##### Table of Contents








---




Securities and Exchange Commission

Washington, D.C. 20549




---

FORM 10-K



---

|                                                |  |                                                                                                     
|----------------------------------------------- |  | ----------------------------------------------------------------------------------------------------
|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,
    2004
|                                               
|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) |  | (I.R.S. Employer Identification No.)

11601 Wilshire Boulevard,
4th Floor

Los Angeles, California 90025-1740


(Address and zip code of principal executive
offices)


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 checkmark 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
$1.9 billion based on the closing price on the New York
Stock Exchange for such shares on June 30, 2004.

The number of the Registrants shares of
common stock outstanding was 66,364,703 as of March 10,
2005.

DOCUMENTS INCORPORATED BY REFERENCE

Part III of this report incorporates
information by reference from the definitive Proxy Statement for
the 2005 Annual Meeting of Stockholders.





---
















ARDEN REALTY, INC.

TABLE OF CONTENTS

|         |     |  |  |                                                                                                                      |  |  |    | 
|-------- | --- |  |  | -------------------------------------------------------------------------------------------------------------------- |  |  | -- | 
|Item     |     |  |  | Page                                                                                                                
|No.      |     |  |  | No.                                                                                                                 
|         |     |  |  |                                                                                                                     
|PART I  
|         | 1.  |  |  | Business                                                                                                             |  |  | 1  | 
|         | 2.  |  |  | Properties                                                                                                           |  |  | 7  | 
|         | 3.  |  |  | Legal Proceedings                                                                                                    |  |  | 18 | 
|         | 4.  |  |  | Submission of Matters to a
    Vote of Security Holders                                                              |  |  | 18 | 
|        
|PART II 
|         | 5.  |  |  | Market for Registrants
    Common Equity, Related Stockholder Matters and Issuer Purchases
    of Equity Securities |  |  | 19 | 
|         | 6.  |  |  | Selected Financial Data                                                                                              |  |  | 20 | 
|         | 7.  |  |  | Managements Discussion
    and Analysis of Financial Condition and Results of Operations                            |  |  | 22 | 
|         | 7A. |  |  | Quantitative and Qualitative
    Disclosure about Market Risk                                                        |  |  | 40 | 
|         | 8.  |  |  | Financial Statements and
    Supplementary Data                                                                      |  |  | 49 | 
|         | 9.  |  |  | Changes in and Disagreements
    with Accountants on Accounting and Financial Disclosure                             |  |  | 51 | 
|         | 9A. |  |  | Controls and Procedures                                                                                              |  |  | 51 | 
|         | 9B. |  |  | Other Information                                                                                                    |  |  | 51 | 
|        
|PART III
|         | 10. |  |  | Directors and Executive
    Officers of the Registrant                                                               |  |  | 52 | 
|         | 11. |  |  | Executive Compensation                                                                                               |  |  | 52 | 
|         | 12. |  |  | Security Ownership of
    Certain Beneficial Owners and Management and Related Stockholder
    Matters               |  |  | 52 | 
|         | 13. |  |  | Certain Relationships and
    Related Transactions                                                                   |  |  | 52 | 
|         | 14. |  |  | Principal Accountant Fees
    and Services                                                                           |  |  | 52 | 
|        
|PART IV 
|         | 15. |  |  | Exhibits, Financial
    Statement Schedules and Reports on Form 8-K                                                  |  |  | 53 | 
|         |     |  |  | Signatures                                                                                                           |  |  | 58 | 
|EX-10.49
|EX-12.1 
|EX-23.1 
|EX-31.1 
|EX-31.2 
|EX-32.1 
|EX-32.2 



i



---



##### Table of Contents






PART I

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 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, 2004, we
owned approximately 97.5% 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 primarily in one
industry segment, the operation of commercial real estate
located in Southern California. The financial information
contained in this report relates primarily to this industry
segment.



|    |                        
|--- | -----------------------
|(c) | DESCRIPTION OF BUSINESS

We are a full-service real estate organization
managed by 6 senior executive officers who have experience in
the real estate industry ranging from 14 to 35 years and
who collectively have an average of 20 years of experience.
We perform all property management, construction management,
accounting, finance and acquisition and disposition activities
and a majority of our leasing transactions for our portfolio
with our staff of approximately 300 employees.

As of December 31, 2004, we were Southern
Californias largest publicly traded office landlord as
measured by total net rentable square feet owned. As of
December 31, 2004, our portfolio of primarily suburban
office properties consisted of 120 properties and 197 buildings
containing approximately 18.2 million net rentable square
feet and our operating portfolio was 91.2% occupied.



| |                     
| | --------------------
| | Portfolio Management

We perform all portfolio management activities,
including on-site property management, management of all lease
negotiations, construction management of tenant improvements or
tenant build-outs, property renovations and capital expenditures
for our portfolio. We directly manage these activities from
approximately 40 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 consistent 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

1



---



##### Table of Contents



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, referred to as
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.

We currently lease approximately 59% 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 achieve gains in rental rates and
occupancy, control operating expenses and maximize income from
ancillary operations and services. When market conditions
permit, we may also selectively develop, renovate or acquire new
properties in submarkets that add value and fit strategically
into our portfolio. We may also sell existing properties and use
the net proceeds to repay outstanding indebtedness or place 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 tenants in the markets
    where we have extensive real estate expertise and relationships;                                                                               
|
| |  | 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 and our technical expertise in reducing energy
    consumption expenses.

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 tenants 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

2



---



##### Table of Contents



corporate office provides support to all regional
offices and provides immediate response for critical operational
issues. We believe providing quality service leads to enhanced
tenant retention.


Proactive Marketing and
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 marketing and leasing strategies, to
effectively monitor the demand for office space in our existing
submarkets, to efficiently identify 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
provides us with the opportunity to enhance portfolio value by
controlling operating costs. We seek to capitalize on the
economies of scale and concentration which result from the
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 67.3% ratio of
property operating results to total property revenues in 2004.

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 limited 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 office
    real estate sector downturn in 2001; 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 many key submarkets.                                                                                                                                          

Internal Operating Strategy

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



| |   |                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------
| |  | stabilizing occupancy throughout our portfolio
    and increasing rental rates, as market conditions permit;       
|
| |  | maintaining or increasing the retention rate of
    expiring leases;                                               
|
| |  | 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 techniques and systems; and              
|
| |  | sourcing new and innovative revenue streams while
    providing high quality services to our tenants.              

Stabilizing Occupancy and Increasing Rental
Rates

Various published reports noted that Southern
California achieved approximately 6.7 million square feet
of positive net absorption in 2004 with average rental rates
increasing approximately 3-4%. 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 management staff
and by providing alternatives within our portfolio to

3



---



##### Table of Contents



accommodate their changing space requirements. We
strive to achieve growth in rental revenues by negotiating
annual or mid-term increases in rental rates in a majority of
our leases.


Retaining Existing Tenants

We also seek to retain our existing tenants when
leases expire. Retention of existing tenants reduces the costs
of lease rollover by eliminating the down-time required to find
a replacement tenant and reducing build-out costs required for
new tenants. 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. During 2004, we retained approximately 64% of our
leases that were scheduled to expire.

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, construction materials, building services and
supplies on a portfolio-wide basis also reduces our overall
operating expenses.

Cost Control Management Techniques 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 purchasing 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 and roving security systems that allow
    us to provide security services to our tenants at a lower cost;           
|
| |  | online competitive bid purchasing of supplies,
    building materials and construction services;                               
|
| |  | enhancement of billing systems, which enables 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.

Sourcing Additional Revenue While Providing
High Quality Services to Tenants

We operate one of the most energy efficient
office portfolios in the country. We have invested in energy
enhancement programs within our portfolio with the aim of
reducing energy consumption, enhancing efficiency and lowering
operating costs. We also participate annually in the
Environmental Protection Agencys, or the EPA, Energy Star
Program. This program involves top commercial real estate
landlords throughout the United States and rigorous
bench-marking procedures that track individual building energy
efficiency. Currently, of the 906 total Energy Star designated
office buildings awarded nationally during 2004, 125 were
awarded in California; of those, we had 62 EPA Energy Star
Certified buildings in our portfolio.

We have formed a taxable REIT subsidiary,
Next>edge, to market our expertise in energy solutions and
facilities management. Next>edge has begun to assist
companies in increasing their energy efficiency and reducing
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.

4



---



##### Table of Contents





| |                            
| | ---------------------------
| | External Operating Strategy

We believe in the diversity and balance of the
Southern California economy and 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 which 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 of office properties
to attract tenants to our properties, to acquire new 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 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 over the past few seasons. 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 26% of our properties and 19% 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
photovoltaic panels, micro-turbine units, 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, 2004, we had
approximately 300 full-time employees that perform all of
our property and construction management, accounting, finance,
acquisition and disposition activities and a majority of our
leasing transactions.

Available
Information

We file with the Securities and Exchange
Commission, or SEC, our annual report on Form 10-K,
quarterly reports on Form 10-Q, current reports on
Form  8-K and all amendments to those reports, proxy

5



---



##### Table of Contents



statements and registration statements. The
public may read and copy any materials we file with the SEC at
the SECs Public Reference Room at 450 Fifth Street,
N.W., Washington, D.C. 20549. The public may also obtain
public information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. In addition, the SEC
maintains an internet site at www.sec.gov that contains
reports, proxy and information regarding registrants, including
us, that file electronically. This annual report on
Form 10-K and other periodic and current reports, and
amendments to those reports, filed or furnished with the SEC,
are also 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 or furnish them with the SEC.




|    |                   
|--- | ------------------
|(d) | FOREIGN OPERATIONS

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

6



---



##### Table of Contents








|        |           
|------- | ----------
|ITEM 2. | Properties



| |                   
| | ------------------
| | Existing Portfolio

Our portfolio consists of 120 primarily office
properties, containing approximately 18.2 million net
rentable square feet that individually range from approximately
12,000 to 600,000 net rentable square feet. Of the 120
properties currently in service in our portfolio, 119, 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, 2004:

|                       |         |               |       |              |     |                 |    |                    |     |       |    |       |     |                    |    |       |     |     |           |           |            |            |    |    |    |     |        |         |         |         |    |    |     |     |  
|---------------------- | ------- | ------------- | ----- | ------------ | --- | --------------- | -- | ------------------ | --- | ----- | -- | ----- | --- | ------------------ | -- | ----- | --- | --- | --------- | --------- | ---------- | ---------- | -- | -- | -- | --- | ------ | ------- | ------- | ------- | -- | -- | --- | --- | -
|                       |         |               |       |              |     |                 |    |                    |     |       |    |       |     |                   
|                       |         |               |       |              |     |                 |    |                    |     |       |    |       |     | 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, 2004 
|                       |         |               |       |              |     |                 |    |                   
|                       |         |               |       | % of         |     |                 |    | % of               |     |       |    | % of  |     |                    |    | % of 
|Location               |         | Total         |       | Total        |     | Total           |    | Total              |     | Total |    | Total |     | Total              |    | Total
|                       |         |               |       |              |     |                 |    |                    |     |       |    |       |     |                    |    |      
|                       |         |               |       |              |     |                 |    |                    |     |       |    |       |     |                   
|                       |         |               |       |              |     |                 |    |                    |     |       |    |       |     | ($000s and       
|                       |         |               |       |              |     |                 |    |                    |     |       |    |       |     | unaudited)        
|Los Angeles County     |         |               |       |              |     |                 |    |                    |     |       |    |       |     |                    |    |       |     |     |           |           |            |            |    |    |    |     |        |         |         |         |    |   
|                       | West(4) |               |       | 30           |     |                 |    | 25                 | %   |       |    | 32    |     |                    |    | 16    | %   |     |           | 5,044,621 |            |            |    | 28 | %  |     | $      | 107,688 |         |         |    | 39 | %  
|                       | North   |               |       | 28           |     |                 |    | 23                 | %   |       |    | 44    |     |                    |    | 22    | %   |     |           | 3,468,768 |            |            |    | 19 | %  |     |        | 44,962  |         |         |    | 16 | %  
|                       | South   |               |       | 13           |     |                 |    | 11                 | %   |       |    | 17    |     |                    |    | 9     | %   |     |           | 2,851,215 |            |            |    | 15 | %  |     |        | 37,052  |         |         |    | 14 | %  
|                       |         |               |       |              |     |                 |    |                    |     |       |    |       |     |                    |    |       |     |     |           |           |            |            |    |    |    |     |        |         |         |         |    |   
|                       |         | Subtotal      |       |              | 71  |                 |    |                    | 59  | %     |    |       | 93  |                    |    |       | 47  | %   |           |           | 11,364,604 |            |    |    | 62 | %   |        |         | 189,702 |         |    |    | 69  | %  
|Orange County          |         |               | 20    |              |     |                 | 17 | %                  |     |       | 51 |       |     |                    | 26 | %     |     |     | 3,255,079 |           |            |            | 18 | %  |    |     | 39,602 |         |         |         | 14 | % 
|San Diego County       |         |               | 23    |              |     |                 | 19 | %                  |     |       | 35 |       |     |                    | 18 | %     |     |     | 2,695,678 |           |            |            | 15 | %  |    |     | 36,418 |         |         |         | 13 | % 
|Ventura/ Kern Counties |         |               | 6     |              |     |                 | 5  | %                  |     |       | 17 |       |     |                    | 9  | %     |     |     | 795,299   |           |            |            | 4  | %  |    |     | 9,831  |         |         |         | 4  | % 
|                       |         |               |       |              |     |                 |    |                    |     |       |    |       |     |                    |    |       |     |     |           |           |            |            |    |    |    |     |        |         |         |         |    |   
|                       |         | Subtotal      |       |              | 120 |                 |    |                    | 100 | %     |    |       | 196 |                    |    |       | 100 | %   |           |           | 18,110,660 |            |    |    | 99 | %   |        | $       | 275,553 |         |    |    | 100 | %  
|Renovation Building(5) |         |               |      |              |     |                 |   |                    |     |       | 1  |       |     |                    |   |       |     |     | 99,119    |           |            |            | 1  | %  |    |     | 5      |         |         |         |   |   
|                       |         |               |       |              |     |                 |    |                    |     |       |    |       |     |                    |    |       |     |     |           |           |            |            |    |    |    |     |        |         |         |         |    |   
|                       |         |               | Total |              |     | 120             |    |                    |     | 100   | %  |       |     | 197                |    |       |     | 100 | %         |           |            | 18,209,779 |    |    |    | 100 | %      |         | $       | 275,558 |    |    |     | 100 | %
|                       |         |               |       |              |     |                 |    |                    |     |       |    |       |     |                    |    |       |     |     |           |           |            |            |    |    |    |     |        |         |         |         |    |   



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes one property with approximately
    167,000 net rentable square feet held for disposition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|(2) | Property Operating Results is a non-GAAP measure
    of performance. Property Operating Results is used by investors
    and our management to evaluate and compare the performance of
    our office properties and to determine trends in earnings and to
    compute the fair value of our properties as it is not affected
    by (1) the cost of funds of the property owner,
    (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 Generally Accepted Accounting Principles, or GAAP, or
    (3) general and administrative expenses and other specific
    costs such as permanent impairments to carrying costs. The cost
    of funds is eliminated from net income because it is specific to
    the particular financing capabilities and constraints of the
    owner. The cost of funds is also eliminated because it is
    dependent on historical interest rates and other costs of
    capital as well as past decisions made by us regarding the
    appropriate mix of capital which may have changed or may change
    in the future. Depreciation and amortization expenses as well as
    gains or losses from the sale of operating real estate assets
    are eliminated because they may not accurately represent the
    actual change in value in our office properties that result from
    use of the properties or changes in market conditions. While
    certain aspects of real property do decline in value over time
    in a manner that is reasonably captured by depreciation and
    amortization, the value of the properties as a whole have
    historically increased or decreased in value as a result of
    changes in overall economic conditions instead of from actual
    use of the property or the passage of time. Gains and losses
    from the sale of real property vary from property to property
    and are affected by market conditions at the time of sale which
    will usually change from period to period. These gains and
    losses can create distortions when comparing one period to
    another or when comparing our operating results to the operating
    results of other real estate companies that have not made
    similarly timed purchases or sales. We believe that eliminating
    these costs from net income is useful because the resulting
    measure captures the actual revenue generated and actual
    expenses incurred in operating our office properties as well as
    trends in occupancy rates, rental rates and operating costs.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | However, the usefulness of Property Operating
    Results is limited because it 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. Property Operating Results may fail
    to capture significant trends in these components of net income
    which further limits its usefulness.

7



---



##### Table of Contents





| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Property Operating Results is a measure of the
    operating performance of our office properties but does not
    measure our performance as a whole. Property Operating Results
    is therefore not a substitute for net income as computed in
    accordance with GAAP. This measure should be analyzed in
    conjunction with net income computed in accordance with GAAP and
    discussions elsewhere in Managements Discussion and
    Analysis of Financial Condition and Results of Operations
    regarding the components of net income that are eliminated in
    the calculation of Property Operating Results. 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.
|
| | The following is a reconciliation of Property
    Operating Results to net income computed in accordance with GAAP
    (in thousands):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

|                           |                                                   |                         |         |         |   |      |         |         |   |   |         |         |  
|-------------------------- | ------------------------------------------------- | ----------------------- | ------- | ------- | - | ---- | ------- | ------- | - | - | ------- | ------- | -
|                           |                                                   |                        
|                           |                                                   | Year Ended December 31,
|                           |                                                   |                        
|                           |                                                   | 2004                    |         | 2003    |   | 2002
|                           |                                                   |                         |         |         |   |     
|Net Income                 |                                                   | $                       | 73,775  |         |   | $    | 58,509  |         |   | $ | 70,175  |        
|Add:                       |                                                   |                         |         |         |   |      |         |         |   |   |         |        
|                           | General and administrative expense                |                         |         | 19,503  |   |      |         | 16,931  |   |   |         | 12,581  |  
|                           | Interest expense                                  |                         |         | 88,856  |   |      |         | 93,093  |   |   |         | 87,827  |  
|                           | Depreciation and amortization                     |                         |         | 121,687 |   |      |         | 111,952 |   |   |         | 100,317 |  
|                           | Minority interest                                 |                         |         | 5,255   |   |      |         | 5,375   |   |   |         | 5,816   |  
|                           | Interest and other loss                           |                         |         | 508     |   |      |         | 401     |   |   |         |        |  
|                           | Impairment on investment in securities            |                         |         | 2,700   |   |      |         |        |   |   |         |        |  
|Less:                      |                                                   |                         |         |         |   |      |         |         |   |   |         |        
|                           | Interest and other income                         |                         |         |        |   |      |         |        |   |   |         | (2,063  | )
|                           | Gain on sale of discontinued properties           |                         |         | (30,473 | ) |      |         | (5,937  | ) |   |         |        |  
|                           | Discontinued operations, net of minority interest |                         |         | (6,253  | ) |      |         | (12,538 | ) |   |         | (15,570 | )
|                           | Gain on sale of operating properties              |                         |         |        |   |      |         |        |   |   |         | (1,967  | )
|                           |                                                   |                         |         |         |   |      |         |         |   |   |         |        
|Property Operating Results |                                                   | $                       | 275,558 |         |   | $    | 267,786 |         |   | $ | 257,116 |        
|                           |                                                   |                         |         |         |   |      |         |         |   |   |         |        



|    |                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | Excludes the operating results of two properties
    sold during the first quarter of 2004, one property sold during
    the third quarter of 2004, nine properties sold during the
    fourth quarter of 2004 and one property classified as held for
    disposition. The operating results for these properties 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) | Comprised of one building in a business park
    containing a total of four buildings. After completion of the
    renovation, the total square footage of this building will
    expand to 130,000 square feet.                                                                                                                                                                                                    

The following is a summary of our occupancy and
in-place rents as of December 31, 2004:

|                       |                            |          |      |         |   |                          |       |                 |   |  |       |       |  |  |       |       | 
|---------------------- | -------------------------- | -------- | ---- | ------- | - | ------------------------ | ----- | --------------- | - |  | ----- | ----- |  |  | ----- | ----- | 
|                       |                            |          |      |         |   |                         
|                       |                            |          |      |         |   | Annualized Base Rent Per
|                       |                            |          |      |         |   | Leased Square Foot(1)   
|                       |                            |          |      |         |   |                         
|                       |                            | Percent  |      | Percent |   | Portfolio                |       | Full Service   
|Location               |                            | Occupied |      | Leased  |   | Total                    |       | Gross Leases(2)
|                       |                            |          |      |         |   |                          |       |                
|Los Angeles County     |                            |          |      |         |   |                          |       |                 |   |  |       |       |  |  |       |      
|                       | West                       |          |      | 93.5    | % |                          |       | 94.8            | % |  | $     | 27.80 |  |  | $     | 27.81 | 
|                       | North                      |          |      | 91.9    | % |                          |       | 94.7            | % |  |       | 22.26 |  |  |       | 22.96 | 
|                       | South                      |          |      | 89.5    | % |                          |       | 91.0            | % |  |       | 19.03 |  |  |       | 20.15 | 
|                       |                            |          |      |         |   |                          |       |                 |   |  |       |       |  |  |       |      
|                       | Subtotal/ Weighted Average |          |      | 92.0    | % |                          |       | 93.8            | % |  |       | 23.96 |  |  |       | 24.67 | 
|Orange County          |                            |          | 90.0 | %       |   |                          | 91.3  | %               |   |  | 18.69 |       |  |  | 22.31 |      
|San Diego County       |                            |          | 87.8 | %       |   |                          | 88.5  | %               |   |  | 19.87 |       |  |  | 24.26 |      
|Ventura/ Kern Counties |                            |          | 95.0 | %       |   |                          | 96.1  | %               |   |  | 18.84 |       |  |  | 19.61 |      
|                       |                            |          |      |         |   |                          |       |                 |   |  |       |       |  |  |       |      
|                       | Subtotal/ Weighted Average |          |      | 91.2    | % |                          |       | 92.7            | % |  |       | 22.21 |  |  |       | 24.08 | 
|Renovation Building    |                            |          |     |         |   |                          | 100.0 | %               |   |  | 17.40 |       |  |  |      |      
|                       |                            |          |      |         |   |                          |       |                 |   |  |       |       |  |  |       |      
|                       | Total/ Weighted Average    |          |      | 90.5    | % |                          |       | 92.7            | % |  | $     | 22.18 |  |  | $     | 24.08 | 
|                       |                            |          |      |         |   |                          |       |                 |   |  |       |       |  |  |       |      



---



|    |                                                                                                                                                                                                                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Based on monthly contractual base rent under
    existing leases as of December 31, 2004, 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 31 properties and approximately
    3.5 million square feet under triple net and modified gross
    leases.                                                                                                                                                                                                                                       

8



---



##### Table of Contents





| |                   
| | ------------------
| | Renovation Summary

The following table summarizes information about
the building under renovation as of December 31, 2004:

|                         |  |        |         |                |  |                |       |         |  |              |       |                |  |           |     |           |  |  |              |  |  |   |       |  |  |  |     |   |  |  |      |  
|------------------------ |  | ------ | ------- | -------------- |  | -------------- | ----- | ------- |  | ------------ | ----- | -------------- |  | --------- | --- | --------- |  |  | ------------ |  |  | - | ----- |  |  |  | --- | - |  |  | ---- | -
|                         |  |        |         |                |  |                |       |         |  |              |       | Estimated      |  |           |     |          
|                         |  |        |         |                |  |                |       |         |  |              |       | Year 1         |  | Estimated |     | Estimated
|                         |  |        |         |                |  |                |       |         |  | Estimated    |       | Stabilized     |  | Year 1    |     | Year 1   
|                         |  |        |         |                |  |                |       |         |  | Construction |       | Cash Property  |  | Annual    |     | Annual   
|                         |  | Square |         | Costs Incurred |  | Estimated      |       | Percent |  | Completion   |       | Operating      |  | Cash      |     | GAAP     
|Building                 |  | Feet   |         | To Date        |  | Total Cost(1)  |       | Leased  |  | Date         |       | Results(2)     |  | Yield     |     | Yield(3) 
|                         |  |        |         |                |  |                |       |         |  |              |       |                |  |           |     |          
|                         |  |        |         | (in thousands) |  | (in thousands) |       |         |  |              |       | (in thousands) |  |           |     |          
|22745 Savi Ranch Parkway |  |        | 130,000 |                |  | $              | 7,659 |         |  | $            | 9,705 |                |  |           | 100 | %         |  |  | 1st Qtr 2005 |  |  | $ | 1,881 |  |  |  | 9.6 | % |  |  | 11.2 | %
|                         |  |        |         |                |  |                |       |         |  |              |       |                |  |           |     |           |  |  |              |  |  |   |       |  |  |  |     |   |  |  |      |  



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Estimated total cost includes capital
    expenditures, tenant improvements, leasing commissions and
    carrying costs during renovation.                                                                                                                                                                                                                                                                                
|   
|(2) | 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 principal 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.
|   
|(3) | Estimated Year 1 Annual GAAP Yield includes an
    adjustment for straight-line rents.                                                                                                                                                                                                                                                                                                                                    

This renovation was completed on
February 15, 2005.

In addition to the renovation building above, we
have preliminary architectural designs completed for an
additional 475,000 net rentable square feet of office space
at the Howard Hughes Center in Los Angeles, California. We also
have construction entitlements at the Howard Hughes Center for
up to 600 hotel rooms. Build-to-suit projects 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 or multi-tenant projects at the Howard
Hughes Center until development plans and budgets are finalized
with terms allowing us to achieve yields commensurate with the
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. We also have a 5-acre developable land parcel in Torrance,
California that we intend to market for a build-to-suit
building. We currently 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 the
projects development risk.

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

9



---



##### Table of Contents





| |             
| | ------------
| | Dispositions

The following table summarizes our disposition
activity during 2004:

|                              |  |        |             |           |  |              |                       |          |  |                   |  |             |        |  |  |  |           |  |  |   |         | 
|----------------------------- |  | ------ | ----------- | --------- |  | ------------ | --------------------- | -------- |  | ----------------- |  | ----------- | ------ |  |  |  | --------- |  |  | - | ------- | 
|                              |  |        |             |           |  |              |                       | Property |  | Square            |  | Gross Sales
|Property                      |  | County |             | Submarket |  | Date of Sale |                       | Type     |  | Feet              |  | Price      
|                              |  |        |             |           |  |              |                       |          |  |                   |  |            
|                              |  |        |             |           |  |              |                       |          |  |                   |  | ($000s)   
|Tower Plaza Retail            |  |        | Riverside   |           |  |              | Temecula              |          |  | February 4, 2004  |  |             | Retail |  |  |  | 133,481   |  |  | $ | 17,050  | 
|Univision  5999 Center Drive |  |        | Los Angeles |           |  |              | Culver City/Fox Hills |          |  | March 16, 2004    |  |             | Office |  |  |  | 161,650   |  |  |   | 52,500  | 
|10251 Vista Sorrento          |  |        | San Diego   |           |  |              | Sorrento Mesa         |          |  | August 24, 2004   |  |             | Office |  |  |  | 69,386    |  |  |   | 9,250   | 
|Waples Tech Center            |  |        | San Diego   |           |  |              | Sorrento Mesa         |          |  | December 29, 2004 |  |             | Office |  |  |  | 28,119    |  |  |   | (A)     | 
|Morehouse Center              |  |        | San Diego   |           |  |              | Sorrento Mesa         |          |  | December 29, 2004 |  |             | Office |  |  |  | 181,207   |  |  |   | (A)     | 
|91 Freeway Center             |  |        | Los Angeles |           |  |              | Artesia               |          |  | December 29, 2004 |  |             | Office |  |  |  | 93,277    |  |  |   | (A)     | 
|Norwalk                       |  |        | Los Angeles |           |  |              | Norwalk               |          |  | December 29, 2004 |  |             | Office |  |  |  | 122,175   |  |  |   | (A)     | 
|1501 Hughes Way               |  |        | Los Angeles |           |  |              | Suburban Long Beach   |          |  | December 29, 2004 |  |             | Office |  |  |  | 77,060    |  |  |   | (A)     | 
|3901 Via Oro                  |  |        | Los Angeles |           |  |              | Suburban Long Beach   |          |  | December 29, 2004 |  |             | Office |  |  |  | 53,195    |  |  |   | (A)     | 
|Glendale Corporate Center     |  |        | Los Angeles |           |  |              | Glendale              |          |  | December 29, 2004 |  |             | Office |  |  |  | 108,209   |  |  |   | (A)     | 
|Whittier                      |  |        | Los Angeles |           |  |              | Whittier              |          |  | December 29, 2004 |  |             | Office |  |  |  | 135,415   |  |  |   | (A)     | 
|South Bay Tech                |  |        | Los Angeles |           |  |              | 190th Corridor        |          |  | December 29, 2004 |  |             | Office |  |  |  | 104,815   |  |  |   | (A)     | 
|                              |  |        |             |           |  |              |                       |          |  |                   |  |             |        |  |  |  |           |  |  |   |         | 
|Sub-total                     |  |        | 1,267,989   |           |  |              | 78,800                |         
|(A) Portfolio sale            |  |        |            |           |  |              | 126,000               |         
|                              |  |        |             |           |  |              |                       |         
|                              |  |        |             |           |  |              |                       |          |  |                   |  |             |        |  |  |  | 1,267,989 |  |  | $ | 204,800 | 
|                              |  |        |             |           |  |              |                       |          |  |                   |  |             |        |  |  |  |           |  |  |   |         | 



| |             
| | ------------
| | Acquisitions

The following table summarizes our acquisition
activity during 2004:

|                        |  |        |             |           |  |                  |                  |          |  |                  |  |          |        |  |  |  |         |  |  |   |        | 
|----------------------- |  | ------ | ----------- | --------- |  | ---------------- | ---------------- | -------- |  | ---------------- |  | -------- | ------ |  |  |  | ------- |  |  | - | ------ | 
|                        |  |        |             |           |  |                  |                  |          |  |                  |  | Gross   
|                        |  |        |             |           |  |                  |                  | Property |  | Square           |  | Purchase
|Property                |  | County |             | Submarket |  | Date of Purchase |                  | Type     |  | Feet             |  | Price   
|                        |  |        |             |           |  |                  |                  |          |  |                  |  |         
|                        |  |        |             |           |  |                  |                  |          |  |                  |  | ($000s)
|Homestore               |  |        | Los Angeles |           |  |                  | Westlake Village |          |  | October 4, 2004  |  |          | Office |  |  |  | 137,762 |  |  | $ | 32,300 | 
|Warner Corporate Center |  |        | Los Angeles |           |  |                  | Woodland Hills   |          |  | October 11, 2004 |  |          | Office |  |  |  | 253,000 |  |  |   | 64,500 | 
|                        |  |        |             |           |  |                  |                  |          |  |                  |  |          |        |  |  |  |         |  |  |   |        | 
|                        |  |        |             |           |  |                  |                  |          |  |                  |  |          |        |  |  |  | 390,762 |  |  | $ | 96,800 | 
|                        |  |        |             |           |  |                  |                  |          |  |                  |  |          |        |  |  |  |         |  |  |   |        | 

10



---



##### Table of Contents



The following table presents specific information
regarding our 120 properties as of December 31, 2004:

|                            |  |                             |  |                        |  |           |            |              |  |               |         |         |  |            |     |           |  |              |       |   |  |   |        |  |  |  |     |  |  |   |       | 
|--------------------------- |  | --------------------------- |  | ---------------------- |  | --------- | ---------- | ------------ |  | ------------- | ------- | ------- |  | ---------- | --- | --------- |  | ------------ | ----- | - |  | - | ------ |  |  |  | --- |  |  | - | ----- | 
|                            |  |                             |  |                        |  |           |            |              |  |               |         |         |  |            |     |           |  | Annualized  
|                            |  |                             |  |                        |  |           |            |              |  | Percentage of |         |         |  |            |     |           |  | Base Rent   
|                            |  |                             |  |                        |  |           |            |              |  | Total         |         |         |  |            |     |           |  | per Leased  
|                            |  |                             |  |                        |  | Year(s)   |            | Approximate  |  | Portfolio Net |         |         |  | Annualized |     |           |  | Net Rentable
|Property                    |  |                             |  |                        |  | Built/    |            | Net Rentable |  | Rentable      |         | Percent |  | Base Rent  |     | Number    |  | Square      
|Name                        |  | Major Area                  |  | Submarket              |  | Renovated |            | Square Feet  |  | Square Feet   |         | Leased  |  | ($000s)    |     | of Leases |  | Feet(1)     
|                            |  |                             |  |                        |  |           |            |              |  |               |         |         |  |            |     |           |  |             
|Los Angeles County          |  |                             |  |                        |  |           |            |              |  |               |         |         |  |            |     |           |  |              |       |   |  |   |        |  |  |  |     |  |  |   |       | 
|Los Angeles West            |  |                             |  |                        |  |           |            |              |  |               |         |         |  |            |     |           |  |              |       |   |  |   |        |  |  |  |     |  |  |   |       | 
|145 South Fairfax           |  | Hollywood/Wilshire Corridor |  | Miracle Mile           |  |           | 1984       |              |  |               | 54,398  |         |  |            | 0.3 | %         |  |              | 95.5  | % |  | $ | 1,032  |  |  |  | 13  |  |  | $ | 19.86 | 
|6100 Wilshire               |  | Hollywood/Wilshire Corridor |  | Miracle Mile           |  |           | 1986       |              |  |               | 202,675 |         |  |            | 1.1 |           |  |              | 100.0 |   |  |   | 5,051  |  |  |  | 57  |  |  |   | 24.43 | 
|120 S. Spalding             |  | West Los Angeles            |  | Beverly Hills Triangle |  |           | 1984       |              |  |               | 64,877  |         |  |            | 0.4 |           |  |              | 97.5  |   |  |   | 2,700  |  |  |  | 15  |  |  |   | 42.67 | 
|8383 Wilshire               |  | West Los Angeles            |  | Beverly Hills          |  |           | 1971/93    |              |  |               | 424,588 |         |  |            | 2.3 |           |  |              | 91.7  |   |  |   | 10,100 |  |  |  | 134 |  |  |   | 25.93 | 
|9100 Wilshire               |  | West Los Angeles            |  | Beverly Hills          |  |           | 1971/90    |              |  |               | 328,697 |         |  |            | 1.8 |           |  |              | 92.7  |   |  |   | 8,300  |  |  |  | 76  |  |  |   | 27.25 | 
|9665 Wilshire               |  | West Los Angeles            |  | Beverly Hills Triangle |  |           | 1972/92-93 |              |  |               | 159,645 |         |  |            | 0.9 |           |  |              | 100.0 |   |  |   | 6,140  |  |  |  | 24  |  |  |   | 38.34 | 
|Beverly Atrium              |  | West Los Angeles            |  | Beverly Hills          |  |           | 1989       |              |  |               | 59,582  |         |  |            | 0.3 |           |  |              | 96.6  |   |  |   | 1,718  |  |  |  | 15  |  |  |   | 29.85 | 
|Wilshire Pacific Plaza      |  | West Los Angeles            |  | Brentwood              |  |           | 1976/87    |              |  |               | 101,229 |         |  |            | 0.6 |           |  |              | 99.6  |   |  |   | 2,561  |  |  |  | 43  |  |  |   | 25.39 | 
|World Savings Center(2)     |  | West Los Angeles            |  | Brentwood              |  |           | 1983       |              |  |               | 473,581 |         |  |            | 2.6 |           |  |              | 86.4  |   |  |   | 12,440 |  |  |  | 54  |  |  |   | 30.41 | 
|10350 Santa Monica          |  | West Los Angeles            |  | West Los Angeles       |  |           | 1979       |              |  |               | 42,696  |         |  |            | 0.2 |           |  |              | 92.5  |   |  |   | 902    |  |  |  | 17  |  |  |   | 22.84 | 
|10351 Santa Monica          |  | West Los Angeles            |  | West Los Angeles       |  |           | 1984       |              |  |               | 96,899  |         |  |            | 0.5 |           |  |              | 87.3  |   |  |   | 1,998  |  |  |  | 14  |  |  |   | 23.63 | 
|Century Park Center         |  | West Los Angeles            |  | West Los Angeles       |  |           | 1972/94    |              |  |               | 235,178 |         |  |            | 1.3 |           |  |              | 100.0 |   |  |   | 5,606  |  |  |  | 98  |  |  |   | 23.33 | 
|400 Corporate Pointe        |  | West Los Angeles            |  | Culver City/Fox Hills  |  |           | 1987       |              |  |               | 165,487 |         |  |            | 0.9 |           |  |              | 85.9  |   |  |   | 2,732  |  |  |  | 19  |  |  |   | 19.23 | 
|600 Corporate Pointe        |  | West Los Angeles            |  | Culver City/Fox Hills  |  |           | 1989       |              |  |               | 275,113 |         |  |            | 1.5 |           |  |              | 95.1  |   |  |   | 5,523  |  |  |  | 19  |  |  |   | 21.10 | 
|6060 Center Drive           |  | West Los Angeles            |  | Culver City/Fox Hills  |  |           | 1999       |              |  |               | 256,665 |         |  |            | 1.4 |           |  |              | 99.1  |   |  |   | 8,280  |  |  |  | 8   |  |  |   | 32.55 | 
|6080 Center Drive           |  | West Los Angeles            |  | Culver City/Fox Hills  |  |           | 2001       |              |  |               | 286,568 |         |  |            | 1.6 |           |  |              | 93.2  |   |  |   | 9,643  |  |  |  | 15  |  |  |   | 36.11 | 
|6100 Center Drive           |  | West Los Angeles            |  | Culver City/Fox Hills  |  |           | 2002       |              |  |               | 284,798 |         |  |            | 1.6 |           |  |              | 99.4  |   |  |   | 7,278  |  |  |  | 24  |  |  |   | 25.72 | 
|Bristol Plaza               |  | West Los Angeles            |  | Culver City/Fox Hills  |  |           | 1982       |              |  |               | 84,033  |         |  |            | 0.5 |           |  |              | 95.3  |   |  |   | 1,640  |  |  |  | 28  |  |  |   | 20.47 | 
|Howard Hughes Spectrum Club |  | West Los Angeles            |  | Culver City/Fox Hills  |  |           | 1993       |              |  |               | 36,959  |         |  |            | 0.2 |           |  |              | 100.0 |   |  |   | 967    |  |  |  | 1   |  |  |   | 26.16 | 
|Howard Hughes Tower         |  | West Los Angeles            |  | Culver City/Fox Hills  |  |           | 1987       |              |  |               | 316,014 |         |  |            | 1.7 |           |  |              | 87.0  |   |  |   | 7,541  |  |  |  | 33  |  |  |   | 27.44 | 
|Northpoint                  |  | West Los Angeles            |  | Culver City/Fox Hills  |  |           | 1991       |              |  |               | 105,145 |         |  |            | 0.6 |           |  |              | 94.1  |   |  |   | 2,638  |  |  |  | 7   |  |  |   | 26.67 | 
|1919 Santa Monica           |  | West Los Angeles            |  | Santa Monica           |  |           | 1991       |              |  |               | 43,766  |         |  |            | 0.2 |           |  |              | 85.2  |   |  |   | 947    |  |  |  | 7   |  |  |   | 25.41 | 
|2001 Wilshire Blvd.         |  | West Los Angeles            |  | Santa Monica           |  |           | 1980       |              |  |               | 99,565  |         |  |            | 0.5 |           |  |              | 100.0 |   |  |   | 2,805  |  |  |  | 23  |  |  |   | 27.47 | 
|2730 Wilshire               |  | West Los Angeles            |  | Santa Monica           |  |           | 1985       |              |  |               | 55,531  |         |  |            | 0.3 |           |  |              | 100.0 |   |  |   | 1,553  |  |  |  | 26  |  |  |   | 27.57 | 
|2800 28th Street            |  | West Los Angeles            |  | Santa Monica           |  |           | 1979       |              |  |               | 106,481 |         |  |            | 0.6 |           |  |              | 95.9  |   |  |   | 2,456  |  |  |  | 42  |  |  |   | 24.06 | 
|10780 Santa Monica          |  | West Los Angeles            |  | West Los Angeles       |  |           | 1984       |              |  |               | 93,211  |         |  |            | 0.5 |           |  |              | 97.0  |   |  |   | 2,193  |  |  |  | 33  |  |  |   | 24.26 | 
|1950 Sawtelle               |  | West Los Angeles            |  | West Los Angeles       |  |           | 1988/95    |              |  |               | 104,171 |         |  |            | 0.6 |           |  |              | 98.0  |   |  |   | 2,367  |  |  |  | 42  |  |  |   | 23.17 | 
|11075 Santa Monica          |  | West Los Angeles            |  | West Los Angeles       |  |           | 1983       |              |  |               | 35,996  |         |  |            | 0.2 |           |  |              | 99.1  |   |  |   | 877    |  |  |  | 8   |  |  |   | 24.57 | 
|Westwood Center             |  | West Los Angeles            |  | Westwood               |  |           | 1965/2000  |              |  |               | 314,366 |         |  |            | 1.7 |           |  |              | 99.6  |   |  |   | 11,366 |  |  |  | 45  |  |  |   | 36.30 | 
|Westwood Terrace            |  | West Los Angeles            |  | West Los Angeles       |  |           | 1988       |              |  |               | 136,707 |         |  |            | 0.8 |           |  |              | 98.3  |   |  |   | 3,549  |  |  |  | 22  |  |  |   | 26.41 | 
|                            |  |                             |  |                        |  |           |            |              |  |               |         |         |  |            |     |           |  |              |       |   |  |   |        |  |  |  |     |  |  |   |       | 

