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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-K



|x |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
|- |  | ----------------------------------------------------------------------------------------



| |  | For the fiscal year ended December 31, 2002
| |  | -------------------------------------------



Commission File Number: 001-13243



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PAN PACIFIC RETAIL PROPERTIES, INC.

(Exact Name of Registrant as Specified in Its Charter)



|Maryland                 |  | 33-0752457                          
|------------------------ |  | ------------------------------------
|(State of Incorporation) |  | (I.R.S. Employer Identification No.)



|1631-B South Melrose Drive, Vista, California |  | 92083     
|--------------------------------------------- |  | ----------
|(Address of Principal Executive Offices)      |  | (zip code)



Registrants telephone number, including area code: (760) 727-1002

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



|Title of Each Class           |  | Name of Each Exchange on Which Registered
|----------------------------- |  | -----------------------------------------
|Common Stock, $0.01 par value |  | New York Stock Exchange                  



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



None



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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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not
contained herein, and will not be contained, to the best of Registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ̈



Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

Yes x No ̈.



The aggregate market value of
the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold as of the last business day of the Registrants most recently completed second fiscal quarter was
approximately $1,370,753,000.



As of March 7,
2003, the number of shares of the Registrants common stock outstanding was 39,778,851.



Pan Pacific Retail Properties, Inc.s Definitive Proxy Statement for the 2003 annual meeting of stockholders is incorporated by reference into Part III herein.





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DOCUMENTS
INCORPORATED BY REFERENCE



Part III of this
report on Form 10-K incorporates by reference information from our definitive proxy statement for our 2003 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the close of our fiscal year.



PAN PACIFIC RETAIL PROPERTIES, INC.

TABLE OF CONTENTS



PART I



|                |  |                                                                                       |  | Page
|--------------- |  | ------------------------------------------------------------------------------------- |  | ----
|               
|ITEM 1.         |  | BUSINESS                                                                              |  | 1   
|               
|ITEM 2.         |  | PROPERTIES                                                                            |  | 11  
|               
|ITEM 3.         |  | LEGAL PROCEEDINGS                                                                     |  | 32  
|               
|ITEM 4.         |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                   |  | 32  
|               
|PART II        
|               
|ITEM 5.         |  | MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                 |  | 32  
|               
|ITEM 6.         |  | SELECTED CONSOLIDATED FINANCIAL DATA                                                  |  | 33  
|               
|ITEM 7.         |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |  | 34  
|               
|ITEM 7A.        |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                            |  | 43  
|               
|ITEM 8.         |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                           |  | 43  
|               
|ITEM 9.         |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE  |  | 43  
|               
|PART III       
|               
|ITEM 10.        |  | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                    |  | 43  
|               
|ITEM 11.        |  | EXECUTIVE COMPENSATION                                                                |  | 44  
|               
|ITEM 12.        |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                        |  | 44  
|               
|ITEM 13.        |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                        |  | 44  
|               
|ITEM 14.        |  | CONTROLS AND PROCEDURES                                                               |  | 44  
|               
|PART IV        
|               
|ITEM 15.        |  | EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K                       |  | 45  
|               
|FINANCIAL PAGES |  | F-1                                                                                  



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PART I



ITEM 1. BUSINESS



We
are a self-administered and self-managed real estate investment trust, or REIT. Our portfolio consists principally of community and neighborhood shopping centers predominantly located in five key Western U.S. markets.



At December 31, 2002, 2001 and 2000 our total assets were
$1,424,240,000, $1,339,290,000 and $1,297,690,000, respectively. At December 31, 2002, we owned a portfolio comprised of 105 shopping center properties, of which 102 are located in the Western United States in our five key markets including 40 in
Northern California, 19 in Southern California, 19 in Oregon, 12 in Nevada and 12 in Washington. The portfolio includes approximately 15.9 million square feet of retail space, which was 97.5% leased to a diverse mix of 2,541 tenants.



On November 13, 2000, we acquired Western Properties Trust, a
California real estate investment trust. The transaction was a stock for stock exchange whereby Western common shares and units were exchanged for newly issued shares of our common stock and operating subsidiary units, based upon a fixed exchange
ratio of 0.62. In connection with this transaction, we assumed Westerns obligations under its senior notes and the indentures under which they were issued. As a result, we issued 10,754,776 shares of our common stock to holders of Western
common shares and were obligated to issue 911,934 shares of our common stock upon the exchange of operating subsidiary units held by limited partners of Pan Pacific (Kienows), L.P., formerly Western/Kienow, L.P., and Pan Pacific (Pinecreek), L.P.,
formerly Western/Pinecreek, L.P.



