------------------------
| | /s/ ANDREW J. SOBEL                              
| |                                                  
| | Andrew J. Sobel                                  
| | Executive Vice President  Strategic
    Planning
| | and Operations                                   
| | Arden Realty, Inc.                               

60



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##### Table of Contents



CERTIFICATION OF SENIOR VICE
PRESIDENT

I, Robert C. Peddicord, certify that:



|   |                                                                                                                                                                                                                                                                                                                                             
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1. | I have reviewed this annual report on
    Form 10-K of Arden Realty, Inc.;                                                                                                                                                                                                                                                                  
|  
|2. | Based on my knowledge, this annual report does
    not contain any untrue statement of a material fact or omit to
    state a material fact necessary to make the statements made, in
    light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    annual report;
|  
|3. | Based on my knowledge, the financial statements,
    and other financial information included in this annual report,
    fairly present in all material respects the financial condition,
    results of operations and cash flows of the registrant as of,
    and for, the periods presented in this annual report;                       
|  
|4. | The registrants other certifying officers
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the registrant and we have:                                                                                                       



| |    |                                                                                                                                                                                                                                                                                                             
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | designed such disclosure controls and procedures
    to ensure that material information relating to the registrant,
    including its consolidated subsidiaries, is made known to us by
    others within those entities, particularly during the period in
    which this annual report is being prepared;
|
| | b) | evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c) | presented in this annual report our conclusions
    about the effectiveness of the disclosure controls and
    procedures based on our evaluation as of the Evaluation Date;                                                                                                                                



|   |                                                                                                                                                                                                                                                                   
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|5. | The registrants other certifying officers
    and I have disclosed, based on our most recent evaluation, to
    the registrants auditors and the audit committee of the
    registrants board of directors (or persons performing the
    equivalent function):



| |    |                                                                                                                                                                                                                                                                                                                   
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | all significant deficiencies in the design or
    operation of internal controls which could adversely affect the
    registrants ability to record, process, summarize and
    report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) | any fraud, whether or not material, that involves
    management or other employees who have a significant role in the
    registrants internal controls; and                                                                                                                                                    



|   |                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|6. | The registrants other certifying officers
    and I have indicated in this annual report whether or not there
    were significant changes in internal controls or in other
    factors that could significantly affect internal controls
    subsequent to the date of our most recent evaluation, including
    any corrective actions with regard to significant deficiencies
    and material weaknesses.

Date: March 25, 2003

| |                                                            
| | -----------------------------------------------------------
| | /s/ ROBERT C. PEDDICORD                                    
| |                                                            
| | Robert C. Peddicord                                        
| | Senior Vice President  Leasing and
    Property Operations
| | Arden Realty, Inc.                                         

61



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##### Table of Contents



CERTIFICATION OF GENERAL COUNSEL

I, David A. Swartz, certify that:



|   |                                                                                                                                                                                                                                                                                                                                             
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1. | I have reviewed this annual report on
    Form 10-K of Arden Realty, Inc.;                                                                                                                                                                                                                                                                  
|  
|2. | Based on my knowledge, this annual report does
    not contain any untrue statement of a material fact or omit to
    state a material fact necessary to make the statements made, in
    light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    annual report;
|  
|3. | Based on my knowledge, the financial statements,
    and other financial information included in this annual report,
    fairly present in all material respects the financial condition,
    results of operations and cash flows of the registrant as of,
    and for, the periods presented in this annual report;                       
|  
|4. | The registrants other certifying officers
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the registrant and we have:                                                                                                       



| |    |                                                                                                                                                                                                                                                                                                             
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | designed such disclosure controls and procedures
    to ensure that material information relating to the registrant,
    including its consolidated subsidiaries, is made known to us by
    others within those entities, particularly during the period in
    which this annual report is being prepared;
|
| | b) | evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c) | presented in this annual report our conclusions
    about the effectiveness of the disclosure controls and
    procedures based on our evaluation as of the Evaluation Date;                                                                                                                                



|   |                                                                                                                                                                                                                                                                   
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|5. | The registrants other certifying officers
    and I have disclosed, based on our most recent evaluation, to
    the registrants auditors and the audit committee of the
    registrants board of directors (or persons performing the
    equivalent function):



| |    |                                                                                                                                                                                                                                                                                                                   
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | all significant deficiencies in the design or
    operation of internal controls which could adversely affect the
    registrants ability to record, process, summarize and
    report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) | any fraud, whether or not material, that involves
    management or other employees who have a significant role in the
    registrants internal controls; and                                                                                                                                                    



|   |                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|6. | The registrants other certifying officers
    and I have indicated in this annual report whether or not there
    were significant changes in internal controls or in other
    factors that could significantly affect internal controls
    subsequent to the date of our most recent evaluation, including
    any corrective actions with regard to significant deficiencies
    and material weaknesses.

Date: March 25, 2003

| |                              
| | -----------------------------
| | /s/ DAVID A. SWARTZ          
| |                              
| | David A. Swartz              
| | General Counsel and Secretary
| | Arden Realty, Inc.           

62



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##### Table of Contents



REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders Arden Realty,
Inc.

We have audited the accompanying consolidated
balance sheets of Arden Realty, Inc. as of December 31,
2002 and 2001 and the related consolidated statements of income,
stockholders equity, and cash flows for each of the three
years in the period ended December 31, 2002. These
financial statements are the responsibility of the management of
Arden Realty, Inc. Our responsibility is to express an opinion
on these financial statements based on our audits.

We conducted our audits in accordance with
auditing standards generally accepted in the United States.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the financial statements referred
to above present fairly, in all material respects, the
consolidated financial position of Arden Realty, Inc. at
December 31, 2002 and 2001 and the consolidated results of
its operations and its cash flows for each of the three years in
the period ended December 31, 2002, in conformity with
accounting principles generally accepted in the United States.

As discussed in Note 3 to the financial
statements, on January 1, 2002, Arden Realty, Inc. adopted
Statement of Financial Accounting Standards No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets.



| |                      
| | ---------------------
| | /s/ ERNST & YOUNG LLP

Los Angeles, California

January 28, 2003


F-1



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##### Table of Contents



ARDEN REALTY, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)


|                                                                                                                                                              |                                       |                                            |           |           |           |   |           |           |           | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------- | ------------------------------------------ | --------- | --------- | --------- | - | --------- | --------- | --------- | 
|                                                                                                                                                              |                                       |                                           
|                                                                                                                                                              |                                       | December 31,                              
|                                                                                                                                                              |                                       |                                           
|                                                                                                                                                              |                                       | 2002                                       |           | 2001     
|                                                                                                                                                              |                                       |                                            |           |          
|Assets                                                                                                                                                        |                                       |                                            |           |           |           |   |           |          
|Commercial properties:                                                                                                                                        |                                       |                                            |           |           |           |   |           |          
|                                                                                                                                                              | Land                                  |                                            | $         | 484,439   |           |   | $         | 460,322   |          
|                                                                                                                                                              | Buildings and improvements            |                                            |           | 2,197,896 |           |   |           | 2,016,199 |          
|                                                                                                                                                              | Tenant improvements and leasing costs |                                            |           | 325,779   |           |   |           | 258,815   |          
|                                                                                                                                                              |                                       |                                            |           |           |           |   |           |          
|                                                                                                                                                              |                                       |                                            | 3,008,114 |           |           |   | 2,735,336 |          
|                                                                                                                                                              | Less: accumulated depreciation        |                                            |           | (388,057  | )         |   |           | (301,795  | )        
|                                                                                                                                                              |                                       |                                            |           |           |           |   |           |          
|                                                                                                                                                              |                                       |                                            | 2,620,057 |           |           |   | 2,433,541 |          
|                                                                                                                                                              | Properties under development          |                                            |           | 65,296    |           |   |           | 116,822   |          
|                                                                                                                                                              | Land available for development        |                                            |           | 23,731    |           |   |           | 19,255    |          
|                                                                                                                                                              | Properties held for disposition, net  |                                            |           | 32,540    |           |   |           | 53,362    |          
|                                                                                                                                                              |                                       |                                            |           |           |           |   |           |          
|                                                                                                                                                              | Net investment in real estate         |                                            |           | 2,741,624 |           |   |           | 2,622,980 |          
|Cash and cash equivalents                                                                                                                                     |                                       |                                            | 4,063     |           |           |   | 37,041    |          
|Restricted cash                                                                                                                                               |                                       |                                            | 20,498    |           |           |   | 18,768    |          
|Rent and other receivables, net of allowance of
    $4,001 and $3,770 at December 31, 2002 and 2001,
    respectively                                         |                                       |                                            | 2,917     |           |           |   | 9,685     |          
|Mortgage notes receivable, net of discount                                                                                                                    |                                       |                                            |          |           |           |   | 13,495    |          
|Deferred rent                                                                                                                                                 |                                       |                                            | 43,646    |           |           |   | 38,989    |          
|Prepaid financing costs, expenses and other
    assets, net of accumulated amortization of $10,181 and $8,774 at
    December 31, 2002 and 2001, respectively |                                       |                                            | 19,661    |           |           |   | 20,485    |          
|                                                                                                                                                              |                                       |                                            |           |           |           |   |           |          
|                                                                                                                                                              |                                       | Total assets                               |           | $         | 2,832,409 |   |           | $         | 2,761,443 | 
|                                                                                                                                                              |                                       |                                            |           |           |           |   |           |          
|Liabilities and Stockholders
    Equity                                                                                                                      |                                       |                                            |           |           |           |   |           |          
|Mortgage loans payable                                                                                                                                        |                                       | $                                          | 570,654   |           |           | $ | 573,452   |          
|Unsecured lines of credit                                                                                                                                     |                                       |                                            | 208,587   |           |           |   | 180,350   |          
|Unsecured term loan                                                                                                                                           |                                       |                                            | 125,000   |           |           |   |          |          
|Unsecured senior notes, net of discount                                                                                                                       |                                       |                                            | 498,063   |           |           |   | 497,681   |          
|Accounts payable and accrued expenses                                                                                                                         |                                       |                                            | 55,705    |           |           |   | 43,002    |          
|Security deposits                                                                                                                                             |                                       |                                            | 20,645    |           |           |   | 19,683    |          
|Dividends payable                                                                                                                                             |                                       |                                            | 31,807    |           |           |   | 31,408    |          
|                                                                                                                                                              |                                       |                                            |           |           |           |   |           |          
|                                                                                                                                                              |                                       | Total liabilities                          |           |           | 1,510,461 |   |           |           | 1,345,576 | 
|Minority interests                                                                                                                                            |                                       |                                            | 74,571    |           |           |   | 78,661    |          
|Stockholders Equity                                                                                                                                          |                                       |                                            |           |           |           |   |           |          
|Preferred stock, $.01 par value,
    20,000,000 shares authorized, None issued                                                                                |                                       |                                            |          |           |           |   |          |          
|Common stock, $.01 par value,
    100,000,000 shares authorized, 62,984,217 and 64,098,110
    issued and outstanding, respectively                           |                                       |                                            | 631       |           |           |   | 641       |          
|Additional paid-in capital                                                                                                                                    |                                       |                                            | 1,260,773 |           |           |   | 1,345,698 |          
|Deferred compensation                                                                                                                                         |                                       |                                            | (11,259   | )         |           |   | (9,133    | )        
|Accumulated other comprehensive loss                                                                                                                          |                                       |                                            | (2,768    | )         |           |   |          |          
|                                                                                                                                                              |                                       |                                            |           |           |           |   |           |          
|                                                                                                                                                              |                                       | Total stockholders equity                 |           |           | 1,247,377 |   |           |           | 1,337,206 | 
|                                                                                                                                                              |                                       |                                            |           |           |           |   |           |          
|                                                                                                                                                              |                                       | Total liabilities and stockholders equity |           | $         | 2,832,409 |   |           | $         | 2,761,443 | 
|                                                                                                                                                              |                                       |                                            |           |           |           |   |           |          

See accompanying notes to financial
statements.

F-2



---



##### Table of Contents



ARDEN REALTY, INC.

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share
amounts)


|                                                                                              |                                     |                         |         |      |  |      |         |      |  |   |         |      | 
|--------------------------------------------------------------------------------------------- | ----------------------------------- | ----------------------- | ------- | ---- |  | ---- | ------- | ---- |  | - | ------- | ---- | 
|                                                                                              |                                     |                        
|                                                                                              |                                     | Year Ended December 31,
|                                                                                              |                                     |                        
|                                                                                              |                                     | 2002                    |         | 2001 |  | 2000
|                                                                                              |                                     |                         |         |      |  |     
|Revenues                                                                                      |                                     | $                       | 412,054 |      |  | $    | 414,485 |      |  | $ | 380,622 |     
|Property operating expenses                                                                   |                                     |                         | 129,723 |      |  |      | 121,086 |      |  |   | 109,512 |     
|                                                                                              |                                     |                         |         |      |  |      |         |      |  |   |         |     
|                                                                                              |                                     |                         | 282,331 |      |  |      | 293,399 |      |  |   | 271,110 |     
|General and administrative                                                                    |                                     |                         | 13,166  |      |  |      | 12,143  |      |  |   | 9,336   |     
|Interest                                                                                      |                                     |                         | 88,516  |      |  |      | 84,195  |      |  |   | 78,406  |     
|Depreciation and amortization                                                                 |                                     |                         | 110,202 |      |  |      | 100,775 |      |  |   | 85,947  |     
|Interest and other income                                                                     |                                     |                         | (2,542  | )    |  |      | (2,941  | )    |  |   | (3,527  | )   
|                                                                                              |                                     |                         |         |      |  |      |         |      |  |   |         |     
|Income from continuing operations before gain on
    sale of properties and minority interest |                                     |                         | 72,989  |      |  |      | 99,227  |      |  |   | 100,948 |     
|Gain on sale of properties                                                                    |                                     |                         | 1,967   |      |  |      | 4,591   |      |  |   | 2,132   |     
|                                                                                              |                                     |                         |         |      |  |      |         |      |  |   |         |     
|Income from continuing operations before minority
    interest                                |                                     |                         | 74,956  |      |  |      | 103,818 |      |  |   | 103,080 |     
|Minority interest                                                                             |                                     |                         | (6,198  | )    |  |      | (7,517  | )    |  |   | (7,572  | )   
|                                                                                              |                                     |                         |         |      |  |      |         |      |  |   |         |     
|Income from continuing operations                                                             |                                     |                         | 68,758  |      |  |      | 96,301  |      |  |   | 95,508  |     
|Discontinued operations, net of minority interest                                             |                                     |                         | 1,417   |      |  |      | 1,458   |      |  |   | 1,202   |     
|                                                                                              |                                     |                         |         |      |  |      |         |      |  |   |         |     
|Net income                                                                                    |                                     | $                       | 70,175  |      |  | $    | 97,759  |      |  | $ | 96,710  |     
|                                                                                              |                                     |                         |         |      |  |      |         |      |  |   |         |     
|Basic net income per common share:                                                            |                                     |                         |         |      |  |      |         |      |  |   |         |     
|                                                                                              | Income from continuing operations   |                         | $       | 1.07 |  |      | $       | 1.51 |  |   | $       | 1.51 | 
|                                                                                              | Income from discontinued operations |                         |         | 0.02 |  |      |         | 0.02 |  |   |         | 0.02 | 
|                                                                                              |                                     |                         |         |      |  |      |         |      |  |   |         |     
|Net income per common share  basic                                                           |                                     | $                       | 1.09    |      |  | $    | 1.53    |      |  | $ | 1.53    |     
|                                                                                              |                                     |                         |         |      |  |      |         |      |  |   |         |     
|Weighed average number of common shares-basic                                                 |                                     |                         | 64,151  |      |  |      | 63,754  |      |  |   | 63,408  |     
|                                                                                              |                                     |                         |         |      |  |      |         |      |  |   |         |     
|Diluted net income per common share:                                                          |                                     |                         |         |      |  |      |         |      |  |   |         |     
|                                                                                              | Income from continuing operations   |                         | $       | 1.07 |  |      | $       | 1.51 |  |   | $       | 1.50 | 
|                                                                                              | Income from discontinued operations |                         |         | 0.02 |  |      |         | 0.02 |  |   |         | 0.02 | 
|                                                                                              |                                     |                         |         |      |  |      |         |      |  |   |         |     
|Net income per common
    share  diluted                                                     |                                     | $                       | 1.09    |      |  | $    | 1.53    |      |  | $ | 1.52    |     
|                                                                                              |                                     |                         |         |      |  |      |         |      |  |   |         |     
|Weighed average number of common
    shares  diluted                                         |                                     |                         | 64,351  |      |  |      | 64,014  |      |  |   | 63,598  |     
|                                                                                              |                                     |                         |         |      |  |      |         |      |  |   |         |     

See accompanying notes to financial
statements.

F-3



---



##### Table of Contents



ARDEN REALTY, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS
EQUITY

(in thousands, except share amounts)