11



---



##### Table of Contents



|                                                 |                                                     |                     |  |                            |  |           |              |              |  |               |           |           |  |            |      |           |   |              |       |      |   |   |         |        |  |  |     |     |  |   |       |       | 
|------------------------------------------------ | --------------------------------------------------- | ------------------- |  | -------------------------- |  | --------- | ------------ | ------------ |  | ------------- | --------- | --------- |  | ---------- | ---- | --------- | - | ------------ | ----- | ---- | - | - | ------- | ------ |  |  | --- | --- |  | - | ----- | ----- | 
|                                                 |                                                     |                     |  |                            |  |           |              |              |  |               |           |           |  |            |      |           |   | Annualized  
|                                                 |                                                     |                     |  |                            |  |           |              |              |  | Percentage of |           |           |  |            |      |           |   | Base Rent   
|                                                 |                                                     |                     |  |                            |  |           |              |              |  | Total         |           |           |  |            |      |           |   | per Leased  
|                                                 |                                                     |                     |  |                            |  | Year(s)   |              | Approximate  |  | Portfolio Net |           |           |  | Annualized |      |           |   | Net Rentable
|Property                                         |                                                     |                     |  |                            |  | Built/    |              | Net Rentable |  | Rentable      |           | Percent   |  | Base Rent  |      | Number    |   | Square      
|Name                                             |                                                     | Major Area          |  | Submarket                  |  | Renovated |              | Square Feet  |  | Square Feet   |           | Leased    |  | ($000s)    |      | of Leases |   | Feet(1)     
|                                                 |                                                     |                     |  |                            |  |           |              |              |  |               |           |           |  |            |      |           |   |             
|Subtotal/Weighted Average  Los Angeles
    West |                                                     |                     |  |                            |  |           |              |              |  |               | 5,044,621 |           |  |            | 27.7 | %         |   |              | 94.8  | %    |   | $ | 132,903 |        |  |  | 962 |     |  | $ | 27.80 |      
|Los Angeles North                                |                                                     |                     |  |                            |  |           |              |              |  |               |           |           |  |            |      |           |   |              |       |      |   |   |         |        |  |  |     |     |  |   |       |      
|303 Glenoaks                                     |                                                     | Glendale/Tri-Cities |  | Burbank                    |  |           | 1983/96      |              |  |               | 177,898   |           |  |            | 1.0  | %         |   |              | 99.4  | %    |   | $ | 4,028   |        |  |  | 28  |     |  | $ | 22.78 |      
|333 N. Glenoaks                                  |                                                     | Glendale/Tri-Cities |  | Burbank                    |  |           | 1978         |              |  |               | 82,939    |           |  |            | 0.5  |           |   |              | 98.0  |      |   |   | 1,921   |        |  |  | 17  |     |  |   | 23.62 |      
|601 S. Glenoaks                                  |                                                     | Glendale/Tri-Cities |  | Burbank                    |  |           | 1990         |              |  |               | 74,745    |           |  |            | 0.4  |           |   |              | 87.4  |      |   |   | 1,206   |        |  |  | 18  |     |  |   | 18.45 |      
|Burbank Executive Plaza                          |                                                     | Glendale/Tri-Cities |  | Burbank                    |  |           | 1983         |              |  |               | 63,320    |           |  |            | 0.3  |           |   |              | 99.0  |      |   |   | 1,437   |        |  |  | 19  |     |  |   | 22.92 |      
|425 West Broadway                                |                                                     | Glendale/Tri-Cities |  | Glendale                   |  |           | 1984         |              |  |               | 72,317    |           |  |            | 0.4  |           |   |              | 94.9  |      |   |   | 1,456   |        |  |  | 14  |     |  |   | 21.21 |      
|535 N. Brand Blvd.                               |                                                     | Glendale/Tri-Cities |  | Glendale                   |  |           | 1973/92/99   |              |  |               | 109,104   |           |  |            | 0.6  |           |   |              | 96.6  |      |   |   | 2,233   |        |  |  | 44  |     |  |   | 21.19 |      
|5161 Lankershim                                  |                                                     | Glendale/Tri-Cities |  | North Hollywood            |  |           | 1985/97      |              |  |               | 180,940   |           |  |            | 1.0  |           |   |              | 99.4  |      |   |   | 3,964   |        |  |  | 9   |     |  |   | 22.05 |      
|70 South Lake                                    |                                                     | Glendale/Tri-Cities |  | Pasadena                   |  |           | 1982/94      |              |  |               | 101,236   |           |  |            | 0.5  |           |   |              | 99.9  |      |   |   | 2,627   |        |  |  | 19  |     |  |   | 25.97 |      
|150 East Colorado Boulevard                      |                                                     | Glendale/Tri-Cities |  | Pasadena                   |  |           | 1979/97      |              |  |               | 61,657    |           |  |            | 0.3  |           |   |              | 100.0 |      |   |   | 1,447   |        |  |  | 20  |     |  |   | 23.47 |      
|299 N. Euclid                                    |                                                     | Glendale/Tri-Cities |  | Pasadena                   |  |           | 1983         |              |  |               | 74,573    |           |  |            | 0.4  |           |   |              | 100.0 |      |   |   | 1,890   |        |  |  | 4   |     |  |   | 25.30 |      
|Calabasas Commerce Center                        |                                                     | San Fernando Valley |  | Calabasas                  |  |           | 1990         |              |  |               | 126,771   |           |  |            | 0.7  |           |   |              | 100.0 |      |   |   | 2,323   |        |  |  | 12  |     |  |   | 18.32 |      
|Calabasas Tech                                   |                                                     | San Fernando Valley |  | Calabasas                  |  |           | 1990/2001    |              |  |               | 283,692   |           |  |            | 1.5  |           |   |              | 90.3  |      |   |   | 4,837   |        |  |  | 17  |     |  |   | 18.89 |      
|16000 Ventura                                    |                                                     | San Fernando Valley |  | Encino                     |  |           | 1980/96      |              |  |               | 175,275   |           |  |            | 1.0  |           |   |              | 93.2  |      |   |   | 3,628   |        |  |  | 45  |     |  |   | 22.21 |      
|15250 Ventura                                    |                                                     | San Fernando Valley |  | Sherman Oaks               |  |           | 1970/90-91   |              |  |               | 112,142   |           |  |            | 0.6  |           |   |              | 93.1  |      |   |   | 2,438   |        |  |  | 41  |     |  |   | 23.35 |      
|Noble Professional Center                        |                                                     | San Fernando Valley |  | Sherman Oaks               |  |           | 1985/93      |              |  |               | 52,599    |           |  |            | 0.3  |           |   |              | 92.8  |      |   |   | 1,129   |        |  |  | 18  |     |  |   | 23.11 |      
|Sunset Pointe Plaza                              |                                                     | San Fernando Valley |  | Valencia                   |  |           | 1988         |              |  |               | 59,186    |           |  |            | 0.3  |           |   |              | 99.7  |      |   |   | 1,500   |        |  |  | 27  |     |  |   | 25.42 |      
|Tourney Pointe                                   |                                                     | San Fernando Valley |  | Valencia                   |  |           | 1985/98-2000 |              |  |               | 219,673   |           |  |            | 1.2  |           |   |              | 92.1  |      |   |   | 4,196   |        |  |  | 38  |     |  |   | 20.74 |      
|Homestore                                        |                                                     | San Fernando Valley |  | Westlake Village           |  |           | 2000         |              |  |               | 137,762   |           |  |            | 0.8  |           |   |              | 100.0 |      |   |   | 3,036   |        |  |  | 1   |     |  |   | 22.04 |      
|Westlake  5601 Lindero                          |                                                     | San Fernando Valley |  | Westlake Village           |  |           | 1989         |              |  |               | 106,144   |           |  |            | 0.6  |           |   |              | 95.3  |      |   |   | 1,894   |        |  |  | 5   |     |  |   | 18.73 |      
|Clarendon Crest                                  |                                                     | San Fernando Valley |  | Woodland Hills             |  |           | 1990         |              |  |               | 43,222    |           |  |            | 0.2  |           |   |              | 97.9  |      |   |   | 887     |        |  |  | 18  |     |  |   | 20.95 |      
|Warner Corporate Center                          |                                                     | San Fernando Valley |  | Woodland Hills             |  |           | 1988         |              |  |               | 253,000   |           |  |            | 1.4  |           |   |              | 98.9  |      |   |   | 6,433   |        |  |  | 34  |     |  |   | 25.71 |      
|Woodland Hills                                   |                                                     | San Fernando Valley |  | Woodland Hills             |  |           | 1972/95      |              |  |               | 229,616   |           |  |            | 1.3  |           |   |              | 93.0  |      |   |   | 4,874   |        |  |  | 73  |     |  |   | 22.82 |      
|Los Angeles Corporate Center                     |                                                     | San Gabriel Valley  |  | Monterey Park              |  |           | 1984/86      |              |  |               | 389,615   |           |  |            | 2.1  |           |   |              | 90.6  |      |   |   | 7,552   |        |  |  | 45  |     |  |   | 21.40 |      
|Conejo Business Center                           |                                                     | Ventura             |  | Newbury Park/Thousand Oaks |  |           | 1991         |              |  |               | 69,425    |           |  |            | 0.4  |           |   |              | 92.9  |      |   |   | 1,375   |        |  |  | 29  |     |  |   | 21.32 |      
|Hillside Corporate Center                        |                                                     | Ventura             |  | Newbury Park/Thousand Oaks |  |           | 1998         |              |  |               | 61,000    |           |  |            | 0.3  |           |   |              | 97.3  |      |   |   | 1,564   |        |  |  | 10  |     |  |   | 26.36 |      
|Marin Corporate Center                           |                                                     | Ventura             |  | Newbury Park/Thousand Oaks |  |           | 1986         |              |  |               | 51,776    |           |  |            | 0.3  |           |   |              | 64.9  |      |   |   | 778     |        |  |  | 27  |     |  |   | 23.14 |      
|Westlake Gardens                                 |                                                     | Ventura             |  | Westlake Village           |  |           | 1998         |              |  |               | 50,267    |           |  |            | 0.3  |           |   |              | 94.0  |      |   |   | 1,288   |        |  |  | 19  |     |  |   | 27.27 |      
|Westlake Gardens II                              |                                                     | Ventura             |  | Westlake Village           |  |           | 1999         |              |  |               | 48,874    |           |  |            | 0.3  |           |   |              | 93.1  |      |   |   | 1,229   |        |  |  | 4   |     |  |   | 27.02 |      
|                                                 |                                                     |                     |  |                            |  |           |              |              |  |               |           |           |  |            |      |           |   |              |       |      |   |   |         |        |  |  |     |     |  |   |       |      
|                                                 | Subtotal/ Weighted Average   Los
    Angeles North |                     |  |                            |  |           |              |              |  |               |           | 3,468,768 |  |            |      | 19.0      | % |              |       | 94.7 | % |   | $       | 73,170 |  |  |     | 655 |  |   | $     | 22.26 | 
|Los Angeles SouthSouth Bay Centre                |                                                     | South Bay           |  | 190th Corridor             |  |           | 1984         |              |  |               | 204,197   |           |  |            | 1.1  | %         |   |              | 100.0 | %    |   | $ | 4,150   |        |  |  | 36  |     |  | $ | 20.30 |      
|Pacific Gateway                                  |                                                     | South Bay           |  | 190th Corridor             |  |           | 1982/90      |              |  |               | 225,805   |           |  |            | 1.2  |           |   |              | 97.4  |      |   |   | 4,617   |        |  |  | 40  |     |  |   | 20.99 |      
|Gateway Towers                                   |                                                     | South Bay           |  | 190th Corridor             |  |           | 1984/86      |              |  |               | 433,545   |           |  |            | 2.4  |           |   |              | 95.3  |      |   |   | 9,448   |        |  |  | 74  |     |  |   | 22.88 |      

12



---



##### Table of Contents



|                                 |                                                     |                       |  |                     |  |           |            |              |  |               |         |           |  |            |     |           |   |              |       |      |   |   |        |        |  |  |    |     |  |   |       |       | 
|-------------------------------- | --------------------------------------------------- | --------------------- |  | ------------------- |  | --------- | ---------- | ------------ |  | ------------- | ------- | --------- |  | ---------- | --- | --------- | - | ------------ | ----- | ---- | - | - | ------ | ------ |  |  | -- | --- |  | - | ----- | ----- | 
|                                 |                                                     |                       |  |                     |  |           |            |              |  |               |         |           |  |            |     |           |   | Annualized  
|                                 |                                                     |                       |  |                     |  |           |            |              |  | Percentage of |         |           |  |            |     |           |   | Base Rent   
|                                 |                                                     |                       |  |                     |  |           |            |              |  | Total         |         |           |  |            |     |           |   | per Leased  
|                                 |                                                     |                       |  |                     |  | Year(s)   |            | Approximate  |  | Portfolio Net |         |           |  | Annualized |     |           |   | Net Rentable
|Property                         |                                                     |                       |  |                     |  | Built/    |            | Net Rentable |  | Rentable      |         | Percent   |  | Base Rent  |     | Number    |   | Square      
|Name                             |                                                     | Major Area            |  | Submarket           |  | Renovated |            | Square Feet  |  | Square Feet   |         | Leased    |  | ($000s)    |     | of Leases |   | Feet(1)     
|                                 |                                                     |                       |  |                     |  |           |            |              |  |               |         |           |  |            |     |           |   |             
|100 West Broadway                |                                                     | South Bay             |  | Downtown Long Beach |  |           | 1987/96    |              |  |               | 191,371 |           |  |            | 1.1 |           |   |              | 68.8  |      |   |   | 2,537  |        |  |  | 39 |     |  |   | 19.26 |      
|Oceangate Tower                  |                                                     | South Bay             |  | Downtown Long Beach |  |           | 1971/93-94 |              |  |               | 218,554 |           |  |            | 1.2 |           |   |              | 79.7  |      |   |   | 3,067  |        |  |  | 40 |     |  |   | 17.62 |      
|Continental Grand Plaza          |                                                     | South Bay             |  | El Segundo          |  |           | 1986       |              |  |               | 237,494 |           |  |            | 1.3 |           |   |              | 93.6  |      |   |   | 5,310  |        |  |  | 37 |     |  |   | 23.90 |      
|Grand Avenue Plaza               |                                                     | South Bay             |  | El Segundo          |  |           | 1980       |              |  |               | 82,872  |           |  |            | 0.5 |           |   |              | 88.2  |      |   |   | 1,334  |        |  |  | 16 |     |  |   | 18.26 |      
|5200 West Century                |                                                     | South Bay             |  | LAX                 |  |           | 1982/98-99 |              |  |               | 312,700 |           |  |            | 1.7 |           |   |              | 93.0  |      |   |   | 5,325  |        |  |  | 30 |     |  |   | 18.30 |      
|Skyview Center                   |                                                     | South Bay             |  | LAX                 |  |           | 1981/87/95 |              |  |               | 398,261 |           |  |            | 2.2 |           |   |              | 81.6  |      |   |   | 5,175  |        |  |  | 53 |     |  |   | 15.92 |      
|Long Beach Airport Bldg D(2)     |                                                     | South Bay             |  | Suburban Long Beach |  |           | 1987/95    |              |  |               | 121,610 |           |  |            | 0.7 |           |   |              | 100.0 |      |   |   | 1,211  |        |  |  | 1  |     |  |   | 9.96  |      
|Long Beach Airport Bldg F & G(2) |                                                     | South Bay             |  | Suburban Long Beach |  |           | 1987/95    |              |  |               | 150,403 |           |  |            | 0.8 |           |   |              | 100.0 |      |   |   | 1,354  |        |  |  | 1  |     |  |   | 9.00  |      
|5000 East Spring(2)              |                                                     | South Bay             |  | Suburban Long Beach |  |           | 1989/95    |              |  |               | 168,967 |           |  |            | 0.9 |           |   |              | 96.9  |      |   |   | 3,693  |        |  |  | 44 |     |  |   | 22.55 |      
|Mariner Court                    |                                                     | South Bay             |  | Torrance            |  |           | 1989       |              |  |               | 105,436 |           |  |            | 0.6 |           |   |              | 98.7  |      |   |   | 2,150  |        |  |  | 38 |     |  |   | 20.67 |      
|                                 |                                                     |                       |  |                     |  |           |            |              |  |               |         |           |  |            |     |           |   |              |       |      |   |   |        |        |  |  |    |     |  |   |       |      
|                                 | Subtotal/ Weighted Average   Los
    Angeles South |                       |  |                     |  |           |            |              |  |               |         | 2,851,215 |  |            |     | 15.7      | % |              |       | 91.0 | % |   | $      | 49,371 |  |  |    | 449 |  |   | $     | 19.03 | 
|Orange County                    |                                                     |                       |  |                     |  |           |            |              |  |               |         |           |  |            |     |           |   |              |       |      |   |   |        |        |  |  |    |     |  |   |       |      
|1370 Valley Vista                |                                                     | LA Central            |  | Diamond Bar         |  |           | 1988       |              |  |               | 81,962  |           |  |            | 0.4 | %         |   |              | 100.0 | %    |   | $ | 1,814  |        |  |  | 13 |     |  | $ | 21.39 |      
|Anaheim City Centre(2)           |                                                     | Orange County         |  | Central County      |  |           | 1986/91    |              |  |               | 177,266 |           |  |            | 1.0 |           |   |              | 100.0 |      |   |   | 3,569  |        |  |  | 27 |     |  |   | 19.72 |      
|City Centre I                    |                                                     | Orange County         |  | Central County      |  |           | 1985/97    |              |  |               | 141,903 |           |  |            | 0.8 |           |   |              | 100.0 |      |   |   | 2,849  |        |  |  | 33 |     |  |   | 19.85 |      
|Orange Financial Center          |                                                     | Orange County         |  | Central County      |  |           | 1985/95    |              |  |               | 307,920 |           |  |            | 1.7 |           |   |              | 94.4  |      |   |   | 6,522  |        |  |  | 38 |     |  |   | 22.43 |      
|Fountain Valley City Centre      |                                                     | Orange County         |  | Greater Airport     |  |           | 1982       |              |  |               | 303,267 |           |  |            | 1.7 |           |   |              | 63.4  |      |   |   | 4,591  |        |  |  | 18 |     |  |   | 23.86 |      
|Fountain Valley Plaza            |                                                     | Orange County         |  | Greater Airport     |  |           | 1982       |              |  |               | 107,313 |           |  |            | 0.6 |           |   |              | 37.9  |      |   |   | 843    |        |  |  | 4  |     |  |   | 20.73 |      
|Irvine Corporate Center          |                                                     | Orange County         |  | Greater Airport     |  |           | 1980/88    |              |  |               | 126,781 |           |  |            | 0.7 |           |   |              | 100.0 |      |   |   | 1,446  |        |  |  | 5  |     |  |   | 11.34 |      
|Newport Irvine Center            |                                                     | Orange County         |  | Greater Airport     |  |           | 1981/97    |              |  |               | 75,184  |           |  |            | 0.4 |           |   |              | 88.6  |      |   |   | 1,642  |        |  |  | 28 |     |  |   | 24.65 |      
|South Coast Executive Center     |                                                     | Orange County         |  | Greater Airport     |  |           | 1979/97    |              |  |               | 61,292  |           |  |            | 0.3 |           |   |              | 94.3  |      |   |   | 1,068  |        |  |  | 25 |     |  |   | 18.48 |      
|Von Karman Corporate Center      |                                                     | Orange County         |  | Greater Airport     |  |           | 1981/84    |              |  |               | 452,378 |           |  |            | 2.5 |           |   |              | 86.8  |      |   |   | 8,419  |        |  |  | 31 |     |  |   | 21.44 |      
|Centerpointe La Palma            |                                                     | Orange County         |  | North County        |  |           | 1986/88/90 |              |  |               | 603,582 |           |  |            | 3.3 |           |   |              | 97.8  |      |   |   | 11,074 |        |  |  | 98 |     |  |   | 18.76 |      
|Savi Tech Center                 |                                                     | Orange County         |  | North County        |  |           | 1989       |              |  |               | 242,327 |           |  |            | 1.3 |           |   |              | 100.0 |      |   |   | 2,538  |        |  |  | 3  |     |  |   | 10.47 |      
|Yorba Linda Business Park        |                                                     | Orange County         |  | North County        |  |           | 1988       |              |  |               | 165,710 |           |  |            | 0.9 |           |   |              | 98.3  |      |   |   | 1,483  |        |  |  | 60 |     |  |   | 9.10  |      
|Crown Cabot Financial Center     |                                                     | Orange County         |  | South County        |  |           | 1989       |              |  |               | 174,222 |           |  |            | 1.0 |           |   |              | 97.4  |      |   |   | 4,829  |        |  |  | 41 |     |  |   | 28.46 |      
|5632 Bolsa                       |                                                     | Orange County         |  | West County         |  |           | 1987       |              |  |               | 21,568  |           |  |            | 0.1 |           |   |              | 100.0 |      |   |   | 184    |        |  |  | 1  |     |  |   | 8.52  |      
|5672 Bolsa                       |                                                     | Orange County         |  | West County         |  |           | 1987       |              |  |               | 12,110  |           |  |            | 0.1 |           |   |              | 100.0 |      |   |   | 103    |        |  |  | 1  |     |  |   | 8.52  |      
|5702 Bolsa                       |                                                     | Orange County         |  | West County         |  |           | 1987/97    |              |  |               | 27,731  |           |  |            | 0.1 |           |   |              | 100.0 |      |   |   | 227    |        |  |  | 2  |     |  |   | 8.17  |      
|5832 Bolsa                       |                                                     | Orange County         |  | West County         |  |           | 1985       |              |  |               | 49,355  |           |  |            | 0.3 |           |   |              | 100.0 |      |   |   | 829    |        |  |  | 1  |     |  |   | 16.80 |      
|Huntington Beach Plaza County    |                                                     | Orange County 1984/96 |  | West 53,459         |  |           | 0.3        |              |  |               | 89.6    |           |  |            | 850 |           |   |              | 18    |      |   |   | 17.75  |        |  |  |    |     |  |   |       |      

13



---



##### Table of Contents



|                                                |                                                    |                  |  |                         |  |           |         |              |  |               |           |           |  |            |      |           |   |              |       |      |   |   |        |        |  |  |     |     |  |   |       |       | 
|----------------------------------------------- | -------------------------------------------------- | ---------------- |  | ----------------------- |  | --------- | ------- | ------------ |  | ------------- | --------- | --------- |  | ---------- | ---- | --------- | - | ------------ | ----- | ---- | - | - | ------ | ------ |  |  | --- | --- |  | - | ----- | ----- | 
|                                                |                                                    |                  |  |                         |  |           |         |              |  |               |           |           |  |            |      |           |   | Annualized  
|                                                |                                                    |                  |  |                         |  |           |         |              |  | Percentage of |           |           |  |            |      |           |   | Base Rent   
|                                                |                                                    |                  |  |                         |  |           |         |              |  | Total         |           |           |  |            |      |           |   | per Leased  
|                                                |                                                    |                  |  |                         |  | Year(s)   |         | Approximate  |  | Portfolio Net |           |           |  | Annualized |      |           |   | Net Rentable
|Property                                        |                                                    |                  |  |                         |  | Built/    |         | Net Rentable |  | Rentable      |           | Percent   |  | Base Rent  |      | Number    |   | Square      
|Name                                            |                                                    | Major Area       |  | Submarket               |  | Renovated |         | Square Feet  |  | Square Feet   |           | Leased    |  | ($000s)    |      | of Leases |   | Feet(1)     
|                                                |                                                    |                  |  |                         |  |           |         |              |  |               |           |           |  |            |      |           |   |             
|Huntington Commerce Center                      |                                                    | Orange County    |  | West County             |  |           | 1987    |              |  |               | 69,749    |           |  |            | 0.4  |           |   |              | 98.4  |      |   |   | 638    |        |  |  | 23  |     |  |   | 9.29  |      
|                                                |                                                    |                  |  |                         |  |           |         |              |  |               |           |           |  |            |      |           |   |              |       |      |   |   |        |        |  |  |     |     |  |   |       |      
|Subtotal/ Weighted Average   Orange
    County |                                                    |                  |  |                         |  |           |         |              |  |               | 3,255,079 |           |  |            | 17.9 | %         |   |              | 91.3  | %    |   | $ | 55,518 |        |  |  | 470 |     |  | $ | 18.69 |      
|San Diego County                                |                                                    |                  |  |                         |  |           |         |              |  |               |           |           |  |            |      |           |   |              |       |      |   |   |        |        |  |  |     |     |  |   |       |      
|Carlsbad Corporate Center                       |                                                    | San Diego County |  | Carlsbad                |  |           | 1996    |              |  |               | 129,000   |           |  |            | 0.7  | %         |   |              | 100.0 | %    |   | $ | 445    |        |  |  | 1   |     |  | $ | 3.45  |      
|Carmel Valley Center                            |                                                    | San Diego County |  | Del Mar Heights         |  |           | 1987/89 |              |  |               | 109,518   |           |  |            | 0.6  |           |   |              | 93.8  |      |   |   | 3,410  |        |  |  | 17  |     |  |   | 33.20 |      
|701 B Street(2)                                 |                                                    | San Diego County |  | Downtown                |  |           | 1982/96 |              |  |               | 548,310   |           |  |            | 3.0  |           |   |              | 87.3  |      |   |   | 11,023 |        |  |  | 70  |     |  |   | 23.04 |      
|5120 Shoreham                                   |                                                    | San Diego County |  | Governor Park           |  |           | 1984    |              |  |               | 37,813    |           |  |            | 0.2  |           |   |              | 100.0 |      |   |   | 842    |        |  |  | 7   |     |  |   | 22.24 |      
|Governor Executive Centre                       |                                                    | San Diego County |  | Governor Park           |  |           | 1988    |              |  |               | 52,828    |           |  |            | 0.3  |           |   |              | 85.1  |      |   |   | 1,175  |        |  |  | 10  |     |  |   | 26.12 |      
|Governor Executive Centre II                    |                                                    | San Diego County |  | Governor Park           |  |           | 1989    |              |  |               | 101,433   |           |  |            | 0.6  |           |   |              | 100.0 |      |   |   | 3,006  |        |  |  | 17  |     |  |   | 29.64 |      
|Governor Park Plaza                             |                                                    | San Diego County |  | Governor Park           |  |           | 1986    |              |  |               | 104,441   |           |  |            | 0.6  |           |   |              | 94.0  |      |   |   | 2,485  |        |  |  | 19  |     |  |   | 25.31 |      
|10180 Scripps Ranch                             |                                                    | San Diego County |  | Scripps Ranch           |  |           | 1978/96 |              |  |               | 43,560    |           |  |            | 0.2  |           |   |              | 0     |      |   |   | 0      |        |  |  | 0   |     |  |   | 0     |      
|Activity Business Center                        |                                                    | San Diego County |  | Miramar                 |  |           | 1987    |              |  |               | 167,170   |           |  |            | 0.9  |           |   |              | 72.3  |      |   |   | 1,652  |        |  |  | 41  |     |  |   | 13.66 |      
|Balboa Corporate Center                         |                                                    | San Diego County |  | Kearney Mesa            |  |           | 1990    |              |  |               | 70,987    |           |  |            | 0.4  |           |   |              | 75.8  |      |   |   | 777    |        |  |  | 2   |     |  |   | 14.44 |      
|Panorama Corporate Center                       |                                                    | San Diego County |  | Kearney Mesa            |  |           | 1991    |              |  |               | 130,396   |           |  |            | 0.7  |           |   |              | 99.6  |      |   |   | 2,392  |        |  |  | 3   |     |  |   | 18.42 |      
|Ruffin Corporate Center                         |                                                    | San Diego County |  | Kearney Mesa            |  |           | 1990    |              |  |               | 45,059    |           |  |            | 0.2  |           |   |              | 100.0 |      |   |   | 378    |        |  |  | 1   |     |  |   | 8.40  |      
|Skypark Office Plaza                            |                                                    | San Diego County |  | Kearney Mesa            |  |           | 1986    |              |  |               | 203,946   |           |  |            | 1.1  |           |   |              | 96.9  |      |   |   | 4,423  |        |  |  | 24  |     |  |   | 22.39 |      
|Crossroads                                      |                                                    | San Diego County |  | Mission Valley          |  |           | 1979    |              |  |               | 134,477   |           |  |            | 0.7  |           |   |              | 65.8  |      |   |   | 2,093  |        |  |  | 8   |     |  |   | 23.64 |      
|Poway Industrial                                |                                                    | San Diego County |  | Rancho Bernardo/Poway   |  |           | 1991/96 |              |  |               | 112,000   |           |  |            | 0.6  |           |   |              | 100.0 |      |   |   | 672    |        |  |  | 1   |     |  |   | 6.00  |      
|Bernardo Regency                                |                                                    | San Diego County |  | Rancho Bernardo/Poway   |  |           | 1986    |              |  |               | 48,052    |           |  |            | 0.3  |           |   |              | 93.3  |      |   |   | 1,145  |        |  |  | 16  |     |  |   | 25.54 |      
|Carmel View Office Plaza                        |                                                    | San Diego County |  | Rancho Bernardo/Poway   |  |           | 1985    |              |  |               | 77,672    |           |  |            | 0.4  |           |   |              | 84.1  |      |   |   | 1,497  |        |  |  | 16  |     |  |   | 22.92 |      
|Cymer Technology Center                         |                                                    | San Diego County |  | Rancho Bernardo/Poway   |  |           | 1986    |              |  |               | 155,612   |           |  |            | 0.9  |           |   |              | 100.0 |      |   |   | 1,923  |        |  |  | 2   |     |  |   | 12.36 |      
|Foremost Professional Plaza                     |                                                    | San Diego County |  | Rancho Bernardo/Poway   |  |           | 1992    |              |  |               | 60,311    |           |  |            | 0.3  |           |   |              | 73.6  |      |   |   | 1,113  |        |  |  | 29  |     |  |   | 25.06 |      
|Via Frontera                                    |                                                    | San Diego County |  | Rancho Bernardo/Poway   |  |           | 1982/97 |              |  |               | 77,920    |           |  |            | 0.4  |           |   |              | 100.0 |      |   |   | 914    |        |  |  | 6   |     |  |   | 11.60 |      
|Westridge                                       |                                                    | San Diego County |  | Sorrento Mesa           |  |           | 1984/96 |              |  |               | 48,955    |           |  |            | 0.3  |           |   |              | 82.4  |      |   |   | 551    |        |  |  | 3   |     |  |   | 13.65 |      
|Torreyana Science Park                          |                                                    | San Diego County |  | Torrey Pines            |  |           | 1980/97 |              |  |               | 81,204    |           |  |            | 0.5  |           |   |              | 100.0 |      |   |   | 2,008  |        |  |  | 1   |     |  |   | 24.72 |      
|Genesee Executive Plaza                         |                                                    | San Diego County |  | University Towne Centre |  |           | 1984    |              |  |               | 155,014   |           |  |            | 0.9  |           |   |              | 87.5  |      |   |   | 3,493  |        |  |  | 23  |     |  |   | 25.75 |      
|                                                |                                                    |                  |  |                         |  |           |         |              |  |               |           |           |  |            |      |           |   |              |       |      |   |   |        |        |  |  |     |     |  |   |       |      
|                                                | Subtotal/ Weighted Average  
    San Diego County |                  |  |                         |  |           |         |              |  |               |           | 2,695,678 |  |            |      | 14.8      | % |              |       | 88.5 | % |   | $      | 47,417 |  |  |     | 317 |  |   | $     | 19.87 | 

14



---



##### Table of Contents



|                            |                                                          |                                   |  |              |  |           |         |              |  |               |         |         |            |            |     |           |       |              |       |      |      |   |       |        |         |  |    |     |       |   |       |       |       | 
|--------------------------- | -------------------------------------------------------- | --------------------------------- |  | ------------ |  | --------- | ------- | ------------ |  | ------------- | ------- | ------- | ---------- | ---------- | --- | --------- | ----- | ------------ | ----- | ---- | ---- | - | ----- | ------ | ------- |  | -- | --- | ----- | - | ----- | ----- | ----- | 
|                            |                                                          |                                   |  |              |  |           |         |              |  |               |         |         |            |            |     |           |       | Annualized  
|                            |                                                          |                                   |  |              |  |           |         |              |  | Percentage of |         |         |            |            |     |           |       | Base Rent   
|                            |                                                          |                                   |  |              |  |           |         |              |  | Total         |         |         |            |            |     |           |       | per Leased  
|                            |                                                          |                                   |  |              |  | Year(s)   |         | Approximate  |  | Portfolio Net |         |         |            | Annualized |     |           |       | Net Rentable
|Property                    |                                                          |                                   |  |              |  | Built/    |         | Net Rentable |  | Rentable      |         | Percent |            | Base Rent  |     | Number    |       | Square      
|Name                        |                                                          | Submarket                         |  | Location     |  | Renovated |         | Square Feet  |  | Square Feet   |         | Leased  |            | ($000s)    |     | of Leases |       | Feet(1)     
|                            |                                                          |                                   |  |              |  |           |         |              |  |               |         |         |            |            |     |           |       |             
|Ventura & Kern Counties     |                                                          |                                   |  |              |  |           |         |              |  |               |         |         |            |            |     |           |       |              |       |      |      |   |       |        |         |  |    |     |       |   |       |      
|4900 California             |                                                          | Kern County                       |  | Bakersfield  |  |           | 1983    |              |  |               | 155,791 |         |            |            | 0.9 | %         |       |              | 95.6  | %    |      | $ | 2,385 |        |         |  | 23 |     |       | $ | 16.01 |      
|Parkway Center I            |                                                          | Kern County                       |  | Bakersfield  |  |           | 1992/95 |              |  |               | 61,289  |         |            |            | 0.3 |           |       |              | 90.8  |      |      |   | 1,038 |        |         |  | 11 |     |       |   | 18.64 |      
|Camarillo Business Park     |                                                          | Ventura                           |  | Camarillo    |  |           | 1984/97 |              |  |               | 154,298 |         |            |            | 0.8 |           |       |              | 97.5  |      |      |   | 3,134 |        |         |  | 29 |     |       |   | 20.83 |      
|1000 Town Center            |                                                          | Ventura                           |  | Oxnard       |  |           | 1989    |              |  |               | 108,508 |         |            |            | 0.6 |           |       |              | 99.8  |      |      |   | 2,379 |        |         |  | 10 |     |       |   | 21.96 |      
|Solar Drive Business Center |                                                          | Ventura                           |  | Oxnard       |  |           | 1982    |              |  |               | 138,341 |         |            |            | 0.8 |           |       |              | 98.0  |      |      |   | 2,494 |        |         |  | 36 |     |       |   | 18.39 |      
|Center Promenade            |                                                          | Ventura                           |  | Ventura      |  |           | 1988    |              |  |               | 177,072 |         |            |            | 1.0 |           |       |              | 93.4  |      |      |   | 2,969 |        |         |  | 61 |     |       |   | 17.96 |      
|                            |                                                          |                                   |  |              |  |           |         |              |  |               |         |         |            |            |     |           |       |              |       |      |      |   |       |        |         |  |    |     |       |   |       |      
|                            | Subtotal/ Weighted Average 
    Ventura & Kern Counties |                                   |  |              |  |           |         |              |  |               |         | 795,299 |            |            |     | 4.4       | %     |              |       | 96.1 | %    |   | $     | 14,399 |         |  |    | 170 |       |   | $     | 18.84 |      
|Renovation Building         |                                                          |                                   |  |              |  |           |         |              |  |               |         |         |            |            |     |           |       |              |       |      |      |   |       |        |         |  |    |     |       |   |       |      
|Savi Tech Center(3)         |                                                          | Orange County                     |  | North County |  |           | 1989    |              |  |               | 99,119  |         |            |            | 0.5 | %         |       |              | 100.0 | %    |      | $ | 2,262 |        |         |  | 1  |     |       | $ | 17.40 |      
|                            |                                                          | Portfolio Total/ Weighted Average |  |              |  |           |         |              |  |               |         |         | 18,209,779 |            |     |           | 100.0 | %            |       |      | 92.7 | % |       | $      | 375,040 |  |    |     | 3,024 |   |       | $     | 22.18 | 
|                            |                                                          |                                   |  |              |  |           |         |              |  |               |         |         |            |            |     |           |       |              |       |      |      |   |       |        |         |  |    |     |       |   |       |      



---

|    |                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Calculated as monthly contractual base rent under
    existing leases as of December 31, 2004, 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) | Comprised of one building in a business park
    containing a total of four buildings. After completion of the
    renovation, the total square footage of this building will
    expand to 130,000 square feet. The annualized base rent and
    the annualized base rent per leased net rentable square feet
    amounts are calculated based on the expanded square footage of
    130,000 square feet.

15



---



##### Table of Contents





| |                   
| | ------------------
| | Tenant Information

As of December 31, 2004, we had
approximately 3,000 tenants with no one tenant representing more
than 2.2% of the aggregate annualized base rent of our
properties and only 2 tenants individually representing more
than 1.0% of our aggregate annualized base rent. Our properties
are leased to local, national and international 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 81% 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 of 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 to our buildings.

The following table presents information as of
December 31, 2004 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                              |                            | Locations |    | in Months  |  | Square Feet   |     | Base Rent(1)  |  | Square Feet  |      | (in thousands)
|                                    |                            |           |    |            |  |               |     |               |  |              |      |               
|Vivendi Universal                   |                            |           | 2  |            |  |               | 64  |               |  |              | 1.38 | %              |   |  | 2.14 | %     |   |  | 231,681 |           |  | $ | 7,980 |       
|State of California                 |                            |           | 18 |            |  |               | 51  |               |  |              | 1.63 |                |   |  | 1.61 |       |   |  | 274,065 |           |  |   | 5,992 |       
|University of Phoenix               |                            |           | 6  |            |  |               | 52  |               |  |              | 0.99 |                |   |  | 1.00 |       |   |  | 166,195 |           |  |   | 3,733 |       
|Ceridian Corporation                |                            |           | 2  |            |  |               | 64  |               |  |              | 0.91 |                |   |  | 0.99 |       |   |  | 152,612 |           |  |   | 3,706 |       
|Atlantic Richfield                  |                            |           | 1  |            |  |               | 21  |               |  |              | 0.86 |                |   |  | 0.93 |       |   |  | 143,885 |           |  |   | 3,465 |       
|Pepperdine University               |                            |           | 1  |            |  |               | 167 |               |  |              | 0.68 |                |   |  | 0.87 |       |   |  | 113,488 |           |  |   | 3,251 |       
|Homestore.com, Inc.                 |                            |           | 1  |            |  |               | 37  |               |  |              | 0.82 |                |   |  | 0.82 |       |   |  | 137,762 |           |  |   | 3,036 |       
|Walt Disney Pictures and Television |                            |           | 1  |            |  |               | 43  |               |  |              | 0.76 |                |   |  | 0.78 |       |   |  | 128,258 |           |  |   | 2,894 |       
|Haight, Brown & Bonesteel, LLP      |                            |           | 2  |            |  |               | 77  |               |  |              | 0.38 |                |   |  | 0.73 |       |   |  | 63,262  |           |  |   | 2,736 |       
|Westfield Corporation               |                            |           | 1  |            |  |               | 100 |               |  |              | 0.58 |                |   |  | 0.73 |       |   |  | 96,876  |           |  |   | 2,725 |       
|                                    |                            |           |    |            |  |               |     |               |  |              |      |                |   |  |      |       |   |  |         |           |  |   |       |       
|                                    | Total/ Weighted Average(2) |           |    | 35         |  |               |     | 63            |  |              |      | 8.99           | % |  |      | 10.60 | % |  |         | 1,508,084 |  |   | $     | 39,518 | 
|                                    |                            |           |    |            |  |               |     |               |  |              |      |                |   |  |      |       |   |  |         |           |  |   |       |       






|    |                                                                                                                                                                                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Annualized base rent is calculated as monthly
    contractual base rent under existing leases as of
    December 31, 2004, 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.                                                                                                                                                                                                                                      

16



---



##### Table of Contents



The following table presents the diversification
of the tenants occupying space in our portfolio by industry as
of December 31, 2004:

|                                                                             |                            |       |         |             |  |               |           |            |  |  |       |        |  
|---------------------------------------------------------------------------- | -------------------------- | ----- | ------- | ----------- |  | ------------- | --------- | ---------- |  |  | ----- | ------ | -
|                                                                             |                            |       |         |             |  | Percentage of
|                                                                             |                            |       |         |             |  | Total        
|                                                                             |                            | NAICS |         | Occupied    |  | Occupied     
|North American Industrial Classification System Description (NAICS)          |                            | Code  |         | Square Feet |  | Portfolio    
|                                                                             |                            |       |         |             |  |              
|Professional, Scientific, and Technical Services                             |                            |       | 541     |             |  |               | 4,278,468 |            |  |  | 25.91 | %     
|Finance and Insurance                                                        |                            |       | 521-525 |             |  |               | 2,838,317 |            |  |  | 17.19 |       
|Information                                                                  |                            |       | 511-519 |             |  |               | 1,625,403 |            |  |  | 9.84  |       
|Manufacturing                                                                |                            |       | 311-339 |             |  |               | 1,282,143 |            |  |  | 7.77  |       
|Health Care and Social Assistance                                            |                            |       | 621-624 |             |  |               | 1,107,178 |            |  |  | 6.71  |       
|Educational Services                                                         |                            |       | 611     |             |  |               | 750,882   |            |  |  | 4.55  |       
|Administrative and Support and Waste Management
    and Remediation Services |                            |       | 561-562 |             |  |               | 742,831   |            |  |  | 4.50  |       
|Real Estate, Rental and Leasing                                              |                            |       | 531-533 |             |  |               | 709,020   |            |  |  | 4.29  |       
|Public Administration                                                        |                            |       | 921-928 |             |  |               | 638,857   |            |  |  | 3.87  |       
|Wholesale Trade                                                              |                            |       | 423-425 |             |  |               | 564,150   |            |  |  | 3.42  |       
|Construction                                                                 |                            |       | 236-238 |             |  |               | 334,098   |            |  |  | 2.02  |       
|Transportation and Warehousing                                               |                            |       | 481-493 |             |  |               | 319,070   |            |  |  | 1.93  |       
|Other Services (except Public Administration)                                |                            |       | 811-814 |             |  |               | 295,987   |            |  |  | 1.79  |       
|Arts, Entertainment, and Recreation                                          |                            |       | 711-713 |             |  |               | 287,027   |            |  |  | 1.74  |       
|Accommodation and Food Services                                              |                            |       | 721-722 |             |  |               | 180,608   |            |  |  | 1.09  |       
|Retail Trade                                                                 |                            |       | 441-454 |             |  |               | 112,738   |            |  |  | 0.68  |       
|Mining                                                                       |                            |       | 211-213 |             |  |               | 41,291    |            |  |  | 0.25  |       
|Management of Companies and Enterprises                                      |                            |       | 551     |             |  |               | 34,410    |            |  |  | 0.21  |       
|Utilities                                                                    |                            |       | 221     |             |  |               | 8,975     |            |  |  | 0.05  |       
|Agriculture, Forestry, Fishing and Hunting                                   |                            |       | 111-115 |             |  |               | 6,261     |            |  |  | 0.04  |       
|Other  Uncategorized                                                        |                            |       |        |             |  |               | 352,346   |            |  |  | 2.15  |       
|                                                                             |                            |       |         |             |  |               |           |            |  |  |       |       
|                                                                             | Total Square Feet Occupied |       |         |             |  |               |           | 16,510,060 |  |  |       | 100.00 | %
|                                                                             |                            |       |         |             |  |               |           |            |  |  |       |       



| |                   
| | ------------------
| | Lease Distribution

The following table presents information relating
to the distribution of the leases for our 120 properties, based
on leased net rentable square feet, as of December 31, 2004:

|                        |                         |           |       |         |  |        |       |             |   |            |           |             |  |            |       |        |   |   |        |         |  |   |       |       |  |  |       |        |  
|----------------------- | ----------------------- | --------- | ----- | ------- |  | ------ | ----- | ----------- | - | ---------- | --------- | ----------- |  | ---------- | ----- | ------ | - | - | ------ | ------- |  | - | ----- | ----- |  |  | ----- | ------ | -
|                        |                         |           |       |         |  |        |       | Percent of  |   | Annualized |           |             |  | Percent of
|                        |                         |           |       |         |  | Total  |       | Aggregate   |   | Base Rent  |           | Avg. Base   |  | Aggregate 
|                        |                         |           |       | Percent |  | Leased |       | Portfolio   |   | of         |           | Rent per    |  | Portfolio 
|                        |                         | Number    |       | of All  |  | Square |       | Leased      |   | Leases(1)  |           | Leased      |  | Annualized
|Square Feet Under Lease |                         | of Leases |       | Leases  |  | Feet   |       | Square Feet |   | (000s)    |           | Square Foot |  | Base Rent 
|                        |                         |           |       |         |  |        |       |             |   |            |           |             |  |           
|2,500 and under         |                         |           | 1,490 |         |  |        | 49.29 | %           |   |            | 2,114,663 |             |  |            | 12.60 | %      |   | $ | 50,567 |         |  | $ | 23.91 |       |  |  | 12.42 | %     
|2,501 - 5,000           |                         |           | 704   |         |  |        | 23.29 |             |   |            | 2,447,176 |             |  |            | 14.58 |        |   |   | 60,844 |         |  |   | 24.86 |       |  |  | 14.95 |       
|5,001 - 7,500           |                         |           | 299   |         |  |        | 9.89  |             |   |            | 1,813,171 |             |  |            | 10.80 |        |   |   | 46,939 |         |  |   | 25.89 |       |  |  | 11.53 |       
|7,501 - 10,000          |                         |           | 164   |         |  |        | 5.43  |             |   |            | 1,432,241 |             |  |            | 8.54  |        |   |   | 36,027 |         |  |   | 25.15 |       |  |  | 8.85  |       
|10,001 - 20,000         |                         |           | 241   |         |  |        | 7.97  |             |   |            | 3,405,929 |             |  |            | 20.30 |        |   |   | 85,663 |         |  |   | 25.15 |       |  |  | 21.04 |       
|20,001 - 40,000         |                         |           | 78    |         |  |        | 2.58  |             |   |            | 2,118,322 |             |  |            | 12.62 |        |   |   | 51,036 |         |  |   | 24.09 |       |  |  | 12.54 |       
|40,001 and over         |                         |           | 47    |         |  |        | 1.55  |             |   |            | 3,451,173 |             |  |            | 20.56 |        |   |   | 76,002 |         |  |   | 22.02 |       |  |  | 18.67 |       
|                        |                         |           |       |         |  |        |       |             |   |            |           |             |  |            |       |        |   |   |        |         |  |   |       |       |  |  |       |       
|                        | Total/ Weighted Average |           |       | 3,023   |  |        |       | 100.00      | % |            |           | 16,782,675  |  |            |       | 100.00 | % |   | $      | 407,078 |  |   | $     | 24.26 |  |  |       | 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.

