|
|

|
|

|**Securities
      and Exchange Commission**
|--------------------------------------------
|                                            
|**Washington, D.C.  20549**                 

|**FORM 10-Q**                                                                                         
|------------------------------------------------------------------------------------------------------
|                                                                                                      
|                                                                                                      
|QUARTERLY
        REPORT PURSUANT TO SECTION 13OR 15(d) OF THE
        SECURITIES EXCHANGE ACT OF 1934
|                                                                                                      
|For the
      quarter ended September 30, 2003                                                        
|                                                                                                      
|Commission
      file number 000-30571                                                                

|**ARDEN
      REALTY LIMITED PARTNERSHIP**(Exact name of registrant as specified in its charter)
|------------------------------------------------------------------------------------------------

|**Maryland**                                                   |  | **95-4599813**                      
|-------------------------------------------------------------- |  | ------------------------------------
|(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
|-----------------------------------------------------------------------------

|                                                                                                                                                                                                                                                                                                                                                                                       
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Indicate
      by check mark whether the registrant: (1) has filed all reports required
      to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
      during the preceding 12 months (or for such shorter period that the registrant
      was required to file such reports), and (2) has been subject to such filing
      requirements for the past 90 days.
|Yes  |X|  No  |   |                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                       
|Indicate by check mark whether
      the registrant is an accelerated filer (as defined in Rule 12b-2 of the
      Act).                                                                                                                                                                                                                                                               
|Yes  |   |  
      No  |X|                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                       
|As
      of November 12, 2003 there were 65,932,197 of the registrants common
      partnership units issued and outstanding.                                                                                                                                                                                                                                                         

|
|

|**ARDEN
      REALTY LIMITED PARTNERSHIP** **FORM 10-Q TABLE OF CONTENTS**
|--------------------------------------------------------------------------

|**PART I.**  |  | **FINANCIAL INFORMATION** | PAGE NO.
|------------ |  | ------------------------- | --------
|             |  |                           |         
|             |  | Item 1.                   |         
|             |  |                           |         
|             |  |                           |         
|             |  |                           |         
|             |  |                           |         
|             |  |                           |         
|             |  |                           |         
|             |  |                           |         
|             |  |                           |         
|             |  |                           |         
|             |  | Item 2.                   |         
|             |  |                           |         
|             |  | Item 3.                   |         
|             |  |                           |         
|             |  | Item 4.                   |         
|             |  |                           |         
|**PART II.** |  | **OTHER INFORMATION**     |         
|             |  |                           |         
|             |  | Item 1.                   |         
|             |  |                           |         
|             |  | Item 2.                   |         
|             |  |                           |         
|             |  | Item 3.                   |         
|             |  |                           |         
|             |  | Item 4.                   |         
|             |  |                           |         
|             |  | Item 5.                   |         
|             |  |                           |         
|             |  | Item 6.                   |         
|             |  |                           |         
|             |  | **SIGNATURES**            |         

|
|

|**Part I.  
      FINANCIAL INFORMATION**                                                                 
|----------------------------------------------------------------------------------------------------------
|                                                                                                          
|**Item
      1.   Financial Statements**                                                                  
|                                                                                                          
|**Arden
      Realty Limited Partnership Consolidated Balance Sheets (in thousands, except unit amounts)**

|                                                                                    |  |  | **September
      30,
      2003** |           | **December
      31,
      2002** |  
|----------------------------------------------------------------------------------- |  |  | ---------------------------------- | --------- | --------------------------------- | -
|                                                                                    |  |  |                                    |          
|                                                                                    |  |  | **(unaudited)**                    |           |                                   |  
|**Assets**                                                                          |  |  |                                    |           |                                   |  
|Investment
      in real estate:                                                    |  | 
|Land                                                                                |  |  | $                                  | 467,096   |                                   | $
|Buildings
      and improvements                                                    |  |  |                                    | 2,107,298 |                                   |  
|Tenant
      improvements and leasing commissions                                   |  |  |                                    | 336,404   |                                   |  
|                                                                                    |  |  |                                    |          
|                                                                                    |  |  |                                    | 2,910,798 |                                   |  
|Less:
      accumulated depreciation and amortization                               |  |  |                                    | (438,770  | )                                 |  
|                                                                                    |  |  |                                    |          
|                                                                                    |  |  |                                    | 2,472,028 |                                   |  
|Properties
      under development                                                  |  |  |                                    | 71,659    |                                   |  
|Land
      available for development                                                |  |  |                                    | 23,701    |                                   |  
|Properties
      held for disposition, net                                          |  |  |                                    | 70,970    |                                   |  
|                                                                                    |  |  |                                    |          
|Net
      investment in real estate                                                 |  |  |                                    | 2,638,358 |                                   |  
|                                                                                    |  |  |                                    |           |                                   |  
|Cash and
      cash equivalents                                                     |  |  |                                    | 18,292    |                                   |  
|Restricted
      cash                                                               |  |  |                                    | 23,550    |                                   |  
|Rent and
      other receivables, net of allowance of $4,633 and $4,001 at          |  | 
|September
      30, 2003 and December 31, 2002, respectively                        |  |  |                                    | 2,193     |                                   |  
|Due from
      general partner                                                      |  |  |                                    | 4,683     |                                   |  
|Deferred
      rent                                                                 |  |  |                                    | 43,889    |                                   |  
|Prepaid financing
      costs, expenses and other assets, net of amortization       |  |  |                                    | 19,506    |                                   |  
|                                                                                    |  |  |                                    |          
|Total
      assets                                                                  |  |  | $                                  | 2,750,471 |                                   | $
|                                                                                    |  |  |                                    |          
|                                                                                    |  | 
|**Liabilities**                                                                     |  | 
|Mortgage
      loans payable                                                        |  |  | $                                  | 566,912   |                                   | $
|Unsecured
      lines of credit                                                     |  |  |                                    | 150,000   |                                   |  
|Unsecured
      term loan                                                           |  |  |                                    | 125,000   |                                   |  
|Unsecured
      senior notes, net of discount                                       |  |  |                                    | 498,350   |                                   |  
|Accounts
      payable and accrued expenses                                         |  |  |                                    | 58,308    |                                   |  
|Security
      deposits                                                             |  |  |                                    | 22,144    |                                   |  
|                                                                                    |  |  |                                    |          
|Total
      liabilities                                                             |  |  |                                    | 1,420,714 |                                   |  
|                                                                                    |  |  |                                    |           |                                   |  
|Minority
      interest                                                             |  |  |                                    | 2,762     |                                   |  
|                                                                                    |  | 
|**Partners
      Capital**                                                         |  | 
|Preferred partner,
        2,000,000 Series B Cumulative Redeemable Preferred units |  |  |                                    | 50,000    |                                   |  
|outstanding at September 30, 2003 and December 31, 2002                             |  | 
|General and
      limited partners, 65,902,197 and 64,701,042 common operating      |  | 
|partnership units outstanding at September 30, 2003 and
      December 31, 2002,    |  | 
|respectively                                                                        |  |  |                                    | 1,296,505 |                                   |  
|Deferred
      compensation                                                         |  |  |                                    | (15,757   | )                                 |  
|Accumulated
      other comprehensive loss                                          |  |  |                                    | (3,753    | )                                 |  
|                                                                                    |  |  |                                    |          
|Total
      partners capital                                                       |  |  |                                    | 1,326,995 |                                   |  
|                                                                                    |  |  |                                    |          
|Total
      liabilities and partners capital                                       |  |  | $                                  | 2,750,471 |                                   | $
|                                                                                    |  |  |                                    |          

|*See accompanying
      notes to consolidated financial statements.*
|--------------------------------------------------------------------
|                                                                    
|3                                                                   
|                                                                    
|                                                                    

|**Arden
      Realty Limited Partnership** **Consolidated Statements of Income (in thousands, except per unit
      data) (unaudited)**
|---------------------------------------------------------------------------------------------------------------------------------------

|                                                                                                        |  |  | **Three
      Months Ended
      September 30,** |         | **Nine
      Months Ended
      September 30,** |  
|------------------------------------------------------------------------------------------------------- |  |  | ------------------------------------------------ | ------- | ----------------------------------------------- | -
|                                                                                                        |  |  |                                                  |        
|                                                                                                        |  |  | **2003**                                         |         | **2002**                                        |  
|                                                                                                        |  |  |                                                  |         |                                                 |  
|Property
      revenues                                                                                 |  |  | $                                                | 104,858 |                                                 | $
|Property
      operating expenses                                                                       |  |  |                                                  | 35,255  |                                                 |  
|                                                                                                        |  |  |                                                  |         |                                                 |  
|                                                                                                        |  |  |                                                  | 69,603  |                                                 |  
|                                                                                                        |  |  |                                                  |         |                                                 |  
|General and
      administrative expenses                                                               |  |  |                                                  | 4,318   |                                                 |  
|Interest
      expense                                                                                  |  |  |                                                  | 23,953  |                                                 |  
|Depreciation
      and amortization                                                                     |  |  |                                                  | 30,578  |                                                 |  
|Interest
      and other income                                                                         |  |  |                                                  | (121    | )                                               |  
|                                                                                                        |  |  |                                                  |         |                                                 |  
|Income from
      continuing operations before gain
        on sale of properties and minority interest |  |  |                                                  | 10,875  |                                                 |  
|Gain on sale
      of operating properties                                                              |  |  |                                                  |        |                                                 |  
|                                                                                                        |  |  |                                                  |         |                                                 |  
|Income from
      continuing operations before minority interest                                        |  |  |                                                  | 10,875  |                                                 |  
|Minority
      interest                                                                                 |  |  |                                                  | (22     | )                                               |  
|                                                                                                        |  |  |                                                  |         |                                                 |  
|Income from
      continuing operations                                                                 |  |  |                                                  | 10,853  |                                                 |  
|Discontinued
      operations                                                                           |  |  |                                                  | 1,400   |                                                 |  
|Gain on sale
      of discontinued properties                                                           |  |  |                                                  |        |                                                 |  
|                                                                                                        |  |  |                                                  |         |                                                 |  
|Net income                                                                                              |  |  | $                                                | 12,253  |                                                 | $
|                                                                                                        |  |  |                                                  |         |                                                 |  
|                                                                                                        |  | 
|Net income
      allocated to:                                                                          |  | 
|Preferred
      Partner                                                                                 |  |  | $                                                | 1,078   |                                                 | $
|                                                                                                        |  |  |                                                  |         |                                                 |  
|General
      and limited partners                                                                      |  |  | $                                                | 11,175  |                                                 | $
|                                                                                                        |  |  |                                                  |         |                                                 |  
|                                                                                                        |  | 
|Basic net
      income per common operating partnership unit:                                           |  | 
|Income
      from continuing operations                                                                 |  |  | $                                                | 0.15    |                                                 | $
|Income
      from discontinued operations                                                               |  |  |                                                  | 0.02    |                                                 |  
|                                                                                                        |  |  |                                                  |         |                                                 |  
|Net income
      per common operating partnership unit - basic                                          |  |  | $                                                | 0.17    |                                                 | $
|                                                                                                        |  |  |                                                  |         |                                                 |  
|                                                                                                        |  |  |                                                  |         |                                                 |  
|Weighted
      average number of common operating partnership                                           |  |  |                                                  |         |                                                 |  
|units
       basic                                                                                     |  |  |                                                  | 65,326  |                                                 |  
|                                                                                                        |  |  |                                                  |         |                                                 |  
|                                                                                                        |  | 
|Diluted net
      income per common operating partnership unit:                                         |  | 
|Income
      from continuing operations                                                                 |  |  | $                                                | 0.15    |                                                 | $
|Income
      from discontinued operations                                                               |  |  |                                                  | 0.02    |                                                 |  
|                                                                                                        |  |  |                                                  |         |                                                 |  
|Net income
      per common operating partnership unit - diluted                                        |  |  | $                                                | 0.17    |                                                 | $
|                                                                                                        |  |  |                                                  |         |                                                 |  
|                                                                                                        |  | 
|Weighted
      average number of common operating partnership
          units  diluted                 |  |  |                                                  | 65,740  |                                                 |  
|                                                                                                        |  |  |                                                  |         |                                                 |  

|*See accompanying
      notes to consolidated financial statements.*
|--------------------------------------------------------------------
|                                                                    
|4                                                                   
|                                                                    
|                                                                    

|**Arden
      Realty Limited Partnership** **Consolidated Statements of Cash Flows (in thousands) (unaudited)**
|---------------------------------------------------------------------------------------------------------------