|                              |                                             |              |            |            |   |          |     |          |   |              |           |               |   |               |   |         |   |   |        |         |   |   |        |       |  |  |   |        |   |   |           |           |  
|----------------------------- | ------------------------------------------- | ------------ | ---------- | ---------- | - | -------- | --- | -------- | - | ------------ | --------- | ------------- | - | ------------- | - | ------- | - | - | ------ | ------- | - | - | ------ | ----- |  |  | - | ------ | - | - | --------- | --------- | -
|                              |                                             |              |            |            |   |          |     |          |   | Notes        |           | Accumulated   |   |              
|                              |                                             | Common Stock |            | Additional |   |          |     |          |   | Receivable   |           | Other         |   | Total        
|                              |                                             |              |            | Paid in    |   | Retained |     | Deferred |   | From         |           | Comprehensive |   | Stockholders
|                              |                                             | Shares       |            | Amount     |   | Capital  |     | Earnings |   | Compensation |           | Officers      |   | Loss          |   | Equity 
|                              |                                             |              |            |            |   |          |     |          |   |              |           |               |   |               |   |        
|Balance at January 1, 2000    |                                             |              | 63,358,977 |            |   | $        | 633 |          |   | $            | 1,377,292 |               |   | $             |  |         |   | $ |       |         |   | $ | (2,167 | )     |  |  |  |        |   | $ | 1,375,758 |          
|                              | Surrender of restricted stock by officers   |              |            | (85,106    | ) |          |     |         |   |              |           | (1,920        | ) |               |   |        |   |   |        |        |   |   |        |      |  |  |   |       |   |   |           | (1,920    | )
|                              | Notes and interest receivable from officers |              |            |           |   |          |     |         |   |              |           |              |   |               |   |        |   |   |        |        |   |   |        | 2,167 |  |  |   |       |   |   |           | 2,167     |  
|                              | Stock Compensation                          |              |            | 373,000    |   |          |     | 4        |   |              |           | 9,455         |   |               |   |        |   |   |        | (9,459  | ) |   |        |      |  |  |   |       |   |   |           |          |  
|                              | Amortization of stock compensation          |              |            |           |   |          |     |         |   |              |           |              |   |               |   |        |   |   |        | 586     |   |   |        |      |  |  |   |       |   |   |           | 586       |  
|                              | Preferred partnership units issuance costs  |              |            |           |   |          |     |         |   |              |           | (119          | ) |               |   |        |   |   |        |        |   |   |        |      |  |  |   |       |   |   |           | (119      | )
|                              | Net income                                  |              |            |           |   |          |     |         |   |              |           |              |   |               |   | 96,710  |   |   |        |        |   |   |        |      |  |  |   |       |   |   |           | 96,710    |  
|                              | Dividends declared and payable              |              |            |           |   |          |     |         |   |              |           | (21,301       | ) |               |   | (96,710 | ) |   |        |        |   |   |        |      |  |  |   |       |   |   |           | (118,011  | )
|                              |                                             |              |            |            |   |          |     |          |   |              |           |               |   |               |   |         |   |   |        |         |   |   |        |       |  |  |   |        |   |   |           |          
|Balance at December 31, 2000. |                                             |              | 63,646,871 |            |   |          | 637 |          |   |              | 1,363,407 |               |   |               |  |         |   |   | (8,873 | )       |   |   |       |       |  |  |  |        |   |   | 1,355,171 |          
|                              |                                             |              |            |            |   |          |     |          |   |              |           |               |   |               |   |         |   |   |        |         |   |   |        |       |  |  |   |        |   |   |           |          
|                              | OP units converted                          |              |            | 335,573    |   |          |     | 3        |   |              |           | 6,583         |   |               |   |        |   |   |        |        |   |   |        |      |  |  |   |       |   |   |           | 6,586     |  
|                              | Stock options exercised                     |              |            | 21,166     |   |          |     |         |   |              |           | 463           |   |               |   |        |   |   |        |        |   |   |        |      |  |  |   |       |   |   |           | 463       |  
|                              | Stock compensation                          |              |            | 94,500     |   |          |     | 1        |   |              |           | 2,532         |   |               |   |        |   |   |        | (2,533  | ) |   |        |      |  |  |   |       |   |   |           |          |  
|                              | Amortization of stock compensation          |              |            |           |   |          |     |         |   |              |           |              |   |               |   |        |   |   |        | 2,273   |   |   |        |      |  |  |   |       |   |   |           | 2,273     |  
|                              | Net income                                  |              |            |           |   |          |     |         |   |              |           |              |   |               |   | 97,759  |   |   |        |        |   |   |        |      |  |  |   |       |   |   |           | 97,759    |  
|                              | Dividends declared and payable              |              |            |           |   |          |     |         |   |              |           | (27,287       | ) |               |   | (97,759 | ) |   |        |        |   |   |        |      |  |  |   |       |   |   |           | (125,046  | )
|                              |                                             |              |            |            |   |          |     |          |   |              |           |               |   |               |   |         |   |   |        |         |   |   |        |       |  |  |   |        |   |   |           |          
|Balance at December 31, 2001. |                                             |              | 64,098,110 |            |   |          | 641 |          |   |              | 1,345,698 |               |   |               |  |         |   |   | (9,133 | )       |   |   |       |       |  |  |  |        |   |   | 1,337,206 |          
|                              |                                             |              |            |            |   |          |     |          |   |              |           |               |   |               |   |         |   |   |        |         |   |   |        |       |  |  |   |        |   |   |           |          
|                              | OP units converted                          |              |            | 121,875    |   |          |     | 2        |   |              |           | 2,488         |   |               |   |        |   |   |        |        |   |   |        |      |  |  |   |       |   |   |           | 2,490     |  
|                              | Stock options exercised                     |              |            | 423,999    |   |          |     | 4        |   |              |           | 9,074         |   |               |   |        |   |   |        |        |   |   |        |      |  |  |   |       |   |   |           | 9,078     |  
|                              | Stock compensation                          |              |            | 187,500    |   |          |     | 2        |   |              |           | 4,813         |   |               |   |        |   |   |        | (4,815  | ) |   |        |      |  |  |   |       |   |   |           |          |  
|                              | Amortization of stock compensation          |              |            |           |   |          |     |         |   |              |           |              |   |               |   |        |   |   |        | 1,444   |   |   |        |      |  |  |   |       |   |   |           | 1,444     |  
|                              | Forfeiture of stock compensation            |              |            | (51,267    | ) |          |     |         |   |              |           | (1,245        | ) |               |   |        |   |   |        | 1,245   |   |   |        |      |  |  |   |       |   |   |           |          |  
|                              | Stock repurchases                           |              |            | (1,796,000 | ) |          |     | (18      | ) |              |           | (40,675       | ) |               |   |        |   |   |        |        |   |   |        |      |  |  |   |       |   |   |           | (40,693   | )
|                              | Unrealized loss on interest rate swaps      |              |            |           |   |          |     |         |   |              |           |              |   |               |   |        |   |   |        |        |   |   |        |      |  |  |   | (2,768 | ) |   |           | (2,768    | )
|                              | Net income                                  |              |            |           |   |          |     |         |   |              |           |              |   |               |   | 70,175  |   |   |        |        |   |   |        |      |  |  |   |       |   |   |           | 70,175    |  
|                              |                                             |              |            |            |   |          |     |          |   |              |           |               |   |               |   |         |   |   |        |         |   |   |        |       |  |  |   |        |   |   |           |          
|                              | Comprehensive income                        |              |            |           |   |          |     |         |   |              |           |              |   |               |   |        |   |   |        |        |   |   |        |      |  |  |   |       |   |   |           | 67,407    |  
|                              | Dividends declared and payable              |              |            |           |   |          |     |         |   |              |           | (59,380       | ) |               |   | (70,175 | ) |   |        |        |   |   |        |      |  |  |   |       |   |   |           | (129,555  | )
|                              |                                             |              |            |            |   |          |     |          |   |              |           |               |   |               |   |         |   |   |        |         |   |   |        |       |  |  |   |        |   |   |           |          
|                              | Balance at December 31, 2002.               |              |            | 62,984,217 |   |          | $   | 631      |   |              | $         | 1,260,773     |   |               | $ |        |   |   | $      | (11,259 | ) |   | $      |      |  |  | $ | (2,768 | ) |   | $         | 1,247,377 |  
|                              |                                             |              |            |            |   |          |     |          |   |              |           |               |   |               |   |         |   |   |        |         |   |   |        |       |  |  |   |        |   |   |           |          

See accompanying notes to financial
statements.

F-4



---



##### Table of Contents



ARDEN REALTY, INC.

CONSOLIDATED STATEMENTS OF CASH
FLOWS

(in thousands)


|                                                                                      |                                                                      |                                                    |          |         |        |      |          |         |        |   |          |        |        |  
|------------------------------------------------------------------------------------- | -------------------------------------------------------------------- | -------------------------------------------------- | -------- | ------- | ------ | ---- | -------- | ------- | ------ | - | -------- | ------ | ------ | -
|                                                                                      |                                                                      |                                                   
|                                                                                      |                                                                      | Year Ended December 31,                           
|                                                                                      |                                                                      |                                                   
|                                                                                      |                                                                      | 2002                                               |          | 2001    |        | 2000
|                                                                                      |                                                                      |                                                    |          |         |        |     
|Operating Activities:                                                                 |                                                                      |                                                    |          |         |        |      |          |         |        |   |          |       
|Net income                                                                            |                                                                      | $                                                  | 70,175   |         |        | $    | 97,759   |         |        | $ | 96,710   |       
|Adjustments to reconcile net income to net cash
    provided by operating activities: |                                                                      |                                                    |          |         |        |      |          |         |        |   |          |       
|                                                                                      | Minority interest, including discontinued
    operations             |                                                    |          | 6,236   |        |      |          | 7,565   |        |   |          | 7,613  |       
|                                                                                      | Depreciation and amortization, including
    discontinued operations |                                                    |          | 111,418 |        |      |          | 101,819 |        |   |          | 87,267 |       
|                                                                                      | Amortization of loan costs and fees                                  |                                                    |          | 3,807   |        |      |          | 3,568   |        |   |          | 3,568  |       
|                                                                                      | Gain on sale of property                                             |                                                    |          | (1,967  | )      |      |          | (4,591  | )      |   |          | (2,132 | )     
|                                                                                      | Amortization of deferred compensation                                |                                                    |          | 1,199   |        |      |          | 1,938   |        |   |          | 586    |       
|                                                                                      | Changes in operating assets and liabilities:                         |                                                    |          |         |        |      |          |         |        |   |          |        |       
|                                                                                      |                                                                      | Rent and other receivables                         |          |         | 20,263 |      |          |         | 3,775  |   |          |        | (1,080 | )
|                                                                                      |                                                                      | Deferred rent                                      |          |         | (4,657 | )    |          |         | (7,401 | ) |          |        | (7,656 | )
|                                                                                      |                                                                      | Prepaid financing costs, expenses and other assets |          |         | (2,997 | )    |          |         | (4,366 | ) |          |        | (7,480 | )
|                                                                                      |                                                                      | Accounts payable and accrued expenses              |          |         | 9,728  |      |          |         | 4,388  |   |          |        | 11,359 |  
|                                                                                      |                                                                      | Security deposits                                  |          |         | 962    |      |          |         | 213    |   |          |        | 3,397  |  
|                                                                                      |                                                                      |                                                    |          |         |        |      |          |         |        |   |          |       
|Net cash provided by operating activities                                             |                                                                      |                                                    | 214,167  |         |        |      | 204,667  |         |        |   | 192,152  |       
|                                                                                      |                                                                      |                                                    |          |         |        |      |          |         |        |   |          |       
|Investing Activities:                                                                 |                                                                      |                                                    |          |         |        |      |          |         |        |   |          |       
|Acquisitions and improvements to commercial
    properties                            |                                                                      |                                                    | (251,534 | )       |        |      | (161,785 | )       |        |   | (227,707 | )     
|Proceeds from sales of properties                                                     |                                                                      |                                                    | 24,287   |         |        |      | 45,931   |         |        |   | 11,683   |       
|                                                                                      |                                                                      |                                                    |          |         |        |      |          |         |        |   |          |       
|Net cash used in investing activities                                                 |                                                                      |                                                    | (227,247 | )       |        |      | (115,854 | )       |        |   | (216,024 | )     
|                                                                                      |                                                                      |                                                    |          |         |        |      |          |         |        |   |          |       
|Financing Activities:                                                                 |                                                                      |                                                    |          |         |        |      |          |         |        |   |          |       
|Proceeds from term loan                                                               |                                                                      |                                                    | 125,000  |         |        |      |         |         |        |   |         |       
|Proceeds from mortgage loans                                                          |                                                                      |                                                    |         |         |        |      |         |         |        |   | 45,052   |       
|Repayment of mortgage loans                                                           |                                                                      |                                                    | (2,798   | )       |        |      | (2,603   | )       |        |   | (209,804 | )     
|Proceeds from unsecured lines of credit                                               |                                                                      |                                                    | 255,937  |         |        |      | 140,500  |         |        |   | 238,000  |       
|Repayments of unsecured lines of credit                                               |                                                                      |                                                    | (227,700 | )       |        |      | (213,500 | )       |        |   | (273,500 | )     
|Proceeds from issuances of unsecured senior
    notes, net of discount                |                                                                      |                                                    |         |         |        |      | 149,064  |         |        |   | 348,364  |       
|(Increase) decrease in restricted cash                                                |                                                                      |                                                    | (1,730   | )       |        |      | 599      |         |        |   | (854     | )     
|Proceeds from issuance of common stock, net of
    offering costs                     |                                                                      |                                                    | 9,078    |         |        |      | 463      |         |        |   |         |       
|Repurchase of common stock                                                            |                                                                      |                                                    | (40,693  | )       |        |      |         |         |        |   |         |       
|Distributions to minority interests                                                   |                                                                      |                                                    | (3,527   | )       |        |      | (4,182   | )       |        |   | (3,968   | )     
|Distributions to preferred operating partnership
    units holder                     |                                                                      |                                                    | (4,312   | )       |        |      | (4,312   | )       |        |   | (4,312   | )     
|Dividends paid                                                                        |                                                                      |                                                    | (129,153 | )       |        |      | (123,233 | )       |        |   | (116,611 | )     
|Preferred operating partnership units issuance
    cost                               |                                                                      |                                                    |         |         |        |      |         |         |        |   | (119     | )     
|                                                                                      |                                                                      |                                                    |          |         |        |      |          |         |        |   |          |       
|Net cash (used in) provided by financing
    activities                               |                                                                      |                                                    | (19,898  | )       |        |      | (57,204  | )       |        |   | 22,248   |       
|                                                                                      |                                                                      |                                                    |          |         |        |      |          |         |        |   |          |       
|Net (decrease) increase in cash and cash
    equivalents                              |                                                                      |                                                    | (32,978  | )       |        |      | 31,609   |         |        |   | (1,624   | )     
|Cash and cash equivalents at beginning of period                                      |                                                                      |                                                    | 37,041   |         |        |      | 5,432    |         |        |   | 7,056    |       
|                                                                                      |                                                                      |                                                    |          |         |        |      |          |         |        |   |          |       
|Cash and cash equivalents at end of period                                            |                                                                      | $                                                  | 4,063    |         |        | $    | 37,041   |         |        | $ | 5,432    |       
|                                                                                      |                                                                      |                                                    |          |         |        |      |          |         |        |   |          |       
|Supplemental Disclosure of Cash Flow
    Information:                                 |                                                                      |                                                    |          |         |        |      |          |         |        |   |          |       
|Cash paid during the period for interest, net of
    amount capitalized               |                                                                      | $                                                  | 94,007   |         |        | $    | 83,809   |         |        | $ | 70,139   |       
|                                                                                      |                                                                      |                                                    |          |         |        |      |          |         |        |   |          |       

See accompanying notes to financial
statements.

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ARDEN REALTY, INC.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

1. Business

Description of Business

The terms Arden Realty,
us, we and our as used in
these financial statements refer to Arden Realty, Inc. We are a
self-administered and self-managed real estate investment trust,
or REIT, that owns, manages, leases, develops, renovates and
acquires commercial properties located in Southern California.

Organization and Formation of the
Company

We were incorporated in Maryland in May 1996 and
are the sole general partner of Arden Realty Limited
Partnership, or the operating partnership. We conduct
substantially all of our business through the operating
partnership and certain other majority owned subsidiaries, which
hold our interests in our real estate assets. Commencing with
our taxable year ended December 31, 1996, we have operated
and qualified as a REIT for federal income tax purposes.

As of December 31, 2002, our portfolio
consisted of 137 primarily suburban office properties and
223 buildings containing approximately 19.4 million
net rentable square feet including one development property with
approximately 283,000 net rentable square feet currently under
lease-up. As of December 31, 2002, our properties were
90.1% occupied.

2. Basis of Presentation and Summary of
Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial
statements include the accounts of Arden Realty, Inc., the
operating partnership, and our subsidiaries. All significant
intercompany balances and transactions have been eliminated in
consolidation.

We consolidate all entities for which we have
controlling financial interest as measured by a majority of the
voting interest. For entities in which the controlling financial
interest is not clearly indicated by ownership of a majority of
the voting interest, we would consolidate those entities for
which we own a majority of the financial interest in profits or
losses or entities that we control by agreement.

We currently own 100% of all of our consolidated
subsidiaries and do not have any unconsolidated investments
other than an investment in the securities of a non-publicly
traded company. This investment represents approximately 5.8% of
the total equity outstanding for this particular company.
Because we do not control this company contractually nor exert
significant influence over its operating and financial policies,
we account for this investment under the cost method of
accounting.

The minority interests at December 31, 2002
and 2001 consisted of limited partnership interests in the
operating partnership of approximately 2.7% and 2.8%,
respectively, exclusive of ownership interests of our preferred
units holders.

Risks and Uncertainties

The preparation of financial statements, in
conformity with accounting principles generally accepted in the
United States, requires us to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates.

Our properties are all located in Southern
California. As a result of our geographic concentration, the
operations of these properties could be affected by the economic
conditions in this region.

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Segment Information

We view our operations as principally one
segment, namely the operation of commercial real estate located
in Southern California, and the financial information disclosed
herein represents all of the financial information related to
this principal operating segment.

Commercial Properties

Our properties are stated at depreciated cost.
Write-downs to estimated fair value are recognized whenever a
propertys estimated undiscounted future cash flows are
less than its book value. Prior to the year ended
December 31, 2001, properties held for disposition were
carried at the lower of their depreciated cost or fair value
less cost to sell. Beginning January 1, 2002, we
implemented Statement of Financial Accounting Standards
No. 144 Accounting for the Impairment or Disposal of
Long-Lived Assets (SFAS 144), which was required to be
adopted in fiscal years beginning after December 15, 2001
and which supercedes Statement of Financial Accounting Standards
No. 121 Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of (SFAS
121). As a result, we will continue to carry properties held for
disposition at the lower of their depreciated cost or fair value
less cost to sell in accordance with SFAS 144. Based on our
assessment, no write-downs to estimated fair value were
necessary as of December 31, 2002 and 2001, respectively.
The implementation of SFAS 144 did not significantly impact our
results of operation or financial position, however, its
adoption impacted the conformity of our current year operating
results presentation to prior years as discussed in footnote 3
below.

Costs related to the acquisition, development,
construction and improvement of properties are capitalized.
Interest, real estate taxes, insurance and other development
related costs incurred during construction periods are
capitalized and depreciated on the same basis as the related
assets.

Repair and maintenance costs are charged to
expenses as incurred and significant replacements and
betterments are capitalized. Repairs and maintenance costs
include all costs that do not extend the useful life of a an
asset or increase its operating efficiency. Significant
replacements and betterments represent costs that extend an
assets useful life or increase its operating efficiency.

Depreciation is calculated under the
straight-line method using depreciable lives of ten to forty
seven years for building and building improvements and five-year
lives for furniture, fixtures and equipment. Amortization of
tenant improvements is calculated using the straight-line method
over the term of the related lease.

The carrying amount of all commercial properties
is evaluated periodically to determine if adjustment to the
useful life is warranted. During 2001, the useful life of
certain building and building improvements were adjusted to more
accurately reflect their estimated usefulness. The effect of
this change in estimate in 2001 was an increase to net income of
approximately $10.1 million or $0.16 per common share. This
change in estimate did not have an impact on our 2001 cash flows.

Costs associated with leasing properties are
capitalized and amortized to expense on a straight-line basis
over the related lease term.

Cash Equivalents

Cash equivalents consist of highly liquid
investments with original maturities of three months or less
when acquired.

Restricted Cash

Restricted cash at December 31, 2002 and
2001 consists of $13.7 million in cash deposits as required
by certain of our mortgage loans payable and $6.8 million and
$5.1 million, respectively, in impound accounts for real
estate taxes and insurance, as required by certain of our
mortgage loans payable.

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Prepaid Financing Costs

Costs associated with obtaining long-term
financing are capitalized and amortized to interest expense over
the term of the related loan.

Revenue Recognition

Minimum rent, including rental abatements and
contractual fixed increases attributable to operating leases, is
recognized on a straight-line basis over the term of the related
lease. Amounts expected to be received in later years are
included in deferred rents. Property operating expense
reimbursements due from tenants for common area maintenance,
real estate taxes and other recoverable costs are recognized in
the period the related expenses are incurred.

Allowance for Rents and Other
Receivables

We periodically evaluate the collectibility of
amounts due from tenants and maintain an allowance for doubtful
accounts for estimated losses resulting from the inability of
tenants to make required payments under lease agreements. We
also maintain an allowance for deferred rent receivable that
arises from the straight-lining of rents. We exercise judgment
in establishing these allowances and consider payment history
and current credit status in developing these estimates. If
estimates differ from actual results this could impact our
operating results.

Income Taxes

We generally will not be subject to federal
income taxes as long as we continue to qualify as a REIT. A REIT
will generally not be subject to federal income taxation on that
portion of income that qualifies as REIT taxable income and to
the extent that it distributes such taxable income to its
stockholders and complies with certain requirements. As a REIT,
we are allowed to reduce taxable income by all or a portion of
distributions to stockholders and must distribute at least 90%
of our taxable income to qualify as a REIT. As dividends have
eliminated taxable income, and compliance with certain
requirements have been met, no Federal income tax provision has
been reflected in the accompanying consolidated financial
statements. State income tax requirements are essentially the
equivalent of the Federal rules.

During 2002, 2001 and 2000, we declared dividends
of $2.02, $1.96 and $1.86 per share, respectively.

Fair Value of Financial
Instruments

Our disclosures of estimated fair value of
financial instruments at December 31, 2002 and 2001,
respectively, were determined using available market information
and appropriate valuation methods. Considerable judgment is
necessary to interpret market data and develop estimated fair
value. The use of different market assumptions or estimation
methods may have a material effect on the estimated fair value
amounts.

Our cash equivalents, mortgage notes receivable,
unsecured lines of credit, interest rate swap agreements,
accounts payable and other financial instruments are carried at
amounts that reasonably approximate their fair value amounts.

The estimated fair value of our mortgage loans
payable and unsecured senior notes is as follows
(in thousands):

|                       |  |                   |         |                   |  |          |         |            |  |   |         |  |  |   |         | 
|---------------------- |  | ----------------- | ------- | ----------------- |  | -------- | ------- | ---------- |  | - | ------- |  |  | - | ------- | 
|                       |  |                   |         |                  
|                       |  | December 31, 2002 |         | December 31, 2001
|                       |  |                   |         |                  
|                       |  | Carrying          |         | Estimated         |  | Carrying |         | Estimated 
|                       |  | Amount            |         | Fair Value        |  | Amount   |         | Fair Value
|                       |  |                   |         |                   |  |          |         |           
|Mortgage loans payable |  | $                 | 570,654 |                   |  | $        | 600,663 |            |  | $ | 573,452 |  |  | $ | 580,799 | 
|                       |  |                   |         |                   |  |          |         |            |  |   |         |  |  |   |         | 
|Unsecured senior notes |  | $                 | 498,063 |                   |  | $        | 541,762 |            |  | $ | 497,681 |  |  | $ | 516,273 | 
|                       |  |                   |         |                   |  |          |         |            |  |   |         |  |  |   |         | 

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The estimated fair value is based on interest
rates available at each of the dates presented for issuance of
debt with similar terms and remaining maturities. The estimated
fair value amounts of our notes payable above are not
necessarily indicative of the amounts that we could realize in a
current market exchange.

Interest Rate Swap
Agreements

We have periodically entered into interest rate
swap agreements to effectively convert floating rate debt into
fixed rate debt. Net amounts received or paid under these
agreements are recognized as an adjustment to interest expense
when such amounts are incurred or earned. Our objective in using
interest rate swap agreements is to limit our exposure to
interest rate movements. During 2002, such agreements were used
to fix the floating interest rate associated with
$50 million of the Wells Fargo unsecured line of credit and
the entire $125 million balance of the unsecured term loan.