17



---



##### Table of Contents





| |                  
| | -----------------
| | Lease Expirations

The following table presents a summary schedule
of the total lease expirations for our 120 properties for leases
in place at December 31, 2004. 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 |       |             
|                         |                   |                         |     |            |       |               |           | Annualized   |            | Base Rent  |       | Percentage  
|                         |                   |                         |     | Square     |       | Percentage of |           | Base Rent of |            | per Square |       | of Aggregate
|                         |                   | Number of               |     | Footage of |       | Aggregate     |           | 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           |                   |                         | 113 |            |       |               | 499,517   |              |            |            | 2.98  | %            |        | $ | 8,878  |        |         | $ | 17.77 |       |       |  | 2.18  | %    
|Q1 2005                  |                   |                         | 136 |            |       |               | 465,009   |              |            |            | 2.77  |              |        |   | 9,421  |        |         |   | 20.26 |       |       |  | 2.31  |      
|Q2 2005                  |                   |                         | 160 |            |       |               | 623,578   |              |            |            | 3.72  |              |        |   | 13,792 |        |         |   | 22.12 |       |       |  | 3.39  |      
|Q3 2005                  |                   |                         | 167 |            |       |               | 624,148   |              |            |            | 3.72  |              |        |   | 14,522 |        |         |   | 23.27 |       |       |  | 3.57  |      
|Q4 2005                  |                   |                         | 188 |            |       |               | 802,859   |              |            |            | 4.78  |              |        |   | 17,347 |        |         |   | 21.61 |       |       |  | 4.26  |      
|                         |                   |                         |     |            |       |               |           |              |            |            |       |              |        |   |        |        |         |   |       |       |       |  |       |      
|                         | 2005 Sub-Total(2) |                         |     | 651        |       |               |           | 2,515,594    |            |            |       | 14.99        |        |   |        | 55,082 |         |   |       | 21.90 |       |  |       | 13.53 |       
|2006                     |                   |                         | 596 |            |       |               | 2,513,849 |              |            |            | 14.98 |              |        |   | 59,551 |        |         |   | 23.69 |       |       |  | 14.63 |      
|2007                     |                   |                         | 529 |            |       |               | 2,416,185 |              |            |            | 14.40 |              |        |   | 56,854 |        |         |   | 23.53 |       |       |  | 13.97 |      
|2008                     |                   |                         | 392 |            |       |               | 2,355,397 |              |            |            | 14.03 |              |        |   | 58,662 |        |         |   | 24.91 |       |       |  | 14.41 |      
|2009                     |                   |                         | 344 |            |       |               | 2,139,029 |              |            |            | 12.74 |              |        |   | 51,137 |        |         |   | 23.91 |       |       |  | 12.56 |      
|2010                     |                   |                         | 159 |            |       |               | 1,615,217 |              |            |            | 9.62  |              |        |   | 39,338 |        |         |   | 24.35 |       |       |  | 9.66  |      
|2011                     |                   |                         | 53  |            |       |               | 704,942   |              |            |            | 4.20  |              |        |   | 22,102 |        |         |   | 31.35 |       |       |  | 5.43  |      
|2012                     |                   |                         | 54  |            |       |               | 855,313   |              |            |            | 5.10  |              |        |   | 20,291 |        |         |   | 23.72 |       |       |  | 4.98  |      
|2013                     |                   |                         | 34  |            |       |               | 411,142   |              |            |            | 2.45  |              |        |   | 12,195 |        |         |   | 29.66 |       |       |  | 3.00  |      
|2014+                    |                   |                         | 98  |            |       |               | 756,490   |              |            |            | 4.51  |              |        |   | 22,988 |        |         |   | 30.39 |       |       |  | 5.65  |      
|                         |                   |                         |     |            |       |               |           |              |            |            |       |              |        |   |        |        |         |   |       |       |       |  |       |      
|                         |                   | Total/ Weighted Average |     |            | 3,023 |               |           |              | 16,782,675 |            |       |              | 100.00 | % |        | $      | 407,078 |   |       | $     | 24.26 |  |       |       | 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 during the year
ended December 31, 2004.






|        |                                                        
|------- | -------------------------------------------------------
|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, 2004.

18



---



##### Table of Contents






PART II






|        |                                                                                                                     
|------- | --------------------------------------------------------------------------------------------------------------------
|ITEM 5. | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities

Our common stock is traded on the New York Stock
Exchange, or NYSE, under the symbol ARI. On
March 10, 2005, the last reported sales price per share of
common stock on the NYSE was $35.41 and there were approximately
226 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.

|               |  |      |       |     |  |              |       |  |  |   |       | 
|-------------- |  | ---- | ----- | --- |  | ------------ | ----- |  |  | - | ----- | 
|               |  |      |       |     |  | Per Share   
|               |  |      |       |     |  | Common Stock
|               |  |      |       |     |  | Dividends   
|               |  | High |       | Low |  | Declared    
|               |  |      |       |     |  |             
|2003           |  |      |       |     |  |              |       |  |  |   |       | 
|First Quarter  |  | $    | 23.69 |     |  | $            | 20.18 |  |  | $ | 0.505 | 
|Second Quarter |  | $    | 26.23 |     |  | $            | 22.68 |  |  | $ | 0.505 | 
|Third Quarter  |  | $    | 27.92 |     |  | $            | 26.15 |  |  | $ | 0.505 | 
|Fourth Quarter |  | $    | 30.34 |     |  | $            | 27.49 |  |  | $ | 0.505 | 
|2004           |  |      |       |     |  |              |       |  |  |   |       | 
|First Quarter  |  | $    | 32.75 |     |  | $            | 29.30 |  |  | $ | 0.505 | 
|Second Quarter |  | $    | 32.86 |     |  | $            | 26.89 |  |  | $ | 0.505 | 
|Third Quarter  |  | $    | 33.15 |     |  | $            | 29.54 |  |  | $ | 0.505 | 
|Fourth Quarter |  | $    | 37.72 |     |  | $            | 32.66 |  |  | $ | 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, capital requirements and annual
distribution requirements under the REIT provisions of the
Internal Revenue Code and such other factors our Board of
Directors deem relevant.

19



---



##### Table of Contents








|        |                        
|------- | -----------------------
|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.

|                                                                                                                                                     |                                     |                                                    |          |      |  |      |          |      |  |      |          |      |  |   |          |      |  |   |          |      | 
|---------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------- | -------------------------------------------------- | -------- | ---- |  | ---- | -------- | ---- |  | ---- | -------- | ---- |  | - | -------- | ---- |  | - | -------- | ---- | 
|                                                                                                                                                     |                                     |                                                   
|                                                                                                                                                     |                                     | Year Ended December 31,                           
|                                                                                                                                                     |                                     |                                                   
|                                                                                                                                                     |                                     | 2004                                               |          | 2003 |  | 2002 |          | 2001 |  | 2000
|                                                                                                                                                     |                                     |                                                    |          |      |  |      |          |      |  |     
|                                                                                                                                                     |                                     |                                                   
|                                                                                                                                                     |                                     | (in thousands, except ratio and per share amounts)
|Operating Data:                                                                                                                                      |                                     |                                                    |          |      |  |      |          |      |  |      |          |      |  |   |          |      |  |   |          |     
|Property revenues                                                                                                                                    |                                     | $                                                  | 409,193  |      |  | $    | 393,765  |      |  | $    | 374,135  |      |  | $ | 382,839  |      |  | $ | 351,924  |     
|Interest and other (loss) income                                                                                                                     |                                     |                                                    | (508     | )    |  |      | (401     | )    |  |      | 2,063    |      |  |   | 2,135    |      |  |   | 3,290    |     
|Property operating expenses                                                                                                                          |                                     |                                                    | (133,635 | )    |  |      | (125,979 | )    |  |      | (117,019 | )    |  |   | (110,421 | )    |  |   | (100,574 | )   
|General and administrative expense                                                                                                                   |                                     |                                                    | (19,503  | )    |  |      | (16,931  | )    |  |      | (12,581  | )    |  |   | (11,496  | )    |  |   | (9,103   | )   
|Depreciation and amortization                                                                                                                        |                                     |                                                    | (121,687 | )    |  |      | (111,952 | )    |  |      | (100,317 | )    |  |   | (92,613  | )    |  |   | (78,672  | )   
|Interest expense                                                                                                                                     |                                     |                                                    | (88,856  | )    |  |      | (93,093  | )    |  |      | (87,827  | )    |  |   | (85,949  | )    |  |   | (78,495  | )   
|                                                                                                                                                     |                                     |                                                    |          |      |  |      |          |      |  |      |          |      |  |   |          |      |  |   |          |     
|Income from continuing operations before gain on
    sale of operating properties, impairment on investment in
    securities, and minority interest |                                     |                                                    | 45,004   |      |  |      | 45,409   |      |  |      | 58,454   |      |  |   | 84,495   |      |  |   | 88,370   |     
|Gain on sale of operating properties(1)                                                                                                              |                                     |                                                    |         |      |  |      |         |      |  |      | 1,967    |      |  |   | 4,591    |      |  |   | 2,132    |     
|                                                                                                                                                     |                                     |                                                    |          |      |  |      |          |      |  |      |          |      |  |   |          |      |  |   |          |     
|Income from continuing operations before
    impairment on investment securities and minority interest                                               |                                     |                                                    | 45,004   |      |  |      | 45,409   |      |  |      | 60,421   |      |  |   | 89,086   |      |  |   | 90,502   |     
|Impairment on investment in securities                                                                                                               |                                     |                                                    | (2,700   | )    |  |      |         |      |  |      |         |      |  |   |         |      |  |   |         |     
|Minority interest                                                                                                                                    |                                     |                                                    | (5,255   | )    |  |      | (5,375   | )    |  |      | (5,816   | )    |  |   | (7,046   | )    |  |   | (7,158   | )   
|                                                                                                                                                     |                                     |                                                    |          |      |  |      |          |      |  |      |          |      |  |   |          |      |  |   |          |     
|Income from continuing operations                                                                                                                    |                                     |                                                    | 37,049   |      |  |      | 40,034   |      |  |      | 54,605   |      |  |   | 82,040   |      |  |   | 83,344   |     
|Discontinued operations, net of minority interest                                                                                                    |                                     |                                                    | 6,253    |      |  |      | 12,538   |      |  |      | 15,570   |      |  |   | 15,719   |      |  |   | 13,366   |     
|Gain on sale of discontinued properties                                                                                                              |                                     |                                                    | 30,473   |      |  |      | 5,937    |      |  |      |         |      |  |   |         |      |  |   |         |     
|                                                                                                                                                     |                                     |                                                    |          |      |  |      |          |      |  |      |          |      |  |   |          |      |  |   |          |     
|Net income                                                                                                                                           |                                     | $                                                  | 73,775   |      |  | $    | 58,509   |      |  | $    | 70,175   |      |  | $ | 97,759   |      |  | $ | 96,710   |     
|                                                                                                                                                     |                                     |                                                    |          |      |  |      |          |      |  |      |          |      |  |   |          |      |  |   |          |     
|Basic net income per common share:                                                                                                                   |                                     |                                                    |          |      |  |      |          |      |  |      |          |      |  |   |          |      |  |   |          |     
|                                                                                                                                                     | Income from continuing operations   |                                                    | $        | 0.57 |  |      | $        | 0.63 |  |      | $        | 0.85 |  |   | $        | 1.28 |  |   | $        | 1.32 | 
|                                                                                                                                                     | Income from discontinued operations |                                                    |          | 0.56 |  |      |          | 0.29 |  |      |          | 0.24 |  |   |          | 0.25 |  |   |          | 0.21 | 
|                                                                                                                                                     |                                     |                                                    |          |      |  |      |          |      |  |      |          |      |  |   |          |      |  |   |          |     
|Net income per common share-basic                                                                                                                    |                                     | $                                                  | 1.13     |      |  | $    | 0.92     |      |  | $    | 1.09     |      |  | $ | 1.53     |      |  | $ | 1.53     |     
|                                                                                                                                                     |                                     |                                                    |          |      |  |      |          |      |  |      |          |      |  |   |          |      |  |   |          |     
|Weighed average number of common shares-basic                                                                                                        |                                     |                                                    | 65,372   |      |  |      | 63,553   |      |  |      | 64,151   |      |  |   | 63,754   |      |  |   | 63,408   |     
|                                                                                                                                                     |                                     |                                                    |          |      |  |      |          |      |  |      |          |      |  |   |          |      |  |   |          |     
|Diluted net income per common share:                                                                                                                 |                                     |                                                    |          |      |  |      |          |      |  |      |          |      |  |   |          |      |  |   |          |     
|                                                                                                                                                     | Income from continuing operations   |                                                    | $        | 0.56 |  |      | $        | 0.63 |  |      | $        | 0.85 |  |   | $        | 1.28 |  |   | $        | 1.31 | 
|                                                                                                                                                     | Income from discontinued operations |                                                    |          | 0.56 |  |      |          | 0.29 |  |      |          | 0.24 |  |   |          | 0.25 |  |   |          | 0.21 | 
|                                                                                                                                                     |                                     |                                                    |          |      |  |      |          |      |  |      |          |      |  |   |          |      |  |   |          |     
|Net income per common share-diluted                                                                                                                  |                                     | $                                                  | 1.12     |      |  | $    | 0.92     |      |  | $    | 1.09     |      |  | $ | 1.53     |      |  | $ | 1.52     |     
|                                                                                                                                                     |                                     |                                                    |          |      |  |      |          |      |  |      |          |      |  |   |          |      |  |   |          |     
|Weighed average number of common shares- diluted                                                                                                     |                                     | $                                                  | 65,740   |      |  | $    | 63,815   |      |  | $    | 64,351   |      |  | $ | 64,014   |      |  | $ | 63,598   |     
|                                                                                                                                                     |                                     |                                                    |          |      |  |      |          |      |  |      |          |      |  |   |          |      |  |   |          |     
|Cash dividends declared per common share                                                                                                             |                                     | $                                                  | 2.02     |      |  | $    | 2.02     |      |  | $    | 2.02     |      |  | $ | 1.96     |      |  | $ | 1.86     |     
|                                                                                                                                                     |                                     |                                                    |          |      |  |      |          |      |  |      |          |      |  |   |          |      |  |   |          |     
|Other Data:                                                                                                                                          |                                     |                                                    |          |      |  |      |          |      |  |      |          |      |  |   |          |      |  |   |          |     
|Cash provided by operating activities                                                                                                                |                                     | $                                                  | 184,907  |      |  | $    | 181,482  |      |  | $    | 199,922  |      |  | $ | 204,667  |      |  | $ | 192,152  |     
|Cash used in investing activities                                                                                                                    |                                     | $                                                  | (11,241  | )    |  | $    | (20,355  | )    |  | $    | (213,002 | )    |  | $ | (115,854 | )    |  | $ | (216,024 | )   
|Cash (used in) provided by financing activities                                                                                                      |                                     | $                                                  | (165,333 | )    |  | $    | (160,483 | )    |  | $    | (19,898  | )    |  | $ | (57,204  | )    |  | $ | 22,248   |     
|Funds from Operations(2)                                                                                                                             |                                     | $                                                  | 171,777  |      |  | $    | 174,458  |      |  | $    | 181,549  |      |  | $ | 198,240  |      |  | $ | 185,146  |     



---

Selected financial data continues on next
page.

20



---



##### Table of Contents



|                              |  |                         |           |      |  |      |           |      |  |      |           |  |  |   |           |  |  |   |           | 
|----------------------------- |  | ----------------------- | --------- | ---- |  | ---- | --------- | ---- |  | ---- | --------- |  |  | - | --------- |  |  | - | --------- | 
|                              |  |                        
|                              |  | Year Ended December 31,
|                              |  |                        
|                              |  | 2004                    |           | 2003 |  | 2002 |           | 2001 |  | 2000
|                              |  |                         |           |      |  |      |           |      |  |     
|Balance Sheet Data:           |  |                         |           |      |  |      |           |      |  |      |           |  |  |   |           |  |  |   |           | 
|Net investment in real estate |  | $                       | 2,551,981 |      |  | $    | 2,646,699 |      |  | $    | 2,741,624 |  |  | $ | 2,622,980 |  |  | $ | 2,603,566 | 
|Total assets                  |  | $                       | 2,659,997 |      |  | $    | 2,741,433 |      |  | $    | 2,832,409 |  |  | $ | 2,761,443 |  |  | $ | 2,705,597 | 
|Total indebtedness            |  | $                       | 1,326,084 |      |  | $    | 1,349,781 |      |  | $    | 1,402,304 |  |  | $ | 1,251,483 |  |  | $ | 1,177,769 | 
|Other liabilities(3)          |  | $                       | 83,713    |      |  | $    | 76,638    |      |  | $    | 76,350    |  |  | $ | 62,685    |  |  | $ | 56,885    | 
|Minority interests            |  | $                       | 20,414    |      |  | $    | 72,194    |      |  | $    | 74,571    |  |  | $ | 78,661    |  |  | $ | 86,176    | 
|Total stockholders equity    |  | $                       | 1,196,292 |      |  | $    | 1,210,285 |      |  | $    | 1,247,377 |  |  | $ | 1,337,206 |  |  | $ | 1,355,171 | 



---

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Beginning with the adoption of the Statement of
    Financial Accounting Standard No. 144 in 2002, the
    operating results and gains and losses of real estate properties
    classified as held for disposition are included in discontinued
    operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|(2) | 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
    NAREIT, 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 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
    methodologies for calculating FFO and, accordingly, our FFO may
    not be comparable to other REITs. See a reconciliation of FFO to
    Net income in Item 7 Managements Discussion and
    Analysis of Financial Condition and Results of Operations
    of this report.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           



|    |                            
|--- | ---------------------------
|(3) | Excludes dividends payable.

21



---



##### Table of Contents








|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|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 6 senior executive officers who have experience in
the real estate industry ranging from 14 to 35 years and
who collectively have an average of 20 years of experience.
We perform all property management, construction management,
accounting, finance, acquisition and disposition activities and
a majority of our leasing transactions with our staff of
approximately 300 employees.

As of December 31, 2004, 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 120 primarily suburban office
properties and 197 buildings containing approximately
18.2 million net rentable square feet. As of
December 31, 2004, our operating portfolio was 91.2%
occupied.

Our primary business strategy is to actively
manage our portfolio to achieve gains in rental rates and
occupancy, control operating expenses and 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 use the net
proceeds to repay outstanding indebtedness or place into
investments that we believe will generate higher long-term value.



| |                             
| | ----------------------------
| | Critical Accounting Policies

The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States requires management to make estimates and
assumptions that affect the reported amounts of assets,
liabilities, and the disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses for the reporting
periods. Certain accounting policies are considered to be
critical accounting estimates, as they require management to
make assumptions about matters that are highly uncertain at the
time the estimate is made and changes in the accounting estimate
are reasonably likely to occur from period to period. Management
believes the following critical accounting policies reflect the
Companys more significant judgments and estimates used in
the preparation of the consolidated financial statements. For a
summary of all the Companys significant accounting
policies see note 2 to the Companys consolidated
financial statements included elsewhere in this report. We
periodically evaluate our estimates and assumptions used in the
preparation of our financial statements including our reported
operating results. Because over 97% of our assets as of
December 31, 2004 and 2003, respectively, consists of
investments in real estate and amounts due from tenants, our
primary evaluations consist of recoverability of amounts
invested in real estate properties and collectability of amounts
due from tenants.

Revenue Recognition

We recognize minimum rent, including rental
abatements and contractual fixed increases attributable to
operating leases, on a straight-line basis over the term of the
related lease. The amount by which straight-line rental income
differs from cash rents billed under the lease is included in
deferred rents.

Allowance for Rents and Other
Receivables

We periodically evaluate the collectability of
amounts due from particular tenants based on a variety of
factors including the tenants payment history, our
observation of space utilization, periodic discussions with the
tenants regarding the tenants short and long-term business
plan for the space under contract, the overall financial health
of the business and/or parent company, available financial and
other information regarding the tenant or its parent company and
the amount of lease security on hand. Based on these factors,
unless collection is reasonably assured, we fully reserve
amounts due that are in excess of the lease security we hold.
All of our allowances are tenant specific.

22



---



##### Table of Contents



As of December 31, 2004 and 2003 we had a
total of $5.7 million and $6.3 million in our
allowance for doubtful accounts and other reserves,
respectively, representing approximately 10% and 12% of the
total rent and deferred rent balance outstanding at each
respective balance sheet date. Including security deposits and
existing letters of credit, as of December 31, 2004 and
2003, we had a total of $39.3 million and
$33.5 million of total lease security available,
respectively. For the years ended December 31, 2004, 2003
and 2002 our bad debt expense related to losses for uncollected
rents, deferred rents, tenants reimbursements and other
uncollectible charges were approximately 0.3%, 0.6% and 1.4% of
total gross revenue, respectively, for each of those years. Our
allowances have historically proved to be adequate; however, due
to the uncertainty inherent in the tenant specific evaluation
process, our allowance for doubtful accounts may not prove to be
sufficient in all future periods.

Commercial Properties



| |                     
| | --------------------
| | Impairment of Assets

The recoverability of amounts invested in real
estate properties is highly dependent on the assumptions we use.
For properties we intend to hold and operate, we recognize a
write-down to estimated fair value whenever a propertys
estimated undiscounted future cash flows are less than its
depreciated cost. For properties we intend to sell, we recognize
a write-down to estimated fair value whenever a propertys
estimated sales price less costs to sell are less than its
depreciated costs.

We determine fair value of our properties using
methods similar to those used by independent appraisers,
including comparison of carrying costs on a per square foot
basis to sales price on a per square foot basis on recently
transacted properties that are similar in quality and location
and also by comparing carrying costs to acquisition offers from
prospective buyers. Based on our assessment, no write-downs to
estimated fair value were necessary as of December 31, 2004
and 2003.

Due to the availability of comparable sales
information in most of our sub-markets, historically our fair
value estimates have proven to be accurate. However, our
estimates may vary from actual values, especially for real
estate assets located in sub-markets where quoted per square
foot market prices for comparable properties may not be readily
available or real estate assets that become impaired due to
non-recurring circumstances such as previously unknown
environmental issues or casualty losses that result in damages
in excess of our insurance coverage amount.



| |                      
| | ---------------------
| | Property Acquisitions

The amounts paid for properties acquired are
allocated between the tangible and intangible assets. Tangible
assets include land, building and tenant improvements.
Intangible assets include the value of in place leases. To
arrive at the value of in place leases, we compare estimates of
current market rents to the in place rents. We also make
assumptions regarding the amount of time that currently occupied
space would remain vacant if we had to replace the existing
tenants under current market conditions. We also reduce the
value of each lease using a discount rate that we deem to be
commensurate with each tenants credit profile. The
assumptions we use are based on available market information,from independent sources and our own market knowledge and
experience.

The fair market value that we assign to acquired
leases is amortized over the remaining lease terms. The tangible
assets assigned to building improvements are depreciated over a
much longer period of time, normally forty years. Consequently,
the assumptions we use in this allocation have a significant
impact on the operating results that we will report in future
periods. We cannot guarantee that the initial assumptions that
we use to any propertys purchase price will prove to be
accurate. We also would not revise these estimates in future
periods if our initial amounts were proven to be inaccurate.

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,

23



---



##### Table of Contents



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.

Off-Balance Sheet Arrangements

There are no off-balance sheet transactions,
arrangements or obligations (including contingent obligations)
that have, or are reasonably likely to have a current or future
material effect on our financial condition, changes in the
financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources.

24



---



##### Table of Contents





| |                      
| | ---------------------
| | 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.

Comparison of the year ended December 31,
2004 to the year ended December 31, 2003

(in thousands, except number of properties and
percentages)


|                                |                                                                                               |                                      |         |         |         |         |         |         |         |   |       |        |        |  |   |     |    | 
|------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------ | ------- | ------- | ------- | ------- | ------- | ------- | ------- | - | ----- | ------ | ------ |  | - | --- | -- | 
|                                |                                                                                               |                                      |         |         |         |        
|                                |                                                                                               | Year Ended December 31,              |         |         |         |        
|                                |                                                                                               |                                      |         |         |         | Percent
|                                |                                                                                               | 2004                                 |         | 2003    |         | Change  |         | Change 
|                                |                                                                                               |                                      |         |         |         |         |         |        
|Revenue from rental operations: |                                                                                               |                                      |         |         |         |         |         |         |         |   |       |        |        |  |   |    
|                                | Scheduled cash rents                                                                          |                                      | $       | 351,465 |         |         | $       | 339,009 |         |   | $     | 12,456 |        |  |   | 4   | % 
|                                | Straight-line rents                                                                           |                                      |         | 2,020   |         |         |         | 915     |         |   |       | 1,105  |        |  |   | 121 |   
|                                | Tenant reimbursements                                                                         |                                      |         | 20,129  |         |         |         | 23,355  |         |   |       | (3,226 | )      |  |   | (14 | ) 
|                                | Parking, net of expense                                                                       |                                      |         | 23,816  |         |         |         | 21,635  |         |   |       | 2,181  |        |  |   | 10  |   
|                                | Other rental operations                                                                       |                                      |         | 11,763  |         |         |         | 8,851   |         |   |       | 2,912  |        |  |   | 33  |   
|                                |                                                                                               |                                      |         |         |         |         |         |         |         |   |       |        |        |  |   |    
|                                |                                                                                               | Total revenue from rental operations |         |         | 409,193 |         |         |         | 393,765 |   |       |        | 15,428 |  |   |     | 4  | 
|                                |                                                                                               |                                      |         |         |         |         |         |         |         |   |       |        |        |  |   |    
|Property expenses:              |                                                                                               |                                      |         |         |         |         |         |         |         |   |       |        |        |  |   |    
|                                | Repairs and maintenance                                                                       |                                      |         | 44,281  |         |         |         | 40,738  |         |   |       | 3,543  |        |  |   | 9   |   
|                                | Utilities                                                                                     |                                      |         | 32,835  |         |         |         | 32,497  |         |   |       | 338    |        |  |   | 1   |   
|                                | Real estate taxes                                                                             |                                      |         | 30,569  |         |         |         | 28,156  |         |   |       | 2,413  |        |  |   | 9   |   
|                                | Insurance                                                                                     |                                      |         | 7,506   |         |         |         | 7,909   |         |   |       | (403   | )      |  |   | (5  | ) 
|                                | Ground rent                                                                                   |                                      |         | 746     |         |         |         | 961     |         |   |       | (215   | )      |  |   | (22 | ) 
|                                | Administrative                                                                                |                                      |         | 17,698  |         |         |         | 15,718  |         |   |       | 1,980  |        |  |   | 13  |   
|                                |                                                                                               |                                      |         |         |         |         |         |         |         |   |       |        |        |  |   |    
|                                |                                                                                               | Total property expenses              |         |         | 133,635 |         |         |         | 125,979 |   |       |        | 7,656  |  |   |     | 6  | 
|                                |                                                                                               |                                      |         |         |         |         |         |         |         |   |       |        |        |  |   |    
|Property operating results(1)   |                                                                                               |                                      | 275,558 |         |         |         | 267,786 |         |         |   | 7,772 |        |        |  | 3 |    
|                                | General and administrative                                                                    |                                      |         | 19,503  |         |         |         | 16,931  |         |   |       | 2,572  |        |  |   | 15  |   
|                                | Interest                                                                                      |                                      |         | 88,856  |         |         |         | 93,093  |         |   |       | (4,237 | )      |  |   | (5  | ) 
|                                | Depreciation and amortization                                                                 |                                      |         | 121,687 |         |         |         | 111,952 |         |   |       | 9,735  |        |  |   | 9   |   
|                                | Interest and other loss                                                                       |                                      |         | 508     |         |         |         | 401     |         |   |       | 107    |        |  |   | 27  |   
|                                |                                                                                               |                                      |         |         |         |         |         |         |         |   |       |        |        |  |   |    
|                                | Income from continuing operations before gain on
    sale of properties and minority interest |                                      | $       | 45,004  |         |         | $       | 45,409  |         |   | $     | (405   | )      |  |   | (1  | )%
|                                |                                                                                               |                                      |         |         |         |         |         |         |         |   |       |        |        |  |   |    
|                                | Discontinued operations, net of minority interest                                             |                                      | $       | 6,253   |         |         | $       | 12,538  |         |   | $     | (6,285 | )      |  |   | (50 | )%
|                                |                                                                                               |                                      |         |         |         |         |         |         |         |   |       |        |        |  |   |    
|Number of properties:           |                                                                                               |                                      |         |         |         |         |         |         |         |   |       |        |        |  |   |    
|                                | Acquired during period                                                                        |                                      |         | 2       |         |         |         | 1       |         |   |       |        |        |  |   |     |   
|                                | Completed and placed in service during period                                                 |                                      |         | 1       |         |         |         |        |         |   |       |        |        |  |   |     |   
|                                | Disposed of during period                                                                     |                                      |         | (12     | )       |         |         | (8      | )       |   |       |        |        |  |   |     |   
|                                | Owned at end of period                                                                        |                                      |         | 120     |         |         |         | 129     |         |   |       |        |        |  |   |     |   
|Net rentable square feet:       |                                                                                               |                                      |         |         |         |         |         |         |         |   |       |        |        |  |   |    
|                                | Acquired during period                                                                        |                                      |         | 391     |         |         |         | 101     |         |   |       |        |        |  |   |     |   
|                                | Completed and placed in service during period                                                 |                                      |         | 283     |         |         |         |        |         |   |       |        |        |  |   |     |   
|                                | Expansion space placed in service                                                             |                                      |         | 168     |         |         |         |        |         |   |       |        |        |  |   |     |   
|                                | Disposed of during period                                                                     |                                      |         | (1,268  | )       |         |         | (598    | )       |   |       |        |        |  |   |     |   
|                                | Owned at end of period                                                                        |                                      |         | 18,210  |         |         |         | 18,636  |         |   |       |        |        |  |   |     |   
|Same Property Portfolio(2):     |                                                                                               |                                      |         |         |         |         |         |         |         |   |       |        |        |  |   |    
|                                | Revenue from rental operations                                                                |                                      | $       | 397,842 |         |         | $       | 394,449 |         |   | $     | 3,393  |        |  |   | 1   | % 
|                                | Property expenses                                                                             |                                      |         | 129,822 |         |         |         | 125,953 |         |   |       | 3,869  |        |  |   | 3   |   
|                                |                                                                                               |                                      |         |         |         |         |         |         |         |   |       |        |        |  |   |    
|                                |                                                                                               | $                                    | 268,020 |         |         | $       | 268,496 |         |         | $ | (476  | )      |        |  |  | %  
|                                |                                                                                               |                                      |         |         |         |         |         |         |         |   |       |        |        |  |   |    
|                                | Straight-line rents                                                                           |                                      | $       | 315     |         |         | $       | 592     |         |   |       |        |        |  |   |     |   
|                                |                                                                                               |                                      |         |         |         |         |         |         |         |   |       |        |        |  |   |    
|                                | Number of properties                                                                          |                                      |         | 116     |         |         |         |         |         |   |       |        |        |  |   |     |   
|                                | Number of buildings                                                                           |                                      |         | 192     |         |         |         |         |         |   |       |        |        |  |   |     |   
|                                | Average occupancy                                                                             |                                      |         | 90.0    | %       |         |         | 89.3    | %       |   |       |        |        |  |   |     |   
|                                | Net rentable square feet                                                                      |                                      |         | 17,334  |         |         |         |         |         |   |       |        |        |  |   |     |   

25



---



##### Table of Contents





---

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The components outlined above comprise our
    Property Operating Results. Property Operating Results is a
    non-GAAP measure of performance. Property Operating Results is
    used by investors and our management to evaluate and compare the
    performance of our office properties and to determine trends in
    earnings. Property Operating Results is also employed by
    investors as one of the components used to estimate the value of
    our properties. Property Operating Results is used for the
    purposes noted above because it is not affected by (1) the
    cost of funds of the property owner, (2) the impact of
    depreciation and amortization expense as well as gains or losses
    from the sale of operating real estate assets that are included
    in net income computed in accordance with Generally Accepted
    Accounting Principles, or GAAP or (3) general and
    administrative expenses and other specific costs such as
    permanent impairments to carrying costs. The cost of funds is
    eliminated from net income because it is specific to the
    particular financing capabilities and constraints of the owner.
    The cost of funds is also eliminated because it is dependent on
    historical interest rates and other costs of capital as well as
    past decisions made by us regarding the appropriate mix of
    capital, which may have changed or may change in the future.
    Depreciation and amortization expenses as well as gains or
    losses from the sale of operating real estate assets are
    eliminated because they may not accurately represent the actual
    change in value in our office properties that result from use of
    the properties or changes in market conditions. While certain
    aspects of real property do decline in value over time in a
    manner that is reasonably captured by depreciation and
    amortization, the value of the properties as a whole have
    historically increased or decreased in value as a result of
    changes in overall economic conditions as well as the actual use
    of the property or the passage of time. Gains and losses from
    the sale of real property vary from property to property and are
    affected by market conditions at the time of sale which will
    usually change from period to period. These gains and losses can
    create distortions when comparing one period to another or when
    comparing our operating results to the operating results of
    other real estate companies that have not made similarly timed
    purchases and subsequent sales. General and administrative
    expenses and other owner specific costs such as impairment
    losses are eliminated because these costs are also in large part
    specific to the ownership structure and timing of purchases of
    the owner. We believe that eliminating these costs from net
    income is useful because the resulting measure captures the
    actual revenue generated and actual expenses incurred in
    operating our office properties as well as trends in occupancy
    rates, rental rates and operating costs.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | However, the usefulness of Property Operating
    Results is limited because it 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. Property Operating Results may fail
    to capture significant trends in these components of net income
    which further limits its usefulness.                                                                                                                                                                                                              
|
| | Property Operating Results is a measure of the
    operating performance of our office properties but does not
    measure our performance as a whole. Property Operating Results
    is therefore not a substitute for net income as computed in
    accordance with GAAP. This measure should be analyzed in
    conjunction with net income computed in accordance with GAAP and
    discussions elsewhere in Managements Discussion and
    Analysis of Financial Condition and Results of Operations
    regarding the components of net income that are eliminated in
    the calculation of Property Operating Results. 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.



| |                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------
| | The following is a reconciliation of Property
    Operating Results to net income computed in accordance with GAAP
    (in thousands):

|                           |                                                   |                         |         |         |   |      |         |         |   |   |         |         |  
|-------------------------- | ------------------------------------------------- | ----------------------- | ------- | ------- | - | ---- | ------- | ------- | - | - | ------- | ------- | -
|                           |                                                   |                        
|                           |                                                   | Year Ended December 31,
|                           |                                                   |                        
|                           |                                                   | 2004                    |         | 2003    |   | 2002
|                           |                                                   |                         |         |         |   |     
|Net Income                 |                                                   | $                       | 73,775  |         |   | $    | 58,509  |         |   | $ | 70,175  |        
|Add:                       |                                                   |                         |         |         |   |      |         |         |   |   |         |        
|                           | General and administrative expense                |                         |         | 19,503  |   |      |         | 16,931  |   |   |         | 12,581  |  
|                           | Interest expense                                  |                         |         | 88,856  |   |      |         | 93,093  |   |   |         | 87,827  |  
|                           | Depreciation and amortization                     |                         |         | 121,687 |   |      |         | 111,952 |   |   |         | 100,317 |  
|                           | Minority interest                                 |                         |         | 5,255   |   |      |         | 5,375   |   |   |         | 5,816   |  
|                           | Interest and other loss                           |                         |         | 508     |   |      |         | 401     |   |   |         |        |  
|                           | Impairment on investment in securities            |                         |         | 2,700   |   |      |         |        |   |   |         |        |  
|Less:                      |                                                   |                         |         |         |   |      |         |         |   |   |         |        
|                           | Interest and other income                         |                         |         |        |   |      |         |        |   |   |         | (2,063  | )
|                           | Gain on sale of discontinued properties           |                         |         | (30,473 | ) |      |         | (5,937  | ) |   |         |        |  
|                           | Discontinued operations, net of minority interest |                         |         | (6,253  | ) |      |         | (12,538 | ) |   |         | (15,570 | )
|                           | Gain on sale of operating properties              |                         |         |        |   |      |         |        |   |   |         | (1,967  | )
|                           |                                                   |                         |         |         |   |      |         |         |   |   |         |        
|Property Operating Results |                                                   | $                       | 275,558 |         |   | $    | 267,786 |         |   | $ | 257,116 |        
|                           |                                                   |                         |         |         |   |      |         |         |   |   |         |        



|    |                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Consists of non-development/renovation properties
    classified as part of continuing and discontinued operations
    that were owned for the entirety of the periods presented.

Variances for Results of Operations

Our Property Operating Results for the year ended
December 31, 2004 compared to 2003 were primarily affected
by our acquisitions and development activities since
January 1, 2003.

26



---



##### Table of Contents



As a result of these changes within our portfolio
of properties since January 1, 2003, we do not believe the
Property Operating Results presented above are comparable from
period to period. Therefore, in the table above, we have also
presented the Property Operating Results for our same property
portfolio.

Revenue from Rental Operations

Revenue from rental operations increased
approximately $15.4 million, or 4%, for the year ended
December 31, 2004 compared to 2003. This increase was
primarily due to our December 2003 acquisition of a
101,000 square foot office property in San Diego
County in December of 2003, revenues from our 6100 Center Drive
development property which was placed in service during the
second quarter of 2004, two office properties acquired in Los
Angeles County in October of 2004 totaling approximately
391,000 square feet, an 0.8% point overall occupancy gain
in 2004.

Revenue from rental operations for the same store
portfolio increased by approximately $3.4 million, or 1%,
in 2004 as compared to 2003. The increase was due to an
approximate $2.9 million increase in scheduled cash rents,
a $2.9 million increase in other rental operations and a
$1.6 million increase in parking income, all of which were
partially offset by an approximate $3.7 million decrease in
tenant reimbursements. The increase in scheduled cash rents was
primarily attributable to scheduled rent increases in existing
leases and by the 0.7% increase in average occupancy for these
properties. Other rental operations increased primarily due to
higher lease termination fees in 2004 and lower bad debt expense
as a result of a reduced level of defaults in 2004. Parking
income increased in 2004 primarily due to an increase in
occupancy in 2004 and higher special event parking. Tenant
reimbursements decreased primarily due to the resetting of base
years for new leases in 2004.

Property Expenses

Property expenses increased approximately
$7.7 million, or 6%, for the year ended December 31,
2004 compared to 2003. This increase was partially due to our
acquisition and development activities, gains in occupancy and
increases in operating expenses for the same property portfolio
described below.

Property expenses for the same store portfolio
increased by approximately $3.9 million, or 3%, in 2004 as
compared to 2003. The increase was primarily due to an
approximate $2.9 million increase in repairs and
maintenance, a $1.6 million increase in real estate taxes
and a $1.3 million increase in property administrative
expenses, all of which were partially offset by a
$1.2 million decrease in utilities expense and a
$0.5 million decrease in insurance expense. The increase in
repairs and maintenance expense was primarily due to higher
costs for contracted services and the timing of certain
projects. The increase in real estate taxes was primarily due to
the timing of reassessments and property tax refunds received in
2003 as well as new property tax measures implemented in Los
Angeles County. The increase in property administrative expense
was primarily due to higher employee compensation costs and
higher property legal expenses. The decrease in utilities
expense was primarily due to lower than anticipated usage in
2004 as a result of a mild summer, partially offset by an
increase in occupancy. The decrease in insurance expense was
primarily due to lower premiums on a new insurance policy which
began in March 2004.

General and Administrative

General and administrative expenses increased
approximately $2.6 million in 2004 as compared to 2003.
This increase was primarily related to higher personnel costs
associated with annual merit increases, non-cash compensation
expense associated with restricted stock grants issued in 2004
and 2003 and Section 404 implementation costs in 2004.

Interest Expense

Interest expense decreased approximately
$4.2 million, or 5%, in 2004 as compared to 2003. This
decrease was primarily due to a lower cost of debt in 2004 due
to the refinancing of a $175 million, 7.52% secured loan
with proceeds from property dispositions and from the issuance
of $200 million, 5.20% (5.45% effective rate) unsecured
senior notes in August 2004, partially offset by lower
capitalized interest in 2004. Capitalized interest was lower in
2004 as we stopped capitalizing interest on our 6100 Center
Drive development property in May 2003.

27



---



##### Table of Contents



Depreciation and Amortization

Depreciation and amortization expense increased
by approximately $9.7 million, or 9%, in 2004 as compared
to 2003. The increase was primarily due to depreciation related
to a property acquired in December 2003, two properties acquired
in October 2004, a development property place in service in the
second quarter of 2004 and depreciation related to capital
expenditures, tenant improvements and leasing commissions placed
in service in 2003 and 2004.