|                                                                       |  |  | **Nine
      Months Ended
      September 30,** |         
|---------------------------------------------------------------------- |  |  | ----------------------------------------------- | --------
|                                                                       |  | 
|                                                                       |  |  | **2003**                                        |         
|                                                                       |  |  |                                                 |         
|**Operating
      Activities:**                                        |  |  |                                                 |         
|Net
      income                                                       |  |  | $                                               | 50,601  
|                                                                       |  |  |                                                 |         
|Adjustments
      to reconcile net income to net cash                  |  | 
|provided
      by operating activities:                                |  | 
|Minority
      interest                                                |  |  |                                                 | 78      
|Gain
      on sale of operating properties                             |  |  |                                                 |        
|Gain
      on sale of discontinued properties                          |  |  |                                                 | (5,382  
|Depreciation
      and amortization, including discontinued operations |  |  |                                                 | 90,775  
|Amortization
      of loan costs                                       |  |  |                                                 | 3,058   
|Non-cash
      compensation expense                                    |  |  |                                                 | 1,409   
|Changes
      in operating assets and liabilities:                     |  | 
|Rent
      and other receivables                                       |  |  |                                                 | 724     
|Due
      from general partner                                         |  |  |                                                 | (1,255  
|Deferred
      rent                                                    |  |  |                                                 | (243    
|Prepaid
      financing costs, expenses and other assets               |  |  |                                                 | (1,381  
|Accounts
      payable and accrued expenses                            |  |  |                                                 | 1,589   
|Security
      deposits                                                |  |  |                                                 | 1,499   
|                                                                       |  |  |                                                 |         
|Net
      cash provided by operating activities                        |  |  |                                                 | 141,472 
|                                                                       |  |  |                                                 |         
|                                                                       |  | 
|**Investing
      Activities:**                                        |  | 
|Improvements
      to commercial properties                            |  |  |                                                 | (61,797 
|Acquisition
      of properties                                        |  |  |                                                 |        
|Proceeds
      from sale of properties                                 |  |  |                                                 | 78,719  
|                                                                       |  |  |                                                 |         
|Net
      cash provided by (used in) investing activities              |  |  |                                                 | 16,922  
|                                                                       |  |  |                                                 |         
|                                                                       |  | 
|**Financing
      Activities:**                                        |  | 
|Proceeds
      from term loan                                          |  |  |                                                 |        
|Repayments
      of mortgage loans                                     |  |  |                                                 | (3,742  
|Proceeds
      from unsecured lines of credit                          |  |  |                                                 | 66,500  
|Repayments
      of unsecured lines of credit                          |  |  |                                                 | (125,087
|Proceeds
      from issuance of common operating partnership units     |  |  |                                                 | 22,780  
|Repurchases
      of common operating partnership units                |  |  |                                                 |        
|Distributions
      to preferred operating partnership unit holders    |  |  |                                                 | (3,234  
|Increase
      in restricted cash                                      |  |  |                                                 | (3,052  
|Distributions
      to minority interests                              |  |  |                                                 | (100    
|Distributions
      to common operating partnership unit holders       |  |  |                                                 | (98,230 
|                                                                       |  |  |                                                 |         
|Net
      cash (used in) provided by financing activities              |  |  |                                                 | (144,165
|                                                                       |  |  |                                                 |         
|Net increase
      (decrease) in cash and cash equivalents             |  |  |                                                 | 14,229  
|Cash and
      cash equivalents at beginning of period                 |  |  |                                                 | 4,063   
|                                                                       |  |  |                                                 |         
|Cash and
      cash equivalents at end of period                       |  |  | $                                               | 18,292  
|                                                                       |  |  |                                                 |         
|                                                                       |  | 
|Supplemental
      Disclosure of Cash Flow Information:                |  | 
|Cash
      paid during the period for interest                         |  |  | $                                               | 72,236  
|                                                                       |  |  |                                                 |         

|*See accompanying
      notes to consolidated financial statements.*
|--------------------------------------------------------------------
|                                                                    
|5                                                                   
|                                                                    
|                                                                    

|**Arden
      Realty Limited Partnership** **Notes to Consolidated Condensed Financial Statements
      September 30, 2003 (unaudited)**
|----------------------------------------------------------------------------------------------------------------------------------------

|**1.    
      Description of Business**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|The
        terms us, we and our as used in this
        report refer to Arden Realty Limited Partnership. The term Arden
        Realty refers to Arden Realty, Inc.
      Organization
        and Formation
      We
        are an operating partnership that owns, manages, leases, develops, renovates
        and acquires commercial properties located in Southern California. Arden
        Realty, a real estate investment trust, or REIT is our sole general partner
        and, as of September 30, 2003, owned 97.4% of our common operating partnership
        units, or common OP Units. Arden Realty conducts substantially all of
        its operations through us and our subsidiaries. Commencing with its taxable
        year ended December 31, 1996, Arden Realty has operated and qualified
        as a REIT for federal income tax purposes.
      As
        of September 30, 2003 our portfolio was comprised of 131 primarily suburban
        office properties, consisting of 217 buildings with approximately 18.9
        million net rentable square feet including one development project with
        approximately 283,000 square feet currently under lease-up. As of September
        30, 2003, excluding the development project which was 9% occupied, our
        properties were 89.9% occupied.
      Arden
        Realtys interest in us entitles it to share in our cash distributions,
        and in our profits and losses in proportion to its percentage ownership.
        Certain individuals and entities own our remaining common OP Units, including
        Messrs. Ziman and Coleman, Arden Realtys Chairman and Chief Executive
        Officer and President and Chief Operating Officer, respectively, together
        with other entities and persons. Each limited partner holding common OP
        Units is entitled to cause us to redeem the limited partners common
        OP Units for cash. We may, however, elect to exchange those common OP
        Units for shares of Arden Realtys common stock on a one-for-one
        basis, subject to certain limitations instead of paying cash. With each
        redemption or exchange of common OP Units, Arden Realtys percentage
        interest in us will increase.
      As
        our sole general partner, Arden Realty generally has the exclusive power
        under our partnership agreement to manage us and conduct our business,
        subject to limited exceptions. Arden Realtys board of directors
        manages our affairs. Our existence as a limited partnership cannot be
        terminated until 2096 without the approval of a majority of our partners
        or in connection with the sale of all or substantially all of our assets,
        a business combination, a judicial decree or the redemption of all the
        common OP Units held by our limited partners.
      We
        are a Maryland limited partnership. Arden Realty is a Maryland corporation.
        Arden Realtys common stock is listed on the New York Stock Exchange
        under the symbol ARI.
      **2****.    
      Summary of Significant Accounting Policies** Basis
        of Presentation
      The
        accompanying consolidated financial statements include the accounts of
        Arden Realty, Inc., us and our other 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
        that we control by agreement. We also consolidate all variable interest
        entities for which we are the primary beneficiary.
      We
        and Arden Realty currently own 100% of all of our consolidated subsidiaries
        and do not have any unconsolidated investments other than an investment
        in the securities of a non-publicly traded company. This investment represents
        approximately 5.5% of the total equity outstanding for this particular
        company. Because we do not control this company contractually nor exert
        significant influence over its operating and financial policies, we account
        for this investment under the cost method of accounting.
      Interim
        Financial Data
      The
        accompanying consolidated condensed financial statements should be read
        in conjunction with our 2002 Annual Report on Form 10-K as filed with
        the Securities and Exchange Commission. The accompanying financial information
        reflects all adjustments, which are, in our opinion, of a normal recurring
        nature and necessary for a fair presentation of our financial position,
        results of operations and cash flows for the interim periods. Interim
        results of operations are not necessarily indicative of the results to
        be expected for the full year.
      Reclassifications
      Certain
        prior year amounts have been reclassified to conform with the current
        year presentation.

| 
|-
|6
| 
| 

|**3.    New
      Accounting Standards** In
        January 2003, FASB issued FASB Interpretation No. 46, Consolidation
        of Variable Interest Entities (FIN 46). FIN 46 clarifies the application
        of Accounting Research Bulletin No. 51, Consolidated Financial Statements
        and provides guidance on the identification of entities for which control
        is achieved through means other than through voting rights and how to
        determine when and which business enterprise should consolidate such an
        entity. This new model for consolidation applies to an entity for which
        either the equity investors do not have a controlling financial interest
        or an entity for which the equity investment at risk is insufficient to
        finance that entitys activities without receiving additional subordinated
        financial support from other parties. Our adoption of this statement in
        2003 did not have an impact on our consolidated financial statements.
      In
        May 2003, the FASB issued FASB Statement No. 150 (SFAS 150), Accounting
        for Certain Financial Instruments with Characteristics of both Liabilities
        and Equity. SFAS 150 affects an issuers accounting for certain
        types of freestanding financial instruments. In addition to its requirements
        for the classification and measurement of financial instruments in its
        scope, SFAS 150 also requires disclosures about alternative ways of settling
        the instruments and capital structure of entities, all of whose shares
        are mandatorily redeemable. We adopted SFAS 150 in the third quarter of
        2003 other than as SFAS 150 applies to noncontrolling interests that are
        classified as equity under SFAS 150 in the financial statements of the
        subsidiary which has been deferred indefinitely and its adoption did not
        have an impact on our consolidated financial statements.
      **4.    Property
      Dispositions** On
        March 11, 2003, we sold an approximate 140,000 square foot office property
        located in West Hollywood, California for a gross sales price of approximately
        $32.5 million.
      On
        April 11, 2003, we sold four properties totaling approximately 343,000
        square feet located in Riverside and San Bernardino counties for a gross
        sales price of approximately $43.4 million.
      On
        May 22, 2003, we sold an approximate 33,000 square foot office property
        located in Orange County for a gross sales price of approximately $5.0
        million.
      On
        October 28, 2003, we sold an approximate 21,000 square foot office property
        located in Simi Valley, California for a gross sale price of approximately
        $3.6 million.
      The
        net proceeds from these dispositions were used to reduce the outstanding
        balance on our Wells Fargo unsecured line of credit.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| 
|-
|7
| 
| 

|**5.    Outstanding
      Indebtedness** A
        summary of our outstanding indebtedness as of September 30, 2003 and December
        31, 2002 is as follows:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------

|**Type of Debt**                     |  |  | **September 30,
      2003** |           | **December 30,
      2002** |   | **Stated Annual
      Interest Rate at
      September 30,
      2003** |  | **Rate
      Fixed/Floating** |      | **Number of
      Properties
      Securing Loan** |  | **Maturity**                         | 
|------------------------------------ |  |  | ---------------------------- | --------- | --------------------------- | - | ----------------------------------------------------------------------- |  | ----------------------------- | ---- | -------------------------------------------------- |  | ------------------------------------ | 
|                                     |  |  |                              |           |                             |   |                                                                         |  |                               |      |                                                    |  |                                      | 
|                                     |  |  | ( in thousands)              |           |                             |   |                                                                         |  |                               |      |                                                    | 
|**Mortgage
      Loans Payable:**    |  |  |                              |           |                             |   |                                                                         |  |                               |      |                                                    |  |                                      | 
|*Fixed
      Rate*                   |  | 
|Mortgage
      Financing I(1)        |  |  | $                            | 175,000   |                             | $ | 175,000                                                                 |  |                               | 7.52 | %                                                  |  | Fixed                                | 
|Mortgage
      Financing III(2)      |  |  |                              | 135,251   |                             |   | 136,100                                                                 |  |                               | 6.74 | %                                                  |  | Fixed                                | 
|Mortgage
      Financing IV(2)       |  |  |                              | 110,524   |                             |   | 111,200                                                                 |  |                               | 6.61 | %                                                  |  | Fixed                                | 
|Mortgage
      Financing V(2)        |  |  |                              | 106,483   |                             |   | 108,153                                                                 |  |                               | 6.94 | %                                                  |  | Fixed                                | 
|Mortgage
      Financing VI(2)       |  |  |                              | 21,657    |                             |   | 21,816                                                                  |  |                               | 7.54 | %                                                  |  | Fixed                                | 
|Activity
      Business Center(2)    |  |  |                              | 7,453     |                             |   | 7,580                                                                   |  |                               | 8.85 | %                                                  |  | Fixed                                | 
|145 South
      Fairfax(2)           |  |  |                              | 3,922     |                             |   | 3,952                                                                   |  |                               | 8.93 | %                                                  |  | Fixed                                | 
|Marin Corporate
      Center(2)      |  |  |                              | 2,756     |                             |   | 2,850                                                                   |  |                               | 9.00 | %                                                  |  | Fixed                                | 
|Conejo Business
      Center(2)      |  |  |                              | 2,702     |                             |   | 2,795                                                                   |  |                               | 8.75 | %                                                  |  | Fixed                                | 
|Conejo Business
      Center(2)      |  |  |                              | 1,164     |                             |   | 1,208                                                                   |  |                               | 7.88 | %                                                  |  | Fixed                                | 
|                                     |  |  |                              |           |                             |   |                                                                         |  |                               |      |                                                    |  |                                      | 
|                                     |  |  |                              | 566,912   |                             |   | 570,654                                                                 |  |                               |      |                                                    |  |                                      | 
|                                     |  |  |                              |           |                             |   |                                                                         |  |                               |      |                                                    |  |                                      | 
|**Unsecured
      Lines of Credit:** |  |  |                              |           |                             |   |                                                                         |  |                               |      |                                                    |  |                                      | 
|*Floating
      Rate*                |  |  |                              |           |                             |   |                                                                         |  |                               |      |                                                    |  |                                      | 
|Wells Fargo
      - $310 mm(1)       |  |  |                              | 150,000   |                             |   | 208,587                                                                 |  |                               | 2.77 | %                                                  |  | LIBOR
      +1.00%
      (Notes 4,5) | 
|City National
      Bank - $10 mm(1) |  |  |                              |          |                             |   |                                                                        |  |                               |     |                                                    |  | Prime Rate
      - 0.875%            | 
|                                     |  |  |                              |           |                             |   |                                                                         |  |                               |      |                                                    |  |                                      | 
|                                     |  |  | 150,000                      |           | 208,587                     |   |                                                                         |  |                               |      |                                                    |  |                                      | 
|                                     |  |  |                              |           |                             |   |                                                                         |  |                               |      |                                                    |  |                                      | 
|**Unsecured
      Term Loan:**       |  |  |                              |           |                             |   |                                                                         |  |                               |      |                                                    |  |                                      | 
|*Fixed
      Rate*                   |  |  |                              |           |                             |   |                                                                         |  |                               |      |                                                    |  |                                      | 
|Wells Fargo
      - $125 mm(1)       |  |  |                              | 125,000   |                             |   | 125,000                                                                 |  |                               | 3.64 | %                                                  |  | Fixed
      (Note 6)                 | 
|                                     |  |  |                              |           |                             |   |                                                                         |  |                               |      |                                                    |  |                                      | 
|**Unsecured
      Senior Notes:**    |  |  |                              |           |                             |   |                                                                         |  |                               |      |                                                    |  |                                      | 
|*Fixed
      Rate*                   |  |  |                              |           |                             |   |                                                                         |  |                               |      |                                                    |  |                                      | 
|2005 Notes(7)                        |  |  |                              | 199,846   |                             |   | 199,769                                                                 |  |                               | 8.88 | %                                                  |  | Fixed                                | 
|2007 Notes(7)                        |  |  |                              | 149,362   |                             |   | 149,245                                                                 |  |                               | 7.00 | %                                                  |  | Fixed                                | 
|2010 Notes(7)                        |  |  |                              | 49,734    |                             |   | 49,704                                                                  |  |                               | 9.15 | %                                                  |  | Fixed                                | 
|2010 Notes(7)                        |  |  |                              | 99,408    |                             |   | 99,345                                                                  |  |                               | 8.50 | %                                                  |  | Fixed                                | 
|                                     |  |  |                              |           |                             |   |                                                                         |  |                               |      |                                                    |  |                                      | 
|                                     |  |  |                              | 498,350   |                             |   | 498,063                                                                 |  |                               |      |                                                    |  |                                      | 
|                                     |  |  |                              |           |                             |   |                                                                         |  |                               |      |                                                    |  |                                      | 
|Total Debt                           |  |  | $                            | 1,340,262 |                             | $ | 1,402,304                                                               |  |                               |      |                                                    |  |                                      | 
|                                     |  |  |                              |           |                             |   |                                                                         |  |                               |      |                                                    |  |                                      | 