Statement of Financial Accounting Standards
No. 133, Accounting for Derivative Instruments and
Hedging Activities (SFAS 133), as amended and interpreted,
establishes accounting and reporting standards for derivative
instruments and for hedging activities. The accounting for
changes in the fair value of derivatives depends on the intended
use of the derivative and the resulting destination. Derivatives
used to hedge the exposure to changes in the fair value of an
asset, liability, or firm commitment attributable to a
particular risk, are considered fair value hedges. Derivatives
used to hedge the exposure to variability in expected future
cash flows, or other types of forecasted transactions, are
considered cash flow hedges.

For derivatives designated as fair value hedges,
changes in the fair value of the derivative and the hedged item
related to the hedged risk are recognized in earnings. For
derivatives designated as cash flow hedges, the effective
portion of changes in the fair value of the derivative is
initially reported in other comprehensive income (loss), outside
of earnings and subsequently reclassified to earnings when the
hedged transaction affects earnings.

Under SFAS 133 our interest rate swap agreements
are classified as cash flow hedges with their fair value as of
December 31, 2002 of approximately $2.8 million reported in
accumulated other comprehensive loss in our balance sheet and
statement of changes in stockholders equity. This loss
will be subsequently reclassified to interest expense as
interest payments are made on our floating rate debt. If the
underlying floating rate loans were to be repaid prior to
maturity, we will recognize into interest expense the
unamortized portion of this loss at the time of such early
repayment.

As of December 31, 2002, we did not have any
derivatives that could be designated as fair value hedges.

New Accounting Standards

In June 2001, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 141, Business
Combinations (SFAS 141) and SFAS No. 142,
Goodwill and Other Intangible Assets
(SFAS 142). SFAS 141 requires that the purchase method
of accounting be used for all business combinations initiated
after June 30, 2001. Under SFAS 142, the amortization
of goodwill, including goodwill recorded in past business
combinations, was to be discontinued upon adoption and all
goodwill and intangible assets were to be tested for impairment.
These pronouncements affect the accounting of operating leases
acquired as part of real estate acquisitions. Under these
pronouncements, to the extent that the existing operating leases
at the time of a property acquisition have rental rates,
including lease origination costs, above or below current market
rates, those leases are required to be marked-to-market with the
resulting adjustment amortized into rents over each adjusted
leases remaining term.

As discussed in footnote 3 below, we
acquired five properties during 2002 for a total purchase price
of approximately $135.0 million. We performed a
lease-by-lease analysis for the properties acquired in 2002 and
determined that the in-place rents for leases acquired
approximate market rents. Consequently the adoption of SFAS 141
and 142 did not have a significant impact on our consolidated
financial statements.

In April 2002, FASB issued SFAS No. 145,
Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical
Corrections (SFAS 145). SFAS 145 rescinds

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Statement No. 4 Reporting Gains and
Losses from Extinguishment of Debt. In addition, under
SFAS 145, any gain or loss on extinguishment of debt that
was classified as an extraordinary item in prior periods
presented that does not meet certain defined criteria must be
reclassified. The provisions of SFAS 145 are effective for 2003.
We do not expect that the adoption of this statement will have a
significant impact on our consolidated financial statements.


In June 2002, FASB issued SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal
Activities (SFAS 146). SFAS 146 addresses
financial accounting and reporting for costs associated with
exit or disposal activities. SFAS 146 requires that a
liability for a cost associated with an exit or disposal
activity be recognized when the liability is incurred based on
the present value of the expected contingent payment under the
guarantee. The provisions of SFAS 146 are effective for
2003. We do not expect that the adoption of this statement will
have a significant impact on our consolidated financial
statements.

In November 2002, the FASB issued Interpretation
No. 45, Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others (FIN 45). FIN 45 requires
guarantees and indemnification agreements meeting the
characteristics described in FIN 45 to be initially
recorded as a liability at fair value. FIN 45 also requires
a guarantor to make new disclosures for guarantees, even if the
likelihood of the guarantor having to make payment under the
guarantee is remote. The disclosure requirements within
FIN 45 are effective for 2002 and its adoption is required
for 2003 on a prospective basis to guarantees issued or modified
after December 31, 2002. We adopted the disclosure
provisions of FIN 45 in 2002. We do not expect that the
adoption of this statement will have a significant impact on our
consolidated financial statements.

In December 2002, the FASB issued
SFAS No. 148, Accounting for Stock-Based
Compensation- Transition and Disclosure (SFAS 148)
which amends SFAS 123, Accounting for Stock-Based
Compensation. SFAS 148 provides alternative methods
of transition for a voluntary change to the fair value based
method of accounting for stock-based compensation and requires
disclosure in both annual and interim financial statements about
the method of accounting for stock-based compensation and the
effect of the method used on reported results. We have adopted
the disclosure provisions of SFAS 148 (see
footnote 11). Beginning January 1, 2003, we will adopt
the prospective transition method for all new stock compensation
awards. We do not anticipate that adoption of SFAS 148 will
have a significant impact on our consolidated financial
statements.

In January 2003, the FASB issued FASB
Interpretation No. 46, Consolidation of Variable
Interest Entities (FIN 46). FIN 46 clarifies the
application of Accounting Research Bulletin No. 51,
Consolidated Financial Statements and provides
guidance on the identification of entities for which control is
achieved through means other than through voting rights and how
to determine when and which business enterprise should
consolidate such an entity. This new model for consolidation
applies to an entity which either (1) the equity investors
(if any) do not have a controlling financial interest or
(2) the equity investment at risk is insufficient to
finance that entitys activities without receiving
additional subordinated financial support from other parties.
The provisions of this interpretation are effective for 2003. We
do not expect that the adoption of this statement will have a
significant impact on our consolidated financial statements.

Reclassifications

Certain prior year amounts have been reclassified
to confirm with the current year presentation.

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3. Commercial Properties

Property Acquisitions

|                            |       |        |             |           |  |          |                 |          |  |        |                 |                |  |  |                  |  |  |  |         |         |  |   |        |         | 
|--------------------------- | ----- | ------ | ----------- | --------- |  | -------- | --------------- | -------- |  | ------ | --------------- | -------------- |  |  | ---------------- |  |  |  | ------- | ------- |  | - | ------ | ------- | 
|                            |       |        |             |           |  | Date of  |                 | Property |  | Square |                 | Purchase Price
|Property                    |       | County |             | Submarket |  | Purchase |                 | Type     |  | Feet   |                 | ($000s)      
|                            |       |        |             |           |  |          |                 |          |  |        |                 |               
|Gateway Towers              |       |        | Los Angeles |           |  |          | Torrance        |          |  |        | August 7, 2002  |                |  |  | Office           |  |  |  | 432,894 |         |  | $ | 62,500 |        
|Gateway Land Parcel         |       |        | Los Angeles |           |  |          | Torrance        |          |  |        | August 7, 2002  |                |  |  | Developable Land |  |  |  | N/ A    |         |  |   | 3,500  |        
|Crossroads                  |       |        | San Diego   |           |  |          | Mission Valley  |          |  |        | August 16, 2002 |                |  |  | Office           |  |  |  | 133,566 |         |  |   | 16,900 |        
|Governor Executive Center   |       |        | San Diego   |           |  |          | Governor Park   |          |  |        | August 16, 2002 |                |  |  | Office           |  |  |  | 52,195  |         |  |   | 11,200 |        
|Carmel Valley Center I & II |       |        | San Diego   |           |  |          | Del Mar Heights |          |  |        | August 30, 2002 |                |  |  | Office           |  |  |  | 107,197 |         |  |   | 28,400 |        
|Carmel View Office Plaza    |       |        | San Diego   |           |  |          | Rancho Bernardo |          |  |        | August 30, 2002 |                |  |  | Office           |  |  |  | 77,460  |         |  |   | 12,500 |        
|                            |       |        |             |           |  |          |                 |          |  |        |                 |                |  |  |                  |  |  |  |         |         |  |   |        |        
|                            | Total |        |             |           |  |          |                 |          |  |        |                 |                |  |  |                  |  |  |  |         | 803,312 |  |   | $      | 135,000 | 
|                            |       |        |             |           |  |          |                 |          |  |        |                 |                |  |  |                  |  |  |  |         |         |  |   |        |        

Property Dispositions

|                         |       |        |             |           |  |                          |              |          |                |        |                  |             |        |  |           |  |        |  |        |         |       |   |       |        | 
|------------------------ | ----- | ------ | ----------- | --------- |  | ------------------------ | ------------ | -------- | -------------- | ------ | ---------------- | ----------- | ------ |  | --------- |  | ------ |  | ------ | ------- | ----- | - | ----- | ------ | 
|                         |       |        |             |           |  | Date of                  |              | Property |                | Square |                  | Sales Price
|Property                 |       | County |             | Submarket |  | Sale                     |              | Type     |                | Feet   |                  | ($000s)   
|                         |       |        |             |           |  |                          |              |          |                |        |                  |            
|Harbor Corporate Center  |       |        | Los Angeles |           |  |                          | Torrance     |          |                |        | March 7, 2002    |             |        |  | Office    |  |        |  | 63,925 |         |       | $ | 6,900 |       
|Renaissance Court        |       |        | Los Angeles |           |  | Simi / Conejo Valley     |              |          | April 16, 2002 |        |                  |             | Office |  |           |  | 61,245 |  |        |         | 8,300 |  
|6800 Owensmouth          |       |        | Los Angeles |           |  | West San Fernando Valley |              |          | May 1, 2002    |        |                  |             | Office |  |           |  | 80,014 |  |        |         | 8,400 |  
|2730 Wilshire Apartments |       |        | Los Angeles |           |  |                          | Santa Monica |          |                |        | November 1, 2002 |             |        |  | Apartment |  |        |  |       | (1)     |       |   | 2,300 |       
|                         |       |        |             |           |  |                          |              |          |                |        |                  |             |        |  |           |  |        |  |        |         |       |   |       |       
|                         | Total |        |             |           |  |                          |              |          |                |        |                  |             |        |  |           |  |        |  |        | 205,184 |       |   | $     | 25,900 | 
|                         |       |        |             |           |  |                          |              |          |                |        |                  |             |        |  |           |  |        |  |        |         |       |   |       |       




|    |                                
|--- | -------------------------------
|(1) | Consists of 16 apartment units.

Discontinued Operations and
Properties held for Disposition

As discussed above, we adopted SFAS 144 effective
January 1, 2002 which requires, among other things, that
the operating results of real estate properties classified as
held for disposition subsequent to January 1, 2002 be
included in discontinued operations in the statements of income
for all periods presented. SFAS 144 provides that long-lived
assets classified as held for disposition as a result of
disposal activities that were initiated prior to January 1,
2002, are to be accounted for in accordance with SFAS 121.
Accordingly, the operating results for the properties held for
disposition and sold prior to December 31, 2002 are
included in income from continuing operations for the years
ended December 31, 2002, 2001 and 2000. Consequently, in
order to increase the comparability of our consolidated
statements of income for the years ended December 31, 2002,
2001 and 2000, the tables below summarize the operating results
of our one property currently classified as discontinued
operations and the properties sold since January 1, 2000
that would have qualified as discontinued operations under SFAS
144.

As of December 31, 2002, properties held for
disposition consists of one property representing approximately
140,000 rentable square feet.

The results of operations for the property held
for disposition as of December 31, 2002 classified as
discontinued operations for the years ended December 31
2002, 2001 and 2000 are as follows (in thousands):

F-11



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##### Table of Contents



|                              |  |      |        |      |  |      |        |   |  |   |        |  
|----------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                              |  | 2002 |        | 2001 |  | 2000
|                              |  |      |        |      |  |     
|Revenues                      |  | $    | 4,165  |      |  | $    | 4,040  |   |  | $ | 3,968  |  
|Property operating Expenses   |  |      | (1,495 | )    |  |      | (1,490 | ) |  |   | (1,405 | )
|Depreciation and amortization |  |      | (1,215 | )    |  |      | (1,044 | ) |  |   | (1,320 | )
|Minority interest             |  |      | (38    | )    |  |      | (48    | ) |  |   | (41    | )
|                              |  |      |        |      |  |      |        |   |  |   |        |  
|Discontinued operations       |  | $    | 1,417  |      |  | $    | 1,458  |   |  | $ | 1,202  |  
|                              |  |      |        |      |  |      |        |   |  |   |        |  

The results of operations for the properties sold
since January 1, 2000 that would have qualified as
discontinued operations under SFAS 144 for the years ended
December 31, 2002, 2001 and 2000 were as follows (in
thousands, except number of properties):

|                              |  |      |       |      |  |      |        |   |  |   |        |  
|----------------------------- |  | ---- | ----- | ---- |  | ---- | ------ | - |  | - | ------ | -
|                              |  | 2002 |       | 2001 |  | 2000
|                              |  |      |       |      |  |     
|Revenues                      |  | $    | 1,111 |      |  | $    | 7,744  |   |  | $ | 10,748 |  
|Property operating Expenses   |  |      | (498  | )    |  |      | (3,015 | ) |  |   | (3,537 | )
|Depreciation and amortization |  |      | (39   | )    |  |      | (1,115 | ) |  |   | (69    | )
|Gain on sale of properties    |  |      | 1,967 |      |  |      | 4,592  |   |  |   | 2,118  |  
|Minority interest             |  |      | (67   | )    |  |      | (264   | ) |  |   | (306   | )
|                              |  |      |       |      |  |      |        |   |  |   |        |  
|Net Income                    |  | $    | 2,474 |      |  | $    | 7,942  |   |  | $ | 8,954  |  
|                              |  |      |       |      |  |      |        |   |  |   |        |  
|Number of properties          |  |      | 4     | (1)  |  |      | 14     |   |  |   | 15     |  
|Net rentable square feet      |  |      | 205   |      |  |      | 778    |   |  |   | 854    |  




|    |                                                           
|--- | ----------------------------------------------------------
|(1) | Includes one apartment building sold in November
    2002.

Capitalized
Interest

We capitalize interest and taxes related to
buildings under construction and renovation to the extent those
assets qualify for capitalization.

Total interest incurred and the amount
capitalized for the years ended December 31, 2002, 2001,
and 2000 were as follows (in thousands):

|                        |  |      |        |      |  |      |        |   |  |   |         |  
|----------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  | - | ------- | -
|                        |  | 2002 |        | 2001 |  | 2000
|                        |  |      |        |      |  |     
|Total interest incurred |  | $    | 94,162 |      |  | $    | 93,290 |   |  | $ | 91,052  |  
|Interest capitalized    |  |      | (5,646 | )    |  |      | (9,095 | ) |  |   | (12,646 | )
|                        |  |      |        |      |  |      |        |   |  |   |         |  
|Interest expensed       |  | $    | 88,516 |      |  | $    | 84,195 |   |  | $ | 78,406  |  
|                        |  |      |        |      |  |      |        |   |  |   |         |  

Future
Minimum Lease Payments

Future minimum lease payments to be received
under noncancelable operating leases existing as of
December 31, 2002, are as follows (in thousands):

|           |  |   |         | 
|---------- |  | - | ------- | 
|2003       |  | $ | 335,744 | 
|2004       |  |   | 277,602 | 
|2005       |  |   | 211,061 | 
|2006       |  |   | 154,519 | 
|2007       |  |   | 110,071 | 
|Thereafter |  |   | 275,500 | 

The above future minimum lease payments do not
include payments received for tenant reimbursements of specified
operating expenses.

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##### Table of Contents



We lease the land underlying the office buildings
or parking structures at six of our buildings. Ground lease
expense, including amounts netted against parking revenues, was
approximately $1.9 million, $2.9 million and
$2.3 million for the years ended December 31, 2002,
2001 and 2000, respectively. Future minimum ground lease
payments due under existing ground leases are as follows (in
thousands):

|           |  |   |         | 
|---------- |  | - | ------- | 
|2003       |  | $ | 1,754   | 
|2004       |  |   | 1,785   | 
|2005       |  |   | 1,815   | 
|2006       |  |   | 1,840   | 
|2007       |  |   | 1,865   | 
|Thereafter |  |   | 112,801 | 

4. Mortgage Notes Receivable

In September 1997, we purchased two mortgage
notes receivable, secured by a single commercial office
property, with an aggregate balance of approximately
$17.6 million, for approximately $14.4 million. The
notes bore interest at the Eleventh District Cost of Funds (as
defined) plus 3.25% per annum, require monthly payments of
principal, interest, and additional net cash flow from the
office property and mature on May 31, 2004. These notes
were repaid in full by the borrower in October 2002. As a result
of this redemption, we recognized as income the unamortized
purchase discount on these notes at the time of repurchase
totaling approximately $750,000.

F-13



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##### Table of Contents



5. Mortgage Loans and Unsecured
Indebtedness

A summary of mortgage loans payable, unsecured
lines of credit and unsecured senior notes is as follows:

|                               |            |              |         |              |  |                   |         |                |  |            |      |          |  |                          |                |  |   |  |         |   |      |  |       |  | 
|------------------------------ | ---------- | ------------ | ------- | ------------ |  | ----------------- | ------- | -------------- |  | ---------- | ---- | -------- |  | ------------------------ | -------------- |  | - |  | ------- | - | ---- |  | ----- |  | 
|                               |            |              |         |              |  |                   |         |                |  | Number     |      |         
|                               |            |              |         |              |  |                   |         |                |  | of         |      |         
|                               |            |              |         |              |  | Stated Annual     |         |                |  | Properties |      | Maturity
|                               |            | December 31, |         | December 31, |  | Interest Rate at  |         | Rate           |  | Securing   |      | Month/  
|Type of Debt                   |            | 2002         |         | 2001         |  | December 31, 2002 |         | Fixed/Floating |  | Loan       |      | Year    
|                               |            |              |         |              |  |                   |         |                |  |            |      |         
|                               |            |              |         |              |  |                   |         |                |  |           
|                               |            | ($000s)     |         |              |  |                   |         |                |  |           
|Mortgage Loans Payable:        |            |              |         |              |  |                   |         |                |  |            |      |          |  |                          |                |  |   |  |         |   |      |  |       | 
|Fixed Rate                     |            |              |         |              |  |                   |         |                |  |            |      |          |  |                          |                |  |   |  |         |   |      |  |       | 
|Mortgage Financing I(1)        |            | $            | 175,000 |              |  | $                 | 175,000 |                |  |            | 7.52 | %        |  |                          | Fixed          |  |   |  | 18      |   |      |  | 6/04  | 
|Mortgage Financing III(2)      |            |              | 136,100 |              |  |                   | 136,100 |                |  |            | 6.74 | %        |  |                          | Fixed          |  |   |  | 22      |   |      |  | 4/08  | 
|Mortgage Financing IV(2)       |            |              | 111,200 |              |  |                   | 111,200 |                |  |            | 6.61 | %        |  |                          | Fixed          |  |   |  | 12      |   |      |  | 4/08  | 
|Mortgage Financing V(3)        |            |              | 108,153 |              |  |                   | 110,253 |                |  |            | 6.94 | %        |  |                          | Fixed          |  |   |  | 12      |   |      |  | 4/09  | 
|Mortgage Financing VI(3)       |            |              | 21,816  |              |  |                   | 22,036  |                |  |            | 7.54 | %        |  |                          | Fixed          |  |   |  | 3       |   |      |  | 4/09  | 
|Activity Business Center(3)    |            |              | 7,580   |              |  |                   | 7,737   |                |  |            | 8.85 | %        |  |                          | Fixed          |  |   |  | 1       |   |      |  | 5/06  | 
|145 South Fairfax(3)           |            |              | 3,952   |              |  |                   | 3,987   |                |  |            | 8.93 | %        |  |                          | Fixed          |  |   |  | 1       |   |      |  | 1/27  | 
|Marin Corporate Center(3)      |            |              | 2,850   |              |  |                   | 2,966   |                |  |            | 9.00 | %        |  |                          | Fixed          |  |   |  | 1       |   |      |  | 7/15  | 
|Conejo Business Center(3)      |            |              | 2,795   |              |  |                   | 2,911   |                |  |            | 8.75 | %        |  |                          | Fixed          |  |   |  | (Note 4 | ) |      |  | 7/15  | 
|Conejo Business Center(3)      |            |              | 1,208   |              |  |                   | 1,262   |                |  |            | 7.88 | %        |  |                          | Fixed          |  |   |  | (Note 4 | ) |      |  | 7/15  | 
|                               |            |              |         |              |  |                   |         |                |  |            |      |          |  |                          |                |  |   |  |         |   |      |  |       | 
|                               |            |              | 570,654 |              |  |                   | 573,452 |                |  |            |      |          |  |                          |                |  |   |  |         |   |      |  |       | 
|Unsecured Term Loan:           |            |              |         |              |  |                   |         |                |  |            |      |          |  |                          |                |  |   |  |         |   |      |  |       | 
|Fixed Rate                     |            |              |         |              |  |                   |         |                |  |            |      |          |  |                          |                |  |   |  |         |   |      |  |       | 
|Wells Fargo  $125 mm(1), (5)  |            |              | 125,000 |              |  |                   |        |                |  |            | 3.64 | %        |  |                          | Fixed (Note 6) |  |   |  |        |   |      |  | 6/04  | 
|Unsecured Lines of Credit:     |            |              |         |              |  |                   |         |                |  |            |      |          |  |                          |                |  |   |  |         |   |      |  |       | 
|Floating Rate                  |            |              |         |              |  |                   |         |                |  |            |      |          |  |                          |                |  |   |  |         |   |      |  |       | 
|Wells Fargo  $310 mm(1)       |            |              | 208,587 |              |  |                   | 105,350 |                |  |            | 2.83 | %        |  | LIBOR + 1.00%(Notes 7,8) |                |  |  |  |         |   | 4/06 | 
|Lehman Brothers  $75 mm(9)    |            |              |        |              |  |                   | 75,000  |                |  |            |     |          |  |                          | LIBOR + 1.30%  |  |   |  |        |   |      |  | 7/02  | 
|City National Bank  $10 mm(1) |            |              |        |              |  |                   |        |                |  |            |     |          |  | Prime Rate  0.875%      |                |  |  |  |         |   | 8/03 | 
|                               |            |              |         |              |  |                   |         |                |  |            |      |          |  |                          |                |  |   |  |         |   |      |  |       | 
|                               |            |              | 208,587 |              |  |                   | 180,350 |                |  |            |      |          |  |                          |                |  |   |  |         |   |      |  |       | 
|Unsecured Senior Notes:        |            |              |         |              |  |                   |         |                |  |            |      |          |  |                          |                |  |   |  |         |   |      |  |       | 
|Fixed Rate                     |            |              |         |              |  |                   |         |                |  |            |      |          |  |                          |                |  |   |  |         |   |      |  |       | 
|2005 Notes(10)                 |            |              | 199,769 |              |  |                   | 199,667 |                |  |            | 8.88 | %        |  |                          | Fixed          |  |   |  |        |   |      |  | 3/05  | 
|2007 Notes(10)                 |            |              | 149,245 |              |  |                   | 49,663  |                |  |            | 7.00 | %        |  |                          | Fixed          |  |   |  |        |   |      |  | 11/07 | 
|2010 Notes(10)                 |            |              | 49,704  |              |  |                   | 99,262  |                |  |            | 9.15 | %        |  |                          | Fixed          |  |   |  |        |   |      |  | 3/10  | 
|2010 Notes(10)                 |            |              | 99,345  |              |  |                   | 149,089 |                |  |            | 8.50 | %        |  |                          | Fixed          |  |   |  |        |   |      |  | 11/10 | 
|                               |            |              |         |              |  |                   |         |                |  |            |      |          |  |                          |                |  |   |  |         |   |      |  |       | 
|                               |            |              | 498,063 |              |  |                   | 497,681 |                |  |            |      |          |  |                          |                |  |   |  |         |   |      |  |       | 
|                               |            |              |         |              |  |                   |         |                |  |            |      |          |  |                          |                |  |   |  |         |   |      |  |       | 
|                               | Total Debt |              | $       | 1,402,304    |  |                   | $       | 1,251,483      |  |            |      |          |  |                          |                |  |   |  |         |   |      |  |       |  | 
|                               |            |              |         |              |  |                   |         |                |  |            |      |          |  |                          |                |  |   |  |         |   |      |  |       | 