Discontinued Operations

Financial Accounting Standards No. 144,
(SFAS 144), 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 results of operations for the properties
disposed of or held for disposition during the years ended
December 31, 2004 and 2003 are as follows (in thousands,
except number of properties):

|                         |                                                   |              |        |        |   |         |        |        |  |  |        |         |   |  |     |     |   
|------------------------ | ------------------------------------------------- | ------------ | ------ | ------ | - | ------- | ------ | ------ |  |  | ------ | ------- | - |  | --- | --- | --
|                         |                                                   |              |        |        |   |        
|                         |                                                   | Year Ended   |        |        |   |        
|                         |                                                   | December 31, |        |        |   |        
|                         |                                                   |              |        |        |   | Percent
|                         |                                                   | 2004         |        | 2003   |   | Change  |        | Change
|                         |                                                   |              |        |        |   |         |        |       
|Discontinued Operations: |                                                   |              |        |        |   |         |        |        |  |  |        |         |   |  |     |    
|                         | Revenues                                          |              | $      | 20,533 |   |         | $      | 33,794 |  |  | $      | (13,261 | ) |  |     | (39 | )%
|                         | Property operating expenses                       |              |        | 7,781  |   |         |        | 11,711 |  |  |        | (3,930  | ) |  |     | (34 | ) 
|                         |                                                   |              |        |        |   |         |        |        |  |  |        |         |   |  |     |    
|                         |                                                   |              | 12,752 |        |   |         | 22,083 |        |  |  | (9,331 | )       |   |  | (42 | )  
|                         | Depreciation and amortization                     |              |        | 4,895  |   |         |        | 8,372  |  |  |        | (3,477  | ) |  |     | (42 | ) 
|                         | Interest expense                                  |              |        | 659    |   |         |        | 674    |  |  |        | (15     | ) |  |     | (2  | ) 
|                         | Interest and other income                         |              |        | (2     | ) |         |        |       |  |  |        | (2      | ) |  |     | 100 |   
|                         | Minority interest                                 |              |        | 947    |   |         |        | 499    |  |  |        | 448     |   |  |     | 90  |   
|                         |                                                   |              |        |        |   |         |        |        |  |  |        |         |   |  |     |    
|                         | Discontinued operations, net of minority interest |              | $      | 6,253  |   |         | $      | 12,538 |  |  | $      | (6,285  | ) |  |     | (50 | )%
|                         |                                                   |              |        |        |   |         |        |        |  |  |        |         |   |  |     |    
|                         | Gain on sale of discontinued properties           |              | $      | 30,473 |   |         | $      | 5,937  |  |  | $      | 24,536  |   |  |     | 413 | % 
|                         |                                                   |              |        |        |   |         |        |        |  |  |        |         |   |  |     |    
|                         | Properties sold                                   |              |        | 12     |   |         |        | 8      |  |  |        |         |   |  |     |     |   
|                         | Properties held for disposition at end of period  |              |        | 1      |   |         |        | 2      |  |  |        |         |   |  |     |     |   

28



---



##### Table of Contents



Comparison of the year ended December 31,
2003 to the year ended December 31, 2002

(in thousands, except number of properties and
percentages)


|                                |                                                                                               |                                      |         |         |         |         |         |         |         |   |        |         |        |  |   |      |    | 
|------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------ | ------- | ------- | ------- | ------- | ------- | ------- | ------- | - | ------ | ------- | ------ |  | - | ---- | -- | 
|                                |                                                                                               |                                      |         |         |         |        
|                                |                                                                                               | Year Ended December 31,              |         |         |         |        
|                                |                                                                                               |                                      |         |         |         | Percent
|                                |                                                                                               | 2003                                 |         | 2002    |         | Change  |         | Change 
|                                |                                                                                               |                                      |         |         |         |         |         |        
|Revenue from rental operations: |                                                                                               |                                      |         |         |         |         |         |         |         |   |        |         |        |  |   |     
|                                | Scheduled cash rents                                                                          |                                      | $       | 339,009 |         |         | $       | 320,505 |         |   | $      | 18,504  |        |  |   | 6    | % 
|                                | Straight-line rents                                                                           |                                      |         | 915     |         |         |         | 4,629   |         |   |        | (3,714  | )      |  |   | (80  | ) 
|                                | Tenant reimbursements                                                                         |                                      |         | 23,355  |         |         |         | 21,161  |         |   |        | 2,194   |        |  |   | 10   |   
|                                | Parking, net of expense                                                                       |                                      |         | 21,635  |         |         |         | 20,350  |         |   |        | 1,285   |        |  |   | 6    |   
|                                | Other rental operations                                                                       |                                      |         | 8,851   |         |         |         | 7,490   |         |   |        | 1,361   |        |  |   | 18   |   
|                                |                                                                                               |                                      |         |         |         |         |         |         |         |   |        |         |        |  |   |     
|                                |                                                                                               | Total revenue from rental operations |         |         | 393,765 |         |         |         | 374,135 |   |        |         | 19,630 |  |   |      | 5  | 
|                                |                                                                                               |                                      |         |         |         |         |         |         |         |   |        |         |        |  |   |     
|Property expenses:              |                                                                                               |                                      |         |         |         |         |         |         |         |   |        |         |        |  |   |     
|                                | Repairs and maintenance                                                                       |                                      |         | 40,738  |         |         |         | 35,294  |         |   |        | 5,444   |        |  |   | 15   |   
|                                | Utilities                                                                                     |                                      |         | 32,497  |         |         |         | 32,338  |         |   |        | 159     |        |  |   | 0    |   
|                                | Real estate taxes                                                                             |                                      |         | 28,156  |         |         |         | 27,290  |         |   |        | 866     |        |  |   | 3    |   
|                                | Insurance                                                                                     |                                      |         | 7,909   |         |         |         | 7,291   |         |   |        | 618     |        |  |   | 8    |   
|                                | Ground rent                                                                                   |                                      |         | 961     |         |         |         | 895     |         |   |        | 66      |        |  |   | 7    |   
|                                | Administrative                                                                                |                                      |         | 15,718  |         |         |         | 13,911  |         |   |        | 1,807   |        |  |   | 13   |   
|                                |                                                                                               |                                      |         |         |         |         |         |         |         |   |        |         |        |  |   |     
|                                |                                                                                               | Total property expenses              |         |         | 125,979 |         |         |         | 117,019 |   |        |         | 8,960  |  |   |      | 8  | 
|                                |                                                                                               |                                      |         |         |         |         |         |         |         |   |        |         |        |  |   |     
|Property operating results(1)   |                                                                                               |                                      | 267,786 |         |         |         | 257,116 |         |         |   | 10,670 |         |        |  | 4 |     
|                                | General and administrative                                                                    |                                      |         | 16,931  |         |         |         | 12,581  |         |   |        | 4,350   |        |  |   | 35   |   
|                                | Interest                                                                                      |                                      |         | 93,093  |         |         |         | 87,827  |         |   |        | 5,266   |        |  |   | 6    |   
|                                | Depreciation and amortization                                                                 |                                      |         | 111,952 |         |         |         | 100,317 |         |   |        | 11,635  |        |  |   | 12   |   
|                                | Interest and other loss (income)                                                              |                                      |         | 401     |         |         |         | (2,063  | )       |   |        | (2,464  | )      |  |   | (119 | ) 
|                                |                                                                                               |                                      |         |         |         |         |         |         |         |   |        |         |        |  |   |     
|                                | Income from continuing operations before gain on
    sale of properties and minority interest |                                      | $       | 45,409  |         |         | $       | 58,454  |         |   | $      | (13,045 | )      |  |   | (22  | )%
|                                |                                                                                               |                                      |         |         |         |         |         |         |         |   |        |         |        |  |   |     
|                                | Discontinued operations, net of minority interest                                             |                                      | $       | 12,538  |         |         | $       | 15,570  |         |   | $      | (3,032  | )      |  |   | (19  | )%
|                                |                                                                                               |                                      |         |         |         |         |         |         |         |   |        |         |        |  |   |     
|Number of properties:           |                                                                                               |                                      |         |         |         |         |         |         |         |   |        |         |        |  |   |     
|                                | Acquired during period                                                                        |                                      |         | 1       |         |         |         | 5       |         |   |        |         |        |  |   |      |   
|                                | Completed and placed in service during period                                                 |                                      |         |        |         |         |         | 1       |         |   |        |         |        |  |   |      |   
|                                | Disposed of during period                                                                     |                                      |         | (8      | )       |         |         | (3      | )       |   |        |         |        |  |   |      |   
|                                | Owned at end of period                                                                        |                                      |         | 129     | (2)     |         |         | 136     |         |   |        |         |        |  |   |      |   
|Net rentable square feet:       |                                                                                               |                                      |         |         |         |         |         |         |         |   |        |         |        |  |   |     
|                                | Acquired during period                                                                        |                                      |         | 101     |         |         |         | 803     |         |   |        |         |        |  |   |      |   
|                                | Completed and placed in service during period                                                 |                                      |         |        |         |         |         | 287     |         |   |        |         |        |  |   |      |   
|                                | Disposed of during period                                                                     |                                      |         | (597    | )       |         |         | (205    | )       |   |        |         |        |  |   |      |   
|                                | Owned at end of period                                                                        |                                      |         | 18,636  | (2)     |         |         | 19,132  |         |   |        |         |        |  |   |      |   
|Same Store Portfolio(3):        |                                                                                               |                                      |         |         |         |         |         |         |         |   |        |         |        |  |   |     
|                                | Revenue from rental operations                                                                |                                      | $       | 391,960 |         |         | $       | 386,826 |         |   | $      | 5,134   |        |  |   | 1    | % 
|                                | Property expenses                                                                             |                                      |         | 126,041 |         |         |         | 121,112 |         |   |        | 4,929   |        |  |   | 4    |   
|                                |                                                                                               |                                      |         |         |         |         |         |         |         |   |        |         |        |  |   |     
|                                |                                                                                               | $                                    | 265,919 |         |         | $       | 265,714 |         |         | $ | 205    |         |        |  |  | %   
|                                |                                                                                               |                                      |         |         |         |         |         |         |         |   |        |         |        |  |   |     
|                                | Straight-line rents                                                                           |                                      | $       | 721     |         |         | $       | 4,312   |         |   |        |         |        |  |   |      |   
|                                |                                                                                               |                                      |         |         |         |         |         |         |         |   |        |         |        |  |   |     
|                                | Number of properties                                                                          |                                      |         | 122     |         |         |         | 122     |         |   |        |         |        |  |   |      |   
|                                | Average occupancy                                                                             |                                      |         | 90.2    | %       |         |         | 91.3    | %       |   |        |         |        |  |   |      |   
|                                | Net rentable square feet                                                                      |                                      |         | 17,444  |         |         |         | 17,444  |         |   |        |         |        |  |   |      |   

29



---



##### Table of Contents








|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The components outlined above comprise our
    Property Operating Results. Property Operating Results is a
    non-GAAP measure of performance. Property Operating Results is
    used by investors and our management to evaluate and compare the
    performance of our office properties and to determine trends in
    earnings. Property Operating Results is also employed by
    investors as one of the components used to estimate the value of
    our properties. Property Operating Results is used for the
    purposes noted above because it is not affected by (1) the
    cost of funds of the property owner, (2) the impact of
    depreciation and amortization expense as well as gains or losses
    from the sale of operating real estate assets that are included
    in net income computed in accordance with Generally Accepted
    Accounting Principles, or GAAP or (3) general and
    administrative expenses and other specific costs such as
    permanent impairments to carrying costs. The cost of funds is
    eliminated from net income because it is specific to the
    particular financing capabilities and constraints of the owner.
    The cost of funds is also eliminated because it is dependent on
    historical interest rates and other costs of capital as well as
    past decisions made by us regarding the appropriate mix of
    capital, which may have changed or may change in the future.
    Depreciation and amortization expenses as well as gains or
    losses from the sale of operating real estate assets are
    eliminated because they may not accurately represent the actual
    change in value in our office properties that result from use of
    the properties or changes in market conditions. While certain
    aspects of real property do decline in value over time in a
    manner that is reasonably captured by depreciation and
    amortization, the value of the properties as a whole have
    historically increased or decreased in value as a result of
    changes in overall economic conditions as well as the actual use
    of the property or the passage of time. Gains and losses from
    the sale of real property vary from property to property and are
    affected by market conditions at the time of sale which will
    usually change from period to period. These gains and losses can
    create distortions when comparing one period to another or when
    comparing our operating results to the operating results of
    other real estate companies that have not made similarly timed
    purchases and subsequent sales. General and administrative
    expenses and other owner specific costs such as impairment
    losses are eliminated because these costs are also in large part
    specific to the ownership structure and timing of purchases of
    the owner. We believe that eliminating these costs from net
    income is useful because the resulting measure captures the
    actual revenue generated and actual expenses incurred in
    operating our office properties as well as trends in occupancy
    rates, rental rates and operating costs.
|   
|    | However, the usefulness of Property Operating
    Results is limited because it 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. Property Operating Results may fail
    to capture significant trends in these components of net income
    which further limits its usefulness.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|    | Property Operating Results is a measure of the
    operating performance of our office properties but does not
    measure our performance as a whole. Property Operating Results
    is therefore not a substitute for net income as computed in
    accordance with GAAP. This measure should be analyzed in
    conjunction with net income computed in accordance with GAAP and
    discussions elsewhere in Managements Discussion and
    Analysis of Financial Condition and Results of Operations
    regarding the components of net income that are eliminated in
    the calculation of Property Operating Results. 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|    | The following is a reconciliation of Property
    Operating Results to net income computed in accordance with GAAP
    (in thousands):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

|                           |                                                   |      |         |         |   |      |         |         |   |   |         |         |  
|-------------------------- | ------------------------------------------------- | ---- | ------- | ------- | - | ---- | ------- | ------- | - | - | ------- | ------- | -
|                           |                                                   | 2003 |         | 2002    |   | 2001
|                           |                                                   |      |         |         |   |     
|Net Income                 |                                                   | $    | 58,509  |         |   | $    | 70,175  |         |   | $ | 97,759  |        
|Add:                       |                                                   |      |         |         |   |      |         |         |   |   |         |        
|                           | General and administrative expense                |      |         | 16,931  |   |      |         | 12,581  |   |   |         | 11,496  |  
|                           | Interest expense                                  |      |         | 93,093  |   |      |         | 87,827  |   |   |         | 85,949  |  
|                           | Depreciation and amortization                     |      |         | 111,952 |   |      |         | 100,317 |   |   |         | 92,613  |  
|                           | Interest and other loss                           |      |         | 401     |   |      |         |        |   |   |         |        |  
|                           | Minority interest                                 |      |         | 5,375   |   |      |         | 5,816   |   |   |         | 7,046   |  
|Less:                      |                                                   |      |         |         |   |      |         |         |   |   |         |        
|                           | Interest and other income                         |      |         |        |   |      |         | (2,063  | ) |   |         | (2,135  | )
|                           | Discontinued operations, net of minority interest |      |         | (12,538 | ) |      |         | (15,570 | ) |   |         | (15,719 | )
|                           | Gain on sale of discontinued properties           |      |         | (5,937  | ) |      |         |        |   |   |         |        |  
|                           | Gain on sale of operating properties              |      |         |        |   |      |         | (1,967  | ) |   |         | (4,591  | )
|                           |                                                   |      |         |         |   |      |         |         |   |   |         |        
|Property Operating Results |                                                   | $    | 267,786 |         |   | $    | 257,116 |         |   | $ | 272,418 |        
|                           |                                                   |      |         |         |   |      |         |         |   |   |         |        



|    |                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Excludes one development property containing
    approximately 283,000 net rentable square feet under
    lease-up.                                                              
|   
|(3) | Consists of non-development/renovation properties
    classified as part of continuing and discontinued operations
    that were owned for the entirety of the periods presented.

30



---



##### Table of Contents



Variances for Results of Operations

Our Property Operating Results for the year ended
December 31, 2003 compared to 2002 were primarily affected
by our acquisitions and development activities since
January 1, 2002.

As a result of these changes within our portfolio
of properties since January 1, 2002, we do not believe the
Property Operating Results presented above are comparable from
period to period. Therefore, in the table above, we have also
presented the Property Operating Results for our same property
portfolio.

Revenue from Rental Operations

Revenue from rental operations increased
approximately $19.6 million, or 5%, for the year ended
December 31, 2003 compared to 2002. This increase was
primarily due to our August 2002 acquisitions of a
430,00 square foot office property in Los Angeles County
and four office properties in San Diego County totaling
approximately 370,000 square feet and a December 2003
acquisition of a 101,000 square foot office property in
San Diego County and the placement in service of our 6080
Center Drive development property in December of 2002.

Revenue from rental operations for the same store
portfolio increased by approximately $5.1 million, or 1%,
in 2003 as compared to 2002. The increase was due to an
approximate $6.0 million increase in scheduled cash rents,
a $2.3 million increase in tenant reimbursements and a
$0.9 million increased in parking income, all of which were
partially offset by an approximate $3.6 million decrease in
straight-line rents and a $0.5 million decrease in other
rental operations. The increase in scheduled cash rents was
primarily attributable to scheduled rent increases in existing
leases that were partially offset by the 1.1% decrease in
average occupancy for these properties. Tenant reimbursement
increased primarily due to recovery billings for higher
operating expenses in 2003 as discussed below. Parking income
increased primarily due to an increase in demand for monthly
parking in 2003 in some of our buildings. Straight-line rents
decreased primarily due to the decline in occupancy and the
scheduled reversal of straight-line rents for certain older
leases. Other rental operations decreased primarily due to
decreases in lease termination settlements in 2003.

Property Expenses

Property expenses increased approximately
$9.0 million, or 8%, for the year ended December 31,
2003 compared to 2002. This increase was partially due our
acquisition and development activities described above.

Property expenses for the same store portfolio
increased by approximately $4.9 million, or 4%, in 2003 as
compared to 2002. The increase was primarily due to an
approximate $3.6 million increase in repairs and
maintenance, a $1.6 million increase in property
administrative expenses and a $0.4 million increase in
insurance expense, partially offset by a $0.8 million
decrease in real estate taxes. The increase in repairs and
maintenance expense was primarily due to higher contractual
costs for janitorial and other contract services as well as the
timing of certain projects. The increase in property
administrative expense was primarily due to higher employee
compensation costs, higher property legal expenses and costs
associated with training programs implemented in 2003. The
increase in insurance expense was due to increases in
industry-wide rates and premiums related to a $100 million
terrorism insurance policy entered into in the second quarter of
2002. Real estate taxes decreased due to the timing of final
reassessments of some properties in 2002.

General and Administrative

General and administrative expenses increased
approximately $4.4 million or, 35% in 2003 as compared to
2002. This increase was primarily due to employee compensation
costs, including employee separation costs in the current year
and non-cash compensation costs associated with annual
restricted stock grants issued in 2003 as well as higher
corporate governance costs in 2003.

Interest Expense

Interest expense increased approximately
$5.3 million, or 6%, in 2003 as compared to 2002. This
increase was primarily due to an increase in borrowings in the
last half of 2002 for property acquisitions, lower interest
capitalized in 2003 and costs associated with interest rate
swaps entered into at the end of 2002 to fix

31



---



##### Table of Contents



approximately $175 million of floating rate
debt. Capitalized interest in 2003 was lower as we ceased
capitalizing interest on our 6100 Center Drive property in May
2003.


Depreciation and Amortization

Depreciation and amortization expense increased
by approximately $11.6 million, or 12%, in 2003 as compared
to 2002. The increase was primarily due to depreciation related
to five properties acquired in August 2002, the placement in
service of our 6080 Center Drive development property in the
fourth quarter of 2002 and depreciation related to capital
expenditures, tenant improvements and leasing commissions placed
in service in 2002 and 2003.

Interest and Other Loss (Income)

Interest and other loss (income) decreased by
approximately $2.5 million, or 119%, in 2003 as compared to
2002, primarily due to the repayment by the borrower of a
$13.7 million mortgage note receivable in the fourth
quarter of 2002 and the reclassification of the operating
results for Next>edge, our taxable REIT subsidiary that
provides energy consulting services, into interest and other
income for the years ended December 31, 2003 and 2002.

Discontinued Operations

SFAS 144, effective January 1, 2002,
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 results of operations for the properties
disposed of or held for disposition during the years ended
December 31, 2003 and 2002 are as follows (in thousands,
except number of properties):

|                                                 |                                                   |              |        |        |  |         |        |        |  |  |        |        |   |  |     |     |   
|------------------------------------------------ | ------------------------------------------------- | ------------ | ------ | ------ |  | ------- | ------ | ------ |  |  | ------ | ------ | - |  | --- | --- | --
|                                                 |                                                   |              |        |        |  |        
|                                                 |                                                   | Year Ended   |        |        |  |        
|                                                 |                                                   | December 31, |        |        |  |        
|                                                 |                                                   |              |        |        |  | Percent
|                                                 |                                                   | 2003         |        | 2002   |  | Change  |        | Change
|                                                 |                                                   |              |        |        |  |         |        |       
|Discontinued Operations:                         |                                                   |              |        |        |  |         |        |        |  |  |        |        |   |  |     |    
|                                                 | Revenues                                          |              | $      | 33,794 |  |         | $      | 41,978 |  |  | $      | (8,184 | ) |  |     | (19 | )%
|                                                 | Property operating expenses                       |              |        | 11,711 |  |         |        | 14,199 |  |  |        | (2,488 | ) |  |     | (18 | ) 
|                                                 |                                                   |              |        |        |  |         |        |        |  |  |        |        |   |  |     |    
|                                                 |                                                   |              | 22,083 |        |  |         | 27,779 |        |  |  | (5,696 | )      |   |  | (21 | )  
|                                                 | Depreciation and amortization                     |              |        | 8,372  |  |         |        | 11,100 |  |  |        | (2,728 | ) |  |     | (25 | ) 
|                                                 | Interest expense                                  |              |        | 674    |  |         |        | 689    |  |  |        | (15    | ) |  |     | (2  | ) 
|                                                 | Minority interest                                 |              |        | 499    |  |         |        | 420    |  |  |        | 79     |   |  |     | 19  |   
|                                                 |                                                   |              |        |        |  |         |        |        |  |  |        |        |   |  |     |    
|                                                 | Discontinued operations, net of minority interest |              | $      | 12,538 |  |         | $      | 15,570 |  |  | $      | (3,032 | ) |  |     | (19 | )%
|                                                 |                                                   |              |        |        |  |         |        |        |  |  |        |        |   |  |     |    
|                                                 | Gain on sale of discontinued properties           |              | $      | 5,937  |  |         | $      |       |  |  | $      | 5,937  |   |  |     | 100 | % 
|                                                 |                                                   |              |        |        |  |         |        |        |  |  |        |        |   |  |     |    
|Properties sold                                  |                                                   |              | 8      |        |  |         | 3      |        |  |  |        |        |   |  |     |    
|Properties held for disposition at end of period |                                                   |              | 2      |        |  |         | 1      |        |  |  |        |        |   |  |     |    

32



---



##### Table of Contents



Liquidity and Capital Resources



| |           
| | ----------
| | Cash Flows

Cash provided by operating activities increased
by approximately $3.4 million to $184.9 million in
2004 as compared to $181.5 million in 2003. This increase
was primarily due to lower financing costs in 2004 as a result
of a $175 million 7.52% loan and a $50 million, 8.675%
preferred equity issuance that were refinanced at lower carrying
costs. In addition, our cash flow from operations was affected
by the timing of our acquisitions and dispositions in 2004.
Although during 2004 we had net property sales,
$126 million of our $204.8 million in dispositions
occurred in December of 2004.

Cash used in investing activities decreased by
approximately $9.2 million to $11.2 million in 2004 as
compared to $20.4 million in 2003. The decrease was
primarily due to higher net selling activities in 2004. In 2004,
our cash flow used in investing activities was also affected by
a higher level of tenant improvement and leasing commission
expenditures as a result of approximately 485,000 square
feet of additional leasing completed in 2004 over 2003.

Cash used in financing activities increased by
approximately $4.8 million to $165.3 million in 2004
as compared to $160.5 million in 2003. This increase was
primarily due to higher net debt repayments in 2004 with
proceeds generated from our capital recycling program.



| |                                           
| | ------------------------------------------
| | Cash Balances and Available
    Borrowings

As of December 31, 2004, we had
approximately $27.8 million in cash and cash equivalents,
including $14.8 million in restricted cash. Restricted cash
consisted of $9.7 million in interest bearing cash deposits
required by four of our mortgage loans and $5.1 million in
cash impound accounts for real estate taxes and insurance as
required by several of our mortgage loans.

Through our Operating Partnership, we have access
to a total of $330 million under two unsecured lines of
credit. As of December 31, 2004, $121.5 million was
outstanding and $208.5 million was available under these
unsecured lines of credit.



| |                          
| | -------------------------
| | Capital Recycling Program

Under our capital recycling program, we evaluate
our existing portfolio of properties and current market
opportunities to determine if the sale or purchase of properties
would improve the overall quality or return on invested capital
of our existing portfolio. Proceeds from sales of properties may
be used to pay down our borrowings until we identify attractive
properties to purchase, renovate or develop. During 2004, we
sold twelve properties totaling approximately 1.3 million
square feet for approximately $204.8 million in gross sales
proceeds. In October 2004, we acquired two office properties
consisting of approximately 391,000 square feet for
approximately $96.8 million. For additional information
regarding the properties acquired and sold, see the accompanying
notes to our financial statements elsewhere in this report.

33



---



##### Table of Contents





| |             
| | ------------
| | Debt Summary

Following is a summary of scheduled principal
payments for our total outstanding indebtedness as of
December 31, 2004 (in thousands):

|           |       |        |         |           | 
|---------- | ----- | ------ | ------- | --------- | 
|Year       |       | Amount
|           |       |       
|2005       |       | $      | 216,871 |          
|2006       |       |        | 251,101 |          
|2007       |       |        | 158,035 |          
|2008       |       |        | 230,726 |          
|2009       |       |        | 112,291 |          
|2010       |       |        | 150,307 |          
|2011       |       |        | 200,538 |          
|2012       |       |        | 768     |          
|2013       |       |        | 845     |          
|2014       |       |        | 914     |          
|Thereafter |       |        | 3,688   |          
|           |       |        |         |          
|           | Total |        | $       | 1,326,084 | 
|           |       |        |         |          

Following is other information related to our
indebtedness as of December 31, 2004 (in thousands, except
percentage and interest rate data):

Unsecured
and Secured Debt:

|               |  |         |           |         |  |                  |     |                     |  |  |      |   |  |  |     | 
|-------------- |  | ------- | --------- | ------- |  | ---------------- | --- | ------------------- |  |  | ---- | - |  |  | --- | 
|               |  |         |           |         |  | Weighted Average |     | Weighted Average   
|               |  | Balance |           | Percent |  | Interest Rate(1) |     | Maturity (in years)
|               |  |         |           |         |  |                  |     |                    
|               |  | (000s) |           |         |  |                  |     |                    
|Unsecured Debt |  | $       | 943,445   |         |  |                  | 71  | %                   |  |  | 6.79 | % |  |  | 3.2 | 
|Secured Debt   |  |         | 382,639   |         |  |                  | 29  |                     |  |  | 7.16 |   |  |  | 3.8 | 
|               |  |         |           |         |  |                  |     |                     |  |  |      |   |  |  |     | 
|Total Debt     |  | $       | 1,326,084 |         |  |                  | 100 | %                   |  |  | 6.90 |   |  |  | 3.4 | 
|               |  |         |           |         |  |                  |     |                     |  |  |      |   |  |  |     | 

Floating
and Fixed Rate Debt:

|                      |  |         |           |         |  |                  |     |                     |  |  |      |   |  |  |     | 
|--------------------- |  | ------- | --------- | ------- |  | ---------------- | --- | ------------------- |  |  | ---- | - |  |  | --- | 
|                      |  |         |           |         |  | Weighted Average |     | Weighted Average   
|                      |  | Balance |           | Percent |  | Interest Rate(1) |     | Maturity (in years)
|                      |  |         |           |         |  |                  |     |                    
|                      |  | (000s) |           |         |  |                  |     |                    
|Floating Rate Debt(2) |  | $       | 171,500   |         |  |                  | 13  | %                   |  |  | 5.88 | % |  |  | 2.1 | 
|Fixed Debt(3)         |  |         | 1,154,584 |         |  |                  | 87  |                     |  |  | 7.05 |   |  |  | 3.5 | 
|                      |  |         |           |         |  |                  |     |                     |  |  |      |   |  |  |     | 
|Total Debt            |  | $       | 1,326,084 |         |  |                  | 100 | %                   |  |  | 6.90 | % |  |  | 3.4 | 
|                      |  |         |           |         |  |                  |     |                     |  |  |      |   |  |  |     | 



---



|    |                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes amortization of prepaid financing costs.                                                                                
|   
|(2) | Includes $100 million of fixed rate debt
    that has been converted to floating rate through interest rate
    hedge agreements.
|   
|(3) | Includes $175 million of floating rate debt
    that has been fixed through interest rate hedge agreements.                      

Interest
Incurred:

|                           |  |                         |        |      |  |      |        |   |  |   |        |  
|-------------------------- |  | ----------------------- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                           |  |                        
|                           |  | Year Ended December 31,
|                           |  |                        
|                           |  | 2004                    |        | 2003 |  | 2002
|                           |  |                         |        |      |  |     
|Total interest incurred(1) |  | $                       | 90,451 |      |  | $    | 96,263 |   |  | $ | 94,162 |  
|Amount capitalized         |  |                         | (936   | )    |  |      | (2,496 | ) |  |   | (5,646 | )
|                           |  |                         |        |      |  |      |        |   |  |   |        |  
|Amount expensed(1)         |  | $                       | 89,515 |      |  | $    | 93,767 |   |  | $ | 88,516 |  
|                           |  |                         |        |      |  |      |        |   |  |   |        |  



---



|    |                                                                                             
|--- | --------------------------------------------------------------------------------------------
|(1) | Includes interest expense for a property
    currently classified as held for disposition.

34



---



##### Table of Contents





| |                                                                                                     
| | ----------------------------------------------------------------------------------------------------
| | Consolidated Income Available for Debt Service
    and Compliance with Principal Financial Covenants

Consolidated Income Available for Debt Service is
a non-GAAP measurement of our performance and liquidity.
Consolidated Income Available for Debt Service is presented
below because this data is used by investors and our management
as a supplemental measure to (a) evaluate our operating
performance and compare it to other real estate companies,
(b) determine trends in earnings, (c) determine our
ability to service debt and (d) determine our ability to
fund future capital expenditure requirements. As discussed more
fully below, Consolidated Income Available for Debt Service is
also used in several financial covenants we are required to
satisfy each quarter under the terms of our principal debt
agreements.

Consolidated Income Available for Debt Service
permits investors and management to view income from our
operations on an unleveraged basis before the effects of
non-cash depreciation and amortization expense. By excluding
interest expense, Consolidated Income Available for Debt Service
measures our operating performance independent of our capital
structure and indebtedness and, therefore, allows for a more
meaningful comparison of our operating performance between
quarters as well as annual periods and to compare our operating
performance to that of other companies, and to more readily
identify and evaluate trends in earnings.

The usefulness of Consolidated Income Available
for Debt Service is limited because it does not reflect 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.
These costs have been or may in the future be incurred by us,
each of which affects or could effect our operating performance
and ability to finance our investments at competitive borrowing
costs, successfully maintain our REIT status, and acquire and
dispose of real estate properties at favorable prices to us.
Some of these costs 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. Due to the significance of the net income components
excluded from Consolidated Income Available for Debt Service,
this measure should not be considered an alternative to (and
should be considered in conjunction with) net income, cash flow
from operations, and other performance or liquidity measures
prescribed by GAAP. This measure should also be analyzed in
conjunction with discussions elsewhere in
Managements Discussion and Analysis of Financial
Condition and Results of Operations regarding the items
eliminated in the calculation of Consolidated Income Available
for Debt Service.

The reader is cautioned that Consolidated Income
Available for Debt Service, as calculated by us, may not be
comparable to similar measures reported by other companies
(under names such as or similar to Consolidated Income Available
for Debt Service, EBITDA or adjusted EBITDA) that do not define
this measure exactly the same as we do.

35



---



##### Table of Contents



We calculate Consolidated Income Available for
Debt Service as follows:

|                                               |                                                    |                         |         |        |   |      |         |        |   |      |         |        |   |   |         |        |   |   |         |         |  
|---------------------------------------------- | -------------------------------------------------- | ----------------------- | ------- | ------ | - | ---- | ------- | ------ | - | ---- | ------- | ------ | - | - | ------- | ------ | - | - | ------- | ------- | -
|                                               |                                                    |                        
|                                               |                                                    | Year Ended December 31,
|                                               |                                                    |                        
|                                               |                                                    | 2004                    |         | 2003   |   | 2002 |         | 2001   |   | 2000
|                                               |                                                    |                         |         |        |   |      |         |        |   |     
|Net cash provided by operating activities      |                                                    | $                       | 184,907 |        |   | $    | 181,482 |        |   | $    | 199,922 |        |   | $ | 204,667 |        |   | $ | 192,152 |        
|Add:                                           |                                                    |                         |         |        |   |      |         |        |   |      |         |        |   |   |         |        |   |   |         |        
|                                               | Interest expense                                   |                         |         | 88,856 |   |      |         | 93,093 |   |      |         | 87,827 |   |   |         | 85,949 |   |   |         | 78,495  |  
|                                               | Interest expense from discontinued operations      |                         |         | 659    |   |      |         | 674    |   |      |         | 689    |   |   |         | (1,754 | ) |   |         | (89     | )
|                                               | Gain on repayment on mortgage note receivable      |                         |         |       |   |      |         |       |   |      |         | 750    |   |   |         |       |   |   |         |        |  
|Less:                                          |                                                    |                         |         |        |   |      |         |        |   |      |         |        |   |   |         |        |   |   |         |        
|                                               | Amortization of loan costs and fees                |                         |         | (3,801 | ) |      |         | (3,972 | ) |      |         | (3,807 | ) |   |         | (3,568 | ) |   |         | (3,568  | )
|                                               | Straight-line rent                                 |                         |         | (1,841 | ) |      |         | (1,732 | ) |      |         | (5,465 | ) |   |         | (9,208 | ) |   |         | (8,077  | )
|Changes in operating assets and liabilities:   |                                                    |                         |         |        |   |      |         |        |   |      |         |        |   |   |         |        |   |   |         |        
|                                               | Rent and other receivables                         |                         |         | 2,265  |   |      |         | 771    |   |      |         | (6,768 | ) |   |         | (3,775 | ) |   |         | 1,080   |  
|                                               | Deferred rent                                      |                         |         | 1,015  |   |      |         | 557    |   |      |         | 4,657  |   |   |         | 7,401  |   |   |         | 7,656   |  
|                                               | Prepaid financing costs, expenses and other assets |                         |         | 4,783  |   |      |         | 1,494  |   |      |         | 2,997  |   |   |         | 4,366  |   |   |         | 7,480   |  
|                                               | Accounts payable and accrued expenses              |                         |         | (3,338 | ) |      |         | 2,365  |   |      |         | (9,729 | ) |   |         | (4,388 | ) |   |         | (11,359 | )
|                                               | Security deposits                                  |                         |         | (3,285 | ) |      |         | (1,676 | ) |      |         | (962   | ) |   |         | (213   | ) |   |         | (3,397  | )
|                                               |                                                    |                         |         |        |   |      |         |        |   |      |         |        |   |   |         |        |   |   |         |        
|Consolidated Income Available for Debt Service |                                                    | $                       | 270,220 |        |   | $    | 273,056 |        |   | $    | 270,111 |        |   | $ | 279,477 |        |   | $ | 260,373 |        
|                                               |                                                    |                         |         |        |   |      |         |        |   |      |         |        |   |   |         |        |   |   |         |        

|                                               |                                                |                         |         |         |   |      |         |         |   |      |         |         |   |   |         |        |   |   |         |        |  
|---------------------------------------------- | ---------------------------------------------- | ----------------------- | ------- | ------- | - | ---- | ------- | ------- | - | ---- | ------- | ------- | - | - | ------- | ------ | - | - | ------- | ------ | -
|                                               |                                                |                        
|                                               |                                                | Year Ended December 31,
|                                               |                                                |                        
|                                               |                                                | 2004                    |         | 2003    |   | 2002 |         | 2001    |   | 2000
|                                               |                                                |                         |         |         |   |      |         |         |   |     
|Net Income                                     |                                                | $                       | 73,775  |         |   | $    | 58,509  |         |   | $    | 70,175  |         |   | $ | 97,759  |        |   | $ | 96,710  |       
|Add:                                           |                                                |                         |         |         |   |      |         |         |   |      |         |         |   |   |         |        |   |   |         |       
|                                               | Interest expense                               |                         |         | 88,856  |   |      |         | 93,093  |   |      |         | 87,827  |   |   |         | 85,949 |   |   |         | 78,495 |  
|                                               | Interest expense from discontinued operations  |                         |         | 659     |   |      |         | 674     |   |      |         | 689     |   |   |         | (1,754 | ) |   |         | (89    | )
|                                               | Depreciation and amortization                  |                         |         | 121,687 |   |      |         | 111,952 |   |      |         | 100,317 |   |   |         | 92,613 |   |   |         | 78,672 |  
|                                               | Minority interest                              |                         |         | 5,255   |   |      |         | 5,375   |   |      |         | 5,816   |   |   |         | 7,046  |   |   |         | 7,158  |  
|                                               | Minority interest from discontinued operations |                         |         | 947     |   |      |         | 499     |   |      |         | 420     |   |   |         | 519    |   |   |         | 455    |  
|                                               | Amortization of deferred compensation          |                         |         | 3,760   |   |      |         | 2,251   |   |      |         | 1,199   |   |   |         | 1,938  |   |   |         | 586    |  
|                                               | Depreciation from discontinued operations      |                         |         | 4,895   |   |      |         | 8,372   |   |      |         | 11,100  |   |   |         | 9,206  |   |   |         | 8,595  |  
|                                               | Impairment on investment in securities         |                         |         | 2,700   |   |      |         |        |   |      |         |        |   |   |         |       |   |   |         |       |  
|Less:                                          |                                                |                         |         |         |   |      |         |         |   |      |         |         |   |   |         |        |   |   |         |       
|                                               | Gain on sale of discontinued properties        |                         |         | (30,473 | ) |      |         | (5,937  | ) |      |         |        |   |   |         |       |   |   |         |       |  
|                                               | Gain on sale of operating properties           |                         |         |        |   |      |         |        |   |      |         | (1,967  | ) |   |         | (4,591 | ) |   |         | (2,132 | )
|                                               | Straight-line rent                             |                         |         | (1,841  | ) |      |         | (1,732  | ) |      |         | (5,465  | ) |   |         | (9,208 | ) |   |         | (8,077 | )
|                                               |                                                |                         |         |         |   |      |         |         |   |      |         |         |   |   |         |        |   |   |         |       
|Consolidated Income Available for Debt Service |                                                | $                       | 270,220 |         |   | $    | 273,056 |         |   | $    | 270,111 |         |   | $ | 279,477 |        |   | $ | 260,373 |       
|                                               |                                                |                         |         |         |   |      |         |         |   |      |         |         |   |   |         |        |   |   |         |       

Consolidated Income Available for Debt Service is
also presented because it is used in ratios contained in the
principal financial covenants of the Indenture governing our
publicly traded senior unsecured notes and our Credit Agreement
with a syndicate of banks led by Wells Fargo. As of
December 31, 2004, our senior unsecured notes represented
approximately 53% of our total outstanding debt and amounts
outstanding under our Wells Fargo unsecured line of credit
represented approximately 9% of our total outstanding debt. The
Consolidated Income Available for Debt Service ratios and the
other ratios reported below are part of financial covenants we
are required to satisfy each fiscal quarter. We believe
information about these ratios is useful to

36



---



##### Table of Contents



(1) confirm that we are in compliance with
the financial 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, including other REITs, that present the same
ratios.


If we were to fail to satisfy these financial
covenants, we would be in default under the terms of the
Indenture for the senior unsecured notes and/or the Wells Fargo
Credit Agreement. A default under those agreements could
accelerate the obligation to repay such debt and could cause us
to be in default under our other debt agreements. Depending on
the circumstances surrounding such acceleration, we might not be
able to repay the debt on terms that are favorable to us, or at
all, which could have a material adverse affect on our financial
condition and our ability to raise capital in the future.

The reader is cautioned that these ratios, as
calculated by us, may not be comparable to similarly entitled
ratios reported by other companies that do not calculate these
ratios exactly the same as we do. These ratios should not be
considered as alternatives to the ratio of earnings to fixed
charges.

The following table summarizes the principal
ratios contained in the financial covenants of our senior
unsecured notes and Wells Fargo unsecured line of credit as of
December 31, 2004 (in thousands, except percentage and
covenant ratio data):

|                                                  |                           |   |           |           | 
|------------------------------------------------- | ------------------------- | - | --------- | --------- | 
|Net investment in real estate                     |                           | $ | 2,551,981 |          
|Cash and cash equivalents                         |                           |   | 13,040    |          
|Restricted cash                                   |                           |   | 14,788    |          
|Accumulated depreciation and amortization         |                           |   | 488,808   |          
|                                                  |                           |   |           |          
|                                                  | Total Assets              |   | $         | 3,068,617 | 
|                                                  |                           |   |           |          
|                                                  | Total unencumbered assets |   | $         | 2,097,592 | 
|                                                  |                           |   |           |          
|Mortgage loans payable(1)                         |                           | $ | 382,639   |          
|Unsecured lines of credit                         |                           |   | 121,500   |          
|Unsecured term loan                               |                           |   | 125,000   |          
|Unsecured senior notes, net of discount           |                           |   | 696,945   |          
|                                                  |                           |   |           |          
|                                                  | Total Outstanding Debt    |   | $         | 1,326,084 | 
|                                                  |                           |   |           |          
|Consolidated Income Available for Debt Service(2) |                           | $ | 270,220   |          
|                                                  |                           |   |           |          
|Interest incurred(2)                              |                           | $ | 90,451    |          
|Loan fee amortization(2)                          |                           |   | (3,332    | )        
|                                                  |                           |   |           |          
|Debt Service(2)                                   |                           | $ | 87,119    |          
|                                                  |                           |   |           |          

|                                                                            |  |      |                   |        |  |  |     |  
|--------------------------------------------------------------------------- |  | ---- | ----------------- | ------ |  |  | --- | -
|Senior Unsecured Notes Covenant Ratios                                      |  | Test |                   | Actual
|                                                                            |  |      |                   |       
|Ratio of Consolidated Income Available for Debt
    Service to Debt Service |  |      | Greater than 1.5  |        |  |  | 3.1 |  
|Total Outstanding Debt/ Total Assets                                        |  |      | Less than 60%     |        |  |  | 43  | %
|Secured Debt/ Total Assets                                                  |  |      | Less than 40%     |        |  |  | 12  | %
|Unencumbered Assets/ Unsecured Debt                                         |  |      | Greater than 150% |        |  |  | 222 | %

|                                                                                   |  |      |                   |        |  |  |     | 
|---------------------------------------------------------------------------------- |  | ---- | ----------------- | ------ |  |  | --- | 
|Wells Fargo Unsecured Line of Credit Covenant Ratios                               |  | Test |                   | Actual
|                                                                                   |  |      |                   |       
|Ratio of Consolidated Income Available for Debt
    Service to interest expense(3) |  |      | Greater than 2.0  |        |  |  | 3.0 | 
|Ratio of Consolidated Income Available for Debt
    Service to fixed charges(4)    |  |      | Greater than 1.75 |        |  |  | 2.2 | 



---



|    |                                                                                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Represents 9 secured loans that are secured by 53
    properties in our portfolio.                                                                                                                                                                                                                        
|   
|(2) | Represents amounts for the most recent four
    consecutive quarters. Loan fee amortization excludes discount
    amortization on senior unsecured notes.                                                                                                                                                 
|   
|(3) | Interest expense consists of interest expense
    plus capitalized interest and less amortization of loan fees and
    discounts.                                                                                                                                                                         
|   
|(4) | Fixed charges consist of interest costs, whether
    expensed or capitalized, principal payments on all debt, an
    amount equal to $0.3125 per quarter multiplied by the
    weighted average gross leasable square feet of the portfolio at
    the end of the period and preferred unit distributions.