|
|

|(1) | Requires monthly payments of interest only, with outstanding principal
        balance due upon maturity.                    
|--- | -----------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                              
|(2) | Requires monthly payments
      of principal and interest.                                                                   
|    |                                                                                                                              
|(3) | Both mortgage loans
      are secured by the Conejo Business Center property.                                                
|    |                                                                                                                              
|(4) | This line of credit
      also has an annual 20 basis points facility fee on the entire $310 million
      commitment amount.

|(5) | In 2002, we entered into interest rate swap agreements that fixed the
        interest rate on $50 million of the outstanding balance on this line of
        credit at 4.06% through April 2006.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | In 2002, we entered into interest rate swap agreements that fixed the
        interest rate on the entire balance of this loan at 3.64% in 2003, 4.18%
        in 2004, 4.75% in 2005 and 4.90% in 2006.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Requires semi-annual interest payments only, with principal balance due
        upon maturity.
|--- | ----------------------------------------------------------------------------------------------

|6.Interest
      Rate Swap Agreements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|We
        have entered into interest rate swap agreements to effectively convert
        floating rate debt into fixed rate debt, to convert fixed rate debt to
        floating rate debtand to lock the current Treasury rate in anticipation
        of future debt issuances. Net amounts received or paid under these agreements
        are recognized as an adjustment to interest expense when such amounts
        are incurred or earned. Our objective in using interest rate swap agreements
        is to 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. Since June of 2003, we
        have also entered into $150 million of forward-starting swaps that effectively
        fixed the 10-year Treasury rate at an average rate of approximately 4.1%
        for borrowings that are anticipated to occur in 2004 to 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.
      In
        October and November of 2003, we also entered into reverse interest rate
        swap 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 swaps, we will receive interest at a fixed rate of 7.00% and pay
        interest at a variable rate averaging six-month LIBOR in arrears plus
        3.10%. The interest rate swaps mature at the same time the notes are due.
        These swaps 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 swaps 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.

| 
|-
|8
| 
| 

|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
        designation. 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
        recognized to earnings when the hedged transaction affects earnings.
      Under
        SFAS 133, our $175 million in floating-to-fixedswaps and our$150 million in forward-starting swaps outstanding as of September
        30, 2003 are classified as cash flow hedges with their fair value of approximately
        $3.8 million reported in accumulated other comprehensive loss on our balance
        sheet. The estimated fair value of these interest rate swap 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 swaps oraspart of interest
        expense for future borrowings in the case oftheforward
        starting swaps. If the underlying debt related totheseswaps
        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.
      **7.     Partners
      Capital**A
        common Operating Partnership unit, or common OP Unit, and a share of Arden
        Realtys common stock have essentially the same economic characteristics
        as they share equally in our total net income or loss and distributions.
        A common OP Unit may be redeemed for cash or, at our election, for shares
        of Arden Realtys common stock on a one-for-one basis.
      Included
        in our partners capital balance is $50 million of 8 5/8%
        Series B Cumulative Redeemable Preferred Operating Partnership Units,
        or Preferred OP Units. These Preferred OP Units were issued in September
        of 1999, are callable by us after five years and are exchangeable after
        ten years by the holder into our 8 5/8% Series B Cumulative
        Redeemable Preferred Stock, on a one-for-one basis. The Preferred OP Units
        and Series B Cumulative Redeemable Preferred Stock have no stated maturity
        or mandatory redemption and are subordinate to all debt.
      On
        July 23, 2003, we made a distribution of $0.505 per common OP unit. In
        addition, on September 30, 2003, we made a distribution of approximately
        $1.1 million to our preferred unit holders.
      **8.    
      Revenue from Rental Operations and Property Expenses** Revenue
        from rental operations and property expenses for properties held for use
        are summarized as follows (in thousands):
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                      |  |  | **Three
      Months Ended
      September 30,** |             | **Nine
      Months Ended
      September 30,** |  
|------------------------------------- |  |  | ------------------------------------------------ | ----------- | ----------------------------------------------- | -
|                                      |  |  |                                                  |            
|                                      |  |  | **2003**                                         |             | **2002**                                        |  
|                                      |  | 
|                                      |  |  |                                                  | (unaudited) |                                                
|Revenue
      from Rental Operations: |  |  |                                                  |             |                                                 |  
|Scheduled
      cash rents            |  |  | $                                                | 89,490      |                                                 | $
|Straight-line
      rents             |  |  |                                                  | 131         |                                                 |  
|Tenant
      reimbursements           |  |  |                                                  | 7,081       |                                                 |  
|Parking,
      net of expenses        |  |  |                                                  | 5,659       |                                                 |  
|Other
      rental operations         |  |  |                                                  | 2,497       |                                                 |  
|                                      |  |  |                                                  |             |                                                 |  
|                                      |  |  |                                                  | 104,858     |                                                 |  
|                                      |  |  |                                                  |             |                                                 |  
|                                      |  | 
|Property
      Expenses:              |  | 
|Repairs
      and maintenance         |  |  |                                                  | 10,795      |                                                 |  
|Utilities                             |  |  |                                                  | 10,722      |                                                 |  
|Real
      estate taxes               |  |  |                                                  | 7,245       |                                                 |  
|Insurance                             |  |  |                                                  | 2,166       |                                                 |  
|Ground
      rent                     |  |  |                                                  | 326         |                                                 |  
|Administrative                        |  |  |                                                  | 4,001       |                                                 |  
|                                      |  |  |                                                  |             |                                                 |  
|                                      |  |  |                                                  | 35,255      |                                                 |  
|                                      |  |  |                                                  |             |                                                 |  
|                                      |  |  | $                                                | 69,603      |                                                 | $
|                                      |  |  |                                                  |             |                                                 |  

| 
|-
|9
| 
| 

|**9.    Stock
      Option Plan** Beginning
        on January 1, 2003, we adopted 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
        in 2003 in accordance with SFAS No. 123, Accounting for Stock-Based
        Compensation. We used the Black-Scholes option valuation model to
        estimate the fair value of the stock options granted in 2003. During the
        three and nine months ended September 30 2003, we expensed approximately
        $8,000 and $24,000, respectively, of stock option based employee compensation
        costs.
      The
        following table reflects pro forma net income and earnings per share had
        we elected to expense all options granted prior to 2003 assuming the fair
        value method and using the Black-Scholes option valuation model (in thousands,
        except per share amounts):
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                                                     |  |  | **Three
      Months Ended
      September 30,** |        | **Nine
      Months Ended
      September 30,** |  
|-------------------------------------------------------------------------------------------------------------------- |  |  | ------------------------------------------------ | ------ | ----------------------------------------------- | -
|                                                                                                                     |  |  |                                                  |       
|                                                                                                                     |  |  | **2003**                                         |        | **2002**                                        |  
|                                                                                                                     |  | 
|Net
      income available to common stockholders, 
        as reported                                              |  |  | $                                                | 12,253 |                                                 | $
|Stock based
      employee compensation costs for options
         granted  prior to 2003 assuming fair value method |  |  |                                                  | (124   | )                                               |  
|                                                                                                                     |  |  |                                                  |        |                                                 |  
|Net income
      available to common stockholders, 
        as adjusted                                              |  |  | $                                                | 12,129 |                                                 | $
|                                                                                                                     |  |  |                                                  |        |                                                 |  
|Earnings
      per share:                                                                                            |  | 
|Basic
      as reported                                                                                              |  |  | $                                                | 0.17   |                                                 | $
|                                                                                                                     |  |  |                                                  |        |                                                 |  
|Basic
      as adjusted                                                                                              |  |  | $                                                | 0.17   |                                                 | $
|                                                                                                                     |  |  |                                                  |        |                                                 |  
|Diluted
      as reported                                                                                            |  |  | $                                                | 0.17   |                                                 | $
|                                                                                                                     |  |  |                                                  |        |                                                 |  
|Diluted
      as adjusted                                                                                            |  |  | $                                                | 0.17   |                                                 | $
|                                                                                                                     |  |  |                                                  |        |                                                 |  

|**10.   Comprehensive
      Income** Comprehensive
        income represents net income, plus the results of certain non-shareholders
        equity changes not reflected in the Consolidated Statements of Income.
        The components of comprehensive income are as follows (in thousands):
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                            |  |  | **Three
      Months Ended
      September 30,** |        | **Nine
      Months Ended
      September 30,** |  
|----------------------------------------------------------- |  |  | ------------------------------------------------ | ------ | ----------------------------------------------- | -
|                                                            |  |  |                                                  |       
|                                                            |  |  | **2003**                                         |        | **2002**                                        |  
|                                                            |  |  |                                                  |        |                                                 |  
|Net
      Income                                            |  |  | $                                                | 12,253 |                                                 | $
|Other comprehensive income (loss):                          |  |  |                                                  |        |                                                 |  
|Unrealized derivative gain (loss)
      on cash flow hedges |  |  |                                                  | 1,924  |                                                 |  
|                                                            |  |  |                                                  |        |                                                 |  
|Comprehensive income                                        |  |  | $                                                | 14,177 |                                                 | $
|                                                            |  |  |                                                  |        |                                                 |  

|**11.    
      Commitments and Contingencies** 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. There were no material changes
        in our legal proceedings during the three and nine months ended September
        30, 2003.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|  
|--
|10
|  
|  

|**Item
        2.   Managements Discussion and Analysis of Financial
        Condition and Results of Operations**
      **Overview**
      The
        following discussion relates to our unaudited consolidated financial statements
        included herein, which should be read in conjunction with the financial
        statements and related notes thereto included elsewhere in this Form 10-Q
        and in our 2002 Annual Report on Form 10-K.
      We
        are an operating partnership that owns, manages, leases, develops, renovates
        and acquires commercial properties located in Southern California. We
        are managed by 7 senior executive officers who have experience in the
        real estate industry ranging from 12 to 34 years and who collectively
        have an average of 18 years experience. We perform all property and development
        management, accounting, finance and acquisition/disposition activities
        and a majority of our leasing transactions with our staff of approximately
        300 employees.
      As
        of September 30, 2003, Arden Realty, our general partner, was Southern
        Californias largest publicly traded office landlord as measured
        by total net rentable square feet owned. As of that date, our portfolio
        was comprised of 131 primarily suburban office properties, consisting
        of 217 buildings with approximately 18.9 million net rentable square feet,
        including one development project with approximately 283,000 net rentable
        square feet currently under lease-up. As of September 30, 2003, excluding
        the development project which was 9% occupied, our portfolio was 89.9%
        occupied.
      **Business Strategy** Our
        primary business strategy is to actively manage our portfolio to seek
        to achieve gains in rental rates and occupancy, control operating expenses
        and to maximize income from ancillary operations and services. When market
        conditions permit, we may also selectively develop, renovate or acquire
        new properties that add value and fit strategically into our portfolio.
        We may also sell existing properties and redeploy the proceeds into investments
        we believe will generate higher long-term value.
      We
        continue to seek to build a tenant base of smaller, diverse companies
        that limits our exposure to any single tenant or industry. Smaller tenants
        typically translate into shorter-term leases. Shorter-term leases provide
        greater opportunity for renewing a substantial portion of our portfolio
        at higher rental rates each year during strong markets, but create challenges
        to maintain occupancy and rates when markets weaken. The average term
        of our leases is 4 to 5 years, resulting in approximately 15% to 20% of
        our leases expiring annually.
      We
        closely monitor our operating expenses and capital expenditures to sustain
        or improve operating margins and dividend coverage. We may defer discretionary
        capital expenditures until market conditions improve.
      **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. We believe current uncertainty over the national
        and Southern California economic environment is exerting downward pressures
        on the demand for Southern California commercial office space. We are
        experiencing continued downward pressures on occupancy and rental rates
        and upward pressure on leasing costs due to several factors including
        the following:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Job growth
      in Southern California, which we believe to be a leading indicator of office
      demand in the region, was negative in 2002 as well as in the first nine
      months of 2003 and is largely dependent on improved economic activity;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Occupancy
      and rental rates have decreased in recent months and are expected to decrease
      further in the coming months due to the state of the local economy and competition
      from other office landlords;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                          
| |  | Tenant concessions for new and renewal leases have increased
      in some submarkets in recent months;                                                                                                                  
| |   |                                                                                                                                                                                                                          
| |  | Some tenants are under-utilizing their existing space and
      can therefore expand internally before they need new space;                                                                                              
| |   |                                                                                                                                                                                                                          
| |  | Sublease space is impacting vacancy and rental rates in
      some submarkets; and                                                                                                                                       
| |   |                                                                                                                                                                                                                          
| |  | Over-building has increased
      vacancy rates in some submarkets.                                                                                                                                                      
| |   |                                                                                                                                                                                                                          