|    |                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------
|(1) | Requires monthly payments of interest only, with
    outstanding principal balance due upon maturity.                       
|   
|(2) | Requires monthly payments of interest only for
    five years and monthly payments of principal and interest
    thereafter.
|   
|(3) | Requires monthly payments of principal and
    interest.                                                                    
|   
|(4) | Both mortgage loans are secured by the Conejo
    Business Center property.                                                 



|    |                                                                                                                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(5) | This loan has a two-year extension option.                                                                                                                                                          
|   
|(6) | In 2002, we entered into interest rate swap
    agreements that fixed the interest rate on the entire balance of
    this loan at 3.64% in 2003, 4.18% in 2004, 4.75% in 2005 and
    4.90% in 2006.
|   
|(7) | This line of credit also has annual 20 basis
    points facility fee on the $310 million commitment amount.                                                                                         
|   
|(8) | In 2002, we entered into interest rate swap
    agreements that fixed the interest rate on $50 million of
    the outstanding balance on this line of credit at 4.06% through
    April of 2006.    
|   
|(9) | This line of credit was repaid in June 2002.                                                                                                                                                        



|     |                                                                                           
|---- | ------------------------------------------------------------------------------------------
|(10) | Requires semi-annual interest payments only, with
    principal balance due upon maturity.

On June 13, 2002, our operating partnership
closed on a $75 million unsecured term loan with Wells
Fargo. This loan matures in June 2004, has a two-year extension
option and bears interest at LIBOR + 1.25%

F-14



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##### Table of Contents



during the initial term and LIBOR + 1.45% during
the extension period. On September 25, 2002, our operating
partnership increased this term loan by an additional
$50 million. The initial $75 million in proceeds from
this loan were used to repay the outstanding balance on our
Lehman Brothers unsecured line of credit that was scheduled to
mature in July 2002. The additional $50 million in
borrowings were used to pay down our Wells Fargo unsecured line
of credit.


On August 9, 2002, our operating partnership
renewed and increased its unsecured line of credit with a group
of banks led by Wells Fargo. The renewed line of credit provides
for borrowings up to $310 million with an option to
increase the amount to $350 million and bears interest at a
rate ranging between LIBOR + 0.80% and LIBOR + 1.25% (including
an annual facility fee ranging from 0.15% to 0.40% based on the
aggregate amount of the line of credit) depending on the
operating partnerships unsecured debt rating. This new
line of credit amends the previous $275 million unsecured
line of credit that was scheduled to mature in April 2003. This
new line of credit matures in April 2006. In addition, as long
as the operating partnership maintains an unsecured debt rating
of BBB-/ Baa3 or better, the agreement contains a competitive
bid option, whereby the lenders may bid on the interest rate to
be charged for up to $150 million of the unsecured line of
credit. The operating partnership also has the option to convert
the interest rate on this line of credit to the higher of Wells
Fargos prime rate or the Federal Funds rate plus 0.5%. As
of December 31, 2002, there was approximately
$208.6 million outstanding on this line of credit and
approximately $111.4 million was available for additional
borrowings.

During the fourth quarter of 2002, our operating
partnership entered into interest rate swap agreements totaling
$175 million that fixed the floating interest rates on
$50 million of its unsecured line of credit and all of its
$125 million unsecured term loan. This has decreased our
interest rate exposure by approximately 50%, from 22% of total
indebtedness as of September 30, 2002 to approximately 11%
at December 31, 2002. As a result of these transactions,
$50 million of our operating partnerships line of
credit will now bear interest at 4.06% through the maturity of
the line in April of 2006 and its $125 million term loan
will now bear interest at 3.64% in 2003, 4.18% in 2004, 4.75% in
2005 and 4.9% from January through June of 2006.

Following is a summary of scheduled principal
payments for our total debt outstanding as of December 31,
2002 ($000s):

|             |  |        |           | 
|------------ |  | ------ | --------- | 
|Year Ended   |  |       
|December 31, |  | Amount
|             |  |       
|2003         |  | $      | 5,461     | 
|2004         |  |        | 307,062   | 
|2005         |  |        | 207,678   | 
|2006         |  |        | 223,649   | 
|2007         |  |        | 158,681   | 
|Thereafter   |  |        | 499,773   | 
|             |  |        |           | 
|             |  | $      | 1,402,304 | 
|             |  |        |           | 

6. Stockholders
Equity

A common operating partnership unit, or common OP
Unit, and a share of our common stock have essentially the same
economic characteristics as they share equally in the total net
income or loss and distributions of the operating partnership. A
common OP Unit may be redeemed for cash or, at our election, for
shares of common stock on a one-for-one basis.

During the year ended December 31, 2002, we
redeemed an aggregate of 121,875 common OP units of the
operating partnership for shares of our common stock.

Our minority interest balance includes
$50 million of 85/8% Series B Cumulative Redeemable
Preferred Operating Partnership Units, or Preferred OP Units.
These Preferred OP Units were issued in September of 1999, are
callable by us after five years and are exchangeable after ten
years by the holder into our 85/8%

F-15



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##### Table of Contents



Series B Cumulative Redeemable Preferred
Stock, on a one-for-one basis. The Preferred OP Units have no
stated maturity or mandatory redemption and are subordinate to
all debt.


On January 1, 2002, we extended the vesting
period of a total of 477,600 unvested restricted stock awards
granted to several key executive officers in 2000 and 2001, from
their initial four-year and five-year vesting periods to a
ten-year vesting period from their initial grant date.

On February 28, 2002 we issued a total of
182,500 restricted stock awards to several key executive
officers. Holders of these shares have full voting rights and
will receive any dividends paid but are prohibited from selling
or transferring unvested shares. Of the 182,500 restricted
shares awarded, 15,500 shares vest equally over three years
and 167,000 shares vest equally over ten years. The fair
market value on the date of the grant for these restricted
shares was $25.70 per share. On July 15, 2002, each
non-employee director was granted 1,000 shares of
restricted stock under our Stock Option and Incentive Plan as
part of their annual compensation. The fair market value on the
date of the grant for these restricted shares was $25.09 per
share. These restricted stock awards will vest equally on the
anniversary date of the awards over five years.

We recorded deferred compensation charges
totaling approximately $4.8 million during 2002 for the
grants described above based on the market value of these shares
on the date of award and will amortize the compensation charges
to expense on a straight-line basis over the respective vesting
periods.

On July 24, 2002 our Board of Directors
authorized a common stock repurchase program pursuant to which
we are authorized to purchase up to $75 million of our
common stock over the following 12 months. As part of this
repurchase program, we acquired 1,796,000 shares of our
common stock at an average price of approximately $22.66 per
share during the year ended December 31, 2002.

On December 11, 2002, we declared a
quarterly dividend of $0.505 per share to stockholders of record
on December 31, 2002. This dividend was paid on
January 22, 2003. We declared dividends of $2.02 per common
share for the year ended December 31, 2002.

7. Commitments and
Contingencies

Capital Commitments

As of December 31, 2002, we had
approximately $3.9 million outstanding in capital
commitments related to tenant improvements, renovation costs and
general property-related capital expenditures.

Litigation

We are presently subject to various lawsuits,
claims and proceedings of a nature considered normal to our
ordinary course of business. We expect most of these legal
proceedings to be covered by our liability insurance. The most
significant of these contingencies not covered by insurance is
described below.

In December 2001, the owner of the entertainment
center at our Howard Hughes Center project asserted a claim
against us for indemnification arising out of a Los Angeles
Superior Court judgment against them, which invalidated a
transfer of in-lieu credits that Arden Realty made in August of
1999 as part of our sale of the land for the entertainment
center. The value of these in-lieu credits was approximately
$6.0 million and were transferred to satisfy certain
Transportation Impact Assessment fees related to the
entertainment center. On January 17, 2003 the California
Court of Appeal reversed the Superior Courts Judgment,
rendering the indemnification claim moot. On January 23,
2003, the plaintiff in the original lawsuit filed a petition for
rehearing with the California Court of Appeal. On
February 8, 2003, the California Court of Appeal denied the
petition for rehearing.

Based on our review of the current facts and
circumstances and advice of our outside counsel, we are not able
to express an opinion as to the ultimate outcome of this matter.
However, we do not believe that the resolution of this matter or
any of our ongoing legal proceedings will have a material
adverse effect on our consolidated results of operations, cash
flow or financial position.

F-16



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##### Table of Contents



Concentration of Credit
Risk

We maintain our cash and cash equivalents at
financial institutions. The combined account balances at each
institution periodically exceed FDIC insurance coverage, and as
a result, there is a concentration of credit risk related to
amounts on deposit in excess of FDIC insurance coverage.
Management believes that the risk is not significant.

We generally do not require collateral or other
security from our tenants, other than security deposits or
letters of credit.

8. Related Party
Transactions

Promissory
Notes Receivable from Officers

In March 2002, Mr. Andrew Sobel, our
Executive Vice President  Strategic Planning and
Operations, replaced a note due to us in the amount of $194,936
bearing interest at 6.56% per annum that matured in February of
2002 with a new note for the same principal amount bearing
interest at LIBOR + 1.10% per annum and maturing in March 2007.

On July 19, 2001 and September 28,
2001, four officers executed promissory notes totaling
approximately $416,000 primarily for the purpose of meeting
payroll taxes due upon the vesting of stock grants. These notes
mature between July 19, 2006 and September 28, 2011
and bear interest at an annual rate of between 5.75% and 6.00%.
In February 2002, two of these notes to us totaling
approximately $125,000 were repaid in full, including accrued
interest. The remaining loans are personally guaranteed by the
respective officers and are included as part of other
receivables in our balance sheet at December 31, 2002.

9. Revenue from Rental Operations
and Property Operating Expenses

Revenue from rental operations and property
operating expenses for the years ended December 31, 2002,
2001 and 2000 are summarized as follows ($000s):

|                                |                          |      |         |         |  |      |         |         |  |   |         |         | 
|------------------------------- | ------------------------ | ---- | ------- | ------- |  | ---- | ------- | ------- |  | - | ------- | ------- | 
|                                |                          | 2002 |         | 2001    |  | 2000
|                                |                          |      |         |         |  |     
|Revenue From Rental Operations: |                          |      |         |         |  |      |         |         |  |   |         |        
|                                | Scheduled Rents          |      | $       | 352,682 |  |      | $       | 343,224 |  |   | $       | 317,413 | 
|                                | Straight-line Rents      |      |         | 5,348   |  |      |         | 9,120   |  |   |         | 7,920   | 
|                                | Tenant reimbursements    |      |         | 24,968  |  |      |         | 22,683  |  |   |         | 16,454  | 
|                                | Parking, net of expenses |      |         | 20,814  |  |      |         | 21,256  |  |   |         | 17,575  | 
|                                | Other rental operations  |      |         | 8,242   |  |      |         | 18,202  |  |   |         | 21,260  | 
|                                |                          |      |         |         |  |      |         |         |  |   |         |        
|                                |                          |      | 412,054 |         |  |      | 414,485 |         |  |   | 380,622 |        
|                                |                          |      |         |         |  |      |         |         |  |   |         |        
|Property Operating Expenses:    |                          |      |         |         |  |      |         |         |  |   |         |        
|                                | Repairs and maintenance  |      |         | 39,422  |  |      |         | 36,151  |  |   |         | 34,874  | 
|                                | Utilities                |      |         | 35,726  |  |      |         | 33,579  |  |   |         | 29,598  | 
|                                | Real estate taxes        |      |         | 29,921  |  |      |         | 29,089  |  |   |         | 26,362  | 
|                                | Insurance                |      |         | 8,116   |  |      |         | 5,685   |  |   |         | 4,171   | 
|                                | Ground rent              |      |         | 895     |  |      |         | 1,885   |  |   |         | 1,214   | 
|                                | Administrative           |      |         | 15,643  |  |      |         | 14,697  |  |   |         | 13,293  | 
|                                |                          |      |         |         |  |      |         |         |  |   |         |        
|                                |                          |      | 129,723 |         |  |      | 121,086 |         |  |   | 109,512 |        
|                                |                          |      |         |         |  |      |         |         |  |   |         |        
|                                |                          | $    | 282,331 |         |  | $    | 293,399 |         |  | $ | 271,110 |        
|                                |                          |      |         |         |  |      |         |         |  |   |         |        

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10. Earnings Per Share

The following table sets forth the computation of
basic and diluted net income per share for the years ended
December 31, 2002, 2001 and 2000 (in thousands, except per
share amounts):

|                                                 |                                     |      |        |      |  |      |        |      |  |   |        |      | 
|------------------------------------------------ | ----------------------------------- | ---- | ------ | ---- |  | ---- | ------ | ---- |  | - | ------ | ---- | 
|                                                 |                                     | 2002 |        | 2001 |  | 2000
|                                                 |                                     |      |        |      |  |     
|Income from continuing operations                |                                     | $    | 68,758 |      |  | $    | 96,301 |      |  | $ | 95,508 |     
|Discontinued operations net of minority interest |                                     |      | 1,417  |      |  |      | 1,458  |      |  |   | 1,202  |     
|                                                 |                                     |      |        |      |  |      |        |      |  |   |        |     
|Net income                                       |                                     | $    | 70,175 |      |  | $    | 97,759 |      |  | $ | 96,710 |     
|                                                 |                                     |      |        |      |  |      |        |      |  |   |        |     
|Weighted average shares  basic                  |                                     |      | 64,151 |      |  |      | 63,754 |      |  |   | 63,408 |     
|Weighted average diluted stock options           |                                     |      | 200    |      |  |      | 260    |      |  |   | 190    |     
|                                                 |                                     |      |        |      |  |      |        |      |  |   |        |     
|Weighted average shares  diluted                |                                     |      | 64,351 |      |  |      | 64,014 |      |  |   | 63,598 |     
|                                                 |                                     |      |        |      |  |      |        |      |  |   |        |     
|Basic net income per common share:               |                                     |      |        |      |  |      |        |      |  |   |        |     
|                                                 | Income from continuing operations   |      | $      | 1.07 |  |      | $      | 1.51 |  |   | $      | 1.51 | 
|                                                 | Income from discontinued operations |      |        | 0.02 |  |      |        | 0.02 |  |   |        | 0.02 | 
|                                                 |                                     |      |        |      |  |      |        |      |  |   |        |     
|Net income per common share-basic                |                                     | $    | 1.09   |      |  | $    | 1.53   |      |  | $ | 1.53   |     
|                                                 |                                     |      |        |      |  |      |        |      |  |   |        |     
|Diluted net income per common share:             |                                     |      |        |      |  |      |        |      |  |   |        |     
|                                                 | Income from continuing operations   |      | $      | 1.07 |  |      | $      | 1.51 |  |   | $      | 1.50 | 
|                                                 | Income from discontinued operations |      |        | 0.02 |  |      |        | 0.02 |  |   |        | 0.02 | 
|                                                 |                                     |      |        |      |  |      |        |      |  |   |        |     
|Net income per common share-diluted              |                                     | $    | 1.09   |      |  | $    | 1.53   |      |  | $ | 1.52   |     
|                                                 |                                     |      |        |      |  |      |        |      |  |   |        |     

See discussion of discontinued operations in
footnote 3 above.

11. Stock Option Plan

Prior to December 31, 2002 we elected to
follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees
(APB 25) and related interpretations in
accounting for our employee and directors stock options because,
as discussed below, the alternative fair value accounting
provided for under FASB Statement No. 123, Accounting
for Stock-Based Compensation (Statement 123)
requires use of option valuation models that were not developed
for use in valuing employee stock options. Under APB 25,
because the exercise price of employee and director stock
options we granted equals the market price of the underlying
stock on the date of grant, no compensation expense is
recognized. As discussed in footnote 2 above, beginning on
January 1, 2003 we will account for our stock options
issued to employees and directors after such date under the
provisions of SFAS 148.

We established a stock option plan for the
purpose of attracting and retaining executive officers,
directors and other key employees. As of December 31, 2002,
6,500,000 of our authorized shares of common stock have been
reserved for issuance under that plan.

All holders of the above options have a ten-year
period to exercise such options and all options were granted at
exercise prices equal to the market prices at the date of the
grant.

Pro forma information regarding net income and
earnings per share is required by Statement 123, and has been
determined as if we had accounted for its employee stock options
under the fair value method of that Statement. The fair value
for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following
weighted-average assumptions for 2002, 2001 and 2000,
respectively: risk-free interest rate of 4.28%, 4.39% and 6.13%,
dividend yield of 7.80%, 7.60% and 7.75% and a volatility factor
of the expected market price of our common stock of .190, .191
and .198. The weighted average expected life of the options is
approximately seven years.

The Black-Scholes option valuation model was
developed for use in estimating the fair value of traded options
which have no vesting restriction and are fully transferable. In
addition, option valuation models require the input of highly
subjective assumptions including the expected stock price
volatility. Because our

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employee and director stock options have
characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions
can materially affect the fair value estimate, in
managements opinion, the existing models do not
necessarily provide a reliable single measure of the fair value
of our employee and director stock options.