37



---



##### Table of Contents





| |                         
| | ------------------------
| | Future Capital Resources

Depending on market conditions, we may sell
assets over the next twelve to twenty-four months and it is
difficult to predict the actual period and amount of these
potential asset sales. At the time of any such sales, depending
on market conditions, sales proceeds may be placed 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 repurchases of
our common stock. In 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, sales proceeds and short-term
borrowings, if necessary, 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-term 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 to reach stabilization. We consider a
property to be stabilized 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 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.

Contractual
Obligations

As of December 31, 2004, we were subject to
significant contractual payment obligations as described in the
table below.

|                              |                           |                        |           |         |  |      |         |         |  |      |         |         |  |            |         |         |  |   |         |         |  |   |         |         |  |   |         |         | 
|----------------------------- | ------------------------- | ---------------------- | --------- | ------- |  | ---- | ------- | ------- |  | ---- | ------- | ------- |  | ---------- | ------- | ------- |  | - | ------- | ------- |  | - | ------- | ------- |  | - | ------- | ------- | 
|                              |                           |                       
|                              |                           | Payments Due by Period
|                              |                           |                       
|                              |                           | Total                  |           | 2005    |  | 2006 |         | 2007    |  | 2008 |         | 2009    |  | Thereafter
|                              |                           |                        |           |         |  |      |         |         |  |      |         |         |  |           
|                              |                           |                       
|                              |                           | (in thousands)        
|Contractual Obligations:      |                           |                        |           |         |  |      |         |         |  |      |         |         |  |            |         |         |  |   |         |         |  |   |         |         |  |   |         |        
|Long-term debt                |                           |                        |           |         |  |      |         |         |  |      |         |         |  |            |         |         |  |   |         |         |  |   |         |         |  |   |         |        
|                              | Mortgage debt             |                        | $         | 382,639 |  |      | $       | 7,436   |  |      | $       | 15,140  |  |            | $       | 8,710   |  |   | $       | 231,109 |  |   | $       | 112,674 |  |   | $       | 7,570   | 
|                              | Unsecured senior notes(1) |                        |           | 700,000 |  |      |         | 200,000 |  |      |         |        |  |            |         | 150,000 |  |   |         |        |  |   |         |        |  |   |         | 350,000 | 
|                              | Unsecured term loan       |                        |           | 125,000 |  |      |         |        |  |      |         | 125,000 |  |            |         |        |  |   |         |        |  |   |         |        |  |   |         |        | 
|Unsecured line of credit      |                           |                        | 121,500   |         |  |      | 10,000  |         |  |      | 111,500 |         |  |            |        |         |  |   |        |         |  |   |        |         |  |   |        |        
|Ground leases                 |                           |                        | 118,306   |         |  |      | 1,815   |         |  |      | 1,840   |         |  |            | 1,865   |         |  |   | 1,865   |         |  |   | 1,865   |         |  |   | 109,056 |        
|Operating leases              |                           |                        | 18,340    |         |  |      | 2,020   |         |  |      | 2,020   |         |  |            | 2,020   |         |  |   | 2,020   |         |  |   | 2,020   |         |  |   | 8,240   |        
|Capital commitments           |                           |                        | 26,498    |         |  |      | 26,498  |         |  |      |        |         |  |            |        |         |  |   |        |         |  |   |        |         |  |   |        |        
|                              |                           |                        |           |         |  |      |         |         |  |      |         |         |  |            |         |         |  |   |         |         |  |   |         |         |  |   |         |        
|Total Contractual Obligations |                           | $                      | 1,492,283 |         |  | $    | 247,769 |         |  | $    | 255,500 |         |  | $          | 162,595 |         |  | $ | 234,994 |         |  | $ | 116,559 |         |  | $ | 474,866 |        
|                              |                           |                        |           |         |  |      |         |         |  |      |         |         |  |            |         |         |  |   |         |         |  |   |         |         |  |   |         |        



---



|    |                                                                 
|--- | ----------------------------------------------------------------
|(1) | Excludes amortization of discount on unsecured
    senior notes.

38



---



##### Table of Contents



Funds From Operations

The following table reflects the calculation of
our funds from operations for the years ended December 31,
2004, 2003, 2002, 2001 and 2000 (in thousands, except
percentages):

|                         |                                                                                          |                                                    |         |         |      |      |         |         |   |      |         |         |   |  |         |         |   |  |         |         |  
|------------------------ | ---------------------------------------------------------------------------------------- | -------------------------------------------------- | ------- | ------- | ---- | ---- | ------- | ------- | - | ---- | ------- | ------- | - |  | ------- | ------- | - |  | ------- | ------- | -
|                         |                                                                                          |                                                   
|                         |                                                                                          | Year Ended December 31,                           
|                         |                                                                                          |                                                   
|                         |                                                                                          | 2004                                               |         | 2003    |      | 2002 |         | 2001    |   | 2000
|                         |                                                                                          |                                                    |         |         |      |      |         |         |   |     
|                         |                                                                                          |                                                   
|                         |                                                                                          | (in thousands, except ratio and per share amounts)
|Funds from Operations(1) |                                                                                          |                                                    |         |         |      |      |         |         |   |      |         |         |   |  |         |         |   |  |         |        
|                         | Net income                                                                               |                                                    | $       | 73,775  |      |      | $       | 58,509  |   |      | $       | 70,175  |   |  | $       | 97,759  |   |  | $       | 96,710  |  
|                         | Depreciation and minority interest from
    discontinued operations                      |                                                    |         | 5,842   |      |      |         | 8,871   |   |      |         | 11,520  |   |  |         | 9,725   |   |  |         | 9,050   |  
|                         | Gain on sale of discontinued properties                                                  |                                                    |         | (30,473 | )    |      |         | (5,937  | ) |      |         |        |   |  |         |        |   |  |         |        |  
|                         | Depreciation and amortization                                                            |                                                    |         | 121,687 |      |      |         | 111,952 |   |      |         | 100,317 |   |  |         | 92,613  |   |  |         | 78,672  |  
|                         | Gain on sale of operating properties                                                     |                                                    |         |        |      |      |         |        |   |      |         | (1,967  | ) |  |         | (4,591  | ) |  |         | (2,132  | )
|                         | Minority interest                                                                        |                                                    |         | 4,180   | (2)  |      |         | 5,375   |   |      |         | 5,816   |   |  |         | 7,046   |   |  |         | 7,158   |  
|                         | Income allocated to Preferred Operating
    Partnership Units                            |                                                    |         | (3,234  | )(2) |      |         | (4,312  | ) |      |         | (4,312  | ) |  |         | (4,312  | ) |  |         | (4,312  | )
|                         |                                                                                          |                                                    |         |         |      |      |         |         |   |      |         |         |   |  |         |         |   |  |         |        
|Funds from Operations(3) |                                                                                          |                                                    | 171,777 |         |      |      | 174,458 |         |   |      | 181,549 |         |   |  | 198,240 |         |   |  | 185,146 |        
|                         | Arden Realtys percentage share(4)                                                       |                                                    |         | 97.5    | %    |      |         | 97.4    | % |      |         | 97.3    | % |  |         | 96.8    | % |  |         | 96.7    | %
|                         |                                                                                          |                                                    |         |         |      |      |         |         |   |      |         |         |   |  |         |         |   |  |         |        
|                         | Arden Realtys share of Funds from Operations                                            |                                                    | $       | 167,483 |      |      | $       | 169,922 |   |      | $       | 176,647 |   |  | $       | 191,896 |   |  | $       | 179,036 |  
|                         |                                                                                          |                                                    |         |         |      |      |         |         |   |      |         |         |   |  |         |         |   |  |         |        
|                         | Weighted average common shares and operating
    partnership units outstanding  Diluted |                                                    |         | 67,415  |      |      |         | 65,513  |   |      |         | 66,098  |   |  |         | 66,132  |   |  |         | 65,759  |  
|                         |                                                                                          |                                                    |         |         |      |      |         |         |   |      |         |         |   |  |         |         |   |  |         |        



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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
    NAREIT, 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | 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 approximately $1.1 million of
    original issuance costs expensed in conjunction with the
    redemption of our Preferred Operating Partnership Units on
    September 28, 2004.                             
|   
|(3) | Includes approximately $3.8 million,
    $2.2 million, $1.2 million, $1.9 million and
    $586,000 in non-cash compensation expense for the years ended
    December 31, 2004, 2003, 2002, 2001 and 2000, respectively.
|   
|(4) | Represents Arden Realtys weighted average
    ownership percentage during the respective twelve month period.                                                                                                         

39



---



##### Table of Contents



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 and increase rates when leases
expire is largely dependent on the demand for office space in
the markets where our properties are located.

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 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  Lack
of non-farm job growth in Southern California or a deterioration
of the local and national economy 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.






|         |                                                              
|-------- | -------------------------------------------------------------
|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.

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 hedges, 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 2004, we entered into $300 million of
forward-starting interest rate hedge agreements effectively
fixing the 10-year Treasury Rate at approximately 4.37% for
borrowings that are anticipated to occur in 2005 to refinance
some of our scheduled debt maturities. In October and November
of 2003, we also entered into reverse interest rate hedge
agreements to float $100 million of the fixed interest rate
associated with the 7.00% senior unsecured notes due in
November 2007. Under these reverse hedges, we will receive
interest at a fixed rate of 7.00% and pay interest at a variable
rate averaging the six-month LIBOR in arrears plus 3.10%.

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,
2004, a 1% increase in interest rates on our $171.5 million
of floating rate debt, including $100 million in fixed rate
debt swapped to floating through interest rate hedges, would
decrease annual future earnings and cash flows by approximately
$1.7 million and would not have an impact on the fair value
of the floating rate debt. A 1% decrease in interest rates on
our $171.5 million of floating rate debt would increase
annual future earnings and cash flows by approximately
$1.7 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, 2004 was 5.88%.

Our fixed rate debt, including
$175.0 million in floating rate debt swapped to fixed
through interest rate hedges, totaled $1,154.6 million as
of December 31, 2004 with a weighted average interest rate
of 7.05% and a total fair value of approximately
$1,177.0 million. A 1% decrease in interest rates on our
$1,154.6 million of fixed rate debt would increase its fair
value by approximately $36.3 million and would not have an
impact on annual future earnings and cash flows. A 1% increase
in interest rates on our $1,154.6 million of fixed rate
debt would decrease its fair value by approximately
$34.4 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

40



---



##### Table of Contents



actions to further mitigate our exposure to any
such change. Due to the uncertainty of the specific actions that
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 revenues and our
    ability to service our debt.

Through 2009, 2,625 leases, including
month-to-month leases, comprising approximately 74% of our
leased net rentable square footage and approximately 71% of our
annualized base rents at December 31, 2004 are scheduled to
expire as follows:

|     |  |                 |     |                     |  |                     |      |   |  |  |      |  
|---- |  | --------------- | --- | ------------------- |  | ------------------- | ---- | - |  |  | ---- | -
|     |  |                 |     | Percentage of       |  | Percentage of      
|     |  |                 |     | Aggregate Portfolio |  | Aggregate Portfolio
|     |  | Number of       |     | Leased Square       |  | Annualized Base    
|Year |  | Leases Expiring |     | Feet                |  | Rent               
|     |  |                 |     |                     |  |                    
|2005 |  |                 | 764 |                     |  |                     | 18.0 | % |  |  | 15.7 | %
|2006 |  |                 | 596 |                     |  |                     | 15.0 | % |  |  | 14.6 | %
|2007 |  |                 | 529 |                     |  |                     | 14.4 | % |  |  | 14.0 | %
|2008 |  |                 | 392 |                     |  |                     | 14.0 | % |  |  | 14.4 | %
|2009 |  |                 | 344 |                     |  |                     | 12.8 | % |  |  | 12.6 | %

If we are unable to promptly renew or relet
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
which would limit our ability to service our debt.



| |                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Lack of non-farm job growth in Southern
    California or a deterioration of the local and national economy
    will adversely affect our operating results.

All of our properties are located in Southern
California. In 2004, the Southern California economy experienced
a 0.8% increase in job growth representing approximately 55,000
non-farm jobs. We believe non-farm job growth to be a leading
indicator of office demand for the region. During 2005, a total
of approximately 3.0 million square feet of occupied space,
representing approximately 18.0% of our total net rentable
space, including month-to-month leases, will expire. Negative
non-farm job growth in our submarkets or a deterioration of the
local and/or national economy may result in a decline in
occupancy and rental rates and may cause tenant concessions to
increase 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.

41



---



##### Table of Contents





| |                                                                                  
| | ---------------------------------------------------------------------------------
| | 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 may tend to limit our ability to sell
properties 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 26% of our buildings and 19% 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 or all 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 or
all 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, the amounts available
for distributions and on 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

42



---



##### Table of Contents



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:




| |   |                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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 successfully 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 have preliminary architectural designs
completed for an additional 475,000 net rentable square
feet at the Howard Hughes Center in Los Angeles, California and
have completed preliminary designs on a build-to-suit office
building at our Long Beach Airport Business Park. We have
entitlements for up to 600 hotel rooms at the Howard Hughes
Center. We also have 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, proceeds from
our lines of credit or other secured borrowings.

Risks associated with our development activities
may include:



| |   |                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------
| |  | abandonment of development opportunities due to a
    lack of financing or other reasons;                    
|
| |  | construction costs of a property exceeding
    original estimates, possibly making the property uneconomical;

43



---



##### Table of Contents





| |   |                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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. Although the overall
Southern California economy is diverse and well balanced, the
geographic concentration of our portfolio may make us more
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 amount of debt could limit our operational
    flexibility or otherwise adversely affect our financial
    condition.

As of December 31, 2004, we had total debt
of approximately $1.3 billion, consisting of approximately
$382.6 million in secured debt and approximately
$943.4 million of unsecured debt. See
Managements Discussion and Analysis of Financial
Condition and Results of Operations  Liquidity and
Capital Resources.

Our 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.                                                          

Despite current indebtedness levels, we may still
be able to incur substantially more debt in the future, which
would increase the risks associated with our substantial
leverage. 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 $330 million under our two lines of credit.
As of December 31, 2004, we had the ability to borrow an
additional $208.5 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

44



---



##### Table of Contents



as the terms of our existing indebtedness. As of
March 10, 2005, approximately $102.4 million of
principal will be coming due over the next eighteen 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, 2004, approximately 13% 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. As a protection against rising
interest rates, we may enter into agreements such as interest
rate hedges, 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 2004, we entered into
$300 million of forward-starting interest rate hedge
agreements effectively fixing the 10-year Treasury Rate at
approximately 4.37% for borrowings that are anticipated to occur
in 2005 to refinance some of our scheduled debt maturities. In
October and November of 2003, we also entered into reverse
interest rate hedge agreements to float $100 million of the
fixed interest rate associated with the 7.00% senior
unsecured notes due in November 2007. Under these reverse
hedges, we will receive interest at a fixed rate of 7.00% and
pay interest at a variable rate averaging the six-month LIBOR in
arrears plus 3.10%.



| |                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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 four mortgage
financings totaling approximately $365.3 million that are
secured by 49 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 $17.3 million at December 31,
2004. 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, 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.

45



---



##### Table of Contents





| |                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------
| | 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 may
delay, defer or prevent a third party from making offers to
acquire us or assume control over us. For example, such
provisions may:



| |   |                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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.

46



---



##### Table of Contents



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, our Chairman and CEO, 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.



| |                                                                                                         
| | --------------------------------------------------------------------------------------------------------
| | 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, which has
been extended to March 2006 subject to the continuation of the
Terrorism Risk Insurance Act of 2002 (TRIA), specifically
excludes biological, chemical

47



---



##### Table of Contents



or nuclear terrorist acts. We have been notified
by our insurance broker that in the aftermath of the
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 3.6% of our 2004 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. 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.

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
35 properties in our portfolio, representing approximately
35% 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 are believed to be
affected by contamination caused by third party sources and also
house an underground storage tank, two contain friable asbestos,
twenty-three contain non-friable asbestos, and eight 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 non-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. There are no known UST-related violations or
outstanding compliance issues with regulatory agencies. We have
also

48



---



##### Table of Contents



implemented a program to ensure appropriate
double-wall construction, testing protocols, placement of tanks
within bermed areas, and the installation of leak and spill
detection equipment at relevant sites.


Environmental site assessments and investigations
completed to date 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.



| |                                                                                                      
| | -----------------------------------------------------------------------------------------------------
| | We may incur increased costs as a result of
    enacted and proposed changes in laws and regulations.

Enacted and proposed changes in the law and
regulations affecting public companies, including the provisions
of the Sarbanes-Oxley Act of 2002 and rules proposed by the SEC
and by the New York Stock Exchange has resulted in significant
increased compliance costs to us as we evaluate the implications
of any new rules and comply to their requirements. The new rules
could make it more difficult or more costly for us to obtain
certain types of insurance, including director and officer
liability insurance, and we may be forced to accept reduced
policy limits and coverage or incur substantially higher costs
to obtain the same or similar coverage. The impact of these
events could also make it more difficult for us to attract and
retain qualified persons to serve on our board of directors, our
board committees or as executive officers. The compliance with
and the provisions of the Sarbanes-Oxley Act in future years
will result in significant continuing costs 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.

The Board of Directors and Shareholders of Arden
Realty, Inc.

We have audited managements assessment,
included in the accompanying Managements Report on
Internal Control over Financial Reporting, that Arden Realty,
Inc. maintained effective internal control over financial
reporting as of December 31, 2004, based on criteria
established in Internal Control  Integrated Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission (the COSO criteria). Arden Realty,
Inc.s management is responsible for maintaining effective
internal control over financial reporting and for its assessment
of the effectiveness of internal control over financial
reporting. Our responsibility is to express an opinion on
managements assessment and an opinion on the effectiveness
of the companys internal control over financial reporting
based on our audit.

We conducted our audit in accordance with the
standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was
maintained in all material respects. Our audit included
obtaining an understanding of internal control over financial
reporting, evaluating managements assessment, testing and
evaluating the design and operating effectiveness of internal
control, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.

A companys internal control over financial
reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A
companys internal control over financial reporting
includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions
of the assets of the company;

49



---



##### Table of Contents



(2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.


Because of its inherent limitations, internal
control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures
may deteriorate.

In our opinion, managements assessment that
Arden Realty, Inc. maintained effective internal control over
financial reporting as of December 31, 2004, is fairly
stated, in all material respects, based on the COSO criteria.
Also, in our opinion, Arden Realty, Inc. maintained, in all
material respects, effective internal control over financial
reporting as of December 31, 2004, based on the COSO
criteria.

We also have audited, in accordance with the
standards of the Public Company Accounting Oversight Board
(United States), the consolidated balance sheets as of
December 31, 2004 and 2003 and the related consolidated
statements of income, stockholders equity and cash flows
for each of the three years in the period ended
December 31, 2004 of Arden Realty, Inc. and our report
dated March 10, 2005 expressed an unqualified opinion
thereon.



| |                  
| | -----------------
| | Ernst & Young LLP

Los Angeles, California

March 10, 2005


50



---



##### Table of Contents








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

None.






|         |                        
|-------- | -----------------------
|ITEM 9A. | Controls and Procedures

Evaluation of Disclosure Controls and
Procedures

We have established disclosure controls and
procedures that are designed to ensure that information required
to be disclosed by Arden Realty, Inc., including its
consolidated entities, in its reports under the Securities and
Exchange Act of 1934, as amended (the Act) is
recorded, processed, summarized and reported, within the time
periods specified in the U.S. Securities and Exchange
Commissions rules and forms and that such information is
accumulated and communicated to our management, including our
Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required
disclosure. In designing and evaluating the disclosure controls
and procedures, 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 management necessarily was required to
apply its judgment in evaluating the cost-benefit relationship
of possible controls and procedures.

As of and for the year ended December 31,
2004, we carried out an evaluation, under the supervision and
with the participation of 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.

Managements Report on Internal Control
Over Financial Reporting

Internal control over financial reporting is a
process designed by, or under the supervision of, the Chief
Executive Officer and Chief Financial Officer and effected by
the board of directors, management and other personnel to
provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted
accounting principles. Internal control over financial reporting
includes those policies and procedures that: (1) pertain to
the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions
of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance
with authorizations of management and directors; and
(3) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or disposition
of assets that could have a material effect on the financial
statements.

Management is responsible for establishing and
maintaining adequate internal control over financial reporting.
Arden Realty, Inc.s internal control over financial
reporting is supported by written policies and procedures and by
an appropriate segregation of responsibilities and duties. Arden
Realty, Inc. has used the criteria set forth in the Internal
Control-Integrated Frameworkissued by the Committee of
Sponsoring Organizations of the Treadway Commission to assess
its internal control over financial reporting. Based upon this
assessment, management concluded that internal control over
financial reporting is operating effectively as of
December 31, 2004. Ernst & Young LLP has audited
Arden Realty, Inc.s financial statements and has issued an
attestation report on managements assessment of internal
control over financial reporting.

Submitted on March 10, 2005






|         |                  
|-------- | -----------------
|ITEM 9B. | Other Information

None.

51



---



##### Table of Contents






PART III

The information required by Part III is
incorporated by reference from our definitive proxy statement
for our 2005 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, 2004 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         |  |                           | 1,556 |                           |  | $                                    | 25.11 |  |  |  | 542 | 
|Equity Compensation plans not approved by
    shareholders |  |                           | 80    | (2)                       |  |                                      | 24.13 |  |  |  |    | 
|                                                           |  |                           |       |                           |  |                                      |       |  |  |  |     | 
|Total                                                      |  |                           | 1,636 |                           |  | $                                    | 25.06 |  |  |  | 542 | 
|                                                           |  |                           |       |                           |  |                                      |       |  |  |  |     | 



---

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes shares available for issuance under
    restricted stock grants.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(2) | On October 15, 1997, 10,000 options with an
    exercise price of $32.25, on December 15, 1998,
    40,000 options with an exercise price of $22.50, and on
    November 30, 1999, 10,000 options with an exercise
    price of $19.25 were granted to each of our non-employee
    directors: Carl D. Covitz, Larry S. Flax, Steven C. Good and
    Kenneth B. Roath; Peter S. Gold participated only in the 1998
    and 1999 grants. All of these options were granted with an
    exercise price equal to fair market value on the date of grant,
    vest during the non-employee directors continued service
    with Arden over a three-year period, with one third of the
    options vesting on each anniversary of the grant date and expire
    ten years from the anniversary of the grant date, subject to
    earlier termination upon the happening of certain events. From
    these grants, Mr. Roath and Mr. Good exercised 50,000
    and 40,000 options, respectively, during 2003. In addition,
    Mr. Roath forfeited 10,000 options upon his retirement in
    2003. Mr. Covitz, Mr. Flax and Mr. Good exercised
    50,000, 40,000 and 20,000 options, respectively, during 2004.

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. | Principal Accountant Fees and
    Services

The information contained in the section
captioned Proposal 2: Ratification of Appointment of
Independent Auditors of the definitive proxy statement is
incorporated herein by reference.

52



---



##### Table of Contents






PART IV






|         |                                                                    
|-------- | -------------------------------------------------------------------
|ITEM 15. | Exhibits, Financial Statement Schedules 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 No.
|                                                                                                         |  |         
|Report of Independent Auditors                                                                           |  |          | F-1 | 
|Consolidated Balance Sheets as of
    December 31, 2004 and 2003                                         |  |          | F-2 | 
|Consolidated Statements of Income for the years
    ended December 31, 2004, 2003 and 2002               |  |          | F-3 | 
|Consolidated Statements of Stockholders
    Equity for the years ended December 31, 2004, 2003 and 2002 |  |          | F-4 | 
|Consolidated Statements of Cash Flows for the
    years ended December 31, 2004, 2003 and 2002           |  |          | 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

Form 8-K filed on November 4, 2004,
furnishing a press release announcing the registrants
earnings for the third quarter of 2004 (Item 12).

(c) Exhibits

|        |   |     |  |             |  |                                                                                                                                                                                                                                               
|------- | - | --- |  | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |   |     |  |            
|Number  |   |     |  | Description
|        |   |     |  |            
|        | 3 | .1* |  |             |  | Amended and Restated Articles of Incorporation as
    filed as an exhibit to Arden Realtys registration
    statement on Form S-11 (No. 333-08163).                                                                                          
|        | 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 annual report on Form 10-K dated
    March 27, 2000.                            
|        | 3 | .4* |  |             |  | Bylaws of Registrant as filed as an exhibit to
    Arden Realtys registration statement on Form S-11
    (No. 333-08163).                                                                                                                    
|        | 3 | .5* |  |             |  | Certificate of Amendment of the Bylaws 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 Arden
    Realtys quarterly report 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).     

53



---



##### Table of Contents



|        |    |      |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------- | -- | ---- |  | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |      |  |            
|Number  |    |      |  | Description
|        |    |      |  |            
|        | 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 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s annual report on Form 10-K filed 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s annual report on
    Form 10-K filed 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 on November 9, 2001.                                                                                                                                                                                                                    
|        | 4  | .10* |  |             |  | Second Amendment to Rights Agreement, dated as of
    June 19, 2003, between Arden Realty and the Bank of New
    York, as filed as an exhibit to Arden Realtys current
    report on From 8-K dated July 1, 2003.                                                                                                                                                                                                                                                                  
|        | 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. 333-08163).                                                                                                                                                                                                                                                                            
|        | 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 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. 333-08163).                                                                                                                                                                                                                                                                                                                       
|        | 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 on Form 10-Q filed 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 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 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 on
    August 14, 1998.
|        | 10 | .11* |  |             |  | Security Agreement 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
    on August 14, 1998.                                                                                                                                                           

54



---



##### Table of Contents



|        |    |       |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                     
|------- | -- | ----- |  | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |       |  |            
|Number  |    |       |  | Description
|        |    |       |  |            
|        | 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
    on August 14, 1998.                                                                                                           
|        | 10 | .13*  |  |             |  | Letter Agreement dated June 8, 1998 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 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 on August 14, 1998.                                                                                                                                                      
|        | 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 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 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 on
    August 14, 1998.
|        | 10 | .21*  |  |             |  | Security Agreement 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 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 on August 14, 1998.                                                                                  
|        | 10 | .23*  |  |             |  | Letter Agreement dated June 8, 1998 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 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 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- 11 (No. 333-08163).                                                                                                                                                                                                             
|        | 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 on
    May 12, 2000.                                                                                                                     

55



---



##### Table of Contents



|        |    |       |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                
|------- | -- | ----- |  | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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 on 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 on Form 8-K filed 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 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 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 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 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).                                                                                                                                                                          
|        | 10 | .36*^ |  |             |  | 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 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 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 Andrew Sobel and Robert Peddicord, respectively,
    as filed as an exhibit to Arden Realty Limited
    Partnerships quarterly report on Form 10-Q filed on
    November 14, 2001.                                                                                                               
|        | 10 | .39*^ |  |             |  | Amended and Restated Employment Agreement dated
    June 2, 1999, between Arden Realty and Mr. Richard
    Davis as filed on an exhibit to Arden Realty Limited
    Partnerships annual report on Form 10-K filed on
    April 1, 2002.                                                                                                                                                                                       
|        | 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 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 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 on August 14, 2002.                                                                                                                                                         

56



---



##### Table of Contents



|        |    |       |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                                
|------- | -- | ----- |  | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |       |  |            
|Number  |    |       |  | Description
|        |    |       |  |            
|        | 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 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 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 on March 27, 2003.                                                                                                                            
|        | 10 | .46*  |  |             |  | Second Amended and Restated Agreement of Limited
    Partnership of Arden Realty Limited Partnership, dated
    September 7, 1999, filed as an exhibit to Arden
    Realtys quarterly report on Form 10-Q filed with the
    Commission on November 15, 1999.                                                                                                                                 
|        | 10 | .47*  |  |             |  | Admission of New Partners and Amendment to
    Limited Partnership Agreement entered into as of the 20th day of
    December, 2000, by and between Arden Realty Limited Partnership
    and the persons identified as the New Partners
    therein, filed as an exhibit to Arden Realty Limited
    Partnerships annual report on Form 10-K filed with
    the Commission on March 30, 2001.
|        | 10 | .48*  |  |             |  | Second Amendment to Limited Partnership Agreement
    entered into as of September 13, 2003, by Arden Realty
    Limited Partnership, filed as an exhibit to Arden Realty Limited
    Partnerships quarterly report on Form 10-Q filed with
    the Commission on November 13, 2003.                                                                                                          
|        | 10 | .49   |  |             |  | Confidential Resignation Agreement and General
    Release dated as of March 4, 2005 by and between Arden
    Realty, Inc. and Arden Realty Limited Partnership and Andrew J.
    Sobel.                                                                                                                                                                                                       
|        | 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 on
    March 27, 2003 are incorporated here 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.                                                                                                                                                                                                                                                                                                                                                               
|        | 31 | .1    |  |             |  | Certification of Chief Executive Officer,
    pursuant to Rule 13a-14 promulgated under the Exchange Act,
    as created by Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                     
|        | 31 | .2    |  |             |  | Certification of Chief Financial Officer,
    pursuant to Rule 13a-14 promulgated under the Exchange Act,
    as created by Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                     
|        | 32 | .1    |  |             |  | Certification of Chief Executive Officer,
    pursuant to 18 U.S.C. Section 1350, as created by
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                             
|        | 32 | .2    |  |             |  | Certification of Chief Financial Officer,
    pursuant to 18 U.S.C. Section 1350, as created by
    Section 906 of 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.

57



---



##### 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 10, 2005.



| |                   
| | ------------------
| | 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 10, 2005
|                                          
|/s/ VICTOR J. COLEMANVictor J. Coleman     |  | President, Chief Operating Officer and Director                     |  | March 10, 2005
|                                          
|/s/ RICHARD S. DAVISRichard S. Davis       |  | Executive Vice President and Chief Financial
    Officer            |  | March 10, 2005
|                                          
|/s/ ROBERT C. PEDDICORDRobert C. Peddicord |  | Executive Vice President  Leasing and
    Property Operations      |  | March 10, 2005
|                                          
|/s/ LESLIE E. BIDERLeslie E. Bider         |  | Director                                                            |  | March 10, 2005
|                                          
|/s/ CARL D. COVITZCarl D. Covitz           |  | Director                                                            |  | March 10, 2005
|                                          
|/s/ LARRY S. FLAXLarry S. Flax             |  | Director                                                            |  | March 10, 2005
|                                          
|/s/ STEVEN C. GOODSteven C. Good           |  | Director                                                            |  | March 10, 2005
|                                          
|/s/ ALAN I. ROTHENBERGAlan I. Rothenberg   |  | Director                                                            |  | March 10, 2005

58



---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM

Board of Directors and Stockholders

Arden Realty, Inc.


We have audited the accompanying consolidated
balance sheets of Arden Realty, Inc. as of
December 31, 2004 and 2003 and the related consolidated
statements of income, stockholders equity, and cash flows
for each of the three years in the period ended
December 31, 2004. 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 the
standards of the Public Company Accounting Oversight Board
(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, 2004 and 2003 and the consolidated results of
its operations and its cash flows for each of the three years in
the period ended December 31, 2004, in conformity with
U.S. generally accepted accounting principles.

We have also audited, in accordance with the
standards of the Public Company Accounting Oversight Board
(United States), the effectiveness of Arden
Realty, Inc.s internal control over financial
reporting as of December 31, 2004, based on the criteria
established in Internal Control  Integrated
Frameworkissued by the Committee of Sponsoring
Organizations of the Treadway Commission and our reporting dated
March 10, 2005 expressed an unqualified opinion thereon.



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

Los Angeles, California

March 10, 2005


F-1



---



##### Table of Contents



ARDEN REALTY, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)


|                                                                                                                                                                      |                                                 |                               |                                            |           |           |           |           |           |           |           | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------- | ----------------------------- | ------------------------------------------ | --------- | --------- | --------- | --------- | --------- | --------- | --------- | 
|                                                                                                                                                                      |                                                 |                              
|                                                                                                                                                                      |                                                 | December 31,                 
|                                                                                                                                                                      |                                                 |                              
|                                                                                                                                                                      |                                                 | 2004                          |                                            | 2003     
|                                                                                                                                                                      |                                                 |                               |                                            |          
|Assets                                                                                                                                                                |                                                 |                               |                                            |           |           |           |           |          
|Investment in real estate:                                                                                                                                            |                                                 |                               |                                            |           |           |           |           |          
|                                                                                                                                                                      | Land                                            |                               | $                                          | 450,439   |           |           | $         | 438,342   |          
|                                                                                                                                                                      | Buildings and improvements                      |                               |                                            | 2,175,571 |           |           |           | 2,029,276 |          
|                                                                                                                                                                      | Tenant improvements and leasing commissions     |                               |                                            | 360,401   |           |           |           | 329,285   |          
|                                                                                                                                                                      |                                                 |                               |                                            |           |           |           |           |          
|                                                                                                                                                                      |                                                 |                               | 2,986,411                                  |           |           |           | 2,796,903 |          
|                                                                                                                                                                      | Less: accumulated depreciation and amortization |                               |                                            | (488,808  | )         |           |           | (432,814  | )        
|                                                                                                                                                                      |                                                 |                               |                                            |           |           |           |           |          
|                                                                                                                                                                      |                                                 |                               | 2,497,603                                  |           |           |           | 2,364,089 |          
|                                                                                                                                                                      | Properties under development or renovation      |                               |                                            | 16,295    |           |           |           | 75,627    |          
|                                                                                                                                                                      | Land available for development                  |                               |                                            | 23,795    |           |           |           | 23,723    |          
|                                                                                                                                                                      | Properties held for disposition, net            |                               |                                            | 14,288    |           |           |           | 183,260   |          
|                                                                                                                                                                      |                                                 |                               |                                            |           |           |           |           |          
|                                                                                                                                                                      |                                                 | Net investment in real estate |                                            |           | 2,551,981 |           |           |           | 2,646,699 |          
|Cash and cash equivalents                                                                                                                                             |                                                 |                               | 13,040                                     |           |           |           | 4,707     |          
|Restricted cash                                                                                                                                                       |                                                 |                               | 14,788                                     |           |           |           | 19,694    |          
|Rent and other receivables, net of allowance of
    $3,748 and $4,041 at December 31, 2004 and 2003,
    respectively                                                 |                                                 |                               | 5,953                                      |           |           |           | 3,688     |          
|Deferred rent, net of allowance of $1,933 and
    $2,216 at December 31, 2004 and 2003, respectively                                                                  |                                                 |                               | 42,886                                     |           |           |           | 44,203    |          
|Prepaid financing costs, expenses and other
    assets, net of accumulated amortization of $13,244 and $13,781
    at December 31, 2004 and 2003, respectively        |                                                 |                               | 31,349                                     |           |           |           | 22,442    |          
|                                                                                                                                                                      |                                                 |                               |                                            |           |           |           |           |          
|                                                                                                                                                                      |                                                 |                               | Total assets                               |           | $         | 2,659,997 |           |           | $         | 2,741,433 | 
|                                                                                                                                                                      |                                                 |                               |                                            |           |           |           |           |          
|                                                                                                                                                                     
|Liabilities                                                                                                                                                           |                                                 |                               |                                            |           |           |           |           |          
|Mortgage loans payable                                                                                                                                                |                                                 | $                             | 375,417                                    |           |           | $         | 557,435   |          
|Mortgage loan payable  property held
    for disposition                                                                                                             |                                                 |                               | 7,222                                      |           |           |           | 7,394     |          
|Unsecured lines of credit                                                                                                                                             |                                                 |                               | 121,500                                    |           |           |           | 161,000   |          
|Unsecured term loan                                                                                                                                                   |                                                 |                               | 125,000                                    |           |           |           | 125,000   |          
|Unsecured senior notes, net of discount                                                                                                                               |                                                 |                               | 696,945                                    |           |           |           | 498,952   |          
|Accounts payable and accrued expenses                                                                                                                                 |                                                 |                               | 58,215                                     |           |           |           | 54,317    |          
|Security deposits                                                                                                                                                     |                                                 |                               | 25,498                                     |           |           |           | 22,321    |          
|Dividends payable                                                                                                                                                     |                                                 |                               | 33,494                                     |           |           |           | 32,535    |          
|                                                                                                                                                                      |                                                 |                               |                                            |           |           |           |           |          
|                                                                                                                                                                      |                                                 |                               | Total liabilities                          |           |           | 1,443,291 |           |           |           | 1,458,954 | 
|Minority interest                                                                                                                                                     |                                                 |                               | 20,414                                     |           |           |           | 72,194    |          
|Stockholders Equity                                                                                                                                                  |                                                 |                               |                                            |           |           |           |           |          
|Preferred stock, $.01 par value
    20,000,000 shares authorized, none issued                                                                                         |                                                 |                               |                                           |           |           |           |          |          
|Common stock, $.01 par value,
    100,000,000 shares authorized, 66,325,709 and 64,425,450
    issued and outstanding at December 31, 2004 and 2003,
    respectively |                                                 |                               | 664                                        |           |           |           | 646       |          
|Additional paid-in capital                                                                                                                                            |                                                 |                               | 1,212,508                                  |           |           |           | 1,225,192 |          
|Deferred compensation                                                                                                                                                 |                                                 |                               | (12,830                                    | )         |           |           | (14,952   | )        
|Accumulated other comprehensive loss                                                                                                                                  |                                                 |                               | (4,050                                     | )         |           |           | (601      | )        
|                                                                                                                                                                      |                                                 |                               |                                            |           |           |           |           |          
|                                                                                                                                                                      |                                                 |                               | Total stockholders equity                 |           |           | 1,196,292 |           |           |           | 1,210,285 | 
|                                                                                                                                                                      |                                                 |                               |                                            |           |           |           |           |          
|                                                                                                                                                                      |                                                 |                               | Total liabilities and stockholders equity |           | $         | 2,659,997 |           |           | $         | 2,741,433 | 
|                                                                                                                                                                      |                                                 |                               |                                            |           |           |           |           |          

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,
|                                                                                                                                             |                                     |                        
|                                                                                                                                             |                                     | 2004                    |          | 2003 |  | 2002
|                                                                                                                                             |                                     |                         |          |      |  |     
|Property revenues                                                                                                                            |                                     | $                       | 409,193  |      |  | $    | 393,765  |      |  | $ | 374,135  |     
|Property operating expenses                                                                                                                  |                                     |                         | (133,635 | )    |  |      | (125,979 | )    |  |   | (117,019 | )   
|                                                                                                                                             |                                     |                         |          |      |  |      |          |      |  |   |          |     
|                                                                                                                                             |                                     |                         | 275,558  |      |  |      | 267,786  |      |  |   | 257,116  |     
|General and administrative expenses                                                                                                          |                                     |                         | 19,503   |      |  |      | 16,931   |      |  |   | 12,581   |     
|Interest expense                                                                                                                             |                                     |                         | 88,856   |      |  |      | 93,093   |      |  |   | 87,827   |     
|Depreciation and amortization                                                                                                                |                                     |                         | 121,687  |      |  |      | 111,952  |      |  |   | 100,317  |     
|Interest income and other loss (income)                                                                                                      |                                     |                         | 508      |      |  |      | 401      |      |  |   | (2,063   | )   
|                                                                                                                                             |                                     |                         |          |      |  |      |          |      |  |   |          |     
|Income from continuing operations before gain on
    sale of properties and impairment on investment in securities
    and minority interest |                                     |                         | 45,004   |      |  |      | 45,409   |      |  |   | 58,454   |     
|Gain on sale of operating properties                                                                                                         |                                     |                         |         |      |  |      |         |      |  |   | 1,967    |     
|                                                                                                                                             |                                     |                         |          |      |  |      |          |      |  |   |          |     
|Income from continuing operations before
    impairment on investment in securities and minority interest                                    |                                     |                         | 45,004   |      |  |      | 45,409   |      |  |   | 60,421   |     
|Impairment on investment in securities                                                                                                       |                                     |                         | (2,700   | )    |  |      |         |      |  |   |         |     
|Minority interest                                                                                                                            |                                     |                         | (5,255   | )    |  |      | (5,375   | )    |  |   | (5,816   | )   
|                                                                                                                                             |                                     |                         |          |      |  |      |          |      |  |   |          |     
|Income from continuing operations                                                                                                            |                                     |                         | 37,049   |      |  |      | 40,034   |      |  |   | 54,605   |     
|Discontinued operations, net of minority interest                                                                                            |                                     |                         | 6,253    |      |  |      | 12,538   |      |  |   | 15,570   |     
|Gain on sale of discontinued properties                                                                                                      |                                     |                         | 30,473   |      |  |      | 5,937    |      |  |   |         |     
|                                                                                                                                             |                                     |                         |          |      |  |      |          |      |  |   |          |     
|Net income                                                                                                                                   |                                     | $                       | 73,775   |      |  | $    | 58,509   |      |  | $ | 70,175   |     
|                                                                                                                                             |                                     |                         |          |      |  |      |          |      |  |   |          |     
|Basic net income per common share:                                                                                                           |                                     |                         |          |      |  |      |          |      |  |   |          |     
|                                                                                                                                             | Income from continuing operations   |                         | $        | 0.57 |  |      | $        | 0.63 |  |   | $        | 0.85 | 
|                                                                                                                                             | Income from discontinued operations |                         |          | 0.56 |  |      |          | 0.29 |  |   |          | 0.24 | 
|                                                                                                                                             |                                     |                         |          |      |  |      |          |      |  |   |          |     
|Net income per common share  basic                                                                                                          |                                     | $                       | 1.13     |      |  | $    | 0.92     |      |  | $ | 1.09     |     
|                                                                                                                                             |                                     |                         |          |      |  |      |          |      |  |   |          |     
|Weighted average number of common
    shares  basic                                                                                         |                                     |                         | 65,372   |      |  |      | 63,553   |      |  |   | 64,151   |     
|                                                                                                                                             |                                     |                         |          |      |  |      |          |      |  |   |          |     
|Diluted net income per common share:                                                                                                         |                                     |                         |          |      |  |      |          |      |  |   |          |     
|                                                                                                                                             | Income from continuing operations   |                         | $        | 0.56 |  |      | $        | 0.63 |  |   | $        | 0.85 | 
|                                                                                                                                             | Income from discontinued operations |                         |          | 0.56 |  |      |          | 0.29 |  |   |          | 0.24 | 
|                                                                                                                                             |                                     |                         |          |      |  |      |          |      |  |   |          |     
|Net income per common share  diluted                                                                                                        |                                     | $                       | 1.12     |      |  | $    | 0.92     |      |  | $ | 1.09     |     
|                                                                                                                                             |                                     |                         |          |      |  |      |          |      |  |   |          |     
|Weighted average number of common
    shares  diluted                                                                                       |                                     |                         | 65,740   |      |  |      | 63,815   |      |  |   | 64,351   |     
|                                                                                                                                             |                                     |                         |          |      |  |      |          |      |  |   |          |     

See accompanying notes to financial
statements.