|These factors have
        contributed to a decrease in the occupancy of our portfolio from 90.1%
        as of December 31, 2002 to 89.9% as of September 30, 2003.
      According
        to published reports, overall market rental rates in Southern California
        declined 0.4to0.5% during the three months ended September
        30, 2003. Given the current trends, including the expected continued occupancy
        pressures and more aggressive pricing from competing landlords and sublease
        space, we expect market rates will decline by an additional 2to3%
        through the first six months of 2004. Concessions also rose during the
        three months ended September 30, 2003. As occupancy pressures continue,
        we expect concessions in either free or reduced initial rents or higher
        tenant improvement allowances to rise.
      The
        timing and extent of future changes in the national and local economy
        and their effects on our properties and results of operations are difficult
        to accurately predict. It is possible, however, that these national and
        regional issues may more directly affect us and our operating results
        in the future, making it more difficult for us to lease and renew available
        space, to increase or maintain rental rates as leases expire and to collect
        amounts due from our tenants. For additional information, see Risk
        Factors  Further declines in the economic activity of Southern California
        will adversely affect our operating results,  The financial
        condition and solvency of our tenants may reduce our cash flow,
        and  Rising energy costs and power outages in California may
        have an adverse effect on our operations and revenue, in our 2002
        Annual Report on Form 10-K.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|  
|--
|11
|  
|  

|**Critical Accounting
      Policies** Refer
        to our 2002 Annual Report on form 10-K for a discussion of our critical
        accounting policies which include, among other things, revenue recognition,
        allowance for doubtful accounts and depreciation. There have been no material
        changes to these policies in 2003.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|  
|--
|12
|  
|  

|RESULTS
        OF OPERATIONS
      
      Our
        financial position and operating results primarily relate to our portfolio
        of commercial properties and income derived from those properties. Therefore,
        the comparability of financial data from period to period will be affected
        by the timing of property developments, acquisitions and dispositions.
      
      Comparison
        of the three months ended September 30, 2003 to the three months ended
        September 30, 2002 (in thousands, except number of properties
        and percentages):
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                               |  |  | **Three Months
      Ended
      September 30,** |         |          |   |            |   |   |                   
|---------------------------------------------- |  |  | ------------------------------------------------ | ------- | -------- | - | ---------- | - | - | ------------------
|                                               |  |  | **2003**                                         |         | **2002** |   | **Change** |   |   | **Percent Change**
|**Total
      Portfolio:**                     |  |  |                                                  |         |          |   |            |   |   |                   
|                                               |  | 
|**Revenue
      from rental operations:**      |  | 
|Scheduled
      cash rents                     |  |  | $                                                | 89,490  |          | $ | 85,347     |   | $ | 4,143             
|Straight-line
      rents                      |  |  |                                                  | 131     |          |   | 524        |   |   | (393              
|Tenant
      reimbursements                    |  |  |                                                  | 7,081   |          |   | 5,140      |   |   | 1,941             
|Parking,
      net of expense                  |  |  |                                                  | 5,659   |          |   | 5,236      |   |   | 423               
|Other
      rental operations                  |  |  |                                                  | 2,497   |          |   | 2,813      |   |   | (316              
|                                               |  |  |                                                  |         |          |   |            |  
|Total
      revenue from rental operations     |  |  |                                                  | 104,858 |          |   | 99,060     |   |   | 5,798             
|                                               |  | 
|**Property
      expenses:**                   |  | 
|Repairs
      and maintenance                  |  |  |                                                  | 10,795  |          |   | 9,211      |   |   | 1,584             
|Utilities                                      |  |  |                                                  | 10,722  |          |   | 10,138     |   |   | 584               
|Real
      estate taxes                        |  |  |                                                  | 7,245   |          |   | 7,311      |   |   | (66               
|Insurance                                      |  |  |                                                  | 2,166   |          |   | 2,083      |   |   | 83                
|Ground
      rent                              |  |  |                                                  | 326     |          |   | 278        |   |   | 48                
|Administrative                                 |  |  |                                                  | 4,001   |          |   | 3,967      |   |   | 34                
|                                               |  |  |                                                  |         |          |   |            |  
|Total
      property expenses                  |  |  |                                                  | 35,255  |          |   | 32,988     |   |   | 2,267             
|                                               |  |  |                                                  |         |          |   |            |  
|Property
      Operating Results (1)           |  |  |                                                  | 69,603  |          |   | 66,072     |   |   | 3,531             
|General
      and administrative               |  |  |                                                  | 4,318   |          |   | 2,947      |   |   | 1,371             
|Interest                                       |  |  |                                                  | 23,953  |          |   | 22,403     |   |   | 1,550             
|Depreciation
      and amortization            |  |  |                                                  | 30,578  |          |   | 26,368     |   |   | 4,210             
|Interest
      and other income                |  |  |                                                  | (121    | )        |   | (524       | ) |   | (403              
|                                               |  |  |                                                  |         |          |   |            |  
|Income
      from continuing operations before |  | 
|minority
      interest                        |  |  | $                                                | 10,875  |          | $ | 14,878     |   | $ | (4,003            
|                                               |  |  |                                                  |         |          |   |            |  
|Discontinued
      operations                  |  |  | $                                                | 1,400   |          | $ | 2,089      |   | $ | (689              
|                                               |  |  |                                                  |         |          |   |            |  
|                                               |  | 
|**Number
      of Properties:**                |  | 
|Acquired
      during period                   |  |  |                                                  |        |          |   | 5          |  
|In
      service at end of period              |  |  |                                                  | 130     |          |   | 135        |  
|                                               |  | 
|**Net
      Rentable Square Feet:**            |  | 
|Acquired
      during period                   |  |  |                                                  |        |          |   | 803        |  
|In
      service at end of period              |  |  |                                                  | 18,617  |          |   | 18,845     |  
|                                               |  | 
|**Same
      Store Portfolio(2):**             |  | 
|Revenue
      from rental operations           |  |  | $                                                | 99,961  |          | $ | 98,370     |   | $ | 1,591             
|Property
      expenses                        |  |  |                                                  | 33,769  |          |   | 32,365     |   |   | 1,404             
|                                               |  |  |                                                  |         |          |   |            |  
|                                               |  |  | $                                                | 66,192  |          | $ | 66,005     |   | $ | 187               
|                                               |  |  |                                                  |         |          |   |            |  
|Straight-line
      rents                      |  |  | $                                                | 210     |          | $ | 612        |   | $ | (402              
|                                               |  |  |                                                  |         |          |   |            |  
|Number
      of non-development properties     |  |  |                                                  | 124     |          |   | 124        |  
|Average
      occupancy                        |  |  |                                                  | 89.6    | %        |   | 89.8       | %
|Net
      rentable square feet                 |  |  |                                                  | 17,526  |          |   | 17,526     |  
|                                               |  | 

|   
|---
|(1)
|   
|   
|   
|   
|   
|13 
|   
|   

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

| |                                          |  |  | **Three
      Months Ended September 30,** |       
| | ---------------------------------------- |  |  | ------------------------------------------ | ------
| |                                          |  |  | **2003**                                   |       
| | Income
      from continuing operations  |  |  | $                                          | 10,875
| | before
      gain on sale of properties  |  | 
| | and
      minority interest              |  | 
| | Add:                                     |  | 
| | General
      and administrative expense |  |  |                                            | 4,318 
| | Interest
      expense                   |  |  |                                            | 23,953
| | Depreciation
      and amortization      |  |  |                                            | 30,578
| | Less:                                    |  | 
| | Interest
      and other income          |  |  |                                            | (121  
| |                                          |  |  |                                           
| | Property
      Operating Results         |  |  | $                                          | 69,603
| |                                          |  |  |                                           
| |                                          |  | 

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

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|**VARIANCES FOR
        RESULTS OF OPERATIONS**
      
      Our
        results of operations for the three months ended September 30, 2003 compared
        to the same period in 2002 were primarily affected by our acquisitions,
        dispositions and development activities since July 1, 2002.
      
      As
        a result of these changes within our portfolio of properties since July
        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 store
        portfolio.
      
      **Revenue
        from Rental Operations**
      
      The
        increase in revenue from rental operations for the total portfolio was
        primarily due to the 803,000 square feet in acquisitions we made in August
        of 2002, consisting of four properties in San Diego County and one property
        in Los Angeles County, the placement in service of the 6080 Center Drive
        development project at the Howard Hughes Center in the fourth quarter
        of 2002 and a change in our method of estimating tenant reimbursements
        in 2003 to adjust for quarterly seasonality variations associated with
        recoverable operating expenses.
      
      The
        increase in revenue from rental operations for the same store portfolio
        was primarily due to an approximate $1.7 million increase in cash rents,
        a $600,000 increase in tenant reimbursements and a $300,000 increase in
        parking income, all of which were partially offset by a $600,000 decrease
        in other rental operations and a $400,000 decrease in straight-line rents.
        The increase in cash rents was primarily related to scheduled rent increases
        in existing leases that were partially offset by the 0.2% decrease in
        average occupancy for these properties. The increase in tenant reimbursements
        was primarily due to increases in operating expenses, as discussed below.
        The increase in parking income is primarily due to an increase in demand
        for monthly parking spaces in 2003 in some of our buildings. Other rental
        operations decreased primarily due to lower lease termination fees in
        2003 while straight-line rents decreased primarily due to the scheduled
        reversal of straight-line rents for certain older leases in the same store
        portfolio.
      
      **Property Expenses**
      
      The
        increase in property expenses for the total portfolio was primarily due
        to the five properties acquired and the one development property placed
        in service subsequent to July 1, 2002 described above.
      
      The
        increase in property expenses for the same store portfolio was primarily
        due to an approximate $1.0 million increase in repairs and maintenance,
        a $500,000 increase in property administrative expense and a $300,000
        increase in utilities expense, all of which were partially offset by an
        approximate $400,000 decrease in real estate taxes. Repairs and maintenance
        increased primarily due to higher contractual costs for janitorial and
        other contract services as well as the timing of certain projects. Property
        administrative expense increased primarily due to higher personnel costs
        from annual merit increases and higher property legal costs while utilities
        expense increased due to higher usage in 2003. Real estate taxes decreased
        due to the timing of final reassessments of some properties in 2002.
      
      **General
        and Administrative**
      
      General
        and administrative expenses as a percentage of total revenues were approximately
        4.0% for the three months ended September 30, 2003 as compared to approximately
        2.8% for the same period in 2002. The $1.4 million increase in general
        and administrative expenses was primarily related to higher personnel
        costs as a result of employee separation costs incurred in the current
        period, non-cash compensation expense associated with annual restricted
        stock grants issued in 2003 and annual merit increases as well as higher
        corporate governance costs in 2003.
      
      **Interest
        Expense**
      
      Interest
        expense increased approximately $1.6 million, or 7%, during the three
        months ended September 30, 2003 as compared to the same period in 2002.
        This increase was primarily due to increases in borrowings in 2002 for
        property acquisitions and lower capitalized interest in 2003. Capitalized
        interest was lower in 2003 as we stopped capitalizing interest on our
        6100 Center Drive development property in May 2003. The increases in interest
        expense were partially offset by lower effective interest rates in 2003.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|14                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

|**Depreciation
        and Amortization**
      
      Depreciation
        and amortization expense increased by approximately $4.2 million, or 16%,
        during the three months ended September 30, 2003 as compared to the same
        period in 2002, 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 subsequent to the second quarter of 2002.
      