For purposes of pro forma disclosures, the
estimated fair value of the options is amortized to expense over
the options vesting periods. Our pro forma information for
the years ended December 31, 2002, 2001 and 2000 follows
(in thousands, except earnings per share information):

|                                                                       |  |      |        |      |  |      |        |  |  |   |        | 
|---------------------------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  | - | ------ | 
|                                                                       |  | 2002 |        | 2001 |  | 2000
|                                                                       |  |      |        |      |  |     
|Net income available to common stockholders                            |  | $    | 70,175 |      |  | $    | 97,759 |  |  | $ | 96,710 | 
|Stock based employee compensation costs assuming
    fair value method |  |      | 1,477  |      |  |      | 2,099  |  |  |   | 4,444  | 
|                                                                       |  |      |        |      |  |      |        |  |  |   |        | 
|Pro forma net income                                                   |  | $    | 68,698 |      |  | $    | 95,660 |  |  | $ | 92,266 | 
|                                                                       |  |      |        |      |  |      |        |  |  |   |        | 
|Pro forma net income per share  diluted                               |  | $    | 1.07   |      |  | $    | 1.49   |  |  | $ | 1.45   | 
|                                                                       |  |      |        |      |  |      |        |  |  |   |        | 

A summary of Arden Realtys stock option
activity, and related information for the years ended
December 31, 2002, 2001 and 2000 follows:

|                                                   |  |         |       |           |  |         |       |           |  |         |       |           |  |   |       |  |  |   |       |   |  |   |       | 
|-------------------------------------------------- |  | ------- | ----- | --------- |  | ------- | ----- | --------- |  | ------- | ----- | --------- |  | - | ----- |  |  | - | ----- | - |  | - | ----- | 
|                                                   |  |         |       |           |  |        
|                                                   |  | 2002    |       | 2001      |  | 2000   
|                                                   |  |         |       |           |  |        
|                                                   |  |         |       | Weighted- |  |         |       | Weighted- |  |         |       | Weighted-
|                                                   |  |         |       | Average   |  |         |       | Average   |  |         |       | Average  
|                                                   |  | Options |       | Exercise  |  | Options |       | Exercise  |  | Options |       | Exercise 
|                                                   |  | (000s)  |       | Price     |  | (000s)  |       | Price     |  | (000s)  |       | Price    
|                                                   |  |         |       |           |  |         |       |           |  |         |       |          
|Outstanding, beginning of period                   |  |         | 4,724 |           |  | $       | 24.43 |           |  |         | 4,396 |           |  | $ | 24.29 |  |  |   | 3,599 |   |  | $ | 23.96 | 
|Granted                                            |  |         | 164   |           |  |         | 25.60 |           |  |         | 381   |           |  |   | 26.80 |  |  |   | 1,367 |   |  |   | 25.05 | 
|Exercised                                          |  |         | (424  | )         |  |         | 21.40 |           |  |         | (21   | )         |  |   | 21.89 |  |  |   |      |   |  |   |      | 
|Forfeited                                          |  |         | (275  | )         |  |         | 25.68 |           |  |         | (32   | )         |  |   | 24.43 |  |  |   | (570  | ) |  |   | 24.72 | 
|                                                   |  |         |       |           |  |         |       |           |  |         |       |           |  |   |       |  |  |   |       |   |  |   |       | 
|Outstanding at end of year                         |  |         | 4,189 |           |  | $       | 24.33 |           |  |         | 4,724 |           |  | $ | 24.43 |  |  |   | 4,396 |   |  | $ | 24.29 | 
|                                                   |  |         |       |           |  |         |       |           |  |         |       |           |  |   |       |  |  |   |       |   |  |   |       | 
|Exercisable at end of the period                   |  |         | 3,401 |           |  | $       | 24.87 |           |  |         | 3,338 |           |  | $ | 24.58 |  |  |   | 2,514 |   |  | $ | 24.84 | 
|                                                   |  |         |       |           |  |         |       |           |  |         |       |           |  |   |       |  |  |   |       |   |  |   |       | 
|Weighted-average fair value of
    options granted |  | $       | 1.66  |           |  |         |       |           |  | $       | 1.49  |           |  |   |       |  |  | $ | 2.13  |   |  |   |       | 
|                                                   |  |         |       |           |  |         |       |           |  |         |       |           |  |   |       |  |  |   |       |   |  |   |       | 

Exercise prices for options outstanding as of
December 31, 2002 ranged from $19.13 to $32.25. The
weighted average remaining contractual life of those options is
6 years.

12. Employee Retirement Savings
Plan

Effective June 12, 1997, we adopted a
retirement savings plan pursuant to Section 401(k) of the
Internal Revenue Code whereby participants may contribute a
portion of their compensation to their respective retirement
accounts in an amount not to exceed the maximum allowed under
the Internal Revenue Code. The plan provides for matching
contributions by us, which amounted to approximately $844,000 in
2002, $803,000 in 2001 and $517,000 in 2000. Plan participants
are immediately vested in their contributions and are vested
equally over four years in matching contributions by us.

13. Subsequent Event

On January 28, 2003, we issued a total of
81,500 restricted stock awards to several key officers. Of the
81,500 restricted shares awarded, 48,000 shares vest
equally over five years and 33,500 vest after three years (cliff
vesting). We recorded a deferred compensation charge of
approximately $1.7 million based on the market value of
these shares on the date of award and will amortize the
compensation expense on a straight-line basis over the
respective vesting periods.

On March 11, 2003, we declared a first
quarter dividend of $0.505 per share to stockholders of record
on March 31, 2003 (unaudited).

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On March 11, 2003, we sold an approximate
140,000 square foot office property located in West Hollywood,
California for approximately $32.5 million. This property
was classified as held for disposition in our balance sheet at
December 31, 2002. The net proceeds from this disposition
were used to reduce the outstanding balance on the Wells Fargo
unsecured line of credit (unaudited).

14. Quarterly Results

Following is a quarterly summary of our revenue
and expenses for the years ended December 31, 2002, 2001
and 2000. Revenue and expenses may fluctuate significantly from
quarter to quarter due to our development, renovation,
acquisition and sales activity (unaudited).

|                                                  |         |                                                            |         |               |  |                    |         |                   |  |   |         |      |  |   |         |      | 
|------------------------------------------------- | ------- | ---------------------------------------------------------- | ------- | ------------- |  | ------------------ | ------- | ----------------- |  | - | ------- | ---- |  | - | ------- | ---- | 
|                                                  |         |                                                           
|                                                  |         | For the Quarter Ended (in thousands, except share amounts)
|                                                  |         |                                                           
|                                                  |         | March 31, 2002                                             |         | June 30, 2002 |  | September 30, 2002 |         | December 31, 2002
|                                                  |         |                                                            |         |               |  |                    |         |                  
|Revenue                                           |         | $                                                          | 101,197 |               |  | $                  | 101,594 |                   |  | $ | 103,335 |      |  | $ | 105,928 |     
|Property operating expenses                       |         |                                                            | (29,877 | )             |  |                    | (30,544 | )                 |  |   | (34,559 | )    |  |   | (34,743 | )   
|General and administrative                        |         |                                                            | (2,960  | )             |  |                    | (2,951  | )                 |  |   | (3,323  | )    |  |   | (3,932  | )   
|Interest expense                                  |         |                                                            | (21,397 | )             |  |                    | (21,584 | )                 |  |   | (22,403 | )    |  |   | (23,132 | )   
|Depreciation and amortization                     |         |                                                            | (26,061 | )             |  |                    | (28,548 | )                 |  |   | (27,339 | )    |  |   | (28,254 | )   
|Interest and other income                         |         |                                                            | 540     |               |  |                    | 512     |                   |  |   | 524     |      |  |   | 966     |     
|Gain on sale of properties                        |         |                                                            | 1,192   |               |  |                    | 81      |                   |  |   |        |      |  |   | 694     |     
|Minority interests                                |         |                                                            | (1,666  | )             |  |                    | (1,536  | )                 |  |   | (1,469  | )    |  |   | (1,527  | )   
|Discontinued operations, net of minority interest |         |                                                            | 385     |               |  |                    | 383     |                   |  |   | 347     |      |  |   | 302     |     
|                                                  |         |                                                            |         |               |  |                    |         |                   |  |   |         |      |  |   |         |     
|Net Income                                        |         | $                                                          | 21,353  |               |  | $                  | 17,407  |                   |  | $ | 15,113  |      |  | $ | 16,302  |     
|                                                  |         |                                                            |         |               |  |                    |         |                   |  |   |         |      |  |   |         |     
|Net income per share:                             |         |                                                            |         |               |  |                    |         |                   |  |   |         |      |  |   |         |     
|                                                  | Basic   |                                                            | $       | 0.33          |  |                    | $       | 0.27              |  |   | $       | 0.23 |  |   | $       | 0.26 | 
|                                                  |         |                                                            |         |               |  |                    |         |                   |  |   |         |      |  |   |         |     
|                                                  | Diluted |                                                            | $       | 0.33          |  |                    | $       | 0.27              |  |   | $       | 0.23 |  |   | $       | 0.26 | 
|                                                  |         |                                                            |         |               |  |                    |         |                   |  |   |         |      |  |   |         |     

|                                                  |         |                                                            |         |               |  |                    |         |                   |  |   |         |      |  |   |         |      | 
|------------------------------------------------- | ------- | ---------------------------------------------------------- | ------- | ------------- |  | ------------------ | ------- | ----------------- |  | - | ------- | ---- |  | - | ------- | ---- | 
|                                                  |         |                                                           
|                                                  |         | For the Quarter Ended (in thousands, except share amounts)
|                                                  |         |                                                           
|                                                  |         | March 31, 2001                                             |         | June 30, 2001 |  | September 30, 2001 |         | December 31, 2001
|                                                  |         |                                                            |         |               |  |                    |         |                  
|Revenue                                           |         | $                                                          | 102,134 |               |  | $                  | 101,973 |                   |  | $ | 104,773 |      |  | $ | 105,605 |     
|Property operating expenses                       |         |                                                            | (29,496 | )             |  |                    | (28,912 | )                 |  |   | (31,628 | )    |  |   | (31,050 | )   
|General and administrative                        |         |                                                            | (2,866  | )             |  |                    | (2,716  | )                 |  |   | (2,505  | )    |  |   | (4,056  | )   
|Interest expense                                  |         |                                                            | (21,158 | )             |  |                    | (21,081 | )                 |  |   | (20,819 | )    |  |   | (21,137 | )   
|Depreciation and amortization                     |         |                                                            | (23,871 | )             |  |                    | (23,873 | )                 |  |   | (25,692 | )    |  |   | (27,339 | )   
|Interest and other income                         |         |                                                            | 861     |               |  |                    | 764     |                   |  |   | 706     |      |  |   | 610     |     
|Gain on sale of properties                        |         |                                                            |        |               |  |                    | 3,551   |                   |  |   | 24      |      |  |   | 1,016   |     
|Minority interests                                |         |                                                            | (1,885  | )             |  |                    | (2,020  | )                 |  |   | (1,861  | )    |  |   | (1,751  | )   
|Discontinued operations, net of minority interest |         |                                                            | 354     |               |  |                    | 331     |                   |  |   | 491     |      |  |   | 282     |     
|                                                  |         |                                                            |         |               |  |                    |         |                   |  |   |         |      |  |   |         |     
|Net Income                                        |         | $                                                          | 24,073  |               |  | $                  | 28,017  |                   |  | $ | 23,489  |      |  | $ | 22,180  |     
|                                                  |         |                                                            |         |               |  |                    |         |                   |  |   |         |      |  |   |         |     
|Net income per share:                             |         |                                                            |         |               |  |                    |         |                   |  |   |         |      |  |   |         |     
|                                                  | Basic   |                                                            | $       | 0.38          |  |                    | $       | 0.44              |  |   | $       | 0.37 |  |   | $       | 0.35 | 
|                                                  |         |                                                            |         |               |  |                    |         |                   |  |   |         |      |  |   |         |     
|                                                  | Diluted |                                                            | $       | 0.38          |  |                    | $       | 0.44              |  |   | $       | 0.37 |  |   | $       | 0.35 | 
|                                                  |         |                                                            |         |               |  |                    |         |                   |  |   |         |      |  |   |         |     

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|                                                  |         |                                                            |         |               |  |                    |         |                   |  |   |         |      |  |   |         |      | 
|------------------------------------------------- | ------- | ---------------------------------------------------------- | ------- | ------------- |  | ------------------ | ------- | ----------------- |  | - | ------- | ---- |  | - | ------- | ---- | 
|                                                  |         |                                                           
|                                                  |         | For the Quarter Ended (in thousands, except share amounts)
|                                                  |         |                                                           
|                                                  |         | March 31, 2000                                             |         | June 30, 2000 |  | September 30, 2000 |         | December 31, 2000
|                                                  |         |                                                            |         |               |  |                    |         |                  
|Revenue                                           |         | $                                                          | 88,763  |               |  | $                  | 91,736  |                   |  | $ | 98,121  |      |  | $ | 102,002 |     
|Property operating expenses                       |         |                                                            | (25,045 | )             |  |                    | (26,366 | )                 |  |   | (29,152 | )    |  |   | (28,949 | )   
|General and administrative                        |         |                                                            | (1,821  | )             |  |                    | (1,838  | )                 |  |   | (2,297  | )    |  |   | (3,380  | )   
|Interest expense                                  |         |                                                            | (17,852 | )             |  |                    | (18,770 | )                 |  |   | (20,345 | )    |  |   | (21,439 | )   
|Depreciation and amortization                     |         |                                                            | (19,944 | )             |  |                    | (20,669 | )                 |  |   | (22,298 | )    |  |   | (23,036 | )   
|Interest and other income                         |         |                                                            | 855     |               |  |                    | 770     |                   |  |   | 948     |      |  |   | 954     |     
|Gain on sale of property                          |         |                                                            |        |               |  |                    |        |                   |  |   |        |      |  |   | 2,132   |     
|Minority interest                                 |         |                                                            | (1,862  | )             |  |                    | (1,817  | )                 |  |   | (1,910  | )    |  |   | (1,983  | )   
|Discontinued operations, net of minority interest |         |                                                            | 397     |               |  |                    | 152     |                   |  |   | 305     |      |  |   | 348     |     
|                                                  |         |                                                            |         |               |  |                    |         |                   |  |   |         |      |  |   |         |     
|Net income                                        |         | $                                                          | 23,491  |               |  | $                  | 23,198  |                   |  | $ | 23,372  |      |  | $ | 26,649  |     
|                                                  |         |                                                            |         |               |  |                    |         |                   |  |   |         |      |  |   |         |     
|Net income per share:                             |         |                                                            |         |               |  |                    |         |                   |  |   |         |      |  |   |         |     
|                                                  | Basic   |                                                            | $       | 0.37          |  |                    | $       | 0.37              |  |   | $       | 0.37 |  |   | $       | 0.42 | 
|                                                  |         |                                                            |         |               |  |                    |         |                   |  |   |         |      |  |   |         |     
|                                                  | Diluted |                                                            | $       | 0.37          |  |                    | $       | 0.37              |  |   | $       | 0.37 |  |   | $       | 0.42 | 
|                                                  |         |                                                            |         |               |  |                    |         |                   |  |   |         |      |  |   |         |     

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15. Schedule of Commercial Properties and
Accumulated Depreciation

December 31, 2002


(in thousands, except square foot
data)


|                          |  |         |         |               |  |               |       |      |  |              |        |                   |  |   |     |  |  |   |       |  |  |   |        | 
|------------------------- |  | ------- | ------- | ------------- |  | ------------- | ----- | ---- |  | ------------ | ------ | ----------------- |  | - | --- |  |  | - | ----- |  |  | - | ------ | 
|                          |  |         |         |               |  |               |       |     
|                          |  |         |         | Initial Costs |  | Basis Step Up |       |     
|                          |  |         |         |               |  |               |       |     
|                          |  |         |         |               |  | Buildings     |       |      |  | Buildings    |        | Costs Capitalized
|                          |  | Square  |         |               |  | and           |       |      |  | and          |        | Subsequent to    
|                          |  | Footage |         | Land          |  | Improvements  |       | Land |  | Improvements |        | Acquisition(2)   
|                          |  |         |         |               |  |               |       |      |  |              |        |                  
|Century Park Center       |  |         | 243,404 |               |  | $             | 7,189 |      |  | $            | 16,742 |                   |  | $ |    |  |  | $ |      |  |  | $ | 12,559 | 
|Beverly Atrium            |  |         | 59,650  |               |  |               | 4,127 |      |  |              | 11,513 |                   |  |   | 110 |  |  |   | 328   |  |  |   | 2,859  | 
|Woodland Hills            |  |         | 224,955 |               |  |               | 6,566 |      |  |              | 14,754 |                   |  |   | 365 |  |  |   | 880   |  |  |   | 7,624  | 
|222 South Harbor          |  |         | 175,391 |               |  |               | 515   |      |  |              | 11,199 |                   |  |   | 94  |  |  |   | 2,075 |  |  |   | 4,356  | 
|425 West Broadway         |  |         | 71,589  |               |  |               | 1,500 |      |  |              | 4,436  |                   |  |   | 305 |  |  |   | 918   |  |  |   | 2,975  | 
|1950 Sawtelle             |  |         | 103,106 |               |  |               | 1,988 |      |  |              | 7,263  |                   |  |   |    |  |  |   |      |  |  |   | 3,031  | 
|Bristol Plaza             |  |         | 84,014  |               |  |               | 1,820 |      |  |              | 3,380  |                   |  |   | 257 |  |  |   | 485   |  |  |   | 2,587  | 
|16000 Ventura             |  |         | 174,841 |               |  |               | 1,700 |      |  |              | 17,189 |                   |  |   | 185 |  |  |   | 1,929 |  |  |   | 4,871  | 
|5000 East Spring          |  |         | 163,358 |               |  |               |      |      |  |              | 11,658 |                   |  |   |    |  |  |   | 424   |  |  |   | 4,188  | 
|70 South Lake             |  |         | 100,133 |               |  |               | 1,360 |      |  |              | 9,097  |                   |  |   |    |  |  |   |      |  |  |   | 3,091  | 
|Westwood Terrace          |  |         | 135,943 |               |  |               | 2,103 |      |  |              | 16,850 |                   |  |   |    |  |  |   |      |  |  |   | 3,286  | 
|Westlake  5601 Lindero   |  |         | 105,830 |               |  |               | 2,576 |      |  |              | 6,067  |                   |  |   |    |  |  |   |      |  |  |   | 3,322  | 
|6100 Wilshire             |  |         | 202,704 |               |  |               | 1,200 |      |  |              | 19,902 |                   |  |   |    |  |  |   |      |  |  |   | 5,851  | 
|Calabasas Commerce Center |  |         | 126,771 |               |  |               | 1,262 |      |  |              | 9,725  |                   |  |   |    |  |  |   |      |  |  |   | 1,748  | 
|Long Beach AirportDF&G   |  |         | 272,013 |               |  |               |      |      |  |              | 14,452 |                   |  |   |    |  |  |   |      |  |  |   | 560    | 
|Skyview Center            |  |         | 391,675 |               |  |               | 6,514 |      |  |              | 33,701 |                   |  |   |    |  |  |   |      |  |  |   | 7,494  | 
|400 Corporate Pointe      |  |         | 164,598 |               |  |               | 3,382 |      |  |              | 17,527 |                   |  |   | 75  |  |  |   | 390   |  |  |   | 4,237  | 
|5832 Bolsa                |  |         | 49,355  |               |  |               | 690   |      |  |              | 3,526  |                   |  |   | 15  |  |  |   | 80    |  |  |   | 1,622  | 
|9665 Wilshire             |  |         | 158,684 |               |  |               | 6,697 |      |  |              | 22,230 |                   |  |   | 139 |  |  |   | 473   |  |  |   | 9,939  | 
|701 B Street              |  |         | 540,413 |               |  |               | 3,722 |      |  |              | 35,184 |                   |  |   | 64  |  |  |   | 625   |  |  |   | 13,765 | 
|100 Broadway              |  |         | 191,727 |               |  |               | 4,570 |      |  |              | 15,255 |                   |  |   |    |  |  |   |      |  |  |   | 2,580  | 
|Norwalk                   |  |         | 122,175 |               |  |               | 4,508 |      |  |              | 5,532  |                   |  |   |    |  |  |   |      |  |  |   | 4,347  | 
|303 Glenoaks              |  |         | 175,289 |               |  |               | 6,500 |      |  |              | 18,132 |                   |  |   |    |  |  |   |      |  |  |   | 3,780  | 
|10351 Santa Monica        |  |         | 96,251  |               |  |               | 3,080 |      |  |              | 7,906  |                   |  |   |    |  |  |   |      |  |  |   | 1,963  | 
|2730 Wilshire             |  |         | 55,080  |               |  |               | 3,515 |      |  |              | 5,944  |                   |  |   |    |  |  |   |      |  |  |   | 155    | 