F-3



---



##### Table of Contents



ARDEN REALTY, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS
EQUITY

(in thousands, except share amounts)


|                             |                                                                 |              |            |            |   |          |     |          |   |               |           |               |   |        |   |         |   |   |         |        |   |   |        |        |   |   |           |          |  
|---------------------------- | --------------------------------------------------------------- | ------------ | ---------- | ---------- | - | -------- | --- | -------- | - | ------------- | --------- | ------------- | - | ------ | - | ------- | - | - | ------- | ------ | - | - | ------ | ------ | - | - | --------- | -------- | -
|                             |                                                                 |              |            |            |   |          |     |          |   | Accumulated   |           |              
|                             |                                                                 | Common Stock |            | Additional |   |          |     |          |   | Other         |           | Total        
|                             |                                                                 |              |            | Paid in    |   | Retained |     | Deferred |   | Comprehensive |           | Stockholders
|                             |                                                                 | Shares       |            | Amount     |   | Capital  |     | Earnings |   | Compensation  |           | Loss          |   | Equity
|                             |                                                                 |              |            |            |   |          |     |          |   |               |           |               |   |       
|Balance at January 1, 2002   |                                                                 |              | 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 hedges                         |              |            |           |   |          |     |         |   |               |           |              |   |        |   |        |   |   |         |       |   |   |        | (2,995 | ) |   |           | (2,995   | )
|                             | Reclassification adjustment for losses included
    in earnings |              |            |           |   |          |     |         |   |               |           |              |   |        |   |        |   |   |         |       |   |   |        | 227    |   |   |           | 227      |  
|                             | 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 |         
|                             |                                                                 |              |            |            |   |          |     |          |   |               |           |               |   |        |   |         |   |   |         |        |   |   |        |        |   |   |           |         
|                             | OP units converted                                              |              |            | 29,076     |   |          |     |         |   |               |           | 495           |   |        |   |        |   |   |         |       |   |   |        |       |   |   |           | 495      |  
|                             | Stock options exercised                                         |              |            | 1,162,523  |   |          |     | 12       |   |               |           | 27,934        |   |        |   |        |   |   |         |       |   |   |        |       |   |   |           | 27,946   |  
|                             | Stock option expense                                            |              |            |           |   |          |     |         |   |               |           | 41            |   |        |   |        |   |   |         |       |   |   |        |       |   |   |           | 41       |  
|                             | Stock compensation                                              |              |            | 252,500    |   |          |     | 3        |   |               |           | 6,276         |   |        |   |        |   |   |         | (6,279 | ) |   |        |       |   |   |           |         |  
|                             | Amortization of stock compensation                              |              |            |           |   |          |     |         |   |               |           |              |   |        |   |        |   |   |         | 2,545  |   |   |        |       |   |   |           | 2,545    |  
|                             | Forfeiture of stock compensation                                |              |            | (2,866     | ) |          |     |         |   |               |           | (41           | ) |        |   |        |   |   |         | 41     |   |   |        |       |   |   |           |         |  
|                             | Unrealized loss on interest rate hedges                         |              |            |           |   |          |     |         |   |               |           |              |   |        |   |        |   |   |         |       |   |   |        | (155   | ) |   |           | (155     | )
|                             | Reclassification adjustment for losses included
    in earnings |              |            |           |   |          |     |         |   |               |           |              |   |        |   |        |   |   |         |       |   |   |        | 2,322  |   |   |           | 2,322    |  
|                             | Net income                                                      |              |            |           |   |          |     |         |   |               |           |              |   |        |   | 58,509  |   |   |         |       |   |   |        |       |   |   |           | 58,509   |  
|                             |                                                                 |              |            |            |   |          |     |          |   |               |           |               |   |        |   |         |   |   |         |        |   |   |        |        |   |   |           |         
|                             | Comprehensive income                                            |              |            |            |   |          |     |          |   |               |           |               |   |        |   |         |   |   |         |        |   |   |        |        |   |   |           | 60,676   |  
|                             | Dividends declared and payable                                  |              |            |           |   |          |     |         |   |               |           | (70,286       | ) |        |   | (58,509 | ) |   |         |       |   |   |        |       |   |   |           | (128,795 | )
|                             |                                                                 |              |            |            |   |          |     |          |   |               |           |               |   |        |   |         |   |   |         |        |   |   |        |        |   |   |           |         
|Balance at December 31, 2003 |                                                                 |              | 64,425,450 |            |   | $        | 646 |          |   | $             | 1,225,192 |               |   | $      |  |         |   | $ | (14,952 | )      |   | $ | (601   | )      |   | $ | 1,210,285 |         
|                             |                                                                 |              |            |            |   |          |     |          |   |               |           |               |   |        |   |         |   |   |         |        |   |   |        |        |   |   |           |         
|                             | OP units converted                                              |              |            | 16,000     |   |          |     |         |   |               |           | 285           |   |        |   |        |   |   |         |       |   |   |        |       |   |   |           | 285      |  
|                             | Stock options exercised                                         |              |            | 1,750,592  |   |          |     | 18       |   |               |           | 42,727        |   |        |   |        |   |   |         |       |   |   |        |       |   |   |           | 42,745   |  
|                             | Stock option expense                                            |              |            |           |   |          |     |         |   |               |           | 44            |   |        |   |        |   |   |         |       |   |   |        |       |   |   |           | 44       |  
|                             | Stock compensation                                              |              |            | 136,500    |   |          |     |         |   |               |           | 1,596         |   |        |   |        |   |   |         | (1,596 | ) |   |        |       |   |   |           |         |  
|                             | Amortization of stock compensation                              |              |            |           |   |          |     |         |   |               |           | 665           |   |        |   |        |   |   |         | 3,641  |   |   |        |       |   |   |           | 4,306    |  
|                             | Forfeiture of stock compensation                                |              |            | (2,833     | ) |          |     |         |   |               |           | (77           | ) |        |   |        |   |   |         | 77     |   |   |        |       |   |   |           |         |  
|                             | Write-off of preferred OP units original issuance
    costs     |              |            |           |   |          |     |         |   |               |           | 1,075         |   |        |   |        |   |   |         |       |   |   |        |       |   |   |           | 1,075    |  
|                             | Unrealized loss on interest rate hedges                         |              |            |           |   |          |     |         |   |               |           |              |   |        |   |        |   |   |         |       |   |   |        | (4,315 | ) |   |           | (4,315   | )
|                             | Reclassification adjustment for losses included
    in earnings |              |            |           |   |          |     |         |   |               |           |              |   |        |   |        |   |   |         |       |   |   |        | 866    |   |   |           | 866      |  
|                             | Net income                                                      |              |            |           |   |          |     |         |   |               |           |              |   |        |   | 73,775  |   |   |         |       |   |   |        |       |   |   |           | 73,775   |  
|                             |                                                                 |              |            |            |   |          |     |          |   |               |           |               |   |        |   |         |   |   |         |        |   |   |        |        |   |   |           |         
|                             | Comprehensive income                                            |              |            |            |   |          |     |          |   |               |           |               |   |        |   |         |   |   |         |        |   |   |        |        |   |   |           | 70,326   |  
|                             | Dividends declared and payable                                  |              |            |           |   |          |     |         |   |               |           | (58,999       | ) |        |   | (73,775 | ) |   |         |       |   |   |        |       |   |   |           | (132,774 | )
|                             |                                                                 |              |            |            |   |          |     |          |   |               |           |               |   |        |   |         |   |   |         |        |   |   |        |        |   |   |           |         
|Balance at December 31, 2004 |                                                                 |              | 66,325,709 |            |   | $        | 664 |          |   | $             | 1,212,508 |               |   | $      |  |         |   | $ | (12,830 | )      |   | $ | (4,050 | )      |   | $ | 1,196,292 |         
|                             |                                                                 |              |            |            |   |          |     |          |   |               |           |               |   |        |   |         |   |   |         |        |   |   |        |        |   |   |           |         

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,                           
|                                                                                      |                                                                      |                                                   
|                                                                                      |                                                                      | 2004                                               |          | 2003    |        | 2002
|                                                                                      |                                                                      |                                                    |          |         |        |     
|Operating Activities:                                                                 |                                                                      |                                                    |          |         |        |      |          |         |        |   |          |        
|Net income                                                                            |                                                                      | $                                                  | 73,775   |         |        | $    | 58,509   |         |        | $ | 70,175   |        
|Adjustments to reconcile net income to net cash
    provided by operating activities: |                                                                      |                                                    |          |         |        |      |          |         |        |   |          |        
|                                                                                      | Minority interest, including discontinued
    operations             |                                                    |          | 6,202   |        |      |          | 5,873   |        |   |          | 6,236   |       
|                                                                                      | Depreciation and amortization, including
    discontinued operations |                                                    |          | 126,582 |        |      |          | 120,316 |        |   |          | 111,418 |       
|                                                                                      | Amortization of loan costs and fees                                  |                                                    |          | 3,801   |        |      |          | 3,972   |        |   |          | 3,807   |       
|                                                                                      | Gain on sale of property                                             |                                                    |          | (30,473 | )      |      |          | (5,937  | )      |   |          | (1,967  | )     
|                                                                                      | Gain on repayment of mortgage loan receivable                        |                                                    |          |        |        |      |          |        |        |   |          | (750    | )     
|                                                                                      | Impairment on investment in securities                               |                                                    |          | 2,700   |        |      |          |        |        |   |          |        |       
|                                                                                      | Amortization of deferred compensation                                |                                                    |          | 3,760   |        |      |          | 2,251   |        |   |          | 1,199   |       
|                                                                                      | Changes in operating assets and liabilities:                         |                                                    |          |         |        |      |          |         |        |   |          |         |       
|                                                                                      |                                                                      | Rent and other receivables                         |          |         | (2,265 | )    |          |         | (771   | ) |          |         | 6,768  |  
|                                                                                      |                                                                      | Deferred rent                                      |          |         | (1,015 | )    |          |         | (557   | ) |          |         | (4,657 | )
|                                                                                      |                                                                      | Prepaid financing costs, expenses and other assets |          |         | (4,783 | )    |          |         | (1,494 | ) |          |         | (2,997 | )
|                                                                                      |                                                                      | Accounts payable and accrued expenses              |          |         | 3,338  |      |          |         | (2,356 | ) |          |         | 9,728  |  
|                                                                                      |                                                                      | Security deposits                                  |          |         | 3,285  |      |          |         | 1,676  |   |          |         | 962    |  
|                                                                                      |                                                                      |                                                    |          |         |        |      |          |         |        |   |          |        
|Net cash provided by operating activities                                             |                                                                      |                                                    | 184,907  |         |        |      | 181,482  |         |        |   | 199,922  |        
|                                                                                      |                                                                      |                                                    |          |         |        |      |          |         |        |   |          |        
|Investing Activities:                                                                 |                                                                      |                                                    |          |         |        |      |          |         |        |   |          |        
|Acquisitions and improvements to commercial
    properties                            |                                                                      |                                                    | (198,309 | )       |        |      | (111,365 | )       |        |   | (251,534 | )      
|Proceeds from sales of properties                                                     |                                                                      |                                                    | 187,072  |         |        |      | 91,010   |         |        |   | 24,287   |        
|Proceeds from repayment of mortgage note
    receivable                               |                                                                      |                                                    |         |         |        |      |         |         |        |   | 14,245   |        
|                                                                                      |                                                                      |                                                    |          |         |        |      |          |         |        |   |          |        
|Net cash used in investing activities                                                 |                                                                      |                                                    | (11,237  | )       |        |      | (20,355  | )       |        |   | (213,002 | )      
|                                                                                      |                                                                      |                                                    |          |         |        |      |          |         |        |   |          |        
|Financing Activities:                                                                 |                                                                      |                                                    |          |         |        |      |          |         |        |   |          |        
|Proceeds from term loan                                                               |                                                                      |                                                    |         |         |        |      |         |         |        |   | 125,000  |        
|Repayments of mortgage loans                                                          |                                                                      |                                                    | (182,190 | )       |        |      | (5,825   | )       |        |   | (2,798   | )      
|Proceeds from unsecured lines of credit                                               |                                                                      |                                                    | 465,500  |         |        |      | 102,500  |         |        |   | 255,937  |        
|Repayments of unsecured lines of credit                                               |                                                                      |                                                    | (505,000 | )       |        |      | (150,086 | )       |        |   | (227,700 | )      
|Proceeds from issuances of unsecured senior
    notes, net of discount                |                                                                      |                                                    | 197,033  |         |        |      |         |         |        |   |         |        
|Decrease (increase) in restricted cash                                                |                                                                      |                                                    | 5,012    |         |        |      | 804      |         |        |   | (1,730   | )      
|Proceeds from issuance of common stock, net of
    offering costs                     |                                                                      |                                                    | 42,745   |         |        |      | 27,946   |         |        |   | 9,078    |        
|Repurchase of common stock                                                            |                                                                      |                                                    |         |         |        |      |         |         |        |   | (40,693  | )      
|Distributions to minority interests                                                   |                                                                      |                                                    | (3,388   | )       |        |      | (3,443   | )       |        |   | (3,527   | )      
|Distributions to preferred operating partnership
    unit holders                     |                                                                      |                                                    | (3,234   | )       |        |      | (4,312   | )       |        |   | (4,312   | )      
|Redemption of preferred operating partnership
    units                               |                                                                      |                                                    | (50,000  | )       |        |      |         |         |        |   |         |        
|Dividends paid                                                                        |                                                                      |                                                    | (131,815 | )       |        |      | (128,067 | )       |        |   | (129,153 | )      
|                                                                                      |                                                                      |                                                    |          |         |        |      |          |         |        |   |          |        
|Net cash used in financing activities                                                 |                                                                      |                                                    | (165,337 | )       |        |      | (160,483 | )       |        |   | (19,898  | )      
|                                                                                      |                                                                      |                                                    |          |         |        |      |          |         |        |   |          |        
|Net increase (decrease) in cash and cash
    equivalents                              |                                                                      |                                                    | 8,333    |         |        |      | 644      |         |        |   | (32,978  | )      
|Cash and cash equivalents at beginning of period                                      |                                                                      |                                                    | 4,707    |         |        |      | 4,063    |         |        |   | 37,041   |        
|                                                                                      |                                                                      |                                                    |          |         |        |      |          |         |        |   |          |        
|Cash and cash equivalents at end of period                                            |                                                                      | $                                                  | 13,040   |         |        | $    | 4,707    |         |        | $ | 4,063    |        
|                                                                                      |                                                                      |                                                    |          |         |        |      |          |         |        |   |          |        
|Supplemental Disclosure of Cash Flow
    Information:                                 |                                                                      |                                                    |          |         |        |      |          |         |        |   |          |        
|Cash paid during the period for interest, net of
    amount capitalized               |                                                                      | $                                                  | 87,572   |         |        | $    | 96,547   |         |        | $ | 94,007   |        
|                                                                                      |                                                                      |                                                    |          |         |        |      |          |         |        |   |          |        

See accompanying notes to financial
statements.

F-5



---



##### Table of Contents



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. Through
our controlling interest in Arden Realty Limited Partnership, or
the Operating Partnership, and our other subsidiaries, we own,
manage, lease, develop, renovate and acquire commercial office
properties located in Southern California. As of
December 31, 2004, our portfolio was comprised of 120
primarily suburban office properties and 197 buildings
containing approximately 18.2 million net rentable square
feet. As of December 31, 2004, our operating portfolio was
91.2% occupied.

The minority interests at December 31, 2004
consist of limited partnership interests in the Operating
Partnership of approximately 2.5%.



| |                                              
| | ---------------------------------------------
| | 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 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 real estate investment trust (REIT) for
federal income tax purposes.



|   |                                                                         
|-- | ------------------------------------------------------------------------
|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 also
consolidate all variable interest entities for which we are the
primary beneficiary.

Arden Realty and the Operating Partnership
currently own 100% of all of our consolidated subsidiaries and
do not have any unconsolidated investments.



| |                        
| | -----------------------
| | 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.



| |                    
| | -------------------
| | Segment Information

We view our operations as principally one
segment, 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.

F-6



---



##### Table of Contents





| |                      
| | ---------------------
| | 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, 2004
and 2003.

Property acquisitions are accounted for in
accordance with Statement of Financial Accounting Standards
(SFAS) No. 141, Business Combinations. The
fair value of the real estate acquired is allocated to the
acquired tangible assets, consisting of land, building and
tenant improvements, and identified intangible assets and
liabilities, consisting of the value of above-market and
below-market leases, other value of in-place leases and value of
tenant relationships, if any, based in each case on their fair
values.

The fair value of the tangible assets of an
acquired property (which includes land, building and tenant
improvements) is determined by valuing the property as if it
were vacant, and the as-if-vacant value is then
allocated to land, building and tenant improvements based on
managements determination of the relative fair values of
these assets. We determine the as-if-vacant fair value of a
property using methods similar to those used by independent
appraisers. Factors considered by management in performing these
analyses include an estimate of carrying costs during the
expected lease-up periods considering current market conditions
and costs to execute similar leases. In estimating carrying
costs, management includes estimates of lost rental revenue,
real estate taxes, insurance and other operating expenses during
the expected lease-up periods based on current market demand. We
also estimate costs to execute similar leases including leasing
commissions, concessions, legal and other related costs.

In allocating the fair value of the identified
intangible assets and liabilities of an acquired property,
above-market and below-market in-place lease values are recorded
based on the present value (using an interest rate which
reflects the risks associated with the leases acquired) of the
difference between (i) the contractual amounts to be paid
pursuant to the in-place leases and (ii) managements
estimate of fair market lease rates for the corresponding
in-place leases, measured over a period equal to the remaining
non-cancelable term of the lease. The capitalized above-market
and below-market lease values are amortized into rental income
over the remaining non-cancelable terms of the respective leases.

The aggregate value of other acquired intangible
assets, consisting of in-place leases and tenant relationships,
if any, is measured by the excess of (i) the purchase price
paid for a property after adjusting existing in-place leases to
market rental rates over (ii) the estimated fair value of
the property as if vacant, determined as set forth above. This
aggregate value is allocated between in-place lease values and
tenant relationships based on managements evaluation of
the specific characteristics of each tenants lease. Should
acquisitions of properties result in allocating material amounts
to the value of tenant relationships, an amount would be
separately allocated and amortized over the estimated life of
the relationship.

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 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

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.

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

F-7



---



##### Table of Contents





| |                 
| | ----------------
| | 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, 2004 and
2003 consisted of $9.7 million and $13.7 million,
respectively, in cash deposits as required by certain of our
mortgage loans payable and $5.1 million and
$6.0 million, respectively, in impound accounts for real
estate taxes and insurance, as required by certain of our
mortgage loans payable.



| |                        
| | -----------------------
| | 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.

The Company recognizes gains on sales of real
estate pursuant to the provisions of SFAS No. 66
Accounting for Sales for Real Estate. The specific
timing of a sale is measured against various criteria in
SFAS No. 66 related to the terms of the transaction
and any continuing involvement in the form of management or
financial assistance associated with the property. If the sales
criteria are not met, the Company defers gain recognition and
accounts for the continued operations of the property by
applying the finance, installment or cost recovery methods, as
appropriate, until the sales criteria are met.



| |                                              
| | ---------------------------------------------
| | 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.



| |             
| | ------------
| | 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 2004, 2003 and 2002, we declared annual
dividends of $2.02 per share.



| |                                    
| | -----------------------------------
| | Fair Value of Financial Instruments

Our disclosures of estimated fair value of
financial instruments at December 31, 2004 and 2003 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.

F-8



---



##### Table of Contents



Our cash equivalents, mortgage notes receivable,
unsecured lines of credit, interest rate hedge 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, 2004 |         | December 31, 2003
|                       |  |                   |         |                  
|                       |  | Carrying          |         | Estimated         |  | Carrying |         | Estimated 
|                       |  | Amount            |         | Fair Value        |  | Amount   |         | Fair Value
|                       |  |                   |         |                   |  |          |         |           
|Mortgage loans payable |  | $                 | 382,639 |                   |  | $        | 389,755 |            |  | $ | 564,829 |  |  | $ | 581,945 | 
|                       |  |                   |         |                   |  |          |         |            |  |   |         |  |  |   |         | 
|Unsecured senior notes |  | $                 | 696,945 |                   |  | $        | 712,137 |            |  | $ | 498,952 |  |  | $ | 540,904 | 
|                       |  |                   |         |                   |  |          |         |            |  |   |         |  |  |   |         | 

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 Hedge Agreements

We have periodically entered into interest rate
hedge agreements to effectively convert floating rate debt into
fixed rate debt or to remove the variability associated with
forecasted issuances of 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 hedge agreements is to manage
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. In August
2004, we settled $150 million of forward-starting swaps we
entered into in 2003 in conjunction with a forecasted
$200 million issuance of unsecured senior notes. We
expensed approximately $130,000 of ineffectiveness relating to
this settlement during 2004.

In 2003, we also entered into reverse interest
rate hedge agreements to float $100 million of the fixed
interest rate associated with the 7.00% senior unsecured
notes due in November of 2007. Under these reverse hedges, we
will receive interest at a fixed rate of 7.00% and pay interest
at a variable rate averaging the six-month LIBOR in arrears plus
3.10%. The interest rate hedges mature at the same time the
notes are due. These hedges qualify as fair value hedges for
accounting purposes. Net semi-annual interest payments will be
recognized as increases or decreases in interest expense. The
fair value of the interest rate hedges will be recognized on our
balance sheet and the carrying value of the senior unsecured
notes will be increased or decreased by an offsetting amount.

In 2004, we entered into $300 million of
forward-starting swaps that effectively fixed the 10-year
Treasury rate at an average rate of approximately 4.37% for
borrowings that are expected to occur in 2005 to primarily
refinance some of our scheduled debt maturities. The
forward-starting interest rate swaps were entered into at
current market rates and, therefore, had no initial cost.

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.

F-9



---



##### Table of Contents



Under SFAS 133, our $175 million in
floating-to-fixed hedges and our $300 million in
forward-starting hedges outstanding as of December 31, 2004
are classified as cash flow hedges. The fair value of these
instruments of ($3.7) million at December 31, 2004 has
been deferred in accumulated other comprehensive loss on our
balance sheet. Of the amount deferred in other comprehensive
loss at December 31, 2004, we estimate that approximately
$4.8 million will be reclassified out of other
comprehensive loss as an increase to interest expense during
2005. The estimated fair value of these interest rate hedge
agreements are dependent on changes in market interest rates and
other market factors that affect the value of such agreements.
Consequently, the estimated current fair value may significantly
change during the term of the agreements. Any estimated gain or
loss from these agreements will be amortized into earnings as we
recognize the interest expense for the underlying floating-rate
loans at the fixed interest rate provided under our agreements
in the case of the fixed-to-floating hedges or as part of
interest expense for future borrowings in the case of the
forward-starting hedges. If the underlying debt related to these
hedges were to be repaid prior to maturity, we would recognize
into interest expense any unamortized gain or loss at the time
of such early repayment.

Under SFAS 133, our $100 million in
fixed-to-floating hedges are classified as fair value hedges
with their fair value of approximately $162,000 reported in both
the unsecured senior notes and accounts payable and accrued
expenses line items on our balance sheet. The estimated fair
value of these interest rate hedge agreements are dependent on
changes in market interest rates and other market factors that
affect the value of such agreements. Consequently, the estimated
current fair value may significantly change during the term of
the agreements. During the years ended December 31, 2004
and 2003, we recognized approximately $1.6 million and
$400,000, respectively, as a reduction of interest expense
related to our fair value hedges. If the underlying debt related
to these hedges were to be repaid prior to maturity, we would
recognize into interest expense any unamortized gain or loss at
the time of such early repayment.



| |                         
| | ------------------------
| | New Accounting Standards

In December 2004, the FASB issued
SFAS No. 123R, which is a revision of
SFAS No. 123. SFAS No. 123R supersedes APB
Opinion No. 25, and its related implementation guidance.
SFAS No. 123R requires companies to record
compensation expense for share-based payments to employees,
including grants of employee stock options, at fair value.
SFAS No. 123R is effective for most public companies
at the beginning of the first interim or annual period beginning
after June 15, 2005. We believe that the implementation of
the provisions of SFAS No. 123R will not have a
material impact on our financial position or results of
operations.



| |                  
| | -----------------
| | Reclassifications

Certain prior year amounts on our consolidated
balance sheets and consolidated statements of income have been
reclassified to confirm with the current year presentation for
properties sold and classified as held for
disposition pursuant to SFAS 144.

F-10



---



##### Table of Contents





|   |                      
|-- | ---------------------
|3. | Commercial Properties



| |                      
| | ---------------------
| | Property Dispositions

|                              |  |            |             |           |  |              |                       |          |  |                   |  |          |        |  |  |  |           |  |  |   |         |    
|----------------------------- |  | ---------- | ----------- | --------- |  | ------------ | --------------------- | -------- |  | ----------------- |  | -------- | ------ |  |  |  | --------- |  |  | - | ------- | ---
|                              |  |            |             |           |  |              |                       |          |  |                   |  | Sales   
|                              |  |            |             |           |  |              |                       | Property |  | Square            |  | Price   
|Property                      |  | Major Area |             | Submarket |  | Date of Sale |                       | Type     |  | Feet              |  | ($000s)
|                              |  |            |             |           |  |              |                       |          |  |                   |  |         
|Tower Plaza Retail            |  |            | Riverside   |           |  |              | Temecula              |          |  | February 4, 2004  |  |          | Retail |  |  |  | 133,481   |  |  | $ | 17,050  |    
|Univision  5999 Center Drive |  |            | Los Angeles |           |  |              | Culver City/Fox Hills |          |  | March 16, 2004    |  |          | Office |  |  |  | 161,650   |  |  |   | 52,500  |    
|10251 Vista Sorrento          |  |            | San Diego   |           |  |              | Sorrento Mesa         |          |  | August 24, 2004   |  |          | Office |  |  |  | 69,386    |  |  |   | 9,250   |    
|Waples Center                 |  |            | San Diego   |           |  |              | Sorrento Mesa         |          |  | December 29, 2004 |  |          | Office |  |  |  | 28,119    |  |  |   | (A      | )  
|Morehouse Center              |  |            | San Diego   |           |  |              | Sorrento Mesa         |          |  | December 29, 2004 |  |          | Office |  |  |  | 181,207   |  |  |   | (A      | )  
|91 Freeway Center             |  |            | Los Angeles |           |  |              | Artesia               |          |  | December 29, 2004 |  |          | Office |  |  |  | 93,277    |  |  |   | (A      | )  
|Norwalk                       |  |            | Los Angeles |           |  |              | Norwalk               |          |  | December 29, 2004 |  |          | Office |  |  |  | 122,175   |  |  |   | (A      | )  
|1501 Hughes Way               |  |            | Los Angeles |           |  |              | Suburban Long Beach   |          |  | December 29, 2004 |  |          | Office |  |  |  | 77,060    |  |  |   | (A      | )  
|3901 Via Oro                  |  |            | Los Angeles |           |  |              | Suburban Long Beach   |          |  | December 29, 2004 |  |          | Office |  |  |  | 53,195    |  |  |   | (A      | )  
|Glendale Corporate Center     |  |            | Los Angeles |           |  |              | Glendale              |          |  | December 29, 2004 |  |          | Office |  |  |  | 108,209   |  |  |   | (A      | )  
|Whittier                      |  |            | Los Angeles |           |  |              | Whittier              |          |  | December 29, 2004 |  |          | Office |  |  |  | 135,415   |  |  |   | (A      | )  
|South Bay Tech                |  |            | Los Angeles |           |  |              | 190th Corridor        |          |  | December 29, 2004 |  |          | Office |  |  |  | 104,815   |  |  |   | (A      | )  
|                              |  |            |             |           |  |              |                       |          |  |                   |  |          |        |  |  |  |           |  |  |   |         |    
|Sub-total                     |  |            | 1,267,989   |           |  |              | 78,800                |         
|                              |  |            |             |           |  |              |                       |          |  |                   |  |          |        |  |  |  |          |  |  |   | 126,000 | (B)
|                              |  |            |             |           |  |              |                       |          |  |                   |  |          |        |  |  |  |           |  |  |   |         |    
|                              |  |            |             |           |  |              |                       |          |  |                   |  |          |        |  |  |  | 1,267,989 |  |  | $ | 204,800 |    
|                              |  |            |             |           |  |              |                       |          |  |                   |  |          |        |  |  |  |           |  |  |   |         |    



---

(A) Portfolio sale.



|    |                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|(B) | Includes approximately $12.5 million in
    proceeds held in escrow at the end of 2004 as part of a 1031
    exchange transaction to be completed in 2005.



| |                      
| | ---------------------
| | Property Acquisitions

|                        |  |        |             |           |  |          |                  |          |  |        |                  |          |  |  |        |  |  |  |         |  |  |   |        | 
|----------------------- |  | ------ | ----------- | --------- |  | -------- | ---------------- | -------- |  | ------ | ---------------- | -------- |  |  | ------ |  |  |  | ------- |  |  | - | ------ | 
|                        |  |        |             |           |  |          |                  |          |  |        |                  | Purchase
|                        |  |        |             |           |  | Date of  |                  | Property |  | Square |                  | Price   
|Property                |  | County |             | Submarket |  | Purchase |                  | Type     |  | Feet   |                  | ($000s)
|                        |  |        |             |           |  |          |                  |          |  |        |                  |         
|Homestore               |  |        | Los Angeles |           |  |          | Westlake Village |          |  |        | October 4, 2004  |          |  |  | Office |  |  |  | 137,762 |  |  | $ | 32,300 | 
|Warner Corporate Center |  |        | Los Angeles |           |  |          | Woodland Hills   |          |  |        | October 11, 2004 |          |  |  | Office |  |  |  | 253,000 |  |  |   | 64,500 | 
|                        |  |        |             |           |  |          |                  |          |  |        |                  |          |  |  |        |  |  |  |         |  |  |   |        | 
|                        |  |        |             |           |  |          |                  |          |  |        |                  |          |  |  |        |  |  |  | 390,762 |  |  | $ | 96,800 | 
|                        |  |        |             |           |  |          |                  |          |  |        |                  |          |  |  |        |  |  |  |         |  |  |   |        | 



| |                                                                
| | ---------------------------------------------------------------
| | Discontinued Operations and Properties held
    for Disposition

SFAS 144, effective January 1, 2002,
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 Financial Accounting Standards No. 121
(SFAS 121). Accordingly, the operating results for the
properties classified as held for disposition prior to
January 1, 2002 and sold prior to December 31, 2002
are included in income from continuing operations for the year
ended December 31, 2002. In order to increase the
comparability of our consolidated statements of income for the
years ended December 31, 2004, 2003 and 2002, the tables
below summarize the operating results of one property classified
as held for disposition at December 31, 2004,
twelve properties sold during 2004 and eight properties sold
during 2003.

As of December 31, 2004, properties held for
disposition consisted of one property with approximately
167,000 square feet. See footnote 13.

F-11



---



##### Table of Contents



The results of operations for the properties
classified as discontinued operations for the years ended
December 31, 2004, 2003 and 2002 are as follows (in
thousands):

|                                                  |  |                                  |        |      |  |      |         |   |  |   |         |  
|------------------------------------------------- |  | -------------------------------- | ------ | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                                  |  |                                 
|                                                  |  | For the Years Ended December 31,
|                                                  |  |                                 
|                                                  |  | 2004                             |        | 2003 |  | 2002
|                                                  |  |                                  |        |      |  |     
|Revenues                                          |  | $                                | 20,533 |      |  | $    | 33,794  |   |  | $ | 41,978  |  
|Property operating expenses                       |  |                                  | (7,781 | )    |  |      | (11,711 | ) |  |   | (14,199 | )
|Depreciation and amortization                     |  |                                  | (4,895 | )    |  |      | (8,372  | ) |  |   | (11,100 | )
|Interest expense                                  |  |                                  | (659   | )    |  |      | (674    | ) |  |   | (689    | )
|Interest and other income                         |  |                                  | 2      |      |  |      |        |   |  |   |        |  
|Minority interest                                 |  |                                  | (947   | )    |  |      | (499    | ) |  |   | (420    | )
|                                                  |  |                                  |        |      |  |      |         |   |  |   |         |  
|Discontinued operations, net of minority interest |  | $                                | 6,253  |      |  | $    | 12,538  |   |  | $ | 15,570  |  
|                                                  |  |                                  |        |      |  |      |         |   |  |   |         |  
|Gain on sale of discontinued properties           |  | $                                | 30,473 |      |  | $    | 5,937   |   |  | $ |        |  
|                                                  |  |                                  |        |      |  |      |         |   |  |   |         |  



| |                     
| | --------------------
| | 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 was as follows (in thousands):

|                           |  |                                  |        |      |  |      |        |   |  |   |        |  
|-------------------------- |  | -------------------------------- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                           |  |                                 
|                           |  | For the Years Ended December 31,
|                           |  |                                 
|                           |  | 2004                             |        | 2003 |  | 2002
|                           |  |                                  |        |      |  |     
|Total interest incurred(1) |  | $                                | 90,451 |      |  | $    | 96,263 |   |  | $ | 94,162 |  
|Amount capitalized         |  |                                  | (936   | )    |  |      | (2,496 | ) |  |   | (5,646 | )
|                           |  |                                  |        |      |  |      |        |   |  |   |        |  
|Amount expensed(1)         |  | $                                | 89,515 |      |  | $    | 93,767 |   |  | $ | 88,516 |  
|                           |  |                                  |        |      |  |      |        |   |  |   |        |  



---

|    |                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------
|(1) | Includes interest expense related to a property
    currently classified as held for disposition.



| |                              
| | -----------------------------
| | Future Minimum Lease Payments

Future minimum lease payments to be received
under noncancelable operating leases existing as of
December 31, 2004, are as follows (in thousands):

|           |       |   |         |           | 
|---------- | ----- | - | ------- | --------- | 
|2005       |       | $ | 349,967 |          
|2006       |       |   | 305,034 |          
|2007       |       |   | 254,490 |          
|2008       |       |   | 196,735 |          
|2009       |       |   | 144,404 |          
|Thereafter |       |   | 274,098 |          
|           |       |   |         |          
|           | Total |   | $       | 1,524,728 | 
|           |       |   |         |          

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

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 $1.8 million, $2.0 mil-

F-12



---



##### Table of Contents



lion and $1.9 million for the years ended
December 31, 2004, 2003 and 2002, respectively. Future
minimum ground lease payments due under existing ground leases
are as follows (in thousands):


|           |       |   |         |         | 
|---------- | ----- | - | ------- | ------- | 
|2005       |       | $ | 1,815   |        
|2006       |       |   | 1,840   |        
|2007       |       |   | 1,865   |        
|2008       |       |   | 1,865   |        
|2009       |       |   | 1,865   |        
|Thereafter |       |   | 109,056 |        
|           |       |   |         |        
|           | Total |   | $       | 118,306 | 
|           |       |   |         |        



|   |                            
|-- | ---------------------------
|4. | Non-Real Estate Investments

During the year ended December 31, 2004, an
impairment of $2.7 million was recognized in connection
with our investment in the securities of a non-publicly traded
company that provides distributed energy generation to
commercial property owners. This impairment represents our
entire investment in this company.

We recorded this impairment after analyzing
information received from this company regarding their current
business and financial strategies which indicated to us that the
recoverability of our investment was unlikely.



|   |                                              
|-- | ---------------------------------------------
|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 |      |              
|                                |  | December 31,   |         | December 31, |  | Interest Rate at  |         | Fixed/Floating |  | Securing   |      |              
|Type of Debt                    |  | 2004           |         | 2003         |  | December 31, 2004 |         | Rate           |  | Loan       |      | Maturity Date
|                                |  |                |         |              |  |                   |         |                |  |            |      |              
|                                |  |                |         |              |  |                   |         |                |  |           
|                                |  | (in thousands) |         |              |  |                   |         |                |  |           
|Mortgage Loans Payable:         |  |                |         |              |  |                   |         |                |  |            |      |               |  |                           |                |  |   |  |         |   |      |  |      |     
|Fixed Rate                      |  |                |         |              |  |                   |         |                |  |            |      |               |  |                           |                |  |   |  |         |   |      |  |      |     
|Mortgage Financing I(1)         |  | $              |        |              |  | $                 | 175,000 |                |  |            |     |               |  |                           |               |  |   |  |        |   |      |  |     |     
|Mortgage Financing III(2)       |  |                | 132,323 |              |  |                   | 134,544 |                |  |            | 6.74 | %             |  |                           | Fixed          |  |   |  | 22      |   |      |  | 4/08 |     
|Mortgage Financing IV(2)        |  |                | 108,194 |              |  |                   | 109,960 |                |  |            | 6.61 | %             |  |                           | Fixed          |  |   |  | 12      |   |      |  | 4/08 |     
|Mortgage Financing V(2)         |  |                | 103,504 |              |  |                   | 105,899 |                |  |            | 6.94 | %             |  |                           | Fixed          |  |   |  | 12      |   |      |  | 4/09 |     
|Mortgage Financing VI(2)        |  |                | 21,325  |              |  |                   | 21,578  |                |  |            | 7.54 | %             |  |                           | Fixed          |  |   |  | 3       |   |      |  | 4/09 |     
|Activity Business Center(2),(3) |  |                | 7,222   |              |  |                   | 7,394   |                |  |            | 8.85 | %             |  |                           | Fixed          |  |   |  | 1       |   |      |  | 5/06 |     
|145 South Fairfax(2)            |  |                | 3,869   |              |  |                   | 3,912   |                |  |            | 8.93 | %             |  |                           | Fixed          |  |   |  | 1       |   |      |  | 1/27 |     
|Marin Corporate Center(2)       |  |                | 2,585   |              |  |                   | 2,724   |                |  |            | 9.00 | %             |  |                           | Fixed          |  |   |  | 1       |   |      |  | 7/15 |     
|Conejo Business Center(2)       |  |                | 2,531   |              |  |                   | 2,669   |                |  |            | 8.75 | %             |  |                           | Fixed          |  |   |  | (Note 4 | ) |      |  | 7/15 |     
|Conejo Business Center(2)       |  |                | 1,086   |              |  |                   | 1,149   |                |  |            | 7.88 | %             |  |                           | Fixed          |  |   |  | (Note 4 | ) |      |  | 7/15 |     
|                                |  |                |         |              |  |                   |         |                |  |            |      |               |  |                           |                |  |   |  |         |   |      |  |      |     
|                                |  |                | 382,639 |              |  |                   | 564,829 |                |  |            |      |               |  |                           |                |  |   |  |         |   |      |  |      |     
|Unsecured Lines of Credit:      |  |                |         |              |  |                   |         |                |  |            |      |               |  |                           |                |  |   |  |         |   |      |  |      |     
|Floating Rate                   |  |                |         |              |  |                   |         |                |  |            |      |               |  |                           |                |  |   |  |         |   |      |  |      |     
|Wells Fargo  $310 mm(5)        |  |                | 111,500 |              |  |                   | 158,000 |                |  |            | 3.57 | %             |  | LIBOR + 0.90%(Notes 6, 7) |                |  |  |  |         |   | 4/06 | 
|City National Bank  $20 mm(5)  |  |                | 10,000  |              |  |                   | 3,000   |                |  |            | 3.21 | %             |  |                           | LIBOR + 0.90%  |  |   |  |        |   |      |  | 8/05 |     
|                                |  |                |         |              |  |                   |         |                |  |            |      |               |  |                           | Note 8         |  |   |  |         |   |      |  |      |     
|                                |  |                | 121,500 |              |  |                   | 161,000 |                |  |            |      |               |  |                           |                |  |   |  |         |   |      |  |      |     
|Unsecured Term Loan:            |  |                |         |              |  |                   |         |                |  |            |      |               |  |                           |                |  |   |  |         |   |      |  |      |     
|Fixed Rate                      |  |                |         |              |  |                   |         |                |  |            |      |               |  |                           |                |  |   |  |         |   |      |  |      |     
|Wells Fargo  $125 mm(5)        |  |                | 125,000 |              |  |                   | 125,000 |                |  |            | 4.55 | %             |  |                           | Fixed (Note 9) |  |   |  |        |   |      |  | 2/12 | (10)

F-13



---



##### Table of Contents



|                        |  |                |           |              |  |                   |           |                |  |            |      |               |  |  |           |  |  |  |   |  |  |  |       | 
|----------------------- |  | -------------- | --------- | ------------ |  | ----------------- | --------- | -------------- |  | ---------- | ---- | ------------- |  |  | --------- |  |  |  | - |  |  |  | ----- | 
|                        |  |                |           |              |  |                   |           |                |  | Number of  |      |              
|                        |  |                |           |              |  | Stated Annual     |           |                |  | Properties |      |              
|                        |  | December 31,   |           | December 31, |  | Interest Rate at  |           | Fixed/Floating |  | Securing   |      |              
|Type of Debt            |  | 2004           |           | 2003         |  | December 31, 2004 |           | Rate           |  | Loan       |      | Maturity Date
|                        |  |                |           |              |  |                   |           |                |  |            |      |              
|                        |  |                |           |              |  |                   |           |                |  |           
|                        |  | (in thousands) |           |              |  |                   |           |                |  |           
|Unsecured Senior Notes: |  |                |           |              |  |                   |           |                |  |            |      |               |  |  |           |  |  |  |   |  |  |  |       | 
|Fixed Rate              |  |                |           |              |  |                   |           |                |  |            |      |               |  |  |           |  |  |  |   |  |  |  |       | 
|2005 Notes(11),(12)     |  |                | 199,974   |              |  |                   | 199,872   |                |  |            | 8.88 | %             |  |  | Fixed     |  |  |  |  |  |  |  | 3/05  | 
|2007 Notes(11)          |  |                | 149,395   |              |  |                   | 149,907   |                |  |            | 7.00 | %             |  |  | (Note 13) |  |  |  |  |  |  |  | 11/07 | 
|2010 Notes(11)          |  |                | 49,785    |              |  |                   | 49,744    |                |  |            | 9.15 | %             |  |  | Fixed     |  |  |  |  |  |  |  | 3/10  | 
|2010 Notes(11)          |  |                | 99,513    |              |  |                   | 99,429    |                |  |            | 8.50 | %             |  |  | Fixed     |  |  |  |  |  |  |  | 11/10 | 
|2011 Notes(11), (14)    |  |                | 198,278   |              |  |                   |          |                |  |            | 5.20 | %             |  |  | Fixed     |  |  |  |  |  |  |  | 9/11  | 
|                        |  |                |           |              |  |                   |           |                |  |            |      |               |  |  |           |  |  |  |   |  |  |  |       | 
|                        |  |                | 696,945   |              |  |                   | 498,952   |                |  |            |      |               |  |  |           |  |  |  |   |  |  |  |       | 
|                        |  |                |           |              |  |                   |           |                |  |            |      |               |  |  |           |  |  |  |   |  |  |  |       | 
|Total Debt              |  | $              | 1,326,084 |              |  | $                 | 1,349,781 |                |  |            |      |               |  |  |           |  |  |  |   |  |  |  |       | 
|                        |  |                |           |              |  |                   |           |                |  |            |      |               |  |  |           |  |  |  |   |  |  |  |       | 



---

|    |                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | This mortgage financing was repaid in full on
    April 9, 2004.                                                                                                                                                                                                                                                                                                                                                          
|   
|(2) | Requires monthly payments of principal and
    interest.                                                                                                                                                                                                                                                                                                                                                                  
|   
|(3) | This loan is secured by a property currently
    classified as held for disposition. This loan was repaid in
    January of 2005. See footnote 13.                                                                                                                                                                                                                                                                        
|   
|(4) | Both mortgage loans are secured by the Conejo
    Business Center property.                                                                                                                                                                                                                                                                                                                                               
|   
|(5) | Requires monthly payments of interest only, with
    outstanding principal balance due upon maturity.                                                                                                                                                                                                                                                                                                                     
|   
|(6) | This line of credit also has an annual
    20 basis point facility fee on the entire $310 million
    commitment amount. In June 2004, we amended this line of credit
    to reduce the interest rate from LIBOR + 1.00% to LIBOR + 0.90%.                                                                                                                                                                                
|   
|(7) | We have entered into interest rate swap
    agreements to fix the interest rate on $50 million of the
    outstanding balance on this line of credit at 3.95% through
    April of 2006.                                                                                                                                                                                                                                  
|   
|(8) | On October 4, 2004, we amended this line of
    credit to reduce the interest rate from LIBOR + 1.00% or Prime
    Rate  1.875% to LIBOR + 0.90% or Prime
    Rate  1.975%.                                                                                                                                                                                                                                             
|   
|(9) | In 2002, we entered into interest rate swap
    agreements that fixed the interest rate on the entire balance of
    this loan. In June 2004, we amended this loan to reduce it
    effective interest rate by 20 basis points. After this
    amendment and after taking into effect the interest rate swap
    agreements for this loan, it will have an effective interest
    rate of 4.55% in 2005 and 4.70% in 2006.



|     |                                                                                                                                                                                                                                                                                                                                                 
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | On February 18, 2005, we extended the
    maturity of this loan to February of 2012. See footnote 13.                                                                                                                                                                                                                                           
|    
|(11) | Requires semi-annual interest payments only, with
    the principal balance due upon maturity.                                                                                                                                                                                                                                                  
|    
|(12) | These notes were redeemed in March of 2005. See
    footnote 13.                                                                                                                                                                                                                                                                                
|    
|(13) | In 2003, we entered into interest rate swap
    agreements to float the interest rate on $100 million of
    the outstanding balance of these notes at a rate of LIBOR + 3.1%
    through November of 2007. Including these swap agreements, the
    effective interest rate on these notes was approximately 6.53%
    as of December 31, 2004.
|    
|(14) | On August 18, 2004, we issued
    $200 million of unsecured senior notes.                                                                                                                                                                                                                                                                       

Our Operating Partnership has an unsecured line
of credit with a total commitment of $20 million from City
National Bank. This line of credit accrues interest at LIBOR +
0.90% or the City National Bank Prime Rate less 1.975% and is
scheduled to mature on August 1, 2005. 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, 2004 and 2003, there was $10.0 million
and $3.0 million outstanding on this line of credit,
respectively, and $10.0 and $17.0 million was available for
additional borrowings, respectively.