      **Interest
        and Other Income**
      
      Interest
        and other income decreased by approximately $400,000 for the three months
        ended September 30, 2003 as compared to the same period in 2002, primarily
        due to the repayment by the borrower of a $13.7 million mortgage note
        receivable in the fourth quarter of 2002.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|15                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

|*Comparison
        of the nine months ended September 30, 2003 to the nine months ended September
        30, 2002
        (in thousands, except number of properties and percentages):*
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                               | Nine Months
      Ended
      September 30, |  |   |         |   |  
|---------------------------------------------- | ------------------------------------------- |  | - | ------- | - | -
|
|**Total
      Portfolio:**                     |                                             |  |   |         |   |  
|                                               |                                             | 
|**Revenue
      from rental operations:**      |                                             | 
|Scheduled
      cash rents                     |                                             |  | $ | 266,733 |   | $
|Straight-line
      rents                      |                                             |  |   | 601     |   |  
|Tenant
      reimbursements                    |                                             |  |   | 18,279  |   |  
|Parking,
      net of expense                  |                                             |  |   | 16,307  |   |  
|Other
      rental operations                  |                                             |  |   | 6,568   |   |  
|                                               |                                             |  |   |         |   |  
|Total
      revenue from rental operations     |                                             |  |   | 308,488 |   |  
|                                               |                                             | 
|**Property
      expenses:**                   |                                             | 
|Repairs
      and maintenance                  |                                             |  |   | 31,529  |   |  
|Utilities                                      |                                             |  |   | 26,557  |   |  
|Real
      estate taxes                        |                                             |  |   | 21,621  |   |  
|Insurance                                      |                                             |  |   | 6,286   |   |  
|Ground
      rent                              |                                             |  |   | 690     |   |  
|Administrative                                 |                                             |  |   | 12,689  |   |  
|                                               |                                             |  |   |         |   |  
|Total
      property expenses                  |                                             |  |   | 99,372  |   |  
|                                               |                                             |  |   |         |   |  
|Property
      Operating Results (1)           |                                             |  |   | 209,116 |   |  
|General
      and administrative               |                                             |  |   | 11,219  |   |  
|Interest                                       |                                             |  |   | 70,242  |   |  
|Depreciation
      and amortization            |                                             |  |   | 88,573  |   |  
|Interest
      and other income                |                                             |  |   | (631    | ) |  
|Gain
      on sale of operating properties     |                                             |  |   |        |   |  
|                                               |                                             |  |   |         |   |  
|Income
      from continuing operations before |                                             |  | $ | 39,713  |   | $
|minority
      interest                        |                                             | 
|                                               |                                             |  |   |         |   |  
|Discontinued
      operations                  |                                             |  | $ | 5,584   |   | $
|                                               |                                             |  |   |         |   |  
|Gain
      on sale of discontinued properties  |                                             |  | $ | 5,382   |   | $
|                                               |                                             |  |   |         |   |  
|                                               |                                             | 
|**Number
      of Properties:**                |                                             | 
|Acquired
      during period                   |                                             |  |   |        |   |  
|Disposed
      of during period                |                                             |  |   | (6      | ) |  
|In
      service at end of period              |                                             |  |   | 130     |   |  
|                                               |                                             | 
|**Net
      Rentable Square Feet:**            |                                             | 
|Acquired
      during period                   |                                             |  |   |        |   |  
|Disposed
      of during period                |                                             |  |   | (515    | ) |  
|In
      service at end of period              |                                             |  |   | 18,617  |   |  
|                                               |                                             | 
|**Same
      Store Portfolio(2):**             |                                             | 
|Revenue
      from rental operations           |                                             |  | $ | 293,954 |   | $
|Property
      expenses                        |                                             |  |   | 94,749  |   |  
|                                               |                                             |  |   |         |   |  
|                                               |                                             |  | $ | 199,205 |   | $
|                                               |                                             |  |   |         |   |  
|Straight-line
      rents                      |                                             |  | $ | 637     |   | $
|                                               |                                             |  |   |         |   |  
|Number
      of non-development properties     |                                             |  |   | 124     |   |  
|Average
      occupancy                        |                                             |  |   | 90.0    | % |  
|Net
      rentable square feet                 |                                             |  |   | 17,526  |   |  
|                                               |                                             |  |   |        

|   
|---
|(1)
|   
|   
|   
|   
|   
|16 
|   
|   

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

| |                                          |  |  | **Nine Months Ended September
      30,** |        
| | ---------------------------------------- |  |  | ----------------------------------------- | -------
| |                                          |  |  | **2003**                                  |        
| | Income
      from continuing operations  |  |  | $                                         | 39,713 
| | before
      gain on sale of properties  |  | 
| | and
      minority interest              |  | 
| | Add:                                     |  | 
| | General
      and administrative expense |  |  |                                           | 11,219 
| | Interest
      expense                   |  |  |                                           | 70,242 
| | Depreciation
      and amortization      |  |  |                                           | 88,573 
| | Less:                                    |  | 
| | Interest
      and other income          |  |  |                                           | (631   
| |                                          |  |  |                                          
| | Property
      Operating Results         |  |  | $                                         | 209,116
| |                                          |  |  |                                          

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

|**VARIANCES
        FOR RESULTS OF OPERATIONS**
      
      Our
        results of operations for the nine months ended September 30, 2003 compared
        to the same period in 2002 were primarily affected by our acquisitions,
        dispositions and development activities since January 1, 2002. In addition,
        our Property Operating Results from period to period were affected by
        our implementation of SFAS No. 144 Accounting for the Impairment
        or Disposal of Long-Lived Assets (SFAS 144), which resulted in the
        classification of the operating results of some of the properties sold
        since January 1, 2002 into discontinued operations.
      
      As
        a result of these changes within our portfolio of properties since the
        beginning of 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 store
        portfolio.
      
      **Revenue
        from Rental Operations**
      
      The
        increase in revenue from rental operations for the total portfolio was
        primarily due to the 803,000 square feet in acquisitions we made in August
        of 2002, consisting of four properties in San Diego County and one property
        in Los Angeles County and the placement in service of the 6080 Center
        Drive development project at the Howard Hughes Center in the fourth quarter
        of 2002, partially offset by a change in our method of estimating tenant
        reimbursements in 2003 to adjust for quarterly seasonality variations
        associated with recoverable operating expenses and the sale of a 64,000
        square foot property in March 2002, a 61,000 square foot property in April
        2002 and an 80,000 square foot property in May 2002, all of which were
        located in Los Angeles County and which, during the transition into SFAS
        144, were not classified as discontinued operations.
      
      The
        increase in revenue from rental operations for the same store portfolio
        was primarily due to an approximate $4.0 million increase in cash rents,
        a $2.6 million increase in tenant reimbursements and a $700,000 increase
        in parking income, all of which were partially offset by an approximate
        $2.9 million decrease in straight-line rents. The increase in cash rents
        was primarily related to scheduled rent increases in existing leases that
        were partially offset by the 1.0% decrease in average occupancy for these
        properties. The increase in tenant reimbursements was primarily due to
        increases in operating expenses, as discussed below. The increase in parking
        income was 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 in the same store portfolio.
      
      **Property
        Expenses**
      
      The
        increase in property expenses for the total portfolio was primarily due
        to the five properties acquired and the one development property placed
        in service subsequent to January 1, 2002 described above that were partially
        offset by the three properties sold that were not classified as discontinued
        operations in 2002.
      
      The
        increase in property expenses for the same store portfolio was primarily
        due to an approximate $2.8 million increase in repairs and maintenance,
        a $1.8 million increase in property administrative expense, a $500,000
        increase in utilities expense and a $400,000 increase in insurance costs,
        all of which were partially offset by a $800,000 decrease in real estate
        taxes. Repairs and maintenance increased primarily due to higher contractual
        costs for janitorial and other contract services as well as the timing
        of certain projects. Property administrative expense increased primarily
        due to higher personnel costs from annual merit increases, higher property
        legal expenses and costs associated with training programs implemented
        in 2003. Utilities expense increased due to higher usage in 2003. Insurance
        costs increased due to increases in industry-wide rates and premiums related
        to a 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 as a percentage of total revenues were approximately
        3.5% for the nine months ended September 30, 2003 as compared to approximately
        2.6% for the same period in 2002. The approximate $3.0 million increase
        in general and administrative expenses was primarily related to higher
        personnel costs as a result of employee separation costs incurred in the
        current period, non-cash compensation expense associated with annual restricted
        stock grants issued in 2003 and annual merit increases as well as higher
        corporate governance costs in 2003.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|17                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

|**Interest
        Expense**
      
      Interest
        expense increased approximately $4.9 million, or 7%, during the nine months
        ended September 30, 2003 as compared to the same period in 2002. This
        increase was primarily due to increases in borrowings in 2002 for property
        acquisitions and lower capitalized interest in 2003. Capitalized interest
        was lower in 2003 as we stopped capitalizing interest on our 6080 Center
        Drive development property in May 2002 and our 6100 Center Drive development
        property in May 2003. The increases in interest expense were partially
        offset by lower effective interest rates in 2003.
      
      **Depreciation
        and Amortization**
      
      Depreciation
        and amortization expense increased by approximately $9.5 million, or 12%,
        during the nine months ended September 30, 2003 as compared to the same
        period in 2002, 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 subsequent to January 1, 2002.
      
      **Interest
        and Other Income**
      
      Interest
        and other income decreased by approximately $945,000 for the nine months
        ended September 30, 2003 as compared to the same period in 2002, primarily
        due to the repayment by the borrower of a $13.7 million mortgage note
        receivable in the fourth quarter of 2002 and lower effective interest
        rates in 2003.
      
      **LIQUIDITY
        AND CAPITAL RESOURCES**
      
      **Cash
        Flows**
      
      Cash
        provided by operating activities decreased by approximately $12.3 million
        to $141.5 million for the nine months ended September 30, 2003 as compared
        to $153.8 million for the same period in 2002. This decrease was primarily
        due to a $6.7 million reduction in our outstanding trade receivable balance
        during the first nine months of 2002 as a result of collection efforts
        instituted in 2002 and increases in trade payables in 2002 as a result
        of timing of payments.
      
      Cash
        provided by investing activities increased by approximately $215.3 million
        to an inflow of $16.9 million for the nine months ended September 30,
        2003 as compared to an outflow of $198.4 million for the same period in
        2002. This increase was primarily due to the acquisition of five properties
        in the third quarter of 2002, the proceeds of one property sold in the
        first quarter of 2003, five properties sold in the second quarter of 2003
        and from lower development costs in 2003.
      
      Cash
        used in financing activities increased by approximately $158.1 million
        to an outflow of $144.2 million for the nine months ended September 30,
        2003 as compared to an inflow $13.9 million for the same period in 2002.
        This increase was primarily due to the proceeds from our term loan in
        the third quarter of 2002 and higher net repayments in 2003 on our unsecured
        lines of credit from proceeds generated from our capital recycling program.
      
      **Available
        Borrowings, Cash Balance and Capital Resources**
      
      We
        have an unsecured line of credit with a total commitment of $10 million
        from City National Bank. This line of credit accrues interest at the City
        National Bank Prime Rate less 0.875% and is scheduled to mature on August
        1, 2004. 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 September
        30, 2003, there was no outstanding balance on this line of credit and
        $10 million was available for additional borrowings.
      
      We
        also have an unsecured line of credit with a group of banks led by Wells
        Fargo. This line of credit provides for borrowings up to $310 million
        with an option to increase the amount to $350 million and bears interest
        at a rate ranging between LIBOR + 0.80% and LIBOR + 1.25% (including an
        annual facility fee ranging from 0.15% to 0.40% based on the aggregate
        amount of the line of credit) depending on our unsecured debt rating.
        This line of credit matures in April 2006. In addition, as long as we
        maintain 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. We also have 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 September 30, 2003, $150.0 million was outstanding
        on this line of credit and $160.0 million was available for additional
        borrowings.
      
      As
        of September 30, 2003, we had approximately $41.9 million in cash and
        cash equivalents, including $23.6 million in restricted cash. Restricted
        cash consisted of $13.7 million in interest bearing cash deposits required
        by five of our mortgage loans payable and $9.9 million in cash impound
        accounts for real estate taxes and insurance as required by several of
        our mortgage loans payable.
      
      We
        have entered into $150 million of forward-starting swaps during 2003 to
        effectively fix the 10-year Treasury rate at an average rate of approximately
        4.1% for borrowings that are anticipated to occur in 2004 to 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.
      
      In
        October and November of 2003, we also entered into reverse interest rate
        swap 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 swaps, we will receive interest at a fixed rate of 7.00% and pay
        interest at a variable rate averaging six-month LIBOR in arrears plus
        3.10%. These interest rate swaps mature at the same time the notes are
        due. Including these swaps, our current floating-rate debt ratio is approximately
        16%.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|18                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

|We
        expect to continue meeting our short-term liquidity and capital requirements
        generally through net cash provided by operating activities and proceeds
        from our unsecured lines of credit. We 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 and the issuance
        of long-term debt and equity securities.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|19                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

|**Capital
        Recycling Program**
      On
        March 11, 2003, we sold an approximate 140,000 square foot office property
        located in West Hollywood, California for a gross sales price of approximately
        $32.5 million.
      
      On
        April 11, 2003, we sold four properties totaling approximately 343,000
        square feet located in Riverside and San Bernardino counties for a gross
        sales price of approximately $43.4 million.
      
      On
        May 22, 2003, we sold an approximate 33,000 square foot office property
        located in Orange County for a gross sales price of approximately $5.0
        million.
      
      The
        net proceeds from these dispositions were used to reduce the outstanding
        balance on our Wells Fargo unsecured line of credit.
      