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                          |  |             |       |              |  |       |        |                 |  |              |        |             |  |   |        |  |  |   |        |     |  |  |            | 
|------------------------- |  | ----------- | ----- | ------------ |  | ----- | ------ | --------------- |  | ------------ | ------ | ----------- |  | - | ------ |  |  | - | ------ | --- |  |  | ---------- | 
|                          |  |             |       |              |  |       |        |                 |  |             
|                          |  | Total Costs |       |              |  |       |        |                 |  |             
|                          |  |             |       |              |  |       |        |                 |  |             
|                          |  |             |       | Buildings    |  |       |        |                 |  |              |        |            
|                          |  |             |       | and          |  |       |        | Accumulated     |  |              |        | Year Built/
|                          |  | Land        |       | Improvements |  | Total |        | Depreciation(1) |  | Encumbrances |        | Renovated  
|                          |  |             |       |              |  |       |        |                 |  |              |        |            
|Century Park Center       |  | $           | 7,189 |              |  | $     | 29,301 |                 |  | $            | 36,490 |             |  | $ | 7,399  |  |  | $ |       |     |  |  | 1972/94    | 
|Beverly Atrium            |  |             | 4,237 |              |  |       | 14,700 |                 |  |              | 18,937 |             |  |   | 3,484  |  |  |   | 5,268  | (3) |  |  | 1989       | 
|Woodland Hills            |  |             | 6,931 |              |  |       | 23,258 |                 |  |              | 30,189 |             |  |   | 6,554  |  |  |   | 14,564 | (3) |  |  | 1972/95    | 
|222 South Harbor          |  |             | 609   |              |  |       | 17,630 |                 |  |              | 18,239 |             |  |   | 4,815  |  |  |   | 8,914  | (3) |  |  | 1986/91    | 
|425 West Broadway         |  |             | 1,805 |              |  |       | 8,329  |                 |  |              | 10,134 |             |  |   | 2,192  |  |  |   | 4,734  | (3) |  |  | 1984       | 
|1950 Sawtelle             |  |             | 1,988 |              |  |       | 10,294 |                 |  |              | 12,282 |             |  |   | 2,635  |  |  |   | 6,855  | (3) |  |  | 1988/95    | 
|Bristol Plaza             |  |             | 2,077 |              |  |       | 6,452  |                 |  |              | 8,529  |             |  |   | 1,866  |  |  |   | 4,082  | (3) |  |  | 1982       | 
|16000 Ventura             |  |             | 1,885 |              |  |       | 23,989 |                 |  |              | 25,874 |             |  |   | 5,661  |  |  |   | 11,634 | (3) |  |  | 1980/96    | 
|5000 East Spring          |  |             |      |              |  |       | 16,270 |                 |  |              | 16,270 |             |  |   | 3,836  |  |  |   |       |     |  |  | 1989/95    | 
|70 South Lake             |  |             | 1,360 |              |  |       | 12,188 |                 |  |              | 13,548 |             |  |   | 2,756  |  |  |   | 6,677  | (3) |  |  | 1982/94    | 
|Westwood Terrace          |  |             | 2,103 |              |  |       | 20,136 |                 |  |              | 22,239 |             |  |   | 4,285  |  |  |   |       |     |  |  | 1988       | 
|Westlake  5601 Lindero   |  |             | 2,576 |              |  |       | 9,389  |                 |  |              | 11,965 |             |  |   | 2,131  |  |  |   | 6,225  | (3) |  |  | 1989       | 
|6100 Wilshire             |  |             | 1,200 |              |  |       | 25,753 |                 |  |              | 26,953 |             |  |   | 5,752  |  |  |   | 11,566 | (3) |  |  | 1986       | 
|Calabasas Commerce Center |  |             | 1,262 |              |  |       | 11,473 |                 |  |              | 12,735 |             |  |   | 2,315  |  |  |   | 8,103  | (3) |  |  | 1990       | 
|Long Beach AirportDF&G   |  |             |      |              |  |       | 15,012 |                 |  |              | 15,012 |             |  |   | 2,718  |  |  |   |       |     |  |  | 1987/95    | 
|Skyview Center            |  |             | 6,514 |              |  |       | 41,195 |                 |  |              | 47,709 |             |  |   | 8,426  |  |  |   | 27,604 | (3) |  |  | 1981/87/95 | 
|400 Corporate Pointe      |  |             | 3,457 |              |  |       | 22,154 |                 |  |              | 25,611 |             |  |   | 4,340  |  |  |   | 15,583 | (3) |  |  | 1987       | 
|5832 Bolsa                |  |             | 705   |              |  |       | 5,228  |                 |  |              | 5,933  |             |  |   | 1,209  |  |  |   | 2,675  | (3) |  |  | 1985       | 
|9665 Wilshire             |  |             | 6,836 |              |  |       | 32,642 |                 |  |              | 39,478 |             |  |   | 6,325  |  |  |   |       |     |  |  | 1972/92/93 | 
|701 B Street              |  |             | 3,786 |              |  |       | 49,574 |                 |  |              | 53,360 |             |  |   | 11,962 |  |  |   |       |     |  |  | 1982/96    | 
|100 Broadway              |  |             | 4,570 |              |  |       | 17,835 |                 |  |              | 22,405 |             |  |   | 3,056  |  |  |   | 15,120 | (3) |  |  | 1987/96    | 
|Norwalk                   |  |             | 4,508 |              |  |       | 9,879  |                 |  |              | 14,387 |             |  |   | 2,149  |  |  |   | 7,186  | (3) |  |  | 1978/94    | 
|303 Glenoaks              |  |             | 6,500 |              |  |       | 21,912 |                 |  |              | 28,412 |             |  |   | 3,921  |  |  |   | 13,104 | (3) |  |  | 1983/96    | 
|10351 Santa Monica        |  |             | 3,080 |              |  |       | 9,869  |                 |  |              | 12,949 |             |  |   | 1,797  |  |  |   | 5,541  | (3) |  |  | 1984       | 
|2730 Wilshire             |  |             | 3,515 |              |  |       | 6,099  |                 |  |              | 9,614  |             |  |   | 1,359  |  |  |   | 4,679  | (3) |  |  | 1985       | 

F-22



---



##### Table of Contents



|                             |  |         |         |               |  |               |        |      |  |              |        |                   |  |  |   |  |  |  |   |  |  |  |        |  
|---------------------------- |  | ------- | ------- | ------------- |  | ------------- | ------ | ---- |  | ------------ | ------ | ----------------- |  |  | - |  |  |  | - |  |  |  | ------ | -
|                             |  |         |         |               |  |               |        |     
|                             |  |         |         | Initial Costs |  | Basis Step Up |        |     
|                             |  |         |         |               |  |               |        |     
|                             |  |         |         |               |  | Buildings     |        |      |  | Buildings    |        | Costs Capitalized
|                             |  | Square  |         |               |  | and           |        |      |  | and          |        | Subsequent to    
|                             |  | Footage |         | Land          |  | Improvements  |        | Land |  | Improvements |        | Acquisition(2)   
|                             |  |         |         |               |  |               |        |      |  |              |        |                  
|Grand Avenue Plaza (1970)    |  |         | 81,448  |               |  |               | 620    |      |  |              | 2,832  |                   |  |  |  |  |  |  |  |  |  |  | 3,804  |  
|Burbank Executive Plaza      |  |         | 60,395  |               |  |               | 1,100  |      |  |              | 4,384  |                   |  |  |  |  |  |  |  |  |  |  | 10,532 |  
|California Federal Building  |  |         | 81,243  |               |  |               | 1,500  |      |  |              | 5,981  |                   |  |  |  |  |  |  |  |  |  |  | (5,985 | )
|Center Promenade             |  |         | 174,837 |               |  |               | 2,310  |      |  |              | 9,266  |                   |  |  |  |  |  |  |  |  |  |  | 3,765  |  
|Los Angeles Corporate Center |  |         | 389,293 |               |  |               | 26,781 |      |  |              | 15,139 |                   |  |  |  |  |  |  |  |  |  |  | 12,356 |  
|5200 West Century            |  |         | 310,910 |               |  |               | 2,080  |      |  |              | 9,360  |                   |  |  |  |  |  |  |  |  |  |  | 21,203 |  
|15250 Ventura                |  |         | 110,641 |               |  |               | 2,560  |      |  |              | 10,257 |                   |  |  |  |  |  |  |  |  |  |  | 3,977  |  
|10350 Santa Monica           |  |         | 42,292  |               |  |               | 861    |      |  |              | 3,456  |                   |  |  |  |  |  |  |  |  |  |  | 966    |  
|535 N. Brand Blvd            |  |         | 109,187 |               |  |               | 1,600  |      |  |              | 8,427  |                   |  |  |  |  |  |  |  |  |  |  | 12,991 |  
|10780 Santa Monica           |  |         | 92,486  |               |  |               | 2,625  |      |  |              | 7,997  |                   |  |  |  |  |  |  |  |  |  |  | 2,274  |  
|4900 California              |  |         | 155,189 |               |  |               | 4,680  |      |  |              | 14,877 |                   |  |  |  |  |  |  |  |  |  |  | 3,232  |  
|Whittier                     |  |         | 135,415 |               |  |               | 3,575  |      |  |              | 10,798 |                   |  |  |  |  |  |  |  |  |  |  | 2,196  |  
|Clarendon Crest              |  |         | 43,063  |               |  |               | 1,300  |      |  |              | 3,951  |                   |  |  |  |  |  |  |  |  |  |  | 1,127  |  
|Noble Professional Center    |  |         | 51,828  |               |  |               | 1,657  |      |  |              | 5,096  |                   |  |  |  |  |  |  |  |  |  |  | 1,086  |  
|South Bay Centre             |  |         | 202,830 |               |  |               | 4,775  |      |  |              | 14,365 |                   |  |  |  |  |  |  |  |  |  |  | 4,119  |  
|8383 Wilshire                |  |         | 417,463 |               |  |               | 13,570 |      |  |              | 45,505 |                   |  |  |  |  |  |  |  |  |  |  | 12,315 |  
|Parkway Center I             |  |         | 61,333  |               |  |               | 1,480  |      |  |              | 5,941  |                   |  |  |  |  |  |  |  |  |  |  | 1,094  |  
|Centerpointe La Palma        |  |         | 597,550 |               |  |               | 16,011 |      |  |              | 64,400 |                   |  |  |  |  |  |  |  |  |  |  | 7,457  |  
|299 N. Euclid                |  |         | 73,522  |               |  |               | 1,050  |      |  |              | 6,110  |                   |  |  |  |  |  |  |  |  |  |  | 5,576  |  
|2800 28th Street             |  |         | 103,506 |               |  |               | 2,937  |      |  |              | 9,063  |                   |  |  |  |  |  |  |  |  |  |  | 3,295  |  
|1000 Town Center             |  |         | 107,656 |               |  |               | 2,800  |      |  |              | 11,260 |                   |  |  |  |  |  |  |  |  |  |  | 1,295  |  
|Mariner Court                |  |         | 105,436 |               |  |               | 2,350  |      |  |              | 9,461  |                   |  |  |  |  |  |  |  |  |  |  | 1,867  |  
|Pacific Gateway II           |  |         | 223,731 |               |  |               | 6,287  |      |  |              | 19,191 |                   |  |  |  |  |  |  |  |  |  |  | 6,139  |  
|1821 Dyer                    |  |         | 115,061 |               |  |               | 1,808  |      |  |              | 5,474  |                   |  |  |  |  |  |  |  |  |  |  | 4,499  |  
|Crown Cabot Financial        |  |         | 172,900 |               |  |               | 7,056  |      |  |              | 21,360 |                   |  |  |  |  |  |  |  |  |  |  | 8,458  |  
|120 S. Spalding              |  |         | 60,656  |               |  |               | 2,775  |      |  |              | 8,544  |                   |  |  |  |  |  |  |  |  |  |  | 6,111  |  
|South Bay Tech               |  |         | 104,815 |               |  |               | 1,600  |      |  |              | 4,782  |                   |  |  |  |  |  |  |  |  |  |  | 1,200  |  
|1370 Valley Vista            |  |         | 84,081  |               |  |               | 2,698  |      |  |              | 8,141  |                   |  |  |  |  |  |  |  |  |  |  | 1,601  |  

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                             |  |             |        |              |  |       |        |                 |  |              |        |             |  |  |        |  |  |  |        |     |  |  |              | 
|---------------------------- |  | ----------- | ------ | ------------ |  | ----- | ------ | --------------- |  | ------------ | ------ | ----------- |  |  | ------ |  |  |  | ------ | --- |  |  | ------------ | 
|                             |  |             |        |              |  |       |        |                 |  |             
|                             |  | Total Costs |        |              |  |       |        |                 |  |             
|                             |  |             |        |              |  |       |        |                 |  |             
|                             |  |             |        | Buildings    |  |       |        |                 |  |              |        |            
|                             |  |             |        | and          |  |       |        | Accumulated     |  |              |        | Year Built/
|                             |  | Land        |        | Improvements |  | Total |        | Depreciation(1) |  | Encumbrances |        | Renovated  
|                             |  |             |        |              |  |       |        |                 |  |              |        |            
|Grand Avenue Plaza (1970)    |  |             | 620    |              |  |       | 6,636  |                 |  |              | 7,256  |             |  |  | 1,634  |  |  |  | 5,805  | (3) |  |  | 1980         | 
|Burbank Executive Plaza      |  |             | 1,100  |              |  |       | 14,916 |                 |  |              | 16,016 |             |  |  | 3,149  |  |  |  | 4,188  | (3) |  |  | 1983         | 
|California Federal Building  |  |             | 1,500  |              |  |       | (4     | )               |  |              | 1,496  |             |  |  |       |  |  |  | 4,188  | (3) |  |  | 1978         | 
|Center Promenade             |  |             | 2,310  |              |  |       | 13,031 |                 |  |              | 15,341 |             |  |  | 2,517  |  |  |  |       |     |  |  | 1982         | 
|Los Angeles Corporate Center |  |             | 26,781 |              |  |       | 27,495 |                 |  |              | 54,276 |             |  |  | 6,595  |  |  |  | 21,043 | (3) |  |  | 1984/86      | 
|5200 West Century            |  |             | 2,080  |              |  |       | 30,563 |                 |  |              | 32,643 |             |  |  | 6,487  |  |  |  |       |     |  |  | 1982/98/99   | 
|15250 Ventura                |  |             | 2,560  |              |  |       | 14,234 |                 |  |              | 16,794 |             |  |  | 2,663  |  |  |  |       |     |  |  | 1970/90-91   | 
|10350 Santa Monica           |  |             | 861    |              |  |       | 4,422  |                 |  |              | 5,283  |             |  |  | 779    |  |  |  | 2,280  | (3) |  |  | 1979         | 
|535 N. Brand Blvd            |  |             | 1,600  |              |  |       | 21,418 |                 |  |              | 23,018 |             |  |  | 3,356  |  |  |  |       |     |  |  | 1973/92/1999 | 
|10780 Santa Monica           |  |             | 2,625  |              |  |       | 10,271 |                 |  |              | 12,896 |             |  |  | 1,932  |  |  |  |       |     |  |  | 1984         | 
|4900 California              |  |             | 4,680  |              |  |       | 18,109 |                 |  |              | 22,789 |             |  |  | 3,510  |  |  |  |       |     |  |  | 1983         | 
|Whittier                     |  |             | 3,575  |              |  |       | 12,994 |                 |  |              | 16,569 |             |  |  | 2,286  |  |  |  |       |     |  |  | 1982         | 
|Clarendon Crest              |  |             | 1,300  |              |  |       | 5,078  |                 |  |              | 6,378  |             |  |  | 731    |  |  |  | 3,178  | (3) |  |  | 1990         | 
|Noble Professional Center    |  |             | 1,657  |              |  |       | 6,182  |                 |  |              | 7,839  |             |  |  | 1,120  |  |  |  | 3,580  | (3) |  |  | 1985/93      | 
|South Bay Centre             |  |             | 4,775  |              |  |       | 18,484 |                 |  |              | 23,259 |             |  |  | 3,354  |  |  |  | 12,978 | (3) |  |  | 1984         | 
|8383 Wilshire                |  |             | 13,570 |              |  |       | 57,820 |                 |  |              | 71,390 |             |  |  | 10,638 |  |  |  |       |     |  |  | 1971/93      | 
|Parkway Center I             |  |             | 1,480  |              |  |       | 7,035  |                 |  |              | 8,515  |             |  |  | 1,328  |  |  |  | 5,029  | (3) |  |  | 1992/95      | 
|Centerpointe La Palma        |  |             | 16,011 |              |  |       | 71,857 |                 |  |              | 87,868 |             |  |  | 12,328 |  |  |  | 33,832 | (3) |  |  | 1986/88/90   | 
|299 N. Euclid                |  |             | 1,050  |              |  |       | 11,686 |                 |  |              | 12,736 |             |  |  | 2,418  |  |  |  |       |     |  |  | 1983         | 
|2800 28th Street             |  |             | 2,937  |              |  |       | 12,358 |                 |  |              | 15,295 |             |  |  | 2,263  |  |  |  |       |     |  |  | 1979         | 
|1000 Town Center             |  |             | 2,800  |              |  |       | 12,555 |                 |  |              | 15,355 |             |  |  | 1,977  |  |  |  |       |     |  |  | 1989         | 
|Mariner Court                |  |             | 2,350  |              |  |       | 11,328 |                 |  |              | 13,678 |             |  |  | 2,162  |  |  |  | 6,959  | (3) |  |  | 1989         | 
|Pacific Gateway II           |  |             | 6,287  |              |  |       | 25,330 |                 |  |              | 31,617 |             |  |  | 5,047  |  |  |  |       |     |  |  | 1982/90      | 
|1821 Dyer                    |  |             | 1,808  |              |  |       | 9,973  |                 |  |              | 11,781 |             |  |  | 1,701  |  |  |  |       |     |  |  | 1980/88      | 
|Crown Cabot Financial        |  |             | 7,056  |              |  |       | 29,818 |                 |  |              | 36,874 |             |  |  | 5,169  |  |  |  |       |     |  |  | 1989         | 
|120 S. Spalding              |  |             | 2,775  |              |  |       | 14,655 |                 |  |              | 17,430 |             |  |  | 3,306  |  |  |  | 8,299  | (3) |  |  | 1984         | 
|South Bay Tech               |  |             | 1,600  |              |  |       | 5,982  |                 |  |              | 7,582  |             |  |  | 912    |  |  |  |       |     |  |  | 1984         | 
|1370 Valley Vista            |  |             | 2,698  |              |  |       | 9,742  |                 |  |              | 12,440 |             |  |  | 1,678  |  |  |  | 5,532  | (3) |  |  | 1988         | 