Our Operating Partnership also has an unsecured
line of credit with a group of banks led by Wells Fargo. The
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 + 0.65% and LIBOR
+ 1.15% (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 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, 2004 and 2003,
$111.5 million and $158.0 million was outstanding on
this line of

F-14



---



##### Table of Contents



credit, respectively, and $198.5 million and
$152.0 million was available for additional borrowings,
respectively.


Following is a summary of scheduled principal
payments for our total debt outstanding as of December 31,
2004 (in thousands):

|           |       |        |         |           | 
|---------- | ----- | ------ | ------- | --------- | 
|Year       |       | Amount
|           |       |       
|2005       |       | $      | 216,871 | (1)      
|2006       |       |        | 251,101 | (2),(3)  
|2007       |       |        | 158,035 |          
|2008       |       |        | 230,726 |          
|2009       |       |        | 112,291 |          
|Thereafter |       |        | 357,060 |          
|           |       |        |         |          
|           | Total |        | $       | 1,326,084 | 
|           |       |        |         |          



---

|    |                                                                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes $200 million of unsecured senior
    notes redeemed in March of 2005. See footnote 13.                                                                                                
|   
|(2) | Includes $111.5 million outstanding on our
    Wells Fargo unsecured line of credit.                                                                                                           
|   
|(3) | Includes $125 million outstanding on our
    Wells Fargo unsecured term loan. The maturity date of this loan
    was extended to February of 2012 subsequent to year- end. See
    footnote 13.



|   |                     
|-- | --------------------
|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 the election of the Operating Partnership, for shares of our
common stock on a one-for-one basis.

During the years ended December 31, 2004 and
2003, we redeemed an aggregate of 16,000 and 29,076 common
OP Units, respectively, of the Operating Partnership for
shares of our common stock.

During the years ended December 31, 2004 and
2003, we issued a total of 1,750,592 and 1,162,523 common
shares, respectively, relating to exercises of stock options.

In September 2004, we redeemed the
$50 million of 5.625% Series B Cumulative Redeemable
Preferred Operating Partnership Units at par plus accrued unpaid
distributions. These Preferred OP Units were originally
issued in September of 1999. In conjunction with this
redemption, we expensed approximately $1.1 million of
original issuance costs.

During 2004, we issued a total of 136,500
restricted stock awards to several key executive officers,
directors and employees. Holders of these shares have full
voting rights and will receive any dividends but are prohibited
from selling or transferring unvested shares. The fair market
value on the dates of grants for these restricted shares ranged
from $29.30 to $32.66. These restricted shares vest equally on
the anniversary date of the awards over 3 years.

We recorded compensation expense of approximately
$600,000 during 2004 for the grants described above based upon
the market value of these shares on the dates of the awards.

On December 10, 2004, we declared a
quarterly dividend of $0.505 per share to stockholders of
record on December 31, 2004. This dividend was paid on
January 19, 2005. We declared annual dividends of
$2.02 per common share for each of the years ended
December 31, 2004 and 2003.



|   |                              
|-- | -----------------------------
|7. | Commitments and Contingencies



| |                    
| | -------------------
| | Capital Commitments

As of December 31, 2004, we had
approximately $44.8 million outstanding in capital
commitments related to tenant improvements, renovation costs,
operating leases and general property-related capital
expenditures.

F-15



---



##### Table of Contents





| |           
| | ----------
| | Litigation

We are presently subject to various lawsuits,
claims and proceedings of a nature considered normal to our
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 from
operations. There were no material changes in our legal
procedures during the year ended December 31, 2004.



| |                             
| | ----------------------------
| | 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. As of December 31, 2004 and 2003, we had
a total of approximately $39.3 million and
$33.5 million, respectively, of total lease security
available, including security deposits and existing letters of
credit.



|   |                           
|-- | --------------------------
|8. | Related Party Transactions

At December 31, 2004 and 2003, we have four
promissory notes totaling approximately $486,000 relating to two
of our officers. These notes originated during 2001 and 2002 and
mature between July of 2006 and September of 2011. Two of these
notes bear interest at fixed rates ranging from 5.75% to 6.00%.
The remaining note bears interest at LIBOR + 1.10%. These notes
are personally guaranteed by the respective officers and are
included as part of other receivables in our balance sheets at
December 31, 2004 and 2003.

We lease approximately 7,300 square feet of
office space to two companies in which three of our officers
have investment interests. The total annual rents from these
leases is approximately $175,000. We also lease approximately
34,000 square feet to a company related to one of our
independent directors. The total annual rents from this lease is
approximately $497,000. The terms under these leases are
comparable to those that would have been negotiated at inception
with unaffiliated third parties.



|   |                   
|-- | ------------------
|9. | Earnings Per Share

The following table sets forth the computation of
basic and diluted net income per share for the years ended
December 31, 2004, 2003 and 2002 (in thousands, except per
share amounts):

|                                                  |                                     |      |        |      |  |      |        |      |  |   |        |      | 
|------------------------------------------------- | ----------------------------------- | ---- | ------ | ---- |  | ---- | ------ | ---- |  | - | ------ | ---- | 
|                                                  |                                     | 2004 |        | 2003 |  | 2002
|                                                  |                                     |      |        |      |  |     
|Income from continuing operations                 |                                     | $    | 37,049 |      |  | $    | 40,034 |      |  | $ | 54,605 |     
|Discontinued operations, net of minority interest |                                     |      | 6,253  |      |  |      | 12,538 |      |  |   | 15,570 |     
|Gain on sale of discontinued properties           |                                     |      | 30,473 |      |  |      | 5,937  |      |  |   |       |     
|                                                  |                                     |      |        |      |  |      |        |      |  |   |        |     
|Net income                                        |                                     | $    | 73,775 |      |  | $    | 58,509 |      |  | $ | 70,175 |     
|                                                  |                                     |      |        |      |  |      |        |      |  |   |        |     
|Weighted average shares  basic                   |                                     |      | 65,372 |      |  |      | 63,553 |      |  |   | 64,151 |     
|Weighted average diluted stock options            |                                     |      | 368    |      |  |      | 262    |      |  |   | 200    |     
|                                                  |                                     |      |        |      |  |      |        |      |  |   |        |     
|Weighted average shares  diluted                 |                                     |      | 65,740 |      |  |      | 63,815 |      |  |   | 64,351 |     
|                                                  |                                     |      |        |      |  |      |        |      |  |   |        |     
|Basic net income per common share:                |                                     |      |        |      |  |      |        |      |  |   |        |     
|                                                  | Income from continuing operations   |      | $      | 0.57 |  |      | $      | 0.63 |  |   | $      | 0.85 | 
|                                                  | Income from discontinued operations |      |        | 0.56 |  |      |        | 0.29 |  |   |        | 0.24 | 
|                                                  |                                     |      |        |      |  |      |        |      |  |   |        |     
|Net income per common share  basic               |                                     | $    | 1.13   |      |  | $    | 0.92   |      |  | $ | 1.09   |     
|                                                  |                                     |      |        |      |  |      |        |      |  |   |        |     
|Diluted net income per common share:              |                                     |      |        |      |  |      |        |      |  |   |        |     
|                                                  | Income from continuing operations   |      | $      | 0.56 |  |      | $      | 0.63 |  |   | $      | 0.85 | 
|                                                  | Income from discontinued operations |      |        | 0.56 |  |      |        | 0.29 |  |   |        | 0.24 | 
|                                                  |                                     |      |        |      |  |      |        |      |  |   |        |     
|Net income per common share  diluted             |                                     | $    | 1.12   |      |  | $    | 0.92   |      |  | $ | 1.09   |     
|                                                  |                                     |      |        |      |  |      |        |      |  |   |        |     

See discussion of discontinued operations in
footnote 3 above.

F-16



---



##### Table of Contents





|    |                                               
|--- | ----------------------------------------------
|10. | Income (Loss) from Taxable REIT
    Subsidiary

Beginning in 2004, we have reclassified in all
periods presented for financial presentation purposes the
operating results of Next>edge, our taxable REIT subsidiary,
or TRS, from general and administrative expenses to interest
income and other loss in our consolidated statements of income.
Next>edge provides energy consulting services to commercial
real estate owners. The following is a breakdown of the
components of interest and other income (loss) for the years
ended December 31, 2004, 2003 and 2002 (in thousands):

|                                 |  |      |      |      |  |      |        |   |  |   |       |  
|-------------------------------- |  | ---- | ---- | ---- |  | ---- | ------ | - |  | - | ----- | -
|                                 |  | 2004 |      | 2003 |  | 2002
|                                 |  |      |      |      |  |     
|Net loss from Next>edge          |  | $    | (960 | )    |  | $    | (1,135 | ) |  | $ | (478  | )
|Interest and other income        |  |      | 452  |      |  |      | 734    |   |  |   | 2,541 |  
|                                 |  |      |      |      |  |      |        |   |  |   |       |  
|Interest income and other (loss) |  | $    | (508 | )    |  | $    | (401   | ) |  | $ | 2,063 |  
|                                 |  |      |      |      |  |      |        |   |  |   |       |  



|    |                  
|--- | -----------------
|11. | Stock Option Plan

We established a stock option plan for the
purpose of attracting and retaining executive officers,
directors and other key employees. As of December 31, 2004,
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.

A summary of stock option activity and related
information for the years ended December 31, 2004, 2003 and
2002 follows:

|                                               |  |         |        |           |  |         |       |           |  |         |        |           |  |   |       |  |  |   |       |   |  |   |       | 
|---------------------------------------------- |  | ------- | ------ | --------- |  | ------- | ----- | --------- |  | ------- | ------ | --------- |  | - | ----- |  |  | - | ----- | - |  | - | ----- | 
|                                               |  |         |        |           |  |        
|                                               |  | 2004    |        | 2003      |  | 2002   
|                                               |  |         |        |           |  |        
|                                               |  |         |        | Weighted- |  |         |       | Weighted- |  |         |        | Weighted-
|                                               |  |         |        | Average   |  |         |       | Average   |  |         |        | Average  
|                                               |  | Options |        | Exercise  |  | Options |       | Exercise  |  | Options |        | Exercise 
|                                               |  | (000s) |        | Price     |  | (000s) |       | Price     |  | (000s) |        | Price    
|                                               |  |         |        |           |  |         |       |           |  |         |        |          
|Outstanding, beginning of period               |  |         | 3,426  |           |  | $       | 24.77 |           |  |         | 4,479  |           |  | $ | 24.91 |  |  |   | 5,014 |   |  | $ | 24.63 | 
|Granted                                        |  |         |       |           |  |         |      |           |  |         | 268    |           |  |   | 20.81 |  |  |   | 164   |   |  |   | 25.60 | 
|Exercised                                      |  |         | (1,750 | )         |  |         | 24.42 |           |  |         | (1,162 | )         |  |   | 24.04 |  |  |   | (424  | ) |  |   | 21.40 | 
|Forfeited                                      |  |         | (40    | )         |  |         | 28.12 |           |  |         | (159   | )         |  |   | 27.37 |  |  |   | (275  | ) |  |   | 25.68 | 
|                                               |  |         |        |           |  |         |       |           |  |         |        |           |  |   |       |  |  |   |       |   |  |   |       | 
|Outstanding at end of year                     |  |         | 1,636  |           |  | $       | 25.06 |           |  |         | 3,426  |           |  | $ | 24.77 |  |  |   | 4,479 |   |  | $ | 24.91 | 
|                                               |  |         |        |           |  |         |       |           |  |         |        |           |  |   |       |  |  |   |       |   |  |   |       | 
|Exercisable at end of the period               |  |         | 1,366  |           |  | $       | 25.71 |           |  |         | 2,952  |           |  | $ | 25.03 |  |  |   | 3,691 |   |  | $ | 24.75 | 
|                                               |  |         |        |           |  |         |       |           |  |         |        |           |  |   |       |  |  |   |       |   |  |   |       | 
|Weighted-average fair value of options granted |  | $       |       |           |  |         |       |           |  | $       | 0.49   |           |  |   |       |  |  | $ | 1.66  |   |  |   |       | 
|                                               |  |         |        |           |  |         |       |           |  |         |        |           |  |   |       |  |  |   |       |   |  |   |       | 

Exercise prices for options outstanding as of
December 31, 2004 ranged from $19.13 to $32.25. The
weighted average remaining contractual life of those options is
approximately 5 years.

Prior to January 1, 2003 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 (SFAS 123) requires use of option
valuation models that were not developed for use in valuing
employee stock options and that do not necessarily provide a
reliable single measure of the fair value of our employee and
director 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.

Beginning on January 1, 2003, we adopted
prospectively the provisions of SFAS No. 148,
Accounting for Stock-Based Compensation 
Transition and Disclosure under which we began expensing
the costs of new stock options granted to employees. There were
no grants of stock options in 2004. We used the Black-Scholes
option valuation model to estimate the fair value of the stock
options granted in 2003 with the following weighted-average
assumptions for 2003: risk-free interest rate of 2.92%, dividend
yield of 9.70% and a volatility factor of the expected market
price for our common stock of 0.186. During 2004 and 2003, we
recognized approximately $44,000 and $41,000, respectively, of
stock option based employee compensation costs for the stock
options granted in 2003.

F-17



---



##### Table of Contents



Below we also present pro forma information
regarding net income and earnings per share as if we had
expensed all of our stock options granted prior to 2003. 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: risk-free interest rate
of 4.28%, dividend yield of 7.80% and a volatility factor of the
expected market price of our common stock of 0.190. The weighted
average expected life of the options is approximately 7 to
10 years.

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, 2004, 2003 and 2002 follows
(in thousands, except earnings per share information):

|                                                                                                         |                     |      |        |      |  |      |        |      |  |   |        |      | 
|-------------------------------------------------------------------------------------------------------- | ------------------- | ---- | ------ | ---- |  | ---- | ------ | ---- |  | - | ------ | ---- | 
|                                                                                                         |                     | 2004 |        | 2003 |  | 2002
|                                                                                                         |                     |      |        |      |  |     
|Net income available to common stockholders, as
    reported                                             |                     | $    | 73,775 |      |  | $    | 58,509 |      |  | $ | 70,175 |     
|Stock based employee compensation costs for
    options granted prior to 2003 assuming fair value method |                     |      | (201   | )    |  |      | (843   | )    |  |   | (1,477 | )   
|                                                                                                         |                     |      |        |      |  |      |        |      |  |   |        |     
|Net income available to common stockholders, as
    adjusted                                             |                     | $    | 73,574 |      |  | $    | 57,666 |      |  | $ | 68,698 |     
|                                                                                                         |                     |      |        |      |  |      |        |      |  |   |        |     
|Earnings per share:                                                                                      |                     |      |        |      |  |      |        |      |  |   |        |     
|                                                                                                         | Basic as reported   |      | $      | 1.13 |  |      | $      | 0.92 |  |   | $      | 1.09 | 
|                                                                                                         |                     |      |        |      |  |      |        |      |  |   |        |     
|                                                                                                         | Basic as adjusted   |      | $      | 1.13 |  |      | $      | 0.91 |  |   | $      | 1.07 | 
|                                                                                                         |                     |      |        |      |  |      |        |      |  |   |        |     
|                                                                                                         | Diluted as reported |      | $      | 1.12 |  |      | $      | 0.92 |  |   | $      | 1.09 | 
|                                                                                                         |                     |      |        |      |  |      |        |      |  |   |        |     
|                                                                                                         | Diluted as adjusted |      | $      | 1.12 |  |      | $      | 0.90 |  |   | $      | 1.07 | 
|                                                                                                         |                     |      |        |      |  |      |        |      |  |   |        |     



|    |                                 
|--- | --------------------------------
|12. | Employee Retirement Savings Plan



| |            
| | -----------
| | 401(k) 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
$1.0 million in 2004, $888,000 in 2003 and $844,000 in
2002. Plan participants are immediately vested in their
contributions and are vested equally over four years in matching
contributions by us.



| |                           
| | --------------------------
| | Deferred Compensation Plan

We also have a Deferred Compensation Plan, or the
Plan. This plan provides certain key employees, with
supplemental deferred benefits in the form of retirement
payments.

During 2004 and 2003, we made contributions to
the Plan totaling approximately $600,000 and $400,000,
respectively. The contributions made by us on behalf of the Plan
participants vest 100% to the benefit of the Plan participants
after seven years of service to us. A life insurance policy has
been purchased on the life of each Plan participant naming us as
sole beneficiary to provide a reimbursement to us for all or a
portion of the contributions made under the Plan including the
cost of the use of our money.



|    |                  
|--- | -----------------
|13. | Subsequent Events

On January 5, 2005, we sold an approximate
167,000 square foot property located in San Diego
County for approximately $16.7 million. In conjunction with
this sale we repaid a $7.2 million mortgage loan
outstanding on this property. This property was classified as
held for disposition in our balance sheet at December 31,
2004 and 2003. Also on this date, we acquired 707 Broadway, an
approximate 170,000 square foot, 96.6% leased office
property located in San Diego County for approximately
$48.0 million. Approximately $2 million of the
purchase price for 707 Broadway was funded with the issuance of
OP Units.

On January 5, 2005, Andrew Sobel, Executive
Vice President  Strategic Planning, announced his
resignation to pursue other business interests effective
February 28, 2005. As part of his separation, Mr. Sobel

F-18



---



##### Table of Contents



entered into a Confidential Resignation Agreement
and General Release and a Consulting Agreement with a term of
3 years. These agreements provide for the following:




| |   |                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Severance pay in an amount equal to
    24 months base salary, plus an amount equal to
    Mr. Sobels 2003 bonus and an amount equal to the
    value of 16,080 unvested stock options for a total amount of
    $1,503,487;                                                                                                                                                                
|
| |  | The payment of premiums for Mr. Sobel and
    his dependents health and dental benefits coverage for no
    longer the duration of his Consulting Agreement;                                                                                                                                                                                                                                 
|
| |  | Monthly consulting fee of $25,000;                                                                                                                                                                                                                                                                                                                                                            
|
| |  | The continued vesting over the term of the
    Consulting Agreement of 91,417 unvested restricted stock awards,
    which are held by Mr. Sobel pursuant to restricted stock
    agreements with Arden Realty, Inc.;                                                                                                                                                                          
|
| |  | An agreement by Mr. Sobel not to engage in
    any business activity, during the term of the Consulting
    Agreement, that is the same or similar to Mr. Sobels
    work for Arden Realty, Inc. and that is within the same
    geographic territory and which is directly competitive with the
    business conducted by Arden Realty, Inc. at the time of
    Mr. Sobels resignation; and
|
| |  | Customary confidentiality, release of claims,
    non-disparagement, non-solicitation, and indemnification
    provisions.                                                                                                                                                                                                                                                                    

Upon the termination of his employment,
Mr. Sobel forfeited 13,329 unvested restricted stock awards
and 24,120 stock options (including the 16,080 for which he
received payment as described above).

On February 18, 2005, we extended the
maturity of our Operating Partnerships $125 million
unsecured term loan with a group of banks led by Wells Fargo
Bank from June of 2006 to February of 2012. In conjunction with
this extension, our Operating Partnership also entered into a
series of interest rate swap agreements to fix the interest rate
through the extension period. Under these interest rate swap
agreements, the interest rate on this loan is fixed at 5.29%
from June of 2006 through May of 2007, 5.55% from June of 2007
through November of 2008, 5.76% from December of 2008 through
May of 2010 and 5.99% from June of 2010 through February of 2012.

On February 28, 2005, our Operating
Partnership issued $300 million of senior unsecured notes
due in March of 2015. Including offering expenses and the
settlement of forward-starting swaps discussed in
footnote 2, the all-in effective rate of these unsecured
notes is approximately 5.5%. The proceeds from this issuance
were used to redeem the notes discussed below and to reduce the
outstanding balance on our Wells Fargo unsecured line of credit.

On March 1, 2005, our Operating Partnership
redeemed all of its $200 million, 8.875% senior
unsecured notes, maturing March 1, 2005. The total paid for
the redemption was 100% of the principal amount of
$200 million, plus interest accrued through March 1,
2005.

F-19



---



##### Table of Contents





|    |                                  
|--- | ---------------------------------
|14. | Quarterly Results 
    unaudited

Following is a quarterly summary of our revenue
and expenses for the years ended December 31, 2004 and
2003. Revenue and expenses may fluctuate significantly from
quarter to quarter due to our development, renovation,
acquisition and sales activity.

|                                                  |         |                                                                |         |               |  |                    |         |                   |  |   |         |      |  |   |         |      | 
|------------------------------------------------- | ------- | -------------------------------------------------------------- | ------- | ------------- |  | ------------------ | ------- | ----------------- |  | - | ------- | ---- |  | - | ------- | ---- | 
|                                                  |         |                                                               
|                                                  |         | For the Quarter Ended (in thousands, except per share amounts)
|                                                  |         |                                                               
|                                                  |         | March 31, 2004                                                 |         | June 30, 2004 |  | September 30, 2004 |         | December 31, 2004
|                                                  |         |                                                                |         |               |  |                    |         |                  
|Revenue                                           |         | $                                                              | 99,829  |               |  | $                  | 100,518 |                   |  | $ | 103,277 |      |  | $ | 105,569 |     
|Property operating expenses                       |         |                                                                | (32,465 | )             |  |                    | (32,528 | )                 |  |   | (34,657 | )    |  |   | (33,985 | )   
|General and administrative                        |         |                                                                | (4,484  | )             |  |                    | (4,665  | )                 |  |   | (4,823  | )    |  |   | (5,531  | )   
|Interest expense                                  |         |                                                                | (23,147 | )             |  |                    | (21,019 | )                 |  |   | (21,352 | )    |  |   | (23,338 | )   
|Depreciation and amortization                     |         |                                                                | (28,882 | )             |  |                    | (30,481 | )                 |  |   | (30,595 | )    |  |   | (31,729 | )   
|Interest and other income                         |         |                                                                | 766     |               |  |                    | (436    | )                 |  |   | (178    | )    |  |   | (660    | )   
|Impairment on investment in securities            |         |                                                                |        |               |  |                    | (2,700  | )                 |  |   |        |      |  |   |        |     
|Minority interest                                 |         |                                                                | (1,345  | )             |  |                    | (1,267  | )                 |  |   | (2,406  | )    |  |   | (237    | )   
|Discontinued operations, net of minority interest |         |                                                                | 2,160   |               |  |                    | 1,305   |                   |  |   | 973     |      |  |   | 1,815   |     
|Gain on sale of discontinued properties           |         |                                                                | 6,429   |               |  |                    | 400     |                   |  |   | 937     |      |  |   | 22,707  |     
|                                                  |         |                                                                |         |               |  |                    |         |                   |  |   |         |      |  |   |         |     
|Net Income                                        |         | $                                                              | 18,861  |               |  | $                  | 9,127   |                   |  | $ | 11,176  |      |  | $ | 34,611  |     
|                                                  |         |                                                                |         |               |  |                    |         |                   |  |   |         |      |  |   |         |     
|Net income per share:                             |         |                                                                |         |               |  |                    |         |                   |  |   |         |      |  |   |         |     
|                                                  | Basic   |                                                                | $       | 0.29          |  |                    | $       | 0.14              |  |   | $       | 0.17 |  |   | $       | 0.53 | 
|                                                  |         |                                                                |         |               |  |                    |         |                   |  |   |         |      |  |   |         |     
|                                                  | Diluted |                                                                | $       | 0.29          |  |                    | $       | 0.14              |  |   | $       | 0.17 |  |   | $       | 0.52 | 
|                                                  |         |                                                                |         |               |  |                    |         |                   |  |   |         |      |  |   |         |     

|                                                  |         |                                                                |         |               |  |                    |         |                   |  |   |         |      |  |   |         |      | 
|------------------------------------------------- | ------- | -------------------------------------------------------------- | ------- | ------------- |  | ------------------ | ------- | ----------------- |  | - | ------- | ---- |  | - | ------- | ---- | 
|                                                  |         |                                                               
|                                                  |         | For the Quarter Ended (in thousands, except per share amounts)
|                                                  |         |                                                               
|                                                  |         | March 31, 2003                                                 |         | June 30, 2003 |  | September 30, 2003 |         | December 31, 2003
|                                                  |         |                                                                |         |               |  |                    |         |                  
|Revenue                                           |         | $                                                              | 96,022  |               |  | $                  | 97,361  |                   |  | $ | 100,136 |      |  | $ | 100,246 |     
|Property operating expenses                       |         |                                                                | (29,786 | )             |  |                    | (31,077 | )                 |  |   | (33,463 | )    |  |   | (31,653 | )   
|General and administrative                        |         |                                                                | (3,590  | )             |  |                    | (3,981  | )                 |  |   | (4,391  | )    |  |   | (4,969  | )   
|Interest expense                                  |         |                                                                | (22,866 | )             |  |                    | (23,085 | )                 |  |   | (23,785 | )    |  |   | (23,357 | )   
|Depreciation and amortization                     |         |                                                                | (26,973 | )             |  |                    | (27,979 | )                 |  |   | (28,998 | )    |  |   | (28,002 | )   
|Interest and other income                         |         |                                                                | 104     |               |  |                    | 149     |                   |  |   | (171    | )    |  |   | (483    | )   
|Minority interest                                 |         |                                                                | (1,391  | )             |  |                    | (1,354  | )                 |  |   | (1,285  | )    |  |   | (1,345  | )   
|Discontinued operations, net of minority interest |         |                                                                | 4,557   |               |  |                    | 2,848   |                   |  |   | 2,498   |      |  |   | 2,635   |     
|(Loss) Gain on sale of discontinued properties    |         |                                                                | (639    | )             |  |                    | 6,021   |                   |  |   |        |      |  |   | 555     |     
|                                                  |         |                                                                |         |               |  |                    |         |                   |  |   |         |      |  |   |         |     
|Net Income                                        |         | $                                                              | 15,438  |               |  | $                  | 18,903  |                   |  | $ | 10,541  |      |  | $ | 13,627  |     
|                                                  |         |                                                                |         |               |  |                    |         |                   |  |   |         |      |  |   |         |     
|Net income per share:                             |         |                                                                |         |               |  |                    |         |                   |  |   |         |      |  |   |         |     
|                                                  | Basic   |                                                                | $       | 0.24          |  |                    | $       | 0.30              |  |   | $       | 0.17 |  |   | $       | 0.21 | 
|                                                  |         |                                                                |         |               |  |                    |         |                   |  |   |         |      |  |   |         |     
|                                                  | Diluted |                                                                | $       | 0.24          |  |                    | $       | 0.30              |  |   | $       | 0.16 |  |   | $       | 0.21 | 
|                                                  |         |                                                                |         |               |  |                    |         |                   |  |   |         |      |  |   |         |     

Note:Net income per
share on a quarter by quarter basis may not sum to the year to
date net income per share due to rounding.

F-20



---



##### Table of Contents



15. Schedule of Commercial Properties and
Accumulated Depreciation

December 31, 2004


(in thousands, except square foot
data)


|                          |  |         |         |               |  |               |       |      |  |              |        |                   |  |      |     |              |  |       |       |                 |  |              |        |             |  |   |       |  |  |   |        |  |  |   |        |  |  |   |        |  |  |   |        |     |  |  |            | 
|------------------------- |  | ------- | ------- | ------------- |  | ------------- | ----- | ---- |  | ------------ | ------ | ----------------- |  | ---- | --- | ------------ |  | ----- | ----- | --------------- |  | ------------ | ------ | ----------- |  | - | ----- |  |  | - | ------ |  |  | - | ------ |  |  | - | ------ |  |  | - | ------ | --- |  |  | ---------- | 
|                          |  |         |         |               |  |               |       |      |  |              |        |                   |  |      |     |              |  |      
|                          |  |         |         | Initial Costs |  | Basis Step Up |       |      |  | Total Costs  |        |                   |  |      |     |              |  |      
|                          |  |         |         |               |  |               |       |      |  |              |        |                   |  |      |     |              |  |      
|                          |  |         |         |               |  | Buildings     |       |      |  | Buildings    |        | Costs Capitalized |  |      |     | Buildings    |  |       |       |                 |  |              |        |            
|                          |  | Square  |         |               |  | and           |       |      |  | and          |        | Subsequent to     |  |      |     | and          |  |       |       | Accumulated     |  |              |        | Year Built/
|                          |  | Footage |         | Land          |  | Improvements  |       | Land |  | Improvements |        | Acquisition(2)    |  | Land |     | Improvements |  | Total |       | Depreciation(1) |  | Encumbrances |        | Renovated  
|                          |  |         |         |               |  |               |       |      |  |              |        |                   |  |      |     |              |  |       |       |                 |  |              |        |            
|Century Park Center       |  |         | 235,178 |               |  | $             | 7,190 |      |  | $            | 17,262 |                   |  | $    |    |              |  | $     |      |                 |  | $            | 12,292 |             |  | $ | 7,190 |  |  | $ | 29,554 |  |  | $ | 36,744 |  |  | $ | 8,549  |  |  | $ |       |     |  |  | 1972/94    | 
|Beverly Atrium            |  |         | 59,582  |               |  |               | 4,127 |      |  |              | 11,524 |                   |  |      | 118 |              |  |       | 326   |                 |  |              | 2,951  |             |  |   | 4,245 |  |  |   | 14,801 |  |  |   | 19,046 |  |  |   | 4,290  |  |  |   |       |     |  |  | 1989       | 
|Woodland Hills            |  |         | 229,616 |               |  |               | 6,566 |      |  |              | 14,765 |                   |  |      | 365 |              |  |       | 880   |                 |  |              | 7,992  |             |  |   | 6,931 |  |  |   | 23,637 |  |  |   | 30,568 |  |  |   | 7,853  |  |  |   |       |     |  |  | 1972/95    | 
|Anaheim City Centre       |  |         | 177,266 |               |  |               | 515   |      |  |              | 11,208 |                   |  |      | 94  |              |  |       | 2,075 |                 |  |              | 4,480  |             |  |   | 609   |  |  |   | 17,763 |  |  |   | 18,372 |  |  |   | 5,112  |  |  |   |       |     |  |  | 1986/91    | 
|425 West Broadway         |  |         | 72,317  |               |  |               | 1,500 |      |  |              | 4,462  |                   |  |      | 305 |              |  |       | 918   |                 |  |              | 2,201  |             |  |   | 1,805 |  |  |   | 7,581  |  |  |   | 9,386  |  |  |   | 2,164  |  |  |   |       |     |  |  | 1984       | 
|1950 Sawtelle             |  |         | 104,171 |               |  |               | 1,988 |      |  |              | 7,268  |                   |  |      |    |              |  |       |      |                 |  |              | 2,761  |             |  |   | 1,988 |  |  |   | 10,029 |  |  |   | 12,017 |  |  |   | 2,655  |  |  |   | 6,671  | (3) |  |  | 1988/95    | 
|Bristol Plaza             |  |         | 84,033  |               |  |               | 1,820 |      |  |              | 3,381  |                   |  |      | 257 |              |  |       | 485   |                 |  |              | 1,957  |             |  |   | 2,077 |  |  |   | 5,823  |  |  |   | 7,900  |  |  |   | 1,763  |  |  |   |       |     |  |  | 1982       | 
|16000 Ventura             |  |         | 175,275 |               |  |               | 1,700 |      |  |              | 17,145 |                   |  |      | 185 |              |  |       | 1,929 |                 |  |              | 4,974  |             |  |   | 1,885 |  |  |   | 24,048 |  |  |   | 25,933 |  |  |   | 6,573  |  |  |   | 11,319 | (3) |  |  | 1980/96    | 
|5000 East Spring          |  |         | 168,967 |               |  |               |      |      |  |              | 10,903 |                   |  |      |    |              |  |       | 424   |                 |  |              | 6,151  |             |  |   |      |  |  |   | 17,478 |  |  |   | 17,478 |  |  |   | 5,133  |  |  |   |       |     |  |  | 1989/95    | 
|70 South Lake             |  |         | 101,236 |               |  |               | 1,360 |      |  |              | 9,086  |                   |  |      |    |              |  |       |      |                 |  |              | 3,066  |             |  |   | 1,360 |  |  |   | 12,152 |  |  |   | 13,512 |  |  |   | 3,623  |  |  |   |       |     |  |  | 1982/94    | 
|Westwood Terrace          |  |         | 136,707 |               |  |               | 2,103 |      |  |              | 16,888 |                   |  |      |    |              |  |       |      |                 |  |              | 4,073  |             |  |   | 2,103 |  |  |   | 20,961 |  |  |   | 23,064 |  |  |   | 5,485  |  |  |   |       |     |  |  | 1988       | 
|Westlake  5601 Lindero   |  |         | 106,144 |               |  |               | 2,576 |      |  |              | 7,747  |                   |  |      |    |              |  |       |      |                 |  |              | 4,148  |             |  |   | 2,576 |  |  |   | 11,895 |  |  |   | 14,471 |  |  |   | 3,714  |  |  |   |       |     |  |  | 1989       | 
|6100 Wilshire             |  |         | 202,675 |               |  |               | 1,200 |      |  |              | 19,886 |                   |  |      |    |              |  |       |      |                 |  |              | 6,702  |             |  |   | 1,200 |  |  |   | 26,588 |  |  |   | 27,788 |  |  |   | 7,471  |  |  |   |       |     |  |  | 1986       | 
|Calabasas Commerce Center |  |         | 126,771 |               |  |               | 1,262 |      |  |              | 9,721  |                   |  |      |    |              |  |       |      |                 |  |              | 3,000  |             |  |   | 1,262 |  |  |   | 12,721 |  |  |   | 13,983 |  |  |   | 3,297  |  |  |   | 7,878  | (3) |  |  | 1990       | 
|Long Beach Airport  DF&G |  |         | 272,013 |               |  |               |      |      |  |              | 14,457 |                   |  |      |    |              |  |       |      |                 |  |              | 1,549  |             |  |   |      |  |  |   | 16,006 |  |  |   | 16,006 |  |  |   | 3,487  |  |  |   |       |     |  |  | 1987/95    | 
|Skyview Center            |  |         | 398,261 |               |  |               | 6,514 |      |  |              | 33,696 |                   |  |      |    |              |  |       |      |                 |  |              | 9,232  |             |  |   | 6,514 |  |  |   | 42,928 |  |  |   | 49,442 |  |  |   | 10,830 |  |  |   |       |     |  |  | 1981/87/95 | 
|400 Corporate Pointe      |  |         | 165,487 |               |  |               | 3,383 |      |  |              | 17,779 |                   |  |      | 74  |              |  |       | 391   |                 |  |              | 6,494  |             |  |   | 3,457 |  |  |   | 24,664 |  |  |   | 28,121 |  |  |   | 6,041  |  |  |   |       |     |  |  | 1987       | 
|5832 Bolsa                |  |         | 49,355  |               |  |               | 690   |      |  |              | 3,611  |                   |  |      | 15  |              |  |       | 80    |                 |  |              | 1,541  |             |  |   | 705   |  |  |   | 5,232  |  |  |   | 5,937  |  |  |   | 1,936  |  |  |   |       |     |  |  | 1985       | 
|9665 Wilshire             |  |         | 159,645 |               |  |               | 6,697 |      |  |              | 22,574 |                   |  |      | 139 |              |  |       | 473   |                 |  |              | 10,396 |             |  |   | 6,836 |  |  |   | 33,443 |  |  |   | 40,279 |  |  |   | 8,666  |  |  |   |       |     |  |  | 1972/92/93 | 
|701 B Street              |  |         | 548,310 |               |  |               | 3,722 |      |  |              | 35,662 |                   |  |      | 64  |              |  |       | 626   |                 |  |              | 16,123 |             |  |   | 3,786 |  |  |   | 52,411 |  |  |   | 56,197 |  |  |   | 13,553 |  |  |   |       |     |  |  | 1982/96    | 
|100 West Broadway         |  |         | 191,371 |               |  |               | 4,570 |      |  |              | 15,276 |                   |  |      |    |              |  |       |      |                 |  |              | 4,393  |             |  |   | 4,570 |  |  |   | 19,669 |  |  |   | 24,239 |  |  |   | 4,507  |  |  |   |       |     |  |  | 1987/96    | 
|303 Glenoaks              |  |         | 177,898 |               |  |               | 6,500 |      |  |              | 18,132 |                   |  |      |    |              |  |       |      |                 |  |              | 6,617  |             |  |   | 6,500 |  |  |   | 24,749 |  |  |   | 31,249 |  |  |   | 5,706  |  |  |   |       |     |  |  | 1983/96    | 
|10351 Santa Monica        |  |         | 96,899  |               |  |               | 3,080 |      |  |              | 8,014  |                   |  |      |    |              |  |       |      |                 |  |              | 1,961  |             |  |   | 3,080 |  |  |   | 9,975  |  |  |   | 13,055 |  |  |   | 2,330  |  |  |   | 5,388  | (3) |  |  | 1984       | 
|2730 Wilshire             |  |         | 55,531  |               |  |               | 3,515 |      |  |              | 4,413  |                   |  |      |    |              |  |       |      |                 |  |              | 1,651  |             |  |   | 3,515 |  |  |   | 6,064  |  |  |   | 9,579  |  |  |   | 1,636  |  |  |   | 4,478  | (3) |  |  | 1985       | 
|Grand Avenue Plaza        |  |         | 82,872  |               |  |               | 620   |      |  |              | 2,909  |                   |  |      |    |              |  |       |      |                 |  |              | 4,132  |             |  |   | 620   |  |  |   | 7,041  |  |  |   | 7,661  |  |  |   | 1,428  |  |  |   | 5,675  | (3) |  |  | 1980/98    | 