      **Debt
        Summary**
      
      Following
        is a summary of scheduled principal payments for our total debt outstanding
        as of September 30, 2003 (in thousands):
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | **Year** |            |  | **Amount** |  
| | -------- | ---------- |  | ---------- | -
| |          | 2003       |  |            | $
| |          | 2004       |  |            |  
| |          | 2005       |  |            |  
| |          | 2006       |  |            |  
| |          | 2007       |  |            |  
| |          | 2008       |  |            |  
| |          | 2009       |  |            |  
| |          | 2010       |  |            |  
| |          | 2011       |  |            |  
| |          | 2012       |  |            |  
| |          | Thereafter |  |            |  
| |          |           
| |          | Total      |  |            | $
| |          |           

|                                                                                                                    
|--------------------------------------------------------------------------------------------------------------------
|(1) Includes $150
      million outstanding on our Wells Fargo unsecured line of credit.                            
|                                                                                                                    
|                                                                                                                    
|Following
      is certain other information related to our outstanding indebtedness as
      of September 30, 2003:

|**Unsecured
      and Secured Debt:**
|-------------------------------------
|
|                                     
|                                     
|Unsecured
      Debt                 
|Secured
      Debt                   
|                                     
|Total
      Debt                     
|                                     

|                                       
|---------------------------------------
|**Floating
      and Fixed Rate Debt:**
|                                       

|                         |  |  | **Balance** |           | **Percent** |  | **Weighted
      Average
      Interest 
      Rate(1)** |   | **Weighted
      Average
      Maturity
      (in years)** |     
|------------------------ |  |  | ----------- | --------- | ----------- |  | -------------------------------------------------------- | - | ---------------------------------------------------------- | ----
|                         |  |  | (000s)     |           |             |  |                                                          |   |                                                            |     
|Floating
      Rate Debt |  |  | $           | 100,000   |             |  | 8                                                        | % |                                                            | 3.49
|Fixed
      Debt(2)      |  |  |             | 1,240,262 |             |  | 92                                                       |   |                                                            | 7.36
|                         |  |  |             |           |             |  |                                                          |  
|Total
      Debt         |  |  | $           | 1,340,262 |             |  | 100                                                      | % |                                                            | 7.07
|                         |  |  |             |           |             |  |                                                          |  
|                         |  |  |             |           |             |  |                                                          |  
|                        

|                                                                                                           
|-----------------------------------------------------------------------------------------------------------
|(1)                                                                                                        
|                                                                                                           
|(2)                                                                                                        
|                                                                                                           
|                                                                                                           
|Total
      interest incurred and the amount capitalized was as follows (unaudited and
      in thousands):
|                                                                                                           

|                              |  |  | **Three
      Months Ended September 30,** |        | **Nine
      Months Ended September 30,** |  
|----------------------------- |  |  | ------------------------------------------ | ------ | ----------------------------------------- | -
|                              |  |  | **2003**                                   |        | **2002**                                  |  
|Total
      interest incurred |  |  | $                                          | 24,129 |                                           | $
|Amount
      capitalized      |  |  |                                            | (176   | )                                         |  
|                              |  |  |                                            |        |                                           |  
|Amount
      expensed         |  |  | $                                          | 23,953 |                                           | $
|                              |  |  |                                            |        |                                           |  

|  
|--
|20
|  
|  

|**Senior
        Unsecured Notes Covenant Compliance Ratios**
      
      The
        following table summarizes our senior unsecured notes covenant compliance
        ratios as of September 30, 2003 (in thousands, except percentage and covenant
        ratio data):
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Net
      investment in real estate             |  |  | $ | 2,638,358 | 
| | ----------------------------------------------- |  |  | - | --------- | 
| | Cash
      and cash equivalents                 |  |  |   | 18,292    | 
| | Restricted
      Cash                           |  |  |   | 23,550    | 
| | Accumulated
      depreciation and amortization |  |  |   | 438,770   | 
| |                                                 | 
| | Total
      Assets                              |  |  | $ | 3,118,970 | 
| |                                                 | 
| | Total
      unencumbered assets                 |  |  | $ | 1,773,841 | 
| |                                                 | 
| | Mortgage
      loans payable                    |  |  | $ | 566,912   | 
| | Unsecured
      lines of credit                 |  |  |   | 150,000   | 
| | Unsecured
      term loan                       |  |  |   | 125,000   | 
| | Unsecured
      senior notes, net of discount   |  |  |   | 498,350   | 
| |                                                 | 
| | Total
      Outstanding Debt                    |  |  | $ | 1,340,262 | 
| |                                                 | 
| | Consolidated
      EBITDA(1), (2)               |  |  | $ | 275,512   | 
| |                                                 | 
| | Interest
      incurred(2)                      |  |  | $ | 96,981    | 
| | Loan
      fee amortization(2)                  |  |  |   | 3,926     | 
| |                                                 | 
| | Debt
      Service(2)                           |  |  | $ | 100,907   | 
| |                                                 | 
| |                                                 | 

| | Covenant
      Ratios                     |  |  | Test                    |  |  | Actual
| | ----------------------------------------- |  |  | ----------------------- |  |  | ------
| | Total
      Outstanding Debt/Total Assets |  |  | Less
      than 60%     |  |  | 43    
| | Secured
      Debt/Total Assets           |  |  | Less
      than 40%     |  |  | 18    
| | EBITDA
      to Debt Service              |  |  | Greater
      than 1.5  |  |  | 2.7   
| | Unencumbered
      Assets/Unsecured Debt  |  |  | Greater
      than 150% |  |  | 230   

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(1) | Earnings
      before interest, taxes, depreciation and amortization, or EBITDA, is a non-GAAP
      measurement. EBITDA is presented because we use this data and we believe
      this data is also used by investors as an indication of our ability to meet
      our debt service requirements. We consider that EBITDA, when combined with
      other measures, can be a useful measure to determine our ability to service
      debt and fund future capital expenditure requirements. However, due to the
      significance of the net income components excluded from EBITDA, it should
      not be considered an alternative to net income, cash flow from operations,
      or any other operating or liquidity performance measure prescribed by GAAP.                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | Because interest
      expense, taxes, gains or losses on sales of property, losses on valuations
      of derivatives, asset impairment losses, cumulative effect of a change in
      accounting principle, extraordinary items as defined by GAAP and depreciation
      and amortization costs, which are not reflected in EBITDA, have been, will
      be or may be incurred by us, investors are cautioned to reflect our ability
      to finance our investments at competitive borrowing costs, successfully
      maintain our REIT status, acquire and dispose of real estate properties
      at favorable prices to us and also reflect changes in value in our properties
      that result from use or changes in market conditions and the level of capital
      expenditures and leasing costs necessary to maintain the operating performance
      of our properties.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | We present the
      ratio of EBITDA to interest expense and the ratio of EBITDA to fixed charges
      because these ratios are used in several financial covenants contained in
      our principal loan agreements. We are required to satisfy these financial
      covenants each fiscal quarter. We believe this information is useful to
      investors because investors can use this data to (1) confirm that we are
      in compliance with the ratio covenants of our principal loan agreements,
      (2) evaluate our ability to service our debt, (3) evaluate our ability to
      fund future capital expenditures, and (4) compare our ratios to other real
      estate companies that present similar ratios, including other REITs. These
      ratios should not be considered as alternatives to the ratio of earnings
      to fixed charges.                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | The reader is
      cautioned that EBITDA, as calculated by us, may not be comparable to EBITDA
      as reported by other companies that do not define EBITDA exactly the same
      as we do.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | We calculate
      EBITDA as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

| |                                                                                                         |  |  | **Three
      Months Ended****** |       
| | ------------------------------------------------------------------------------------------------------- |  |  | -------------------------------- | ------
| |                                                                                                         |  |  | **9/30/03**                      |       
| | Income
      from continuing operations before gain on
        sale of properties and minority interest |  |  | $                                | 10,875
| | Add:                                                                                                    |  | 
| | Interest
      expense                                                                                  |  |  |                                  | 23,953
| | Depreciation
      and amortization                                                                     |  |  |                                  | 30,578
| | Discontinued
      operations                                                                           |  |  |                                  | 1,400 
| | Depreciation
      from discontinued operations                                                         |  |  |                                  | 527   
| |                                                                                                         |  |  |                                  |       
| | EBITDA                                                                                                  |  |  | $                                | 67,333
| |                                                                                                         |  |  |                                  |       

|    |                                                                       
|--- | ----------------------------------------------------------------------
|(2) | Represent
      amounts for the most recent four consecutive quarters.
|    |                                                                       
|21 
|   
|   

|                                                                                                                                                                                                                        
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|**Funds
        from Operations**
      
      The
        following table reflects the calculation of our funds from operations
        for the three and nine months ended September 30, 2003 and 2002 (in thousands):

|                                                   |  |  | **Three
      Months Ended 
      September 30,** |        | **Nine
      Months Ended 
      September 30,** |     
|-------------------------------------------------- |  |  | ------------------------------------------------- | ------ | ------------------------------------------------ | ----
|                                                   |  |  | **2003**                                          |        | **2002**                                         | ****
|**Funds
      From Operations:(1)**                |  |  |                                                   |        |                                                  |     
|Net income                                         |  |  | $                                                 | 12,253 |                                                  | $   
|Depreciation
      from discontinued operations    |  |  |                                                   | 527    |                                                  |     
|Gain
      on sale of discontinued properties      |  |  |                                                   |       |                                                  |     
|Depreciation
      and amortization                |  |  |                                                   | 30,578 |                                                  |     
|Gain
      on sale of operating properties         |  |  |                                                   |       |                                                  |     
|Distribution
      on Preferred Operating          |  | 
|Partnership
      Units                            |  |  |                                                   | (1,078 | )                                                |     
|                                                   |  |  |                                                   |        |                                                  |     
|Funds
      From Operations(2)                     |  |  | $                                                 | 42,280 |                                                  | $   
|                                                   |  |  |                                                   |        |                                                  |     
|Weighted
      average common shares and Operating |  | 
|Partnership
      units outstanding  Diluted      |  |  |                                                   | 65,740 |                                                  |     
|                                                   |  |  |                                                   |        |                                                  |     
|                                                   |  | 

|
|

|(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.                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | FFO is used
      by investors to compare our performance with other real estate companies.
      Other real estate companies may use different methods for calculating FFO
      and, accordingly, our FFO may not be comparable to other real estate companies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(2) | Includes $572,000
      and $315,000 in non-cash compensation expense for the three months ended
      September 30, 2003 and 2002, respectively and $1.4 million and $875,000
      in non-cash compensation expense for the nine months ended September 30,
      2003 and 2002, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|22 
|   
|   

|**Portfolio and
      Lease Information**
|-----------------------------------------

| |                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------
| | The
        following tables set forth certain information regarding our properties
        as of September 30, 2003.

|                                                          |  | 
|--------------------------------------------------------- |  | 
|**PORTFOLIO
      SUMMARY**As of September 30,
      2003

|                            |  |  |  |     |     |     | Property
      Operating Results(1) | 
|--------------------------- |  |  |  | --- | --- | --- | ----------------------------------- | 
|
|
|
|
|
|                            |  |  |  |     |     |     |                                     | 
|Los Angeles
      County    |  |  |  |     |     |     |                                     | 
|West(2)                     |  |  |  | 30  |     | 23  | %                                   | 
|North                       |  |  |  | 29  |     | 22  | %                                   | 
|South                       |  |  |  | 16  |     | 12  | %                                   | 
|                            |  |  |  |     |     |     |                                     | 
|Subtotal                    |  |  |  | 75  |     | 57  | %                                   | 
|Orange
      County         |  |  |  | 23  |     | 18  | %                                   | 
|San Diego
      County      |  |  |  | 25  |     | 19  | %                                   | 
|Ventura/Kern
      Counties |  |  |  | 6   |     | 5   | %                                   | 
|Riverside
      County(3)   |  |  |  | 1   |     | 1   | %                                   | 
|                            |  |  |  |     |     |     |                                     | 
|Total                       |  |  |  | 130 | (4) | 100 | %                                   | 
|                            |  |  |  |     |     |     |                                     | 
|                            |  |  |  |     |     |     |                                     | 

| |  | 
| |  | 

|(1) |  | Excludes the operating results of one property sold during
      the first quarter of 2003 and five properties sold during the second quarter
      of 2003 and four properties currently classified as held for disposition.
      The operating results for these properties are reported as part of discontinued
      operations in our quarterly operating results.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  |                                                                                                                                                                                                                                                                                                                                                                         
|(2) |  | Includes a
      retail property with approximately 37,000 net rentable square feet.                                                                                                                                                                                                                                                                                    
|    |  |                                                                                                                                                                                                                                                                                                                                                                         
|(3) |  | Consists of
      a retail property with approximately 133,000 net rentable square feet.                                                                                                                                                                                                                                                                                
|    |  |                                                                                                                                                                                                                                                                                                                                                                         
|(4) |  | Including one
      development property currently under lease-up, our total portfolio consists
      of 131 properties with 217 buildings and approximately 18.9 million rentable
      square feet.                                                                                                                                                                   

|**PORTFOLIO
      OCCUPANCY AND IN-PLACE RENTS**As of
      September 30, 2003****
|----------------------------------------------------------------------------------

|                                 |  |  |      |   |     |  |  |      |   |     | 
|-------------------------------- |  |  | ---- | - | --- |  |  | ---- | - | --- | 
|
|
|                                 |  |  |      |   |     |  |  |      |   |     | 
|                                 |  |  |      |   |     |  |  |      |   |     | 
|Los
      Angeles County         |  |  |      |   |     |  |  |      |   |     | 
|West                             |  |  | 92.8 | % | (3) |  |  | 95.2 | % | (3) | 
|North                            |  |  | 90.7 | % |     |  |  | 93.1 | % |     | 
|South                            |  |  | 86.2 | % |     |  |  | 87.9 | % |     | 
|Orange
      County              |  |  | 92.1 | % |     |  |  | 94.5 | % |     | 
|San Diego
      County           |  |  | 82.6 | % |     |  |  | 84.6 | % |     | 
|Ventura/Kern
      Counties      |  |  | 97.7 | % |     |  |  | 97.9 | % |     | 
|Riverside
      County           |  |  | 96.8 | % |     |  |  | 99.4 | % |     | 
|                                 |  |  |      |   |     |  |  |      |   |     | 
|**Total/Weighted
      Average** |  |  | 89.9 | % |     |  |  | 92.0 | % |     | 
|                                 |  |  |      |   |     |  |  |      |   |     | 

|    |  |                                                                                                                                                                                                                                                                                                                                                                       
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(1) |  | Based on monthly
      contractual base rent under existing leases as of September 30, 2003, 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 36
      properties and approximately 3.9 million square feet under triple net and
      modified gross leases.                                                                                                                                                                                                                                              
|    |  |                                                                                                                                                                                                                                                                                                                                                                       
|(3) |  | Excludes a 283,000
      net rentable square foot development property under lease-up that is currently
      61% leased and 9% occupied.                                                                                                                                                                                                                             