F-23



---



##### Table of Contents



|                             |  |         |         |               |  |               |        |      |  |              |         |                   |  |  |   |  |  |  |   |  |  |  |        | 
|---------------------------- |  | ------- | ------- | ------------- |  | ------------- | ------ | ---- |  | ------------ | ------- | ----------------- |  |  | - |  |  |  | - |  |  |  | ------ | 
|                             |  |         |         |               |  |               |        |     
|                             |  |         |         | Initial Costs |  | Basis Step Up |        |     
|                             |  |         |         |               |  |               |        |     
|                             |  |         |         |               |  | Buildings     |        |      |  | Buildings    |         | Costs Capitalized
|                             |  | Square  |         |               |  | and           |        |      |  | and          |         | Subsequent to    
|                             |  | Footage |         | Land          |  | Improvements  |        | Land |  | Improvements |         | Acquisition(2)   
|                             |  |         |         |               |  |               |        |      |  |              |         |                  
|Foremost Professional Plaza  |  |         | 60,534  |               |  |               | 2,049  |      |  |              | 6,196   |                   |  |  |  |  |  |  |  |  |  |  | 1,035  | 
|Northpoint                   |  |         | 104,235 |               |  |               | 1,800  |      |  |              | 20,272  |                   |  |  |  |  |  |  |  |  |  |  | 1,794  | 
|Pennsfield Plaza             |  |         | 21,202  |               |  |               | 800    |      |  |              | 2,383   |                   |  |  |  |  |  |  |  |  |  |  | 341    | 
|Conejo Business Center       |  |         | 69,017  |               |  |               | 2,489  |      |  |              | 7,359   |                   |  |  |  |  |  |  |  |  |  |  | 1,164  | 
|Marin Corporate Center       |  |         | 51,360  |               |  |               | 1,956  |      |  |              | 5,915   |                   |  |  |  |  |  |  |  |  |  |  | 885    | 
|145 South Fairfax            |  |         | 53,994  |               |  |               | 1,825  |      |  |              | 5,551   |                   |  |  |  |  |  |  |  |  |  |  | 1,486  | 
|Bernardo Regency             |  |         | 47,916  |               |  |               | 1,625  |      |  |              | 4,937   |                   |  |  |  |  |  |  |  |  |  |  | 1,239  | 
|City Centre                  |  |         | 302,519 |               |  |               | 8,250  |      |  |              | 24,951  |                   |  |  |  |  |  |  |  |  |  |  | 4,446  | 
|Wilshire Pacific Plaza       |  |         | 100,122 |               |  |               | 3,750  |      |  |              | 11,317  |                   |  |  |  |  |  |  |  |  |  |  | 3,492  | 
|Glendale Corporate Center    |  |         | 108,209 |               |  |               | 2,750  |      |  |              | 12,734  |                   |  |  |  |  |  |  |  |  |  |  | 2,078  | 
|World Savings Center         |  |         | 469,115 |               |  |               |       |      |  |              | 110,382 |                   |  |  |  |  |  |  |  |  |  |  | 15,680 | 
|Beverly Sunset Medical Plaza |  |         | 139,711 |               |  |               | 7,180  |      |  |              | 21,666  |                   |  |  |  |  |  |  |  |  |  |  | 8,248  | 
|Sunset Point Plaza           |  |         | 58,105  |               |  |               | 2,075  |      |  |              | 6,362   |                   |  |  |  |  |  |  |  |  |  |  | 1,136  | 
|Activity Business Center     |  |         | 167,045 |               |  |               | 3,650  |      |  |              | 11,303  |                   |  |  |  |  |  |  |  |  |  |  | 1,727  | 
|Westlake Gardens             |  |         | 49,639  |               |  |               | 1,831  |      |  |              | 5,550   |                   |  |  |  |  |  |  |  |  |  |  | 2,597  | 
|9100 Wilshire Boulevard      |  |         | 326,227 |               |  |               | 16,250 |      |  |              | 48,950  |                   |  |  |  |  |  |  |  |  |  |  | 9,641  | 
|Westwood Center              |  |         | 313,000 |               |  |               | 3,159  |      |  |              | 24,920  |                   |  |  |  |  |  |  |  |  |  |  | 83,251 | 
|1919 Santa Monica            |  |         | 43,796  |               |  |               | 2,580  |      |  |              | 7,772   |                   |  |  |  |  |  |  |  |  |  |  | 809    | 
|600 Corporate Pointe         |  |         | 273,339 |               |  |               | 8,575  |      |  |              | 35,325  |                   |  |  |  |  |  |  |  |  |  |  | 6,172  | 
|150 East Colorado Boulevard  |  |         | 61,168  |               |  |               | 1,988  |      |  |              | 5,841   |                   |  |  |  |  |  |  |  |  |  |  | 2,046  | 
|5161 Lankershim              |  |         | 178,317 |               |  |               | 5,016  |      |  |              | 25,568  |                   |  |  |  |  |  |  |  |  |  |  | 4,572  | 
|1501 Hughes Way              |  |         | 77,060  |               |  |               | 1,348  |      |  |              | 4,058   |                   |  |  |  |  |  |  |  |  |  |  | 3,279  | 
|3901 Via Oro                 |  |         | 53,195  |               |  |               | 692    |      |  |              | 2,081   |                   |  |  |  |  |  |  |  |  |  |  | 1,765  | 
|Huntington Beach Plaza       |  |         | 52,186  |               |  |               | 1,109  |      |  |              | 3,317   |                   |  |  |  |  |  |  |  |  |  |  | 968    | 

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                             |  |             |        |              |  |       |         |                 |  |              |         |             |  |  |        |  |  |  |        |     |  |  |            | 
|---------------------------- |  | ----------- | ------ | ------------ |  | ----- | ------- | --------------- |  | ------------ | ------- | ----------- |  |  | ------ |  |  |  | ------ | --- |  |  | ---------- | 
|                             |  |             |        |              |  |       |         |                 |  |             
|                             |  | Total Costs |        |              |  |       |         |                 |  |             
|                             |  |             |        |              |  |       |         |                 |  |             
|                             |  |             |        | Buildings    |  |       |         |                 |  |              |         |            
|                             |  |             |        | and          |  |       |         | Accumulated     |  |              |         | Year Built/
|                             |  | Land        |        | Improvements |  | Total |         | Depreciation(1) |  | Encumbrances |         | Renovated  
|                             |  |             |        |              |  |       |         |                 |  |              |         |            
|Foremost Professional Plaza  |  |             | 2,049  |              |  |       | 7,231   |                 |  |              | 9,280   |             |  |  | 1,210  |  |  |  |       |     |  |  | 1992       | 
|Northpoint                   |  |             | 1,800  |              |  |       | 22,066  |                 |  |              | 23,866  |             |  |  | 3,456  |  |  |  |       |     |  |  | 1991       | 
|Pennsfield Plaza             |  |             | 800    |              |  |       | 2,724   |                 |  |              | 3,524   |             |  |  | 251    |  |  |  |       |     |  |  | 1989       | 
|Conejo Business Center       |  |             | 2,489  |              |  |       | 8,523   |                 |  |              | 11,012  |             |  |  | 811    |  |  |  | 4,003  |     |  |  | 1991       | 
|Marin Corporate Center       |  |             | 1,956  |              |  |       | 6,800   |                 |  |              | 8,756   |             |  |  | 623    |  |  |  | 2,850  |     |  |  | 1986       | 
|145 South Fairfax            |  |             | 1,825  |              |  |       | 7,037   |                 |  |              | 8,862   |             |  |  | 1,019  |  |  |  | 3,952  |     |  |  | 1984       | 
|Bernardo Regency             |  |             | 1,625  |              |  |       | 6,176   |                 |  |              | 7,801   |             |  |  | 967    |  |  |  |       |     |  |  | 1986       | 
|City Centre                  |  |             | 8,250  |              |  |       | 29,397  |                 |  |              | 37,647  |             |  |  | 4,297  |  |  |  |       |     |  |  | 1982       | 
|Wilshire Pacific Plaza       |  |             | 3,750  |              |  |       | 14,809  |                 |  |              | 18,559  |             |  |  | 2,793  |  |  |  |       |     |  |  | 1976/87    | 
|Glendale Corporate Center    |  |             | 2,750  |              |  |       | 14,812  |                 |  |              | 17,562  |             |  |  | 2,391  |  |  |  |       |     |  |  | 1985       | 
|World Savings Center         |  |             |       |              |  |       | 126,062 |                 |  |              | 126,062 |             |  |  | 19,417 |  |  |  |       |     |  |  | 1983       | 
|Beverly Sunset Medical Plaza |  |             | 7,180  |              |  |       | 29,914  |                 |  |              | 37,094  |             |  |  | 4,554  |  |  |  |       |     |  |  | 1963/92-95 | 
|Sunset Point Plaza           |  |             | 2,075  |              |  |       | 7,498   |                 |  |              | 9,573   |             |  |  | 1,170  |  |  |  | 3,452  | (3) |  |  | 1988       | 
|Activity Business Center     |  |             | 3,650  |              |  |       | 13,030  |                 |  |              | 16,680  |             |  |  | 2,002  |  |  |  | 7,580  |     |  |  | 1987       | 
|Westlake Gardens             |  |             | 1,831  |              |  |       | 8,147   |                 |  |              | 9,978   |             |  |  | 2,140  |  |  |  |       |     |  |  | 1998       | 
|9100 Wilshire Boulevard      |  |             | 16,250 |              |  |       | 58,591  |                 |  |              | 74,841  |             |  |  | 10,182 |  |  |  |       |     |  |  | 1971/90    | 
|Westwood Center              |  |             | 3,159  |              |  |       | 108,171 |                 |  |              | 111,330 |             |  |  | 6,146  |  |  |  |       |     |  |  | 1965/2000  | 
|1919 Santa Monica            |  |             | 2,580  |              |  |       | 8,581   |                 |  |              | 11,161  |             |  |  | 1,227  |  |  |  | 3,724  | (3) |  |  | 1991       | 
|600 Corporate Pointe         |  |             | 8,575  |              |  |       | 41,497  |                 |  |              | 50,072  |             |  |  | 6,527  |  |  |  | 17,692 | (3) |  |  | 1989       | 
|150 East Colorado Boulevard  |  |             | 1,988  |              |  |       | 7,887   |                 |  |              | 9,875   |             |  |  | 1,232  |  |  |  | 4,843  | (3) |  |  | 1979/97    | 
|5161 Lankershim              |  |             | 5,016  |              |  |       | 30,140  |                 |  |              | 35,156  |             |  |  | 4,817  |  |  |  | 13,573 | (3) |  |  | 1985/97    | 
|1501 Hughes Way              |  |             | 1,348  |              |  |       | 7,337   |                 |  |              | 8,685   |             |  |  | 1,431  |  |  |  |       |     |  |  | 1983/97    | 
|3901 Via Oro                 |  |             | 692    |              |  |       | 3,846   |                 |  |              | 4,538   |             |  |  | 1,431  |  |  |  |       |     |  |  | 1986/97    | 
|Huntington Beach Plaza       |  |             | 1,109  |              |  |       | 4,285   |                 |  |              | 5,394   |             |  |  | 635    |  |  |  | 1,509  | (3) |  |  | 1984/96    | 

F-24



---



##### Table of Contents



|                             |  |         |         |               |  |               |        |      |  |              |        |                   |  |  |   |  |  |  |   |  |  |  |        |  
|---------------------------- |  | ------- | ------- | ------------- |  | ------------- | ------ | ---- |  | ------------ | ------ | ----------------- |  |  | - |  |  |  | - |  |  |  | ------ | -
|                             |  |         |         |               |  |               |        |     
|                             |  |         |         | Initial Costs |  | Basis Step Up |        |     
|                             |  |         |         |               |  |               |        |     
|                             |  |         |         |               |  | Buildings     |        |      |  | Buildings    |        | Costs Capitalized
|                             |  | Square  |         |               |  | and           |        |      |  | and          |        | Subsequent to    
|                             |  | Footage |         | Land          |  | Improvements  |        | Land |  | Improvements |        | Acquisition(2)   
|                             |  |         |         |               |  |               |        |      |  |              |        |                  
|Fountain Valley Plaza        |  |         | 107,252 |               |  |               | 2,949  |      |  |              | 9,377  |                   |  |  |  |  |  |  |  |  |  |  | 2,033  |  
|3300 Irvine Avenue           |  |         | 74,224  |               |  |               | 2,215  |      |  |              | 6,697  |                   |  |  |  |  |  |  |  |  |  |  | 1,570  |  
|Von Karman Corporate Center  |  |         | 451,477 |               |  |               | 11,513 |      |  |              | 34,783 |                   |  |  |  |  |  |  |  |  |  |  | 10,553 |  
|1503 South Coast             |  |         | 60,605  |               |  |               | 1,570  |      |  |              | 4,731  |                   |  |  |  |  |  |  |  |  |  |  | 1,171  |  
|625 The City                 |  |         | 139,806 |               |  |               | 4,792  |      |  |              | 14,470 |                   |  |  |  |  |  |  |  |  |  |  | 2,390  |  
|Orange Financial Center      |  |         | 305,439 |               |  |               | 10,379 |      |  |              | 34,415 |                   |  |  |  |  |  |  |  |  |  |  | 8,192  |  
|Lambert Office Plaza         |  |         | 32,807  |               |  |               | 1,095  |      |  |              | 3,296  |                   |  |  |  |  |  |  |  |  |  |  | 810    |  
|Carlsbad Corporate Center    |  |         | 125,000 |               |  |               | 3,722  |      |  |              | 15,061 |                   |  |  |  |  |  |  |  |  |  |  | 4,937  |  
|Balboa Corporate Center      |  |         | 69,890  |               |  |               | 2,759  |      |  |              | 8,303  |                   |  |  |  |  |  |  |  |  |  |  | (117   | )
|Panorama Corporate Center    |  |         | 133,149 |               |  |               | 6,512  |      |  |              | 19,593 |                   |  |  |  |  |  |  |  |  |  |  | 463    |  
|Ruffin Corporate Center      |  |         | 45,059  |               |  |               | 1,766  |      |  |              | 5,315  |                   |  |  |  |  |  |  |  |  |  |  | (29    | )
|Skypark Office Plaza         |  |         | 202,164 |               |  |               | 5,733  |      |  |              | 21,608 |                   |  |  |  |  |  |  |  |  |  |  | 2,807  |  
|Governor Park Plaza          |  |         | 104,065 |               |  |               | 3,382  |      |  |              | 10,177 |                   |  |  |  |  |  |  |  |  |  |  | 3,292  |  
|5120 Shoreham                |  |         | 37,759  |               |  |               | 1,224  |      |  |              | 4,073  |                   |  |  |  |  |  |  |  |  |  |  | 1,120  |  
|Morehouse Tech Center        |  |         | 181,207 |               |  |               | 6,841  |      |  |              | 21,067 |                   |  |  |  |  |  |  |  |  |  |  | 3,475  |  
|Torreyana Science Park       |  |         | 81,204  |               |  |               | 5,035  |      |  |              | 15,148 |                   |  |  |  |  |  |  |  |  |  |  | 363    |  
|Waples Tech Center           |  |         | 28,119  |               |  |               | 1,010  |      |  |              | 3,027  |                   |  |  |  |  |  |  |  |  |  |  | 703    |  
|10251 Vista Sorrento         |  |         | 69,386  |               |  |               | 1,839  |      |  |              | 7,202  |                   |  |  |  |  |  |  |  |  |  |  | 225    |  
|Camarillo Business Park      |  |         | 154,216 |               |  |               | 3,522  |      |  |              | 10,602 |                   |  |  |  |  |  |  |  |  |  |  | 4,273  |  
|Centrelake Plaza             |  |         | 110,763 |               |  |               | 1,570  |      |  |              | 9,473  |                   |  |  |  |  |  |  |  |  |  |  | 3,291  |  
|Chicago Avenue Business Park |  |         | 47,482  |               |  |               | 1,223  |      |  |              | 3,687  |                   |  |  |  |  |  |  |  |  |  |  | 931    |  
|Havengate Center             |  |         | 80,557  |               |  |               | 1,913  |      |  |              | 5,759  |                   |  |  |  |  |  |  |  |  |  |  | 2,646  |  

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                             |  |             |        |              |  |       |        |                 |  |              |        |             |  |  |       |  |  |  |        |     |  |  |         | 
|---------------------------- |  | ----------- | ------ | ------------ |  | ----- | ------ | --------------- |  | ------------ | ------ | ----------- |  |  | ----- |  |  |  | ------ | --- |  |  | ------- | 
|                             |  |             |        |              |  |       |        |                 |  |             
|                             |  | Total Costs |        |              |  |       |        |                 |  |             
|                             |  |             |        |              |  |       |        |                 |  |             
|                             |  |             |        | Buildings    |  |       |        |                 |  |              |        |            
|                             |  |             |        | and          |  |       |        | Accumulated     |  |              |        | Year Built/
|                             |  | Land        |        | Improvements |  | Total |        | Depreciation(1) |  | Encumbrances |        | Renovated  
|                             |  |             |        |              |  |       |        |                 |  |              |        |            
|Fountain Valley Plaza        |  |             | 2,949  |              |  |       | 11,410 |                 |  |              | 14,359 |             |  |  | 2,065 |  |  |  | 4,833  | (3) |  |  | 1982    | 
|3300 Irvine Avenue           |  |             | 2,215  |              |  |       | 8,267  |                 |  |              | 10,482 |             |  |  | 1,452 |  |  |  | 3,244  | (3) |  |  | 1981/97 | 
|Von Karman Corporate Center  |  |             | 11,513 |              |  |       | 45,336 |                 |  |              | 56,849 |             |  |  | 8,226 |  |  |  | 19,108 | (3) |  |  | 1981/84 | 
|1503 South Coast             |  |             | 1,570  |              |  |       | 5,902  |                 |  |              | 7,472  |             |  |  | 781   |  |  |  | 2,262  | (3) |  |  | 1979/97 | 
|625 The City                 |  |             | 4,792  |              |  |       | 16,860 |                 |  |              | 21,652 |             |  |  | 2,865 |  |  |  | 7,055  | (3) |  |  | 1985/97 | 
|Orange Financial Center      |  |             | 10,379 |              |  |       | 42,607 |                 |  |              | 52,986 |             |  |  | 7,058 |  |  |  | 18,184 | (3) |  |  | 1985/95 | 
|Lambert Office Plaza         |  |             | 1,095  |              |  |       | 4,106  |                 |  |              | 5,201  |             |  |  | 701   |  |  |  |       |     |  |  | 1986/97 | 
|Carlsbad Corporate Center    |  |             | 3,722  |              |  |       | 19,998 |                 |  |              | 23,720 |             |  |  | 2,323 |  |  |  | 9,327  | (3) |  |  | 1996    | 
|Balboa Corporate Center      |  |             | 2,759  |              |  |       | 8,186  |                 |  |              | 10,945 |             |  |  | 1,034 |  |  |  | 5,831  | (3) |  |  | 1990    | 
|Panorama Corporate Center    |  |             | 6,512  |              |  |       | 20,056 |                 |  |              | 26,568 |             |  |  | 2,596 |  |  |  | 12,833 | (3) |  |  | 1991    | 
|Ruffin Corporate Center      |  |             | 1,766  |              |  |       | 5,286  |                 |  |              | 7,052  |             |  |  | 675   |  |  |  | 3,480  | (3) |  |  | 1990    | 
|Skypark Office Plaza         |  |             | 5,733  |              |  |       | 24,415 |                 |  |              | 30,148 |             |  |  | 3,621 |  |  |  |       |     |  |  | 1986    | 
|Governor Park Plaza          |  |             | 3,382  |              |  |       | 13,469 |                 |  |              | 16,851 |             |  |  | 2,173 |  |  |  | 5,026  | (3) |  |  | 1986    | 
|5120 Shoreham                |  |             | 1,224  |              |  |       | 5,193  |                 |  |              | 6,417  |             |  |  | 889   |  |  |  | 3,033  | (3) |  |  | 1984    | 
|Morehouse Tech Center        |  |             | 6,841  |              |  |       | 24,542 |                 |  |              | 31,383 |             |  |  | 3,720 |  |  |  |       |     |  |  | 1984    | 
|Torreyana Science Park       |  |             | 5,035  |              |  |       | 15,511 |                 |  |              | 20,546 |             |  |  | 2,022 |  |  |  | 9,500  | (3) |  |  | 1980/97 | 
|Waples Tech Center           |  |             | 1,010  |              |  |       | 3,730  |                 |  |              | 4,740  |             |  |  | 664   |  |  |  |       |     |  |  | 1990    | 
|10251 Vista Sorrento         |  |             | 1,839  |              |  |       | 7,427  |                 |  |              | 9,266  |             |  |  | 971   |  |  |  | 3,882  | (3) |  |  | 1981/95 | 
|Camarillo Business Park      |  |             | 3,522  |              |  |       | 14,875 |                 |  |              | 18,397 |             |  |  | 3,026 |  |  |  | 8,464  | (3) |  |  | 1984/97 | 
|Centrelake Plaza             |  |             | 1,570  |              |  |       | 12,764 |                 |  |              | 14,334 |             |  |  | 2,225 |  |  |  |       |     |  |  | 1989    | 
|Chicago Avenue Business Park |  |             | 1,223  |              |  |       | 4,618  |                 |  |              | 5,841  |             |  |  | 647   |  |  |  |       |     |  |  | 1986    | 
|Havengate Center             |  |             | 1,913  |              |  |       | 8,405  |                 |  |              | 10,318 |             |  |  | 1,440 |  |  |  |       |     |  |  | 1985    | 