On January 17,
2003, we acquired Center Trust, Inc., a Maryland corporation. The transaction was a stock for stock exchange including assumption of debt whereby each share of Center Trust common stock was exchanged for 0.218 newly issued shares of our common
stock. As a result, we issued 6,084,748 shares of our common stock to Center Trust stockholders and are obligated to issue up to 284,263 shares of our common stock to limited partners of CT Operating Partnership, L.P. upon the exchange of operating
partnership units held by them.



We employed 111
people as of December 31, 2002, including ten executive officers and senior personnel, in the areas of administration, accounting services, property management, maintenance, leasing, acquisitions and business development. Our executive offices are
located at 1631-B South Melrose Drive, Vista, California, and our telephone number is (760) 727-1002. In addition to personnel located at our executive offices, we operate regional offices in Las Vegas, Nevada; Kent, Washington; Portland, Oregon;
and Sacramento, California. Each of our regional offices is responsible for property management, maintenance and leasing.



We have elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended. We believe that we
have been organized and have operated in such a manner so as to qualify for taxation as a REIT under the Internal Revenue Code, and we intend to continue to operate in such a manner, but we cannot assure you that we will continue to operate in such
a manner so as to qualify or remain qualified. Even if we qualify for taxation as a REIT, we may be subject to certain federal, state and local taxes on our revenue and properties.



You can access free of charge a copy of the periodic and current reports we file with the Securities and
Exchange Commission at www.sec.gov. Additionally, our periodic and current reports are made available on our website at www.pprp.com as soon as reasonably practicable after these reports are filed with the Securities and Exchange Commission.



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Business Strategies



Our business strategies involve three
fundamental practices:



| |  |  | Owning, operating, acquiring, expanding and developing shopping centers in select markets with strong economic and demographic characteristics in order to establish
and maintain a portfolio of real estate assets with stable income and the potential for long-term growth;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Developing local and regional market expertise through the hands-on participation of senior management in property operations and leasing in order to capitalize on
market trends, retailing trends and acquisition opportunities; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Establishing and maintaining a diversified and complementary tenant mix with an emphasis on tenants that provide day-to-day consumer necessities in order to provide
steady rental revenue.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Growth Strategies



Our principal growth strategy is to acquire
shopping centers that provide an opportunity to expand in current markets or which allow us to establish a presence in targeted markets with favorable economic and demographic characteristics.



| |  |  | We seek to acquire properties that can benefit from our hands-on management, that may require repositioning, redevelopment or renovation, or which can be purchased
at attractive capitalization rates and are consistent in terms of quality and location with our existing portfolio.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We seek to continue to utilize our in-depth market knowledge within our five key markets to pursue our strategy of opportunistic acquisitions of shopping centers for
long-term investment. We believe that significant opportunities continue to exist within these markets to acquire shopping center properties that are consistent with our existing portfolio in terms of quality of construction, positive neighborhood
demographics and location attributes and that provide attractive initial investment yields with potential for growth in cash flow.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We further believe we have certain competitive advantages which enhance our ability to identify and capitalize on acquisition opportunities, including: (i)
long-standing relationships with institutional and other owners of shopping center properties in our five key markets; (ii) fully integrated real estate operations which enable us to respond quickly to acquisition opportunities and to capitalize on
the resulting economies of scale; and (iii) access to capital as a public company.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We also seek to maximize the cash flow from our properties by continuing to enhance the operating performance of each property through our in-house leasing and property management programs.



We pursue:



| |  |  | the leasing of currently available space;
| | - |  | -----------------------------------------



| |  |  | the renewal or releasing of expiring leases at higher rental rates which we believe currently are available based on current market conditions and our recent leasing
activity; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | economies of scale in the management and leasing of properties that may be realized by focusing our acquisition activities within our five key markets.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------



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Financing Strategies



Our financing strategies are to maintain a
strong and flexible financial position by maintaining a prudent level of leverage, maintaining a pool of unencumbered assets and managing our variable interest rate exposure. We intend to finance future acquisitions with the most advantageous source
of capital available to us at the time of an acquisition, which may include the sale of common stock, preferred stock or debt securities through public offerings or private placements, the incurrence of additional indebtedness through secured or
unsecured borrowings and the issuance of operating units of a subsidiary in exchange for contributed property.



During 1998, we completed a secondary offering of 4,348,000 shares of common stock at $21.125 per share. The net proceeds to us were
approximately $85,913,000. The proceeds were used primarily to pay down our revolving credit facility. We also increased our revolving credit facility from $150,000,000 to $200,000,000 and reduced the top borrowing rate thereunder to LIBOR plus
1.375%.