F-21



---



##### Table of Contents



|                             |  |         |         |               |  |               |        |      |  |              |        |                   |  |      |   |              |  |       |   |                 |  |              |        |             |  |  |        |  |  |  |        |  |  |  |        |  |  |  |        |  |  |  |        |     |  |  |            | 
|---------------------------- |  | ------- | ------- | ------------- |  | ------------- | ------ | ---- |  | ------------ | ------ | ----------------- |  | ---- | - | ------------ |  | ----- | - | --------------- |  | ------------ | ------ | ----------- |  |  | ------ |  |  |  | ------ |  |  |  | ------ |  |  |  | ------ |  |  |  | ------ | --- |  |  | ---------- | 
|                             |  |         |         |               |  |               |        |      |  |              |        |                   |  |      |   |              |  |      
|                             |  |         |         | Initial Costs |  | Basis Step Up |        |      |  | Total Costs  |        |                   |  |      |   |              |  |      
|                             |  |         |         |               |  |               |        |      |  |              |        |                   |  |      |   |              |  |      
|                             |  |         |         |               |  | Buildings     |        |      |  | Buildings    |        | Costs Capitalized |  |      |   | Buildings    |  |       |   |                 |  |              |        |            
|                             |  | Square  |         |               |  | and           |        |      |  | and          |        | Subsequent to     |  |      |   | and          |  |       |   | Accumulated     |  |              |        | Year Built/
|                             |  | Footage |         | Land          |  | Improvements  |        | Land |  | Improvements |        | Acquisition(2)    |  | Land |   | Improvements |  | Total |   | Depreciation(1) |  | Encumbrances |        | Renovated  
|                             |  |         |         |               |  |               |        |      |  |              |        |                   |  |      |   |              |  |       |   |                 |  |              |        |            
|Burbank Executive Plaza      |  |         | 63,320  |               |  |               | 1,100  |      |  |              | 4,418  |                   |  |      |  |              |  |       |  |                 |  |              | 2,511  |             |  |  | 1,100  |  |  |  | 6,929  |  |  |  | 8,029  |  |  |  | 2,026  |  |  |  |       |     |  |  | 1987/83    | 
|333 N. Glenoaks              |  |         | 82,939  |               |  |               | 1,500  |      |  |              | 5,976  |                   |  |      |  |              |  |       |  |                 |  |              | 3,309  |             |  |  | 1,500  |  |  |  | 9,285  |  |  |  | 10,785 |  |  |  | 2,413  |  |  |  |       |     |  |  | 1978/83    | 
|Center Promenade             |  |         | 177,072 |               |  |               | 2,310  |      |  |              | 9,296  |                   |  |      |  |              |  |       |  |                 |  |              | 3,433  |             |  |  | 2,310  |  |  |  | 12,729 |  |  |  | 15,039 |  |  |  | 2,992  |  |  |  |       |     |  |  | 1982       | 
|Los Angeles Corporate Center |  |         | 389,615 |               |  |               | 26,781 |      |  |              | 15,165 |                   |  |      |  |              |  |       |  |                 |  |              | 9,677  |             |  |  | 26,781 |  |  |  | 24,842 |  |  |  | 51,623 |  |  |  | 6,990  |  |  |  |       |     |  |  | 1986       | 
|5200 West Century            |  |         | 312,700 |               |  |               | 2,080  |      |  |              | 9,510  |                   |  |      |  |              |  |       |  |                 |  |              | 15,728 |             |  |  | 2,080  |  |  |  | 25,238 |  |  |  | 27,318 |  |  |  | 4,907  |  |  |  |       |     |  |  | 1982/98/99 | 
|15250 Ventura                |  |         | 112,142 |               |  |               | 2,560  |      |  |              | 10,313 |                   |  |      |  |              |  |       |  |                 |  |              | 3,800  |             |  |  | 2,560  |  |  |  | 14,113 |  |  |  | 16,673 |  |  |  | 3,430  |  |  |  |       |     |  |  | 1970/90-91 | 
|10350 Santa Monica           |  |         | 42,696  |               |  |               | 860    |      |  |              | 3,458  |                   |  |      |  |              |  |       |  |                 |  |              | 855    |             |  |  | 860    |  |  |  | 4,313  |  |  |  | 5,173  |  |  |  | 971    |  |  |  |       |     |  |  | 1979       | 
|535 N. Brand Blvd.           |  |         | 109,104 |               |  |               | 1,600  |      |  |              | 8,427  |                   |  |      |  |              |  |       |  |                 |  |              | 11,739 |             |  |  | 1,600  |  |  |  | 20,166 |  |  |  | 21,766 |  |  |  | 2,951  |  |  |  |       |     |  |  | 1973/92/99 | 
|10780 Santa Monica           |  |         | 93,211  |               |  |               | 2,625  |      |  |              | 7,531  |                   |  |      |  |              |  |       |  |                 |  |              | 2,880  |             |  |  | 2,625  |  |  |  | 10,411 |  |  |  | 13,036 |  |  |  | 2,668  |  |  |  |       |     |  |  | 1984       | 
|4900 California              |  |         | 155,791 |               |  |               | 4,680  |      |  |              | 14,133 |                   |  |      |  |              |  |       |  |                 |  |              | 3,756  |             |  |  | 4,680  |  |  |  | 17,889 |  |  |  | 22,569 |  |  |  | 4,122  |  |  |  |       |     |  |  | 1983       | 
|Clarendon Crest              |  |         | 43,222  |               |  |               | 1,300  |      |  |              | 3,741  |                   |  |      |  |              |  |       |  |                 |  |              | 1,529  |             |  |  | 1,300  |  |  |  | 5,270  |  |  |  | 6,570  |  |  |  | 1,279  |  |  |  | 3,106  | (3) |  |  | 1990       | 
|Noble Professional Center    |  |         | 52,599  |               |  |               | 1,657  |      |  |              | 4,817  |                   |  |      |  |              |  |       |  |                 |  |              | 1,344  |             |  |  | 1,657  |  |  |  | 6,161  |  |  |  | 7,818  |  |  |  | 1,479  |  |  |  | 3,481  | (3) |  |  | 1985/93    | 
|South Bay Centre             |  |         | 204,197 |               |  |               | 4,775  |      |  |              | 13,646 |                   |  |      |  |              |  |       |  |                 |  |              | 5,716  |             |  |  | 4,775  |  |  |  | 19,362 |  |  |  | 24,137 |  |  |  | 4,654  |  |  |  | 12,420 | (3) |  |  | 1984       | 
|8383 Wilshire                |  |         | 424,588 |               |  |               | 13,570 |      |  |              | 43,213 |                   |  |      |  |              |  |       |  |                 |  |              | 14,756 |             |  |  | 13,570 |  |  |  | 57,969 |  |  |  | 71,539 |  |  |  | 13,573 |  |  |  |       |     |  |  | 1971/93    | 
|Parkway Center I             |  |         | 61,289  |               |  |               | 1,480  |      |  |              | 5,651  |                   |  |      |  |              |  |       |  |                 |  |              | 1,053  |             |  |  | 1,480  |  |  |  | 6,704  |  |  |  | 8,184  |  |  |  | 1,563  |  |  |  |       |     |  |  | 1992/95    | 
|Centerpointe La Palma        |  |         | 603,582 |               |  |               | 16,011 |      |  |              | 60,874 |                   |  |      |  |              |  |       |  |                 |  |              | 13,223 |             |  |  | 16,011 |  |  |  | 74,097 |  |  |  | 90,108 |  |  |  | 16,782 |  |  |  | 32,918 | (3) |  |  | 1986/88/90 | 
|299 N. Euclid                |  |         | 74,573  |               |  |               | 1,050  |      |  |              | 5,738  |                   |  |      |  |              |  |       |  |                 |  |              | 5,700  |             |  |  | 1,050  |  |  |  | 11,438 |  |  |  | 12,488 |  |  |  | 2,790  |  |  |  |       |     |  |  | 1983/99    | 
|2800 28th Street             |  |         | 106,481 |               |  |               | 2,938  |      |  |              | 8,425  |                   |  |      |  |              |  |       |  |                 |  |              | 4,054  |             |  |  | 2,938  |  |  |  | 12,479 |  |  |  | 15,417 |  |  |  | 2,919  |  |  |  |       |     |  |  | 1979       | 
|1000 Town Center             |  |         | 108,508 |               |  |               | 2,800  |      |  |              | 10,638 |                   |  |      |  |              |  |       |  |                 |  |              | 2,029  |             |  |  | 2,800  |  |  |  | 12,667 |  |  |  | 15,467 |  |  |  | 2,793  |  |  |  |       |     |  |  | 1989       | 
|Mariner Court                |  |         | 105,436 |               |  |               | 2,350  |      |  |              | 9,176  |                   |  |      |  |              |  |       |  |                 |  |              | 1,781  |             |  |  | 2,350  |  |  |  | 10,957 |  |  |  | 13,307 |  |  |  | 2,571  |  |  |  | 6,660  | (3) |  |  | 1989       | 
|Pacific Gateway              |  |         | 225,805 |               |  |               | 6,288  |      |  |              | 18,417 |                   |  |      |  |              |  |       |  |                 |  |              | 6,818  |             |  |  | 6,288  |  |  |  | 25,235 |  |  |  | 31,523 |  |  |  | 6,832  |  |  |  |       |     |  |  | 1982/90    | 
|Irvine Corporate Center      |  |         | 126,781 |               |  |               | 1,808  |      |  |              | 5,295  |                   |  |      |  |              |  |       |  |                 |  |              | 4,559  |             |  |  | 1,808  |  |  |  | 9,854  |  |  |  | 11,662 |  |  |  | 1,849  |  |  |  |       |     |  |  | 1980/88/99 | 
|Crown Cabot Financial        |  |         | 174,222 |               |  |               | 7,056  |      |  |              | 20,667 |                   |  |      |  |              |  |       |  |                 |  |              | 9,352  |             |  |  | 7,056  |  |  |  | 30,019 |  |  |  | 37,075 |  |  |  | 7,064  |  |  |  |       |     |  |  | 1989       | 
|120 S. Spalding              |  |         | 64,877  |               |  |               | 2,775  |      |  |              | 8,287  |                   |  |      |  |              |  |       |  |                 |  |              | 4,863  |             |  |  | 2,775  |  |  |  | 13,150 |  |  |  | 15,925 |  |  |  | 3,189  |  |  |  | 7,943  | (3) |  |  | 1984       | 
|1370 Valley Vista            |  |         | 81,962  |               |  |               | 2,698  |      |  |              | 7,900  |                   |  |      |  |              |  |       |  |                 |  |              | 1,643  |             |  |  | 2,698  |  |  |  | 9,543  |  |  |  | 12,241 |  |  |  | 2,179  |  |  |  | 5,378  | (3) |  |  | 1988       | 
|Foremost Professional Plaza  |  |         | 60,311  |               |  |               | 2,049  |      |  |              | 6,001  |                   |  |      |  |              |  |       |  |                 |  |              | 1,090  |             |  |  | 2,049  |  |  |  | 7,091  |  |  |  | 9,140  |  |  |  | 1,579  |  |  |  | 8,664  |     |  |  | 1992       | 
|Northpoint                   |  |         | 105,145 |               |  |               | 1,800  |      |  |              | 19,022 |                   |  |      |  |              |  |       |  |                 |  |              | 3,790  |             |  |  | 1,800  |  |  |  | 22,812 |  |  |  | 24,612 |  |  |  | 4,498  |  |  |  |       |     |  |  | 1991       | 
|Conejo Business Center       |  |         | 69,425  |               |  |               | 2,489  |      |  |              | 6,960  |                   |  |      |  |              |  |       |  |                 |  |              | 1,740  |             |  |  | 2,489  |  |  |  | 8,700  |  |  |  | 11,189 |  |  |  | 1,677  |  |  |  | 3,617  |     |  |  | 1991       | 

F-22



---



##### Table of Contents



|                            |  |         |         |               |  |               |        |      |  |              |         |                   |  |      |   |              |  |       |   |                 |  |              |        |             |  |  |        |  |  |  |         |  |  |  |         |  |  |  |        |  |  |  |        |     |  |  |           | 
|--------------------------- |  | ------- | ------- | ------------- |  | ------------- | ------ | ---- |  | ------------ | ------- | ----------------- |  | ---- | - | ------------ |  | ----- | - | --------------- |  | ------------ | ------ | ----------- |  |  | ------ |  |  |  | ------- |  |  |  | ------- |  |  |  | ------ |  |  |  | ------ | --- |  |  | --------- | 
|                            |  |         |         |               |  |               |        |      |  |              |         |                   |  |      |   |              |  |      
|                            |  |         |         | Initial Costs |  | Basis Step Up |        |      |  | Total Costs  |         |                   |  |      |   |              |  |      
|                            |  |         |         |               |  |               |        |      |  |              |         |                   |  |      |   |              |  |      
|                            |  |         |         |               |  | Buildings     |        |      |  | Buildings    |         | Costs Capitalized |  |      |   | Buildings    |  |       |   |                 |  |              |        |            
|                            |  | Square  |         |               |  | and           |        |      |  | and          |         | Subsequent to     |  |      |   | and          |  |       |   | Accumulated     |  |              |        | Year Built/
|                            |  | Footage |         | Land          |  | Improvements  |        | Land |  | Improvements |         | Acquisition(2)    |  | Land |   | Improvements |  | Total |   | Depreciation(1) |  | Encumbrances |        | Renovated  
|                            |  |         |         |               |  |               |        |      |  |              |         |                   |  |      |   |              |  |       |   |                 |  |              |        |            
|Marin Corporate Center      |  |         | 51,776  |               |  |               | 1,956  |      |  |              | 5,589   |                   |  |      |  |              |  |       |  |                 |  |              | 1,108  |             |  |  | 1,956  |  |  |  | 6,697   |  |  |  | 8,653   |  |  |  | 1,089  |  |  |  | 2,585  |     |  |  | 1986      | 
|145 South Fairfax           |  |         | 54,398  |               |  |               | 1,825  |      |  |              | 5,325   |                   |  |      |  |              |  |       |  |                 |  |              | 2,473  |             |  |  | 1,825  |  |  |  | 7,798   |  |  |  | 9,623   |  |  |  | 1,513  |  |  |  | 3,869  |     |  |  | 1984      | 
|Bernardo Regency            |  |         | 48,052  |               |  |               | 1,625  |      |  |              | 4,764   |                   |  |      |  |              |  |       |  |                 |  |              | 1,722  |             |  |  | 1,625  |  |  |  | 6,486   |  |  |  | 8,111   |  |  |  | 1,465  |  |  |  |       |     |  |  | 1986      | 
|Fountain Valley City Centre |  |         | 303,267 |               |  |               | 8,250  |      |  |              | 23,513  |                   |  |      |  |              |  |       |  |                 |  |              | 5,941  |             |  |  | 8,250  |  |  |  | 29,454  |  |  |  | 37,704  |  |  |  | 6,305  |  |  |  |       |     |  |  | 1982      | 
|Wilshire Pacific Plaza      |  |         | 101,229 |               |  |               | 3,750  |      |  |              | 10,996  |                   |  |      |  |              |  |       |  |                 |  |              | 4,052  |             |  |  | 3,750  |  |  |  | 15,048  |  |  |  | 18,798  |  |  |  | 3,520  |  |  |  |       |     |  |  | 1976/87   | 
|World Savings Center        |  |         | 473,581 |               |  |               |       |      |  |              | 106,259 |                   |  |      |  |              |  |       |  |                 |  |              | 27,569 |             |  |  |       |  |  |  | 133,828 |  |  |  | 133,828 |  |  |  | 26,957 |  |  |  |       |     |  |  | 1983      | 
|Sunset Point Plaza          |  |         | 59,186  |               |  |               | 2,075  |      |  |              | 6,077   |                   |  |      |  |              |  |       |  |                 |  |              | 1,360  |             |  |  | 2,075  |  |  |  | 7,437   |  |  |  | 9,512   |  |  |  | 1,525  |  |  |  | 3,359  | (3) |  |  | 1988      | 
|Activity Business Center    |  |         | 167,170 |               |  |               | 3,650  |      |  |              | 10,690  |                   |  |      |  |              |  |       |  |                 |  |              | 2,581  |             |  |  | 3,650  |  |  |  | 13,271  |  |  |  | 16,921  |  |  |  | 2,634  |  |  |  | 7,222  |     |  |  | 1987      | 
|Westlake Gardens            |  |         | 50,267  |               |  |               | 1,831  |      |  |              | 5,405   |                   |  |      |  |              |  |       |  |                 |  |              | 2,311  |             |  |  | 1,831  |  |  |  | 7,716   |  |  |  | 9,547   |  |  |  | 2,226  |  |  |  |       |     |  |  | 1998      | 
|9100 Wilshire               |  |         | 328,697 |               |  |               | 16,250 |      |  |              | 47,593  |                   |  |      |  |              |  |       |  |                 |  |              | 10,957 |             |  |  | 16,250 |  |  |  | 58,550  |  |  |  | 74,800  |  |  |  | 13,075 |  |  |  |       |     |  |  | 1971/90   | 
|Westwood Center             |  |         | 314,366 |               |  |               | 3,159  |      |  |              | 24,374  |                   |  |      |  |              |  |       |  |                 |  |              | 85,669 |             |  |  | 3,159  |  |  |  | 110,043 |  |  |  | 113,202 |  |  |  | 13,432 |  |  |  |       |     |  |  | 1965/2000 | 
|1919 Santa Monica           |  |         | 43,766  |               |  |               | 2,580  |      |  |              | 7,623   |                   |  |      |  |              |  |       |  |                 |  |              | 1,296  |             |  |  | 2,580  |  |  |  | 8,919   |  |  |  | 11,499  |  |  |  | 1,697  |  |  |  | 3,620  | (3) |  |  | 1991      | 
|600 Corporate Pointe        |  |         | 275,113 |               |  |               | 8,575  |      |  |              | 34,632  |                   |  |      |  |              |  |       |  |                 |  |              | 8,273  |             |  |  | 8,575  |  |  |  | 42,905  |  |  |  | 51,480  |  |  |  | 8,556  |  |  |  | 17,214 | (3) |  |  | 1989      | 
|150 East Colorado Boulevard |  |         | 61,657  |               |  |               | 1,988  |      |  |              | 5,880   |                   |  |      |  |              |  |       |  |                 |  |              | 2,588  |             |  |  | 1,988  |  |  |  | 8,468   |  |  |  | 10,456  |  |  |  | 1,860  |  |  |  | 4,635  | (3) |  |  | 1979/97   | 
|5161 Lankershim             |  |         | 180,940 |               |  |               | 5,016  |      |  |              | 24,908  |                   |  |      |  |              |  |       |  |                 |  |              | 4,723  |             |  |  | 5,016  |  |  |  | 29,631  |  |  |  | 34,647  |  |  |  | 6,136  |  |  |  | 13,196 | (3) |  |  | 1985/97   | 
|Huntington Beach Plaza      |  |         | 53,459  |               |  |               | 1,109  |      |  |              | 3,284   |                   |  |      |  |              |  |       |  |                 |  |              | 1,335  |             |  |  | 1,109  |  |  |  | 4,619   |  |  |  | 5,728   |  |  |  | 1,068  |  |  |  | 1,468  | (3) |  |  | 1984/96   | 
|Fountain Valley Plaza       |  |         | 107,313 |               |  |               | 2,949  |      |  |              | 8,728   |                   |  |      |  |              |  |       |  |                 |  |              | 3,282  |             |  |  | 2,949  |  |  |  | 12,010  |  |  |  | 14,959  |  |  |  | 2,302  |  |  |  | 4,699  | (3) |  |  | 1982      | 
|Newport Irvine Center       |  |         | 75,184  |               |  |               | 2,215  |      |  |              | 6,554   |                   |  |      |  |              |  |       |  |                 |  |              | 1,784  |             |  |  | 2,215  |  |  |  | 8,338   |  |  |  | 10,553  |  |  |  | 1,895  |  |  |  | 3,154  | (3) |  |  | 1981/97   | 
|Von Karman Corporate Center |  |         | 452,378 |               |  |               | 11,513 |      |  |              | 34,077  |                   |  |      |  |              |  |       |  |                 |  |              | 11,792 |             |  |  | 11,513 |  |  |  | 45,869  |  |  |  | 57,382  |  |  |  | 10,219 |  |  |  | 18,592 | (3) |  |  | 1981/84   | 
|South Coast Executive       |  |         |         |               |  |               |        |      |  |              |         |                   |  |      |   |              |  |       |   |                 |  |              |        |             |  |  |        |  |  |  |         |  |  |  |         |  |  |  |        |  |  |  |        |     |  |  |           | 
|Center                      |  |         | 61,292  |               |  |               | 1,563  |      |  |              | 4,526   |                   |  |      |  |              |  |       |  |                 |  |              | 1,369  |             |  |  | 1,563  |  |  |  | 5,895   |  |  |  | 7,458   |  |  |  | 1,281  |  |  |  | 2,199  | (3) |  |  | 1979/97   | 
|City Centre I               |  |         | 141,903 |               |  |               | 4,792  |      |  |              | 14,172  |                   |  |      |  |              |  |       |  |                 |  |              | 3,724  |             |  |  | 4,792  |  |  |  | 17,896  |  |  |  | 22,688  |  |  |  | 3,491  |  |  |  | 6,859  | (3) |  |  | 1985/97   | 
|Orange Financial Center     |  |         | 307,920 |               |  |               | 10,379 |      |  |              | 34,714  |                   |  |      |  |              |  |       |  |                 |  |              | 9,792  |             |  |  | 10,379 |  |  |  | 44,506  |  |  |  | 54,885  |  |  |  | 9,325  |  |  |  | 17,679 | (3) |  |  | 1985/95   | 
|Carlsbad Corporate Center   |  |         | 129,000 |               |  |               | 3,722  |      |  |              | 12,104  |                   |  |      |  |              |  |       |  |                 |  |              | 8,882  |             |  |  | 3,722  |  |  |  | 20,986  |  |  |  | 24,708  |  |  |  | 3,836  |  |  |  | 9,068  | (3) |  |  | 1996      | 
|Balboa Corporate Center     |  |         | 70,987  |               |  |               | 2,759  |      |  |              | 7,884   |                   |  |      |  |              |  |       |  |                 |  |              | 1,209  |             |  |  | 2,759  |  |  |  | 9,093   |  |  |  | 11,852  |  |  |  | 1,501  |  |  |  | 5,580  | (3) |  |  | 1990      | 

F-23



---



##### Table of Contents



|                              |  |         |         |               |  |               |        |      |  |              |        |                   |  |      |   |              |  |       |   |                 |  |              |        |             |  |  |        |  |  |  |        |  |  |  |        |  |  |  |       |  |  |  |        |     |  |  |            | 
|----------------------------- |  | ------- | ------- | ------------- |  | ------------- | ------ | ---- |  | ------------ | ------ | ----------------- |  | ---- | - | ------------ |  | ----- | - | --------------- |  | ------------ | ------ | ----------- |  |  | ------ |  |  |  | ------ |  |  |  | ------ |  |  |  | ----- |  |  |  | ------ | --- |  |  | ---------- | 
|                              |  |         |         |               |  |               |        |      |  |              |        |                   |  |      |   |              |  |      
|                              |  |         |         | Initial Costs |  | Basis Step Up |        |      |  | Total Costs  |        |                   |  |      |   |              |  |      
|                              |  |         |         |               |  |               |        |      |  |              |        |                   |  |      |   |              |  |      
|                              |  |         |         |               |  | Buildings     |        |      |  | Buildings    |        | Costs Capitalized |  |      |   | Buildings    |  |       |   |                 |  |              |        |            
|                              |  | Square  |         |               |  | and           |        |      |  | and          |        | Subsequent to     |  |      |   | and          |  |       |   | Accumulated     |  |              |        | Year Built/
|                              |  | Footage |         | Land          |  | Improvements  |        | Land |  | Improvements |        | Acquisition(2)    |  | Land |   | Improvements |  | Total |   | Depreciation(1) |  | Encumbrances |        | Renovated  
|                              |  |         |         |               |  |               |        |      |  |              |        |                   |  |      |   |              |  |       |   |                 |  |              |        |            
|Panorama Corporate Center     |  |         | 130,396 |               |  |               | 6,512  |      |  |              | 19,249 |                   |  |      |  |              |  |       |  |                 |  |              | 4,408  |             |  |  | 6,512  |  |  |  | 23,657 |  |  |  | 30,169 |  |  |  | 4,312 |  |  |  | 12,544 | (3) |  |  | 1991       | 
|Ruffin Corporate Center       |  |         | 45,059  |               |  |               | 1,766  |      |  |              | 5,222  |                   |  |      |  |              |  |       |  |                 |  |              | 71     |             |  |  | 1,766  |  |  |  | 5,293  |  |  |  | 7,059  |  |  |  | 939   |  |  |  | 3,330  | (3) |  |  | 1990       | 
|Skypark Office Plaza          |  |         | 203,946 |               |  |               | 5,733  |      |  |              | 21,047 |                   |  |      |  |              |  |       |  |                 |  |              | 7,322  |             |  |  | 5,733  |  |  |  | 28,369 |  |  |  | 34,102 |  |  |  | 5,719 |  |  |  |       |     |  |  | 1986       | 
|Governor Park Plaza           |  |         | 104,441 |               |  |               | 3,382  |      |  |              | 10,005 |                   |  |      |  |              |  |       |  |                 |  |              | 3,299  |             |  |  | 3,382  |  |  |  | 13,304 |  |  |  | 16,686 |  |  |  | 3,265 |  |  |  | 4,890  | (3) |  |  | 1986       | 
|5120 Shoreham                 |  |         | 37,813  |               |  |               | 1,224  |      |  |              | 3,621  |                   |  |      |  |              |  |       |  |                 |  |              | 1,283  |             |  |  | 1,224  |  |  |  | 4,904  |  |  |  | 6,128  |  |  |  | 1,430 |  |  |  | 2,903  | (3) |  |  | 1984       | 
|Torreyana Science Park        |  |         | 81,204  |               |  |               | 5,035  |      |  |              | 14,878 |                   |  |      |  |              |  |       |  |                 |  |              | 648    |             |  |  | 5,035  |  |  |  | 15,526 |  |  |  | 20,561 |  |  |  | 2,845 |  |  |  | 9,236  | (3) |  |  | 1980/97    | 
|Camarillo Business Park       |  |         | 154,298 |               |  |               | 3,522  |      |  |              | 10,427 |                   |  |      |  |              |  |       |  |                 |  |              | 3,680  |             |  |  | 3,522  |  |  |  | 14,107 |  |  |  | 17,629 |  |  |  | 3,305 |  |  |  | 8,100  | (3) |  |  | 1984/97    | 
|5702 Bolsa                    |  |         | 27,731  |               |  |               | 589    |      |  |              | 1,745  |                   |  |      |  |              |  |       |  |                 |  |              | 178    |             |  |  | 589    |  |  |  | 1,923  |  |  |  | 2,512  |  |  |  | 382   |  |  |  | 915    | (3) |  |  | 1987/97    | 
|5672 Bolsa                    |  |         | 12,110  |               |  |               | 254    |      |  |              | 753    |                   |  |      |  |              |  |       |  |                 |  |              | 65     |             |  |  | 254    |  |  |  | 818    |  |  |  | 1,072  |  |  |  | 159   |  |  |  | 321    | (3) |  |  | 1987       | 
|5632 Bolsa                    |  |         | 21,568  |               |  |               | 458    |      |  |              | 1,358  |                   |  |      |  |              |  |       |  |                 |  |              | 92     |             |  |  | 458    |  |  |  | 1,450  |  |  |  | 1,908  |  |  |  | 275   |  |  |  | 822    | (3) |  |  | 1987       | 
|Huntington Commerce Center    |  |         | 69,749  |               |  |               | 992    |      |  |              | 2,941  |                   |  |      |  |              |  |       |  |                 |  |              | 578    |             |  |  | 992    |  |  |  | 3,519  |  |  |  | 4,511  |  |  |  | 777   |  |  |  | 1,513  | (3) |  |  | 1987       | 
|Savi Tech Center              |  |         | 242,327 |               |  |               | 5,876  |      |  |              | 17,396 |                   |  |      |  |              |  |       |  |                 |  |              | 3,390  |             |  |  | 5,876  |  |  |  | 20,786 |  |  |  | 26,662 |  |  |  | 4,630 |  |  |  | 14,320 | (3) |  |  | 1989       | 
|Yorba Linda Business Park     |  |         | 165,710 |               |  |               | 2,629  |      |  |              | 7,796  |                   |  |      |  |              |  |       |  |                 |  |              | 1,230  |             |  |  | 2,629  |  |  |  | 9,026  |  |  |  | 11,655 |  |  |  | 1,904 |  |  |  | 4,057  | (3) |  |  | 1988       | 
|Cymer Technology Center       |  |         | 155,612 |               |  |               | 5,446  |      |  |              | 16,109 |                   |  |      |  |              |  |       |  |                 |  |              | 2,819  |             |  |  | 5,446  |  |  |  | 18,928 |  |  |  | 24,374 |  |  |  | 3,324 |  |  |  | 10,615 | (3) |  |  | 1986       | 
|Poway Industrial              |  |         | 112,000 |               |  |               | 1,876  |      |  |              | 5,561  |                   |  |      |  |              |  |       |  |                 |  |              | 305    |             |  |  | 1,876  |  |  |  | 5,866  |  |  |  | 7,742  |  |  |  | 1,091 |  |  |  | 3,397  | (3) |  |  | 1991/96    | 
|10180 Scripps Ranch           |  |         | 43,560  |               |  |               | 1,165  |      |  |              | 3,448  |                   |  |      |  |              |  |       |  |                 |  |              | 298    |             |  |  | 1,165  |  |  |  | 3,746  |  |  |  | 4,911  |  |  |  | 688   |  |  |  | 1,941  | (3) |  |  | 1978/96    | 
|Via Frontera                  |  |         | 77,920  |               |  |               | 1,792  |      |  |              | 5,306  |                   |  |      |  |              |  |       |  |                 |  |              | 1,024  |             |  |  | 1,792  |  |  |  | 6,330  |  |  |  | 8,122  |  |  |  | 1,495 |  |  |  | 2,797  | (3) |  |  | 1982/97    | 
|Westridge                     |  |         | 48,955  |               |  |               | 1,807  |      |  |              | 5,345  |                   |  |      |  |              |  |       |  |                 |  |              | 616    |             |  |  | 1,807  |  |  |  | 5,961  |  |  |  | 7,768  |  |  |  | 1,204 |  |  |  | 2,890  | (3) |  |  | 1984/96    | 
|6060 Center Drive             |  |         | 256,665 |               |  |               | 4,299  |      |  |              | 48,701 |                   |  |      |  |              |  |       |  |                 |  |              | 12,046 |             |  |  | 4,299  |  |  |  | 60,747 |  |  |  | 65,046 |  |  |  | 7,118 |  |  |  |       |     |  |  | 2000       | 
|Howard Hughes  Spectrum Club |  |         | 36,959  |               |  |               | 2,500  |      |  |              | 7,500  |                   |  |      |  |              |  |       |  |                 |  |              | 37     |             |  |  | 2,500  |  |  |  | 7,537  |  |  |  | 10,037 |  |  |  | 1,271 |  |  |  |       |     |  |  | 1993       | 
|6080 Center Drive             |  |         | 286,568 |               |  |               | 5,082  |      |  |              | 49,853 |                   |  |      |  |              |  |       |  |                 |  |              | 23,702 |             |  |  | 5,082  |  |  |  | 73,555 |  |  |  | 78,637 |  |  |  | 7,209 |  |  |  |       |     |  |  | 2001       | 
|6100 Center Drive             |  |         | 284,798 |               |  |               | 2,513  |      |  |              | 57,079 |                   |  |      |  |              |  |       |  |                 |  |              | 24,174 |             |  |  | 2,513  |  |  |  | 81,253 |  |  |  | 83,766 |  |  |  | 3,390 |  |  |  |       |     |  |  | 2002       | 
|11075 Santa Monica            |  |         | 35,996  |               |  |               | 1,225  |      |  |              | 3,588  |                   |  |      |  |              |  |       |  |                 |  |              | 1,407  |             |  |  | 1,225  |  |  |  | 4,995  |  |  |  | 6,220  |  |  |  | 1,196 |  |  |  |       |     |  |  | 1983       | 
|Continental Grand Plaza       |  |         | 237,494 |               |  |               | 7,125  |      |  |              | 39,416 |                   |  |      |  |              |  |       |  |                 |  |              | 9,252  |             |  |  | 7,125  |  |  |  | 48,668 |  |  |  | 55,793 |  |  |  | 9,634 |  |  |  | 26,011 | (3) |  |  | 1986       | 
|Calabasas Tech                |  |         | 283,692 |               |  |               | 11,513 |      |  |              | 32,696 |                   |  |      |  |              |  |       |  |                 |  |              | 8,501  |             |  |  | 11,513 |  |  |  | 41,197 |  |  |  | 52,710 |  |  |  | 8,745 |  |  |  |       |     |  |  | 1990/2001  | 
|Oceangate Tower               |  |         | 218,554 |               |  |               | 3,080  |      |  |              | 19,838 |                   |  |      |  |              |  |       |  |                 |  |              | 4,290  |             |  |  | 3,080  |  |  |  | 24,128 |  |  |  | 27,208 |  |  |  | 4,603 |  |  |  |       |     |  |  | 1971/93/94 | 

F-24



---



##### Table of Contents



|                             |  |         |            |               |  |               |         |      |  |              |           |                   |  |      |       |              |  |       |       |                 |  |              |         |             |  |   |         |  |  |   |           |  |  |   |           |  |  |   |         |  |  |   |         |     |  |  |              | 
|---------------------------- |  | ------- | ---------- | ------------- |  | ------------- | ------- | ---- |  | ------------ | --------- | ----------------- |  | ---- | ----- | ------------ |  | ----- | ----- | --------------- |  | ------------ | ------- | ----------- |  | - | ------- |  |  | - | --------- |  |  | - | --------- |  |  | - | ------- |  |  | - | ------- | --- |  |  | ------------ | 
|                             |  |         |            |               |  |               |         |      |  |              |           |                   |  |      |       |              |  |      
|                             |  |         |            | Initial Costs |  | Basis Step Up |         |      |  | Total Costs  |           |                   |  |      |       |              |  |      
|                             |  |         |            |               |  |               |         |      |  |              |           |                   |  |      |       |              |  |      
|                             |  |         |            |               |  | Buildings     |         |      |  | Buildings    |           | Costs Capitalized |  |      |       | Buildings    |  |       |       |                 |  |              |         |            
|                             |  | Square  |            |               |  | and           |         |      |  | and          |           | Subsequent to     |  |      |       | and          |  |       |       | Accumulated     |  |              |         | Year Built/
|                             |  | Footage |            | Land          |  | Improvements  |         | Land |  | Improvements |           | Acquisition(2)    |  | Land |       | Improvements |  | Total |       | Depreciation(1) |  | Encumbrances |         | Renovated  
|                             |  |         |            |               |  |               |         |      |  |              |           |                   |  |      |       |              |  |       |       |                 |  |              |         |            
|Genesee Executive Plaza      |  |         | 155,014    |               |  |               | 6,750   |      |  |              | 19,691    |                   |  |      |      |              |  |       |      |                 |  |              | 5,651   |             |  |   | 6,750   |  |  |   | 25,342    |  |  |   | 32,092    |  |  |   | 5,295   |  |  |   | 15,908  | (3) |  |  | 1984         | 
|Solar Drive Business Center  |  |         | 138,341    |               |  |               | 4,250   |      |  |              | 12,447    |                   |  |      |      |              |  |       |      |                 |  |              | 2,093   |             |  |   | 4,250   |  |  |   | 14,540    |  |  |   | 18,790    |  |  |   | 2,680   |  |  |   |        |     |  |  | 1982         | 
|601 S. Glenoaks              |  |         | 74,745     |               |  |               | 2,450   |      |  |              | 7,132     |                   |  |      |      |              |  |       |      |                 |  |              | 1,712   |             |  |   | 2,450   |  |  |   | 8,844     |  |  |   | 11,294    |  |  |   | 1,574   |  |  |   | 5,535   | (3) |  |  | 1990         | 
|Tourney Pointe               |  |         | 219,673    |               |  |               | 6,047   |      |  |              | 20,312    |                   |  |      |      |              |  |       |      |                 |  |              | 12,880  |             |  |   | 6,047   |  |  |   | 33,192    |  |  |   | 39,239    |  |  |   | 6,592   |  |  |   |        |     |  |  | 1985/98/2000 | 
|Hillside Corporate Center    |  |         | 61,000     |               |  |               | 2,213   |      |  |              | 7,336     |                   |  |      |      |              |  |       |      |                 |  |              | 2,285   |             |  |   | 2,213   |  |  |   | 9,621     |  |  |   | 11,834    |  |  |   | 1,792   |  |  |   |        |     |  |  | 1998         | 
|Westlake Gardens II          |  |         | 48,874     |               |  |               | 1,831   |      |  |              | 5,493     |                   |  |      |      |              |  |       |      |                 |  |              | 1,448   |             |  |   | 1,831   |  |  |   | 6,941     |  |  |   | 8,772     |  |  |   | 1,280   |  |  |   |        |     |  |  | 1999         | 
|Howard Hughes Tower          |  |         | 316,014    |               |  |               | 5,830   |      |  |              | 44,839    |                   |  |      |      |              |  |       |      |                 |  |              | 14,405  |             |  |   | 5,830   |  |  |   | 59,244    |  |  |   | 65,074    |  |  |   | 11,543  |  |  |   |        |     |  |  | 1987         | 
|2001 Wilshire Blvd.          |  |         | 99,565     |               |  |               | 5,006   |      |  |              | 14,540    |                   |  |      |      |              |  |       |      |                 |  |              | 1,861   |             |  |   | 5,006   |  |  |   | 16,401    |  |  |   | 21,407    |  |  |   | 2,593   |  |  |   |        |     |  |  | 1980         | 
|Carmel Valley Centre         |  |         | 109,518    |               |  |               | 4,900   |      |  |              | 23,336    |                   |  |      |      |              |  |       |      |                 |  |              | 1,794   |             |  |   | 4,900   |  |  |   | 25,130    |  |  |   | 30,030    |  |  |   | 1,440   |  |  |   |        |     |  |  | 1987/89      | 
|Carmel View Office Plaza     |  |         | 77,672     |               |  |               | 3,100   |      |  |              | 9,342     |                   |  |      |      |              |  |       |      |                 |  |              | 972     |             |  |   | 3,100   |  |  |   | 10,314    |  |  |   | 13,414    |  |  |   | 675     |  |  |   |        |     |  |  | 1985         | 
|Crossroads                   |  |         | 134,477    |               |  |               | 3,950   |      |  |              | 12,810    |                   |  |      |      |              |  |       |      |                 |  |              | 1,723   |             |  |   | 3,950   |  |  |   | 14,533    |  |  |   | 18,483    |  |  |   | 969     |  |  |   |        |     |  |  | 1979         | 
|Governor Executive Center    |  |         | 52,828     |               |  |               | 1,500   |      |  |              | 9,670     |                   |  |      |      |              |  |       |      |                 |  |              | 368     |             |  |   | 1,500   |  |  |   | 10,038    |  |  |   | 11,538    |  |  |   | 521     |  |  |   |        |     |  |  | 1988         | 
|Gateway Towers               |  |         | 433,545    |               |  |               | 5,585   |      |  |              | 56,892    |                   |  |      |      |              |  |       |      |                 |  |              | 4,093   |             |  |   | 5,585   |  |  |   | 60,985    |  |  |   | 66,570    |  |  |   | 3,594   |  |  |   |        |     |  |  | 1984/86      | 
|Governor Executive Center II |  |         | 101,433    |               |  |               | 1,959   |      |  |              | 17,958    |                   |  |      |      |              |  |       |      |                 |  |              | 2,895   |             |  |   | 1,959   |  |  |   | 20,853    |  |  |   | 22,812    |  |  |   | 1,545   |  |  |   |        |     |  |  | 1989         | 
|Homestore                    |  |         | 137,762    |               |  |               | 9,128   |      |  |              | 19,253    |                   |  |      |      |              |  |       |      |                 |  |              | 3,790   |             |  |   | 9,128   |  |  |   | 23,043    |  |  |   | 32,171    |  |  |   | 386     |  |  |   |        |     |  |  | 2000         | 
|Warner Corporate Center      |  |         | 253,000    |               |  |               | 2,860   |      |  |              | 53,725    |                   |  |      |      |              |  |       |      |                 |  |              | 8,806   |             |  |   | 2,860   |  |  |   | 62,531    |  |  |   | 65,391    |  |  |   | 603     |  |  |   |        |     |  |  | 1988         | 
|                             |  |         |            |               |  |               |         |      |  |              |           |                   |  |      |       |              |  |       |       |                 |  |              |         |             |  |   |         |  |  |   |           |  |  |   |           |  |  |   |         |  |  |   |         |     |  |  |              | 
|                             |  |         | 18,110,660 |               |  | $             | 452,473 |      |  | $            | 1,879,789 |                   |  | $    | 1,616 |              |  | $     | 8,607 |                 |  | $            | 660,848 |             |  | $ | 454,089 |  |  | $ | 2,549,244 |  |  | $ | 3,003,333 |  |  | $ | 491,442 |  |  | $ | 382,639 |     |  |  |              | 
|                             |  |         |            |               |  |               |         |      |  |              |           |                   |  |      |       |              |  |       |       |                 |  |              |         |             |  |   |         |  |  |   |           |  |  |   |           |  |  |   |         |  |  |   |         |     |  |  |              | 



---



|    |                                                                                                                                                                                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The depreciable lives for buildings and
    improvements and furniture, fixtures and equipment range from
    five 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
    $54.6 million.                                                                                                            
|   
|(3) | All of these properties are collateral for our
    $365.3 million mortgage financings. The encumbrance
    allocated to an individual property is based on the related
    individual release price.                                    

F-25



---



##### Table of Contents



ARDEN REALTY, INC.

15. Schedule of Commercial Properties and
Accumulated Depreciation (continued)

The changes in our investment in commercial
properties and related accumulated depreciation for each of the
periods in the three years ended December 31, 2004, 2003
and 2002 are as follows (in thousands):

|                          |                                                                                         |                                  |   |           |   |      |   |           |   |  |   |           |  
|------------------------- | --------------------------------------------------------------------------------------- | -------------------------------- | - | --------- | - | ---- | - | --------- | - |  | - | --------- | -
|                          |                                                                                         |                                 
|                          |                                                                                         | Arden Realty, Inc.              
|                          |                                                                                         |                                 
|                          |                                                                                         |                                 
|                          |                                                                                         | For the Years Ended December 31,
|                          |                                                                                         |                                 
|                          |                                                                                         | 2004                             |   | 2003      |   | 2002
|                          |                                                                                         |                                  |   |           |   |     
|Commercial Properties:    |                                                                                         |                                  |   |           |   |      |   |           |   |  |   |          
|                          | Balance at beginning of period                                                          |                                  | $ | 3,008,081 |   |      | $ | 3,045,208 |   |  | $ | 2,797,052 |  
|                          | Improvements                                                                            |                                  |   | 93,811    |   |      |   | 77,532    |   |  |   | 95,073    |  
|                          | Disposition of property                                                                 |                                  |   | (196,999  | ) |      |   | (97,632   | ) |  |   | (24,094   | )
|                          | Write offs of fully depreciated assets                                                  |                                  |   | (65,591   | ) |      |   | (37,913   | ) |  |   | (24,129   | )
|                          | Acquisition of properties                                                               |                                  |   | 97,503    |   |      |   | 22,054    |   |  |   | 134,938   |  
|                          | Transfers from (to) properties under development
    and land available for development |                                  |   | 66,528    |   |      |   |          |   |  |   | 66,368    |  
|                          | Reclassification to other assets                                                        |                                  |   |          |   |      |   | (1,168    | ) |  |   |          |  
|                          |                                                                                         |                                  |   |           |   |      |   |           |   |  |   |          
|                          | Balance at end of period                                                                |                                  | $ | 3,003,333 |   |      | $ | 3,008,081 |   |  | $ | 3,045,208 |  
|                          |                                                                                         |                                  |   |           |   |      |   |           |   |  |   |          
|Accumulated Depreciation: |                                                                                         |                                  |   |           |   |      |   |           |   |  |   |          
|                          | Balance at beginning of period                                                          |                                  | $ | (460,732  | ) |      | $ | (392,611  | ) |  | $ | (307,082  | )
|                          | Depreciation for period                                                                 |                                  |   | (125,315  | ) |      |   | (118,416  | ) |  |   | (111,022  | )
|                          | Disposition of property                                                                 |                                  |   | 29,817    |   |      |   | 12,325    |   |  |   | 1,982     |  
|                          | Write offs of fully depreciated assets                                                  |                                  |   | 65,591    |   |      |   | 37,913    |   |  |   | 24,129    |  
|                          | Transfers to (from) properties under
    development and land available for development |                                  |   | (803      | ) |      |   |          |   |  |   | (618      | )
|                          | Reclassification to other assets                                                        |                                  |   |          |   |      |   | 57        |   |  |   |          |  
|                          |                                                                                         |                                  |   |           |   |      |   |           |   |  |   |          
|                          | Balance at end of period                                                                |                                  | $ | (491,442  | ) |      | $ | (460,732  | ) |  | $ | (392,611  | )
|                          |                                                                                         |                                  |   |           |   |      |   |           |   |  |   |          

F-26