F-25



---



##### Table of Contents



|                              |  |         |         |               |  |               |        |      |  |              |        |                   |  |  |       |  |  |  |   |  |  |  |        | 
|----------------------------- |  | ------- | ------- | ------------- |  | ------------- | ------ | ---- |  | ------------ | ------ | ----------------- |  |  | ----- |  |  |  | - |  |  |  | ------ | 
|                              |  |         |         |               |  |               |        |     
|                              |  |         |         | Initial Costs |  | Basis Step Up |        |     
|                              |  |         |         |               |  |               |        |     
|                              |  |         |         |               |  | Buildings     |        |      |  | Buildings    |        | Costs Capitalized
|                              |  | Square  |         |               |  | and           |        |      |  | and          |        | Subsequent to    
|                              |  | Footage |         | Land          |  | Improvements  |        | Land |  | Improvements |        | Acquisition(2)   
|                              |  |         |         |               |  |               |        |      |  |              |        |                  
|HDS Plaza                     |  |         | 104,178 |               |  |               | 2,604  |      |  |              | 7,838  |                   |  |  |      |  |  |  |  |  |  |  | 1,394  | 
|5702 Bolsa                    |  |         | 27,731  |               |  |               | 589    |      |  |              | 1,775  |                   |  |  |      |  |  |  |  |  |  |  | 99     | 
|5672 Bolsa                    |  |         | 11,968  |               |  |               | 254    |      |  |              | 767    |                   |  |  |      |  |  |  |  |  |  |  | 188    | 
|5632 Bolsa                    |  |         | 21,568  |               |  |               | 458    |      |  |              | 1,381  |                   |  |  |      |  |  |  |  |  |  |  | 55     | 
|Huntington Commerce Center    |  |         | 67,551  |               |  |               | 992    |      |  |              | 2,997  |                   |  |  |      |  |  |  |  |  |  |  | 575    | 
|Savi Tech Center              |  |         | 341,446 |               |  |               | 8,280  |      |  |              | 24,911 |                   |  |  |      |  |  |  |  |  |  |  | 3,210  | 
|Yorba Linda Business Park     |  |         | 167,142 |               |  |               | 2,629  |      |  |              | 7,913  |                   |  |  |      |  |  |  |  |  |  |  | 999    | 
|Cymer Technology Center       |  |         | 155,612 |               |  |               | 5,446  |      |  |              | 16,387 |                   |  |  |      |  |  |  |  |  |  |  | 2,519  | 
|Poway Industrial              |  |         | 112,000 |               |  |               | 1,876  |      |  |              | 5,646  |                   |  |  |      |  |  |  |  |  |  |  | 194    | 
|10180 Scripps Ranch           |  |         | 43,560  |               |  |               | 1,165  |      |  |              | 3,507  |                   |  |  |      |  |  |  |  |  |  |  | 216    | 
|Via Frontera                  |  |         | 77,920  |               |  |               | 1,792  |      |  |              | 5,391  |                   |  |  |      |  |  |  |  |  |  |  | 1,086  | 
|Westridge                     |  |         | 48,955  |               |  |               | 1,807  |      |  |              | 5,591  |                   |  |  |      |  |  |  |  |  |  |  | 728    | 
|Tower Plaza Retail            |  |         | 133,481 |               |  |               | 4,531  |      |  |              | 13,660 |                   |  |  |      |  |  |  |  |  |  |  | 1,438  | 
|6060 Center Drive             |  |         | 241,928 |               |  |               | 1,990  |      |  |              |       |                   |  |  | 2,310 |  |  |  |  |  |  |  | 60,250 | 
|Howard Hughes  Spectrum Club |  |         | 36,959  |               |  |               | 2,500  |      |  |              | 7,500  |                   |  |  |      |  |  |  |  |  |  |  | 36     | 
|6080 Center Drive             |  |         | 287,148 |               |  |               | 1,990  |      |  |              |       |                   |  |  | 3,092 |  |  |  |  |  |  |  | 72,300 | 
|Univision  5999 Center Drive |  |         | 161,650 |               |  |               |       |      |  |              |       |                   |  |  | 1,529 |  |  |  |  |  |  |  | 42,266 | 
|11075 Santa Monica            |  |         | 35,696  |               |  |               | 1,225  |      |  |              | 3,746  |                   |  |  |      |  |  |  |  |  |  |  | 1,470  | 
|Continental Grand Plaza       |  |         | 235,926 |               |  |               | 7,125  |      |  |              | 40,451 |                   |  |  |      |  |  |  |  |  |  |  | 6,445  | 
|Calabasas Tech                |  |         | 273,526 |               |  |               | 11,513 |      |  |              | 34,591 |                   |  |  |      |  |  |  |  |  |  |  | 6,460  | 
|Oceangate Tower               |  |         | 210,907 |               |  |               | 3,080  |      |  |              | 20,386 |                   |  |  |      |  |  |  |  |  |  |  | 3,864  | 
|Lyons Plaza                   |  |         | 61,203  |               |  |               | 2,078  |      |  |              | 6,267  |                   |  |  |      |  |  |  |  |  |  |  | 1,138  | 
|Genesee Executive Plaza       |  |         | 155,820 |               |  |               | 6,750  |      |  |              | 20,178 |                   |  |  |      |  |  |  |  |  |  |  | 3,578  | 
|Solar Drive Business Center   |  |         | 125,132 |               |  |               | 4,250  |      |  |              | 12,770 |                   |  |  |      |  |  |  |  |  |  |  | 1,278  | 
|91 Freeway Center             |  |         | 93,277  |               |  |               | 2,900  |      |  |              | 9,179  |                   |  |  |      |  |  |  |  |  |  |  | 1,614  | 
|601 S. Glenoaks               |  |         | 72,524  |               |  |               | 2,450  |      |  |              | 7,519  |                   |  |  |      |  |  |  |  |  |  |  | 914    | 

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                              |  |             |        |              |  |       |        |                 |  |              |        |             |  |  |       |  |  |  |        |     |  |  |            | 
|----------------------------- |  | ----------- | ------ | ------------ |  | ----- | ------ | --------------- |  | ------------ | ------ | ----------- |  |  | ----- |  |  |  | ------ | --- |  |  | ---------- | 
|                              |  |             |        |              |  |       |        |                 |  |             
|                              |  | Total Costs |        |              |  |       |        |                 |  |             
|                              |  |             |        |              |  |       |        |                 |  |             
|                              |  |             |        | Buildings    |  |       |        |                 |  |              |        |            
|                              |  |             |        | and          |  |       |        | Accumulated     |  |              |        | Year Built/
|                              |  | Land        |        | Improvements |  | Total |        | Depreciation(1) |  | Encumbrances |        | Renovated  
|                              |  |             |        |              |  |       |        |                 |  |              |        |            
|HDS Plaza                     |  |             | 2,604  |              |  |       | 9,232  |                 |  |              | 11,836 |             |  |  | 1,486 |  |  |  |       |     |  |  | 1987       | 
|5702 Bolsa                    |  |             | 589    |              |  |       | 1,874  |                 |  |              | 2,463  |             |  |  | 256   |  |  |  | 941    | (3) |  |  | 1987/97    | 
|5672 Bolsa                    |  |             | 254    |              |  |       | 955    |                 |  |              | 1,209  |             |  |  | 223   |  |  |  | 330    | (3) |  |  | 1987       | 
|5632 Bolsa                    |  |             | 458    |              |  |       | 1,436  |                 |  |              | 1,894  |             |  |  | 188   |  |  |  | 845    | (3) |  |  | 1987       | 
|Huntington Commerce Center    |  |             | 992    |              |  |       | 3,572  |                 |  |              | 4,564  |             |  |  | 558   |  |  |  | 1,555  | (3) |  |  | 1987       | 
|Savi Tech Center              |  |             | 8,280  |              |  |       | 28,121 |                 |  |              | 36,401 |             |  |  | 4,001 |  |  |  | 14,728 | (3) |  |  | 1989       | 
|Yorba Linda Business Park     |  |             | 2,629  |              |  |       | 8,912  |                 |  |              | 11,541 |             |  |  | 1,337 |  |  |  | 4,170  | (3) |  |  | 1988       | 
|Cymer Technology Center       |  |             | 5,446  |              |  |       | 18,906 |                 |  |              | 24,352 |             |  |  | 2,319 |  |  |  | 10,918 | (3) |  |  | 1986       | 
|Poway Industrial              |  |             | 1,876  |              |  |       | 5,840  |                 |  |              | 7,716  |             |  |  | 773   |  |  |  | 3,492  | (3) |  |  | 1991/96    | 
|10180 Scripps Ranch           |  |             | 1,165  |              |  |       | 3,723  |                 |  |              | 4,888  |             |  |  | 485   |  |  |  | 1,997  | (3) |  |  | 1978/96    | 
|Via Frontera                  |  |             | 1,792  |              |  |       | 6,477  |                 |  |              | 8,269  |             |  |  | 1,010 |  |  |  | 2,875  | (3) |  |  | 1982/97    | 
|Westridge                     |  |             | 1,807  |              |  |       | 6,319  |                 |  |              | 8,126  |             |  |  | 1,028 |  |  |  | 2,972  | (3) |  |  | 1984/96    | 
|Tower Plaza Retail            |  |             | 4,531  |              |  |       | 15,098 |                 |  |              | 19,629 |             |  |  | 2,126 |  |  |  |       |     |  |  | 1970/97    | 
|6060 Center Drive             |  |             | 4,300  |              |  |       | 60,250 |                 |  |              | 64,550 |             |  |  | 3,669 |  |  |  |       |     |  |  | 2000       | 
|Howard Hughes  Spectrum Club |  |             | 2,500  |              |  |       | 7,536  |                 |  |              | 10,036 |             |  |  | 865   |  |  |  |       |     |  |  | 1993       | 
|6080 Center Drive             |  |             | 5,082  |              |  |       | 72,300 |                 |  |              | 77,382 |             |  |  | 2,217 |  |  |  |       |     |  |  | 2002       | 
|Univision  5999 Center Drive |  |             | 1,529  |              |  |       | 42,266 |                 |  |              | 43,795 |             |  |  | 1,156 |  |  |  |       |     |  |  | 2001       | 
|11075 Santa Monica            |  |             | 1,225  |              |  |       | 5,216  |                 |  |              | 6,441  |             |  |  | 1,021 |  |  |  |       |     |  |  | 1983       | 
|Continental Grand Plaza       |  |             | 7,125  |              |  |       | 46,896 |                 |  |              | 54,021 |             |  |  | 7,644 |  |  |  | 27,179 | (3) |  |  | 1986       | 
|Calabasas Tech                |  |             | 11,513 |              |  |       | 41,051 |                 |  |              | 52,564 |             |  |  | 6,256 |  |  |  |       |     |  |  | 1990/2001  | 
|Oceangate Tower               |  |             | 3,080  |              |  |       | 24,250 |                 |  |              | 27,330 |             |  |  | 3,721 |  |  |  |       |     |  |  | 1971/93/94 | 
|Lyons Plaza                   |  |             | 2,078  |              |  |       | 7,405  |                 |  |              | 9,483  |             |  |  | 1,020 |  |  |  |       |     |  |  | 1990       | 
|Genesee Executive Plaza       |  |             | 6,750  |              |  |       | 23,756 |                 |  |              | 30,506 |             |  |  | 3,413 |  |  |  | 16,623 | (3) |  |  | 1984       | 
|Solar Drive Business Center   |  |             | 4,250  |              |  |       | 14,048 |                 |  |              | 18,298 |             |  |  | 1,854 |  |  |  |       |     |  |  | 1982       | 
|91 Freeway Center             |  |             | 2,900  |              |  |       | 10,793 |                 |  |              | 13,693 |             |  |  | 1,747 |  |  |  |       |     |  |  | 1986/97    | 
|601 S. Glenoaks               |  |             | 2,450  |              |  |       | 8,433  |                 |  |              | 10,883 |             |  |  | 1,048 |  |  |  | 5,784  | (3) |  |  | 1990       | 

F-26



---



##### Table of Contents



|                          |  |         |            |               |  |               |         |      |  |              |           |                   |  |   |       |  |  |   |       |  |  |   |         | 
|------------------------- |  | ------- | ---------- | ------------- |  | ------------- | ------- | ---- |  | ------------ | --------- | ----------------- |  | - | ----- |  |  | - | ----- |  |  | - | ------- | 
|                          |  |         |            |               |  |               |         |     
|                          |  |         |            | Initial Costs |  | Basis Step Up |         |     
|                          |  |         |            |               |  |               |         |     
|                          |  |         |            |               |  | Buildings     |         |      |  | Buildings    |           | Costs Capitalized
|                          |  | Square  |            |               |  | and           |         |      |  | and          |           | Subsequent to    
|                          |  | Footage |            | Land          |  | Improvements  |         | Land |  | Improvements |           | Acquisition(2)   
|                          |  |         |            |               |  |               |         |      |  |              |           |                  
|Tourney Pointe            |  |         | 219,991    |               |  |               | 6,047   |      |  |              | 21,334    |                   |  |   |      |  |  |   |      |  |  |   | 11,650  | 
|Hillside Corporate Center |  |         | 59,876     |               |  |               | 2,213   |      |  |              | 7,336     |                   |  |   |      |  |  |   |      |  |  |   | 2,129   | 
|Westlake Gardens II       |  |         | 48,874     |               |  |               | 1,832   |      |  |              | 5,493     |                   |  |   |      |  |  |   |      |  |  |   | 1,904   | 
|Howard Hughes Tower       |  |         | 313,833    |               |  |               | 5,830   |      |  |              | 47,170    |                   |  |   |      |  |  |   |      |  |  |   | 10,083  | 
|2001 Wilshire Blvd        |  |         | 101,125    |               |  |               | 5,007   |      |  |              | 14,893    |                   |  |   |      |  |  |   |      |  |  |   | 815     | 
|Carmel Valley Centre      |  |         | 107,197    |               |  |               | 4,900   |      |  |              | 23,416    |                   |  |   |      |  |  |   |      |  |  |   | 29      | 
|Carmel View Office Plaza  |  |         | 77,460     |               |  |               | 3,100   |      |  |              | 9,377     |                   |  |   |      |  |  |   |      |  |  |   | 220     | 
|Crossroads                |  |         | 133,566    |               |  |               | 3,950   |      |  |              | 12,860    |                   |  |   |      |  |  |   |      |  |  |   | 37      | 
|Governor Executive Center |  |         | 52,195     |               |  |               | 1,500   |      |  |              | 9,707     |                   |  |   |      |  |  |   |      |  |  |   | 46      | 
|Gateway Towers            |  |         | 432,894    |               |  |               | 5,585   |      |  |              | 57,128    |                   |  |   |      |  |  |   |      |  |  |   | 1,244   | 
|                          |  |         |            |               |  |               |         |      |  |              |           |                   |  |   |       |  |  |   |       |  |  |   |         | 
|                          |  |         | 19,132,176 |               |  | $             | 483,079 |      |  | $            | 1,836,221 |                   |  | $ | 8,540 |  |  | $ | 8,607 |  |  | $ | 708,761 | 
|                          |  |         |            |               |  |               |         |      |  |              |           |                   |  |   |       |  |  |   |       |  |  |   |         | 

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                          |  |             |         |              |  |       |           |                 |  |              |           |             |  |   |         |  |  |   |         |  |  |  |              | 
|------------------------- |  | ----------- | ------- | ------------ |  | ----- | --------- | --------------- |  | ------------ | --------- | ----------- |  | - | ------- |  |  | - | ------- |  |  |  | ------------ | 
|                          |  |             |         |              |  |       |           |                 |  |             
|                          |  | Total Costs |         |              |  |       |           |                 |  |             
|                          |  |             |         |              |  |       |           |                 |  |             
|                          |  |             |         | Buildings    |  |       |           |                 |  |              |           |            
|                          |  |             |         | and          |  |       |           | Accumulated     |  |              |           | Year Built/
|                          |  | Land        |         | Improvements |  | Total |           | Depreciation(1) |  | Encumbrances |           | Renovated  
|                          |  |             |         |              |  |       |           |                 |  |              |           |            
|Tourney Pointe            |  |             | 6,047   |              |  |       | 32,984    |                 |  |              | 39,031    |             |  |   | 3,515   |  |  |   |        |  |  |  | 1985/98/2000 | 
|Hillside Corporate Center |  |             | 2,213   |              |  |       | 9,465     |                 |  |              | 11,678    |             |  |   | 1,225   |  |  |   |        |  |  |  | 1998         | 
|Westlake Gardens II       |  |             | 1,832   |              |  |       | 7,397     |                 |  |              | 9,229     |             |  |   | 1,119   |  |  |   |        |  |  |  | 1999         | 
|Howard Hughes Tower       |  |             | 5,830   |              |  |       | 57,253    |                 |  |              | 63,083    |             |  |   | 7,121   |  |  |   |        |  |  |  | 1987         | 
|2001 Wilshire Blvd        |  |             | 5,007   |              |  |       | 15,708    |                 |  |              | 20,715    |             |  |   | 1,511   |  |  |   |        |  |  |  | 1980         | 
|Carmel Valley Centre      |  |             | 4,900   |              |  |       | 23,445    |                 |  |              | 28,345    |             |  |   | 168     |  |  |   |        |  |  |  | 1987/89      | 
|Carmel View Office Plaza  |  |             | 3,100   |              |  |       | 9,597     |                 |  |              | 12,697    |             |  |   | 70      |  |  |   |        |  |  |  | 1985         | 
|Crossroads                |  |             | 3,950   |              |  |       | 12,897    |                 |  |              | 16,847    |             |  |   | 92      |  |  |   |        |  |  |  | 1979         | 
|Governor Executive Center |  |             | 1,500   |              |  |       | 9,753     |                 |  |              | 11,253    |             |  |   | 71      |  |  |   |        |  |  |  | 1988         | 
|Gateway Towers            |  |             | 5,585   |              |  |       | 58,372    |                 |  |              | 63,957    |             |  |   | 412     |  |  |   |        |  |  |  | 1984/86      | 
|                          |  |             |         |              |  |       |           |                 |  |              |           |             |  |   |         |  |  |   |         |  |  |  |              | 
|                          |  | $           | 491,619 |              |  | $     | 2,553,589 |                 |  | $            | 3,045,208 |             |  | $ | 392,611 |  |  | $ | 570,654 |  |  |  |              | 
|                          |  |             |         |              |  |       |           |                 |  |              |           |             |  |   |         |  |  |   |         |  |  |  |              | 



---



|    |                                                                                                                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The depreciable life for buildings and
    improvements ranges from ten to forty seven years. Tenant
    improvements and leasing costs are depreciated over the
    remaining term of the lease.   
|   
|(2) | Amounts shown net of write-offs of fully
    depreciated assets and include total capitalized interest of
    $51.2 million.                                                                        
|   
|(3) | All of these properties are collateral for our
    $552.3 million mortgage financings. The encumbrance
    allocated to an individual property is based on the related
    individual release price.

F-27



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##### Table of Contents






ARDEN REALTY, INC.

15. Schedule of Commercial Properties and
Accumulated Depreciation

The changes in our investment in commercial
properties and related accumulated depreciation for each of the
periods in the three years ended December 31, are as
follows ($000s):

|                          |                                                                                         |                                 |   |           |   |      |   |           |   |  |   |           |  
|------------------------- | --------------------------------------------------------------------------------------- | ------------------------------- | - | --------- | - | ---- | - | --------- | - |  | - | --------- | -
|                          |                                                                                         |                                
|                          |                                                                                         | Arden Realty, Inc.             
|                          |                                                                                         |                                
|                          |                                                                                         |                                
|                          |                                                                                         | For the Years Ended December 31
|                          |                                                                                         |                                
|                          |                                                                                         | 2002                            |   | 2001      |   | 2000
|                          |                                                                                         |                                 |   |           |   |     
|Commercial Properties:    |                                                                                         |                                 |   |           |   |      |   |           |   |  |   |          
|                          | Balance at beginning of period                                                          |                                 | $ | 2,797,052 |   |      | $ | 2,741,681 |   |  | $ | 2,453,370 |  
|                          | Improvements                                                                            |                                 |   | 95,073    |   |      |   | 78,580    |   |  |   | 159,163   |  
|                          | Disposition of property                                                                 |                                 |   | (24,094   | ) |      |   | (44,773   | ) |  |   | (10,078   | )
|                          | Write offs of fully depreciated assets                                                  |                                 |   | (24,129   | ) |      |   | (21,412   | ) |  |   | (13,723   | )
|                          | Acquisition of properties                                                               |                                 |   | 134,938   |   |      |   |          |   |  |   |          |  
|                          | Transfers from (to) properties under
    development and land available for development |                                 |   | 66,368    |   |      |   | 42,976    |   |  |   | 152,949   |  
|                          |                                                                                         |                                 |   |           |   |      |   |           |   |  |   |          
|                          | Balance at end of period                                                                |                                 | $ | 3,045,208 |   |      | $ | 2,797,052 |   |  | $ | 2,741,681 |  
|                          |                                                                                         |                                 |   |           |   |      |   |           |   |  |   |          
|Accumulated Depreciation: |                                                                                         |                                 |   |           |   |      |   |           |   |  |   |          
|                          | Balance at beginning of period                                                          |                                 | $ | (307,082  | ) |      | $ | (231,499  | ) |  | $ | (157,608  | )
|                          | Depreciation for period                                                                 |                                 |   | (111,022  | ) |      |   | (100,789  | ) |  |   | (87,126   | )
|                          | Disposition of property                                                                 |                                 |   | 1,982     |   |      |   | 3,794     |   |  |   | 531       |  
|                          | Write offs of fully depreciated assets                                                  |                                 |   | 24,129    |   |      |   | 21,412    |   |  |   | 13,723    |  
|                          | Transfers to (from) properties under
    development and land available for development |                                 |   | (618      | ) |      |   |          |   |  |   | (1,019    | )
|                          |                                                                                         |                                 |   |           |   |      |   |           |   |  |   |          
|                          | Balance at end of period                                                                |                                 | $ | (392,611  | ) |      | $ | (307,082  | ) |  | $ | (231,499  | )
|                          |                                                                                         |                                 |   |           |   |      |   |           |   |  |   |          

F-28