During 1998, we formed Pan Pacific
(Portland), LLC with us as sole managing member. In the fourth quarter of 1998, Pan Pacific (Portland) acquired a portfolio of six shopping centers located in Oregon. In exchange for four properties which were contributed to Pan Pacific (Portland),
832,617 units were issued to certain non-managing members. Distributions are made to the non-managing members at a rate equal to the dividend distribution paid by us on a share of our common stock. A non-managing member can seek redemption of their
units after the first anniversary of their contribution of property. We may, at our option, redeem the units by either (i) issuing common stock at the rate of one share for each unit, or (ii) by paying cash for units based on a ten day average stock
price. During 2001, 400,000 units were redeemed for common stock.



During 1999, we completed a number of financing transactions. At the end of the second quarter, we closed a $35,000,000 financing transaction evidenced by notes, bearing interest at 7.2%, due in July 2006 and secured by
deeds of trust on two properties, Rainbow Promenade and San Dimas Marketplace. At the beginning of the third quarter, we closed a second financing transaction for $56,300,000 evidenced by notes, bearing interest at 7.1%, due in August 2009 and
secured by deeds of trust on four properties, Melrose Village Plaza, Monterey Plaza, Tustin Heights Shopping Center and Tanasbourne Village. The proceeds were used to pay down our unsecured credit facility.



In the third quarter of 1999, we formed Pan Pacific (Rancho
Las Palmas), LLC and Pan Pacific (RLP), Inc. in connection with the acquisition of the Rancho Las Palmas shopping center. We and Pan Pacific (RLP) are co-managing members of Pan Pacific (Rancho Las Palmas). As part of this acquisition, and in
exchange for an interest in the asset contributed to Pan Pacific (Rancho Las Palmas) by an individual, 314,587 non-managing member units were issued to this individual. Distributions are made to this non-managing member at a rate equal to dividend
distributions paid by us on a share of our common stock. The non-managing member can seek redemption of its units after the first anniversary. We, at our option, may redeem the units by either (i) issuing common stock at the rate of one share for
each unit, or (ii) by paying cash for units based on a ten day average stock price.



In December 1999, we extended our $200,000,000 revolving credit facility for an additional three years. In October 1999, we received an investment grade credit rating from Standard & Poors.
Because of this rating, the borrowing rate on our revolving credit facility was reduced to LIBOR plus 1.15%. In November 2000, we also received an investment grade credit rating from Moodys Investors Service.



In connection with our acquisition of Western in November
2000, we entered into new financing arrangements including a $300,000,000 revolving credit facility and a $100,000,000 term credit loan. The revolving credit facility matures in January 2004 and the term credit loan was repaid in full in July 2001.
Our borrowing rate under the revolving credit facility is LIBOR plus 1.10% while the borrowing rate under the term credit loan was LIBOR plus 1.20%.



In connection with our acquisition of Western, we assumed Westerns obligations including its Unsecured Senior Notes in an aggregate
principal amount of $50,000,000 bearing interest at 7.875% due 2004, $25,000,000 bearing interest at 7.10% due 2006, $25,000,000 bearing interest at 7.20% due 2008 and $25,000,000 bearing interest at 7.30% due 2010, and the indentures under which
these notes were issued. We also assumed a mortgage note bearing interest at 7.61% due May 2004 in the principal amount of $9,628,000, secured by a deed of trust on Lakewood Village.



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In April 2001,
we issued $150,000,000 in aggregate principal amount of 7.95% senior notes due April 2011. We sold these notes at 99.225% of the principal amount. We used the net proceeds from the offering to pay off our term credit loan and to repay borrowings
under our revolving credit facility.



We are the
managing member of a joint venture, created for the purpose of developing Olympic Place in Walnut Creek, California. The joint venture entered into a construction loan agreement in December 2001 to borrow up to $25,800,000 to fund the development.
At December 31, 2002 and December 31, 2001, $15,601,000 and $0, respectively, had been drawn on the construction loan. At our option, amounts borrowed under the construction loan bear interest at either LIBOR plus 1.95% or a reference rate. The loan
is secured by the property and is guaranteed by us. We consolidate this joint venture.



In June 2002, we issued $55,000,000 of 5.75% senior notes due June 2007. We sold these notes at 99.458% of the principal amount and used the net proceeds from the offering to repay borrowings under our
revolving credit facility. In December 2002, we issued $100,000,000 of 6.125% senior notes due January 2013. We sold these notes at par value and used the net proceeds from the offering to repay borrowings under our revolving credit facility.