|  
|--
|23
|  
|  

|**TEN LARGEST TENANTS**As of September 30, 2003
|-----------------------------------------------

|                                        |  |    |  |  |     | 
|--------------------------------------- |  | -- |  |  | --- | 
|
|                                        |  |    |  |  |     | 
|State
      of California               |  | 24 |  |  | 46  | 
|Vivendi
      Universal                 |  | 2  |  |  | 79  | 
|University
      of Phoenix             |  | 6  |  |  | 14  | 
|Univision
      Television Group        |  | 1  |  |  | 217 | 
|Ceridian
      Corporation              |  | 2  |  |  | 77  | 
|SBC Communications,
      Inc           |  | 4  |  |  | 21  | 
|Atlantic
      Richfield                |  | 1  |  |  | 35  | 
|State
      Compensation Insurance Fund |  | 1  |  |  | 54  | 
|U.S.
      Government                   |  | 15 |  |  | 36  | 
|Haight,
      Brown & Bonesteel, LLP    |  | 1  |  |  | 94  | 
|                                        |  |    |  |  |     | 
|**Total/Weighted
      Average(2)**     |  | 57 |  |  | 63  | 
|                                        |  |    |  |  |     | 
|                                        |  |    |  |  |     | 

| | 
| | 

|(1) |  | Annualized
        base rent is calculated as monthly contractual base rent under existing
        leases as of September 30, 2003 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.                                                                                                                                                                                                                                                  

|**LEASING ACTIVITY**
|--------------------

|                                                             | Three
      Months Ended
      September 30, 2003 |  | Nine Months
      Ended
      September 30, 2003 |        
|------------------------------------------------------------ | ------------------------------------------------- |  | ------------------------------------------------ | -------
|                                                             |                                                   |  |                                                  |        
|Net
      Absorption (square feet)                           |                                                   |  |                                                  | 64,287 
|                                                             |                                                   |  |                                                  |        
|Gross
      New Leasing Activity (square feet)               |                                                   |  |                                                  | 474,336
|                                                             |                                                   |  |                                                  |        
|Retention
      Rate                                         |                                                   |  |                                                  | 65.9   
|                                                             |                                                   |  |                                                  |        
|Cash
      Rent Growth(1):                                   |                                                   | 
|Expiring
      Rate                                          |                                                   |  | $                                                | 22.76  
|                                                             |                                                   |  |                                                  |        
|New
      / Renewed Rate                                     |                                                   |  | $                                                | 20.88  
|                                                             |                                                   |  |                                                  |        
|Decrease                                                     |                                                   |  |                                                  | (8     
|                                                             |                                                   |  |                                                  |        
|GAAP
      Rent Growth(2):                                   |                                                   | 
|Expiring
      Rate                                          |                                                   |  | $                                                | 21.84  
|                                                             |                                                   |  |                                                  |        
|New
      / Renewed Rate                                     |                                                   |  | $                                                | 22.18  
|                                                             |                                                   |  |                                                  |        
|Increase                                                     |                                                   |  |                                                  | 2      
|                                                             |                                                   |  |                                                  |        
|Weighted
      Average Lease Term in Months                  |                                                   |  |                                                  | 47     
|                                                             |                                                   |  |                                                  |        
|Tenant
      Improvements and Commissions (per square foot): |                                                   | 
|New(3)                                                       |                                                   |  | $                                                | 23.79  
|                                                             |                                                   |  |                                                  |        
|Renewal                                                      |                                                   |  | $                                                | 8.79   
|                                                             |                                                   |  |                                                  |        
|Capital
      Expenditures (per square foot):                |                                                   | 
|Recurring                                                    |                                                   |  | $                                                | 0.02   
|                                                             |                                                   |  |                                                  |        
|Non-recurring                                                |                                                   |  | $                                                | 0.03   
|                                                             |                                                   |  |                                                  |        

| | 
| | 

|(1) |  | Represents
        the difference between initial market rents on new and renewed leases
        as compared to the expiring cash rents on the same space.                                                                                                                                                                                                                                                                           
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(2) |  | Represents estimated
      cash rent growth adjusted for straight-line rents.                                                                                                                                                                                                                                                                                                                                                        
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(3) |  | Excludes all
      newly developed or renovated square footage or square footage vacant at
      acquisition.                                                                                                                                                                                                                                                                                                                        
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(4) |  | Includes two
      tenants with approximately 140,000 net rentable square feet that extended
      their leases early in the first quarter of 2003 for an average of eight
      years that will not use their tenant improvement allowance until 2004. Excluding
      these two renewals, tenant improvements and commissions for renewal leases
      for the nine months ended September 30, 2003 averaged $9.38 per square foot.

|  
|--
|24
|  
|  

|**PORTFOLIO DIVERSIFICATION**As of September 30, 2003
|-----------------------------------------------------

|North
      American Industrial Classification System Description              | NAICS
      Code |  | Occupied
      Square 
      Feet |         |  | Percentage of
      Total
      Occupied
      Portfolio |               
|------------------------------------------------------------------------------ | ---------------- |  | --------------------------------- | ------- |  | -------------------------------------------------------- | --------------
|                                                                               |                  |  |                                   |         |  |                                                          |               
|                                                                               |                  |  |                                   |         |  |                                                          |               
|Professional,
      Scientific, and Technical Services                         |                  |  |                                   | 541     |  |                                                          | 4,464,027     
|Finance
      and Insurance                                                    |                  |  |                                   | 521-525 |  |                                                          | 2,624,913     
|Information                                                                    |                  |  |                                   | 511-519 |  |                                                          | 2,006,107     
|Manufacturing                                                                  |                  |  |                                   | 311-339 |  |                                                          | 1,366,133     
|Health
      Care and Social Assistance                                        |                  |  |                                   | 621-624 |  |                                                          | 1,098,471     
|Administrative
      and Support and Waste Management and Remediation Services |                  |  |                                   | 561-562 |  |                                                          | 671,986       
|Public
      Administration                                                    |                  |  |                                   | 921-928 |  |                                                          | 764,352       
|Educational
      Services                                                     |                  |  |                                   | 611     |  |                                                          | 739,895       
|Real
      Estate, Rental and Leasing                                          |                  |  |                                   | 531-533 |  |                                                          | 753,570       
|Wholesale
      Trade                                                          |                  |  |                                   | 423-425 |  |                                                          | 547,050       
|Transportation
      and Warehousing                                           |                  |  |                                   | 481-493 |  |                                                          | 389,353       
|Arts,
      Entertainment, and Recreation                                      |                  |  |                                   | 711-713 |  |                                                          | 332,879       
|Construction                                                                   |                  |  |                                   | 236-238 |  |                                                          | 250,951       
|Accommodation
      and Food Services                                          |                  |  |                                   | 721-722 |  |                                                          | 184,221       
|Other
      Services (except Public Administration)                            |                  |  |                                   | 811-814 |  |                                                          | 270,090       
|Retail
      Trade                                                             |                  |  |                                   | 441-454 |  |                                                          | 139,961       
|Mining                                                                         |                  |  |                                   | 211-213 |  |                                                          | 73,307        
|Management
      of Companies and Enterprises                                  |                  |  |                                   | 551     |  |                                                          | 21,970        
|Utilities                                                                      |                  |  |                                   | 221     |  |                                                          | 8,795         
|Agriculture,
      Forestry, Fishing and Hunting                               |                  |  |                                   | 111-115 |  |                                                          | 6,065         
|Other
       Uncategorized                                                    |                  |  |                                   |         |  |                                                          | 20,609        
|                                                                               |                  |  |                                   |         |  |                                                          |               
|**Square
      Feet Occupied by Tenants at 9/30/03**                           |                  |  |                                   |         |  |                                                          | **16,734,705**
|                                                                               |                  |  |                                   |         |  |                                                          |               

|  
|--
|25
|  
|  

|**LEASE EXPIRATIONS**
      As of September 30, 2003
|----------------------------------------------------

|                                        | Q4-03                    |   | 2004    |   | 2005 |           | 2006 |   | 2007      |   |   | 2008 and
      Thereafter |  
|--------------------------------------- | ------------------------ | - | ------- | - | ---- | --------- | ---- | - | --------- | - | - | ------------------------- | -
|
|
|West                                    | Expiring
      SF (1)    |   | 219,386 |   |      | 686,873   |      |   | 757,916   |   |   | 493,631                   |  
|                                        | % of
      Leased SF (2) |   | 1.28    | % |      | 4.01      | %    |   | 4.42      | % |   | 2.88                      | %
|                                        | Rent
      per SF (3)    | $ | 29.24   |   | $    | 27.36     |      | $ | 27.29     |   | $ | 29.26                     |  
|North                                   | Expiring
      SF (1)    |   | 113,631 |   |      | 651,651   |      |   | 414,295   |   |   | 396,269                   |  
|                                        | % of
      Leased SF (2) |   | 0.67    | % |      | 3.80      | %    |   | 2.42      | % |   | 2.32                      | %
|                                        | Rent
      per SF (3)    | $ | 22.97   |   | $    | 21.28     |      | $ | 23.12     |   | $ | 24.35                     |  
|South                                   | Expiring
      SF (1)    |   | 57,064  |   |      | 499,740   |      |   | 707,031   |   |   | 301,915                   |  
|                                        | % of
      Leased SF (2) |   | 0.33    | % |      | 2.92      | %    |   | 4.13      | % |   | 1.76                      | %
|                                        | Rent
      per SF (3)    | $ | 21.14   |   | $    | 20.74     |      | $ | 15.64     |   | $ | 22.79                     |  
|
|**Subtotal
      **                    |                          |   |         |   |      |           |      |   |           |   |   |                           |  
|**Los
      Angeles
           County** | Expiring
      SF (1)    |   | 390,081 |   |      | 1,838,264 |      |   | 1,879,242 |   |   | 1,191,815                 |  
|                                        | % of
      Leased SF (2) |   | 2.28    | % |      | 10.73     | %    |   | 10.97     | % |   | 6.96                      | %
|                                        | Rent
      per SF (3)    | $ | 26.33   |   | $    | 23.40     |      | $ | 21.99     |   | $ | 25.99                     |  
|**Orange
      County**                 | Expiring
      SF (1)    |   | 216,910 |   |      | 717,667   |      |   | 620,228   |   |   | 813,624                   |  
|                                        | % of
      Leased SF (2) |   | 1.27    | % |      | 4.19      | %    |   | 3.62      | % |   | 4.75                      | %
|                                        | Rent
      per SF (3)    | $ | 16.09   |   | $    | 16.34     |      | $ | 21.04     |   | $ | 19.65                     |  
|**San
      Diego County**              | Expiring
      SF (1)    |   | 100,278 |   |      | 483,487   |      |   | 544,940   |   |   | 344,506                   |  
|                                        | % of
      Leased SF (2) |   | 0.58    | % |      | 2.82      | %    |   | 3.18      | % |   | 2.01                      | %
|                                        | Rent
      per SF (3)    | $ | 18.82   |   | $    | 20.10     |      | $ | 18.69     |   | $ | 22.56                     |  
|**All
      Others**                    | Expiring
      SF (1)    |   | 22,688  |   |      | 221,151   |      |   | 152,560   |   |   | 208,206                   |  
|                                        | % of
      Leased SF (2) |   | 0.13    | % |      | 1.29      | %    |   | 0.89      | % |   | 1.21                      | %
|                                        | Rent
      per SF (3)    | $ | 20.68   |   | $    | 17.66     |      | $ | 19.94     |   | $ | 19.66                     |  
|
|**Total
      Portfolio**               | Expiring
      SF (1)    |   | 729,957 |   |      | 3,260,569 |      |   | 3,196,970 |   |   | 2,558,151                 |  
|
|                                        | % of
      Leased SF (2) |   | 4.26    | % |      | 19.03     | %    |   | 18.66     | % |   | 14.93                     | %
|
|                                        | Rent
      per SF (3)    | $ | 22.08   |   | $    | 20.97     |      | $ | 21.14     |   | $ | 23.00                     |  
|
|                                        |                          |   |         |   |      |          

| | 
| | 

|(1) |  | Represents
        the rentable square footage of expiring leases. For 2003, represents expirations
        from July 1, 2003 through December 31, 2003, not including month-to-month
        tenants.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  |                                                                                                                                                                                                       
|(2) |  | Percentage of
      total rentable square footage expiring during the period.                                                                                                                         
|    |  |                                                                                                                                                                                                       
|(3) |  | Represents annualized
      ending cash rents of expiring leases.                                                                                                                                     

|**QUARTERLY EXPIRATIONS FOR 2004**
      As of September 30, 2003
|-----------------------------------------------------------------