We are a general partner of a joint venture,
which owns a medical office building in Encinitas, California. During the second quarter of 2002, the joint venture entered into a loan agreement for $18,000,000, bearing interest at 7%, to purchase the building on the property. At December 31,
2002, the balance of the loan was $17,901,472. The loan is secured by the property and is not guaranteed by us. We account for this joint venture under the equity method. This unconsolidated debt is one of two off-balance-sheet financings to which
we are a party.



On September 30, 2002, Plaza
Escuela Holding, Co., LLC completed a financing transaction with an initial funding of $38,087,000, bearing interest at 6.8%, wherein we received a partial payoff of $36,754,000 on our note receivable of $44,349,000 on the Plaza Escuela property in
Walnut Creek, California. The remaining balance of our note of $7,595,000 was converted to a 49% non-managing member interest in Plaza Escuela Holding Co., LLC, the entity that owns the property. Our equity position will earn a preferred return of
12%. In addition, we are entitled to receive 25% of the operating cash flows from the property through November 2008. Proceeds from the note repayment and cash flow participation will be used primarily to repay borrowings under our revolving credit
facility. At December 31, 2002, the balance of the loan was $41,936,000. The loan is secured by the property and is not guaranteed by us. We account for this joint venture under the equity method. This unconsolidated debt is one of two
off-balance-sheet financings to which we are a party.



Dispositions



We dispose
of non-strategic assets if we can obtain attractive terms on the sale and redeploy the proceeds into acquisitions in our core markets with growth opportunities.



During 1999, we disposed of three non-strategic assets. We took back a portion of the proceeds on one sale in
the form of a note receivable secured by a deed of trust. The balance of the net proceeds, as well as the net proceeds from another sale, received in cash, were used to repay indebtedness under our revolving credit facility. The net proceeds from
the other sale were placed with an exchanger and used to acquire another strategic shopping center property in a like-kind exchange transaction pursuant to Section 1031 of the Internal Revenue Code.



In December 2000, we disposed of a single-tenant non-strategic
asset located in Santa Cruz, California. The asset was a part of the Western portfolio and was sold for an amount equal to its net book value. We took back a portion of the proceeds as a note receivable secured by a deed of trust. The balance of the
net proceeds, received in cash, was placed with an exchange accommodator and used to acquire a shopping center property in a like-kind exchange transaction pursuant to Section 1031 of the Internal Revenue Code.



During 2001, we disposed of a non-strategic shopping center,
five single tenant assets, a 30% interest we owned in a shopping center and four parcels of land. We took back a portion of the proceeds as a note receivable secured by a deed of trust on the sale of the non-strategic shopping center. The balance of
the net proceeds on this sale, received in cash, was used to repay indebtedness under our revolving credit facility. The net proceeds on the sale of one of the single tenant assets was also received in cash and was used to repay indebtedness under
our revolving credit facility. The net proceeds on the remaining sales were placed with an exchange accommodator and used to acquire other strategic shopping center properties in like-kind exchange transactions pursuant to Section 1031 of the
Internal Revenue Code.



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During 2002,
we disposed of seven shopping centers, two single tenant assets and one parcel of land. We took back a portion of the proceeds on these sales in the form of three notes receivable secured by deeds of trust. The balance of the net proceeds on the
sales, received in cash, were placed with an exchange accommodator and used to acquire other strategic shopping center properties in like-kind exchange transactions pursuant to Section 1031 of the Internal Revenue Code.



We may dispose of certain non-strategic assets over the next
year. However, if after taking into account the tax consequences of any disposition, including our continued ability to qualify as a REIT, we determine that a disposition would not be in our best interest, we will not dispose of such asset.



Certain Cautionary Statements



Real Estate Investment Associated Risks. Real
property investments are subject to varying degrees of risk. The yields available from equity investments in real estate depend in large part on the amount of income generated and expenses incurred. If our properties do not generate revenue
sufficient to meet operating expenses, including debt service, tenant improvements, leasing commissions and other capital expenditures, we may have to borrow additional amounts to cover fixed costs. This would adversely affect our cash flow and
ability to service our debt and make distributions to our stockholders.



Our revenue and the value of our properties may be adversely affected by a number of factors, including:



| |  |  | the national economic climate;
| | - |  | ------------------------------



| |  |  | the local economic climate;
| | - |  | ---------------------------



| |  |  | local real estate conditions;
| | - |  | -----------------------------



| |  |  | changes in retail expenditures