|                                         |                          |  |  | **Q1-04** |         | **Q2-04** |   | **Q3-04** |   | **Q4-04** |        
|---------------------------------------- | ------------------------ |  |  | --------- | ------- | --------- | - | --------- | - | --------- | -------
|                                         |                          |  |  |           |         |           |   |           |   |           |        
|**Los
      Angeles County:**            |                          |  |  |           |         |           |   |           |   |           |        
|West                                     | Expiring
      SF (1)    |  |  |           | 129,067 |           |   | 204,021   |   |           | 181,666
|                                         | % of Leased
      SF (2) |  |  |           | 0.76    | %         |   | 1.19      | % |           | 1.06   
|                                         | Rent per
      SF (3)    |  |  | $         | 25.47   |           | $ | 25.70     |   | $         | 27.96  
|North                                    | Expiring
      SF (1)    |  |  |           | 89,083  |           |   | 92,425    |   |           | 155,314
|                                         | % of Leased
      SF (2) |  |  |           | 0.52    | %         |   | 0.54      | % |           | 0.90   
|                                         | Rent per
      SF (3)    |  |  | $         | 20.57   |           | $ | 23.45     |   | $         | 23.18  
|South                                    | Expiring
      SF (1)    |  |  |           | 98,366  |           |   | 114,012   |   |           | 208,484
|                                         | % of Leased
      SF (2) |  |  |           | 0.57    | %         |   | 0.67      | % |           | 1.22   
|                                         | Rent per
      SF (3)    |  |  | $         | 26.27   |           | $ | 20.28     |   | $         | 18.24  
|                                         |                          |  |  |           |         |           |   |           |   |           |        
|**Subtotal
      **                     |                          |  |  |           |         |           |   |           |   |           |        
|**Los
      Angeles 
           County** | Expiring
      SF (1)    |  |  |           | 316,516 |           |   | 410,458   |   |           | 545,464
|                                         | % of Leased
      SF (2) |  |  |           | 1.85    | %         |   | 2.40      | % |           | 3.18   
|                                         | Rent per
      SF (3)    |  |  | $         | 24.34   |           | $ | 23.69     |   | $         | 22.88  
|**Orange
      County**                  | Expiring
      SF (1)    |  |  |           | 213,901 |           |   | 155,238   |   |           | 133,667
|                                         | % of Leased
      SF (2) |  |  |           | 1.25    | %         |   | 0.91      | % |           | 0.78   
|                                         | Rent per
      SF (3)    |  |  | $         | 14.32   |           | $ | 19.97     |   | $         | 19.75  
|**San
      Diego County**               | Expiring
      SF (1)    |  |  |           | 196,238 |           |   | 74,040    |   |           | 134,849
|                                         | % of Leased
      SF (2) |  |  |           | 1.14    | %         |   | 0.43      | % |           | 0.79   
|                                         | Rent per
      SF (3)    |  |  | $         | 19.95   |           | $ | 20.26     |   | $         | 24.21  
|**All
      Others**                     | Expiring
      SF (1)    |  |  |           | 31,903  |           |   | 10,257    |   |           | 82,951 
|                                         | % of Leased
      SF (2) |  |  |           | 0.19    | %         |   | 0.05      | % |           | 0.49   
|                                         | Rent per
      SF (3)    |  |  | $         | 20.17   |           | $ | 18.20     |   | $         | 15.85  
|                                         |                          |  |  |           |         |           |   |           |   |           |        
|**Total
      Portfolio**                | Expiring
      SF (1)    |  |  |           | 758,558 |           |   | 649,993   |   |           | 896,931
|                                         |                          |  |  |           |         |           |   |           |   |           |        
|                                         | % of Leased
      SF (2) |  |  |           | 4.43    | %         |   | 3.79      | % |           | 5.24   
|                                         |                          |  |  |           |         |           |   |           |   |           |        
|                                         | Rent per
      SF (3)    |  |  | $         | 20.20   |           | $ | 22.32     |   | $         | 21.96  
|                                         |                          |  |  |           |         |           |   |           |   |           |        

| | 
| | 

|(1) |  | Represents the
      square footage of expiring leases, not including month-to-month tenants.
|--- |  | ---------------------------------------------------------------------------------------------
|    |  |                                                                                              
|(2) |  | Percentage of
      total rentable square footage expiring during the period.                
|    |  |                                                                                              
|(3) |  | Represents annualized
      ending cash rents of expiring leases.                            

|  
|--
|26
|  
|  

|**DEVELOPMENT
      SUMMARY** 
|------------------------------
|As
      of September 30, 2003



|**Property**                          |  | **Square
        Feet** |  | **Costs
        Incurred
        To Date
        (in thousands)** |  | **Estimated
        Total Cost(1)
        (in thousands)** |  | **Percent
        Leased at
        10/28/03** |   | **Shell
        Completion
        Date** | **** | **Estimated
        Stabilization
        Date** |  | **Estimated
        Year 1
        Stabilized
        Cash Property****Operating****Results
        (in thousands)** |  | **Estimated
        Year 1
        Annual
        Cash Yield** |   | **Estimated
        Year 1
        Annual
        GAAP Yield(2)** |  
|------------------------------------- |  | ----------------------- |  | ----------------------------------------------------------------- |  | ---------------------------------------------------------- |  | ---------------------------------------------- | - | ----------------------------------------- | ---- | ------------------------------------------------ |  | -------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------- | - | ----------------------------------------------------------------- | -
|                                      |  |                         |  |                                                                   |  |                                                            |  |                                                |   |                                           |      |                                                  |  |                                                                                                                      |  |                                                                |   |                                                                   |  
|Howard
        Hughes
        Center: |  |                         |  |                                                                   |  |                                                            |  |                                                |   |                                           |      |                                                  |  |                                                                                                                      |  |                                                                |   |                                                                   |  
|6100
        Center
        Drive     |  | 283,000                 |  | $    
        71,659                                              |  | $ 
           81,500                                       |  | 61                                             | % | 2nd
        Qtr 
        2002             |      | 4th
        Qtr 
        2003                    |  | $ 
             6,450                                                                                                |  | 7.9                                                            | % | 8.9                                                               | %
|                                      |  |                         |  |                                                                   |  |                                                            |  |                                                |   |                                           |      |                                                  |  |                                                                                                                      |  |                                                                |   |                                                                   |  

|   
|---
|(1)
|   
|(2)

|In
        addition to the property above, we have preliminary architectural designs
        completed for additional build-to-suit projects at the Howard Hughes Center
        totaling approximately 425,000 net rentable square feet of office space.
        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 projects at the Howard Hughes Center until
        development plans and budgets are finalized and build-to-suit tenant leases
        are signed with terms allowing us to achieve yields commensurate with
        the projects development risk.
       In
        addition to our development at the Howard Hughes Center, we have completed
        preliminary designs and are marketing an approximate 170,000 square foot
        build-to-suit office building at our Long Beach Airport Business Park.
        Also, as part of our Gateway Towers acquisition in August 2002, we acquired
        a 5-acre developable land parcel in Torrance, California that we intend
        to market for a build-to-suit office 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 activities over the next 24 months through
        net cash provided by operating activities, proceeds from asset sales and
        proceeds from our unsecured lines of credit.
       **Item
        3. Quantitative and Qualitative Disclosure about Market Risk**
       Market
        risk is the exposure or loss resulting from changes in interest rates,
        foreign currency exchange rates, commodity prices and equity prices. The
        primary market risk to which we are exposed is interest rate risk, which
        is sensitive to many factors, including governmental monetary and tax
        policies, domestic and international economic and political considerations
        and other factors that are beyond our control.
       *Interest
        Rate Risk*
       In
        order to modify and manage the interest characteristics of our outstanding
        debt and limit the effects of interest rates on our operations, we may
        use a variety of financial instruments, including interest rate swaps,
        caps, floors and other interest rate exchange contracts. The use of these
        types of instruments to hedge our exposure to changes in interest rates
        carries additional risks such as counter-party credit risk. We do not
        enter into any transactions for speculative or trading purposes. During
        2002, we entered into interest rate swap agreements fixing the interest
        rates on variable debt with notional amounts totaling $175.0 million.
        During 2003, we entered into $150 million of forward-starting swap agreements
        fixing the 10-year Treasury rate for borrowings that are anticipated to
        occur in 2004 to refinance some of our scheduled debt maturities. In October
        and November of 2003, we also entered into reverse interest rate swap
        agreements to float $100 million of the fixed interest rate associated
        with the 7.00% senior unsecured notes due in November 2007.
       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 September
        30, 2003, a 1% increase in interest rates on our $100.0 million of floating
        rate debt would decrease annual future earnings and cash flows by approximately
        $1.0 million and would not have an impact on the fair value of the floating
        rate debt. Conversely, a 1% decrease in interest rates on our $100.0 million
        of floating rate debt would increase annual future earnings and cash flows
        by approximately $1.0 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 September 30, 2003 was 3.49%.
       Our
        fixed rate debt totaled $1,240.3 million as of September 30, 2003 with
        a weighted average interest rate of 7.36% and a total fair value of approximately
        $1,294.3 million. A 1% decrease in interest rates would increase the fair
        value of our fixed rate debt by approximately $36.1 million and would
        not have an impact on future earnings and cash flows. A 1% increase in
        interest rates would decrease the fair value of our fixed rated debt by
        approximately $33.8 million and would not have an impact on future earnings
        and cash flows.
       These
        amounts are determined by considering the impact of hypothetical interest
        rates on our borrowing cost. These analyses do not consider the effects
        of the reduced level of overall economic activity that could exist in
        that environment. Further, in the event of a change of this magnitude,
        we would consider taking actions to further mitigate our exposure to the
        change. Due to the uncertainty of the specific actions that would be taken
        and their possible effects, however, this sensitivity analysis assumes
        no changes in our capital structure.
      27
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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

|**Item
        4. Controls and Procedures**
       We
        maintain disclosure controls and procedures that are designed to ensure
        that information required to be disclosed in our Securities Exchange Act
        of 1934 reports is recorded, processed, summarized and reported within
        the time periods specified in the SECs rules and forms, and that
        such information is accumulated and communicated to our management, including
        our Chief Executive Officer and our Chief Financial Officer, as appropriate,
        to allow timely decisions regarding required disclosure. In designing
        and evaluating the disclosure controls and procedures, our management
        recognized that any controls and procedures, no matter how well designed
        and operated, can provide only reasonable assurance of achieving the desired
        control objectives, and our management necessarily was required to apply
        its judgment in evaluating the cost-benefit relationship of possible controls
        and procedures. Also, we have an investment in an unconsolidated entity.
        Because we do not control or manage this entity, our disclosure controls
        and procedures with respect to such an entity are necessarily substantially
        more limited than those we maintain with respect to our consolidated subsidiaries.
       As
        required by Securities Exchange Act Rule 13a15(b), we carried out
        an evaluation, under the supervision and with the participation of our
        management, including our Chief Executive Officer and Chief Financial
        Officer, of the effectiveness of the design and operation of our disclosure
        controls and procedures as of the end of the quarter covered by this report.
        Based on the foregoing, our Chief Executive Officer and Chief Financial
        Officer concluded that our disclosure controls and procedures were effective
        at the reasonable assurance level.
       There
        has been no change in our internal controls over financial reporting during
        our most recent fiscal quarter that has materially affected, or is reasonably
        likely to materially affect, our internal controls over financial reporting.
      28
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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

|**Part
      II**                                                                                                                                                                                                                                                                                                                                                                                                    | **OTHER
      INFORMATION**                                         
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                                     
|**Item 1.**                                                                                                                                                                                                                                                                                                                                                                                                          | **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. There were no material changes in our
      legal proceedings during the three months ended September 30, 2003.
|                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                                     
|**Item 2.**                                                                                                                                                                                                                                                                                                                                                                                                          | **Changes
      in Securities  None**                              
|                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                                     
|**Item 3.**                                                                                                                                                                                                                                                                                                                                                                                                          | **Defaults
      Upon Senior Securities  None**                    
|                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                                     
|**Item 4.**                                                                                                                                                                                                                                                                                                                                                                                                          | **Submission
      of Matters to a Vote of Security Holders  None**
|                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                                     
|**Item 5.**                                                                                                                                                                                                                                                                                                                                                                                                          | **Other
      Information  None**                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                                     
|**Item 6.**                                                                                                                                                                                                                                                                                                                                                                                                          | **Exhibits
      and Reports on Form 8K**                          
|                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                                     

| | **(a)** |  | **Exhibits** |  |                                                                                                                                                                                                                                                                                              
| | ------- |  | ------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |         |  |              |  |                                                                                                                                                                                                                                                                                              
| |         |  | 3.3          |  | 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.
| |         |  |              |  |                                                                                                                                                                                                                                                                                              
| |         |  | 31.1         |  | Officers certifications
      pursuant to Rule 13a****14(a) or Rule 15d****14(a).                                                                                                                                                                                                         
| |         |  |              |  |                                                                                                                                                                                                                                                                                              
| |         |  | 32.1         |  | Officers certifications
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(1)                                                                                                                                                                                                 
| |         |  |              |  |                                                                                                                                                                                                                                                                                              

| |  |    
| |  | ---
| |  | (1)

|   | **(b)** |  | **Reports on Form 8-K  None**
|-- | ------- |  | ------------------------------
|   |         |  |                               
|  
|29
|  
|  

|**SIGNATURES**                                                                                                                                                                                                
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                              
|Pursuant
      to the requirements of the Securities and Exchange Act of 1934, the registrant
      has duly caused this report to be signed on its behalf by the undersigned
      thereunto duly authorized.

|                              |     | ARDEN
      REALTY LIMITED PARTNERSHIP             
|----------------------------- | --- | ---------------------------------------------------
|                              |     | By: ARDEN REALTY,
      INC.                       
|                              |     | Its: General Partner                               
|                              |     |                                                    
|                              |     |                                                    
|Date: November 13,
      2003 | By: | /s/ Andrew J. Sobel                                
|                              |     |                                                    
|                              |     | Andrew J. Sobel                                    
|                              |     | Executive Vice President
       Strategic Planning
|                              |     | and Operations                                     
|                              |     |                                                    
|                              |     |                                                    
|Date: November 13,
      2003 | By: | /s/ Richard S. Davis                               
|                              |     |                                                    
|                              |     | Richard S. Davis                                   
|                              |     | Senior Vice President
      and                    
|                              |     | Chief Financial Officer                            
|                              |     |                                                    
|30                           
|                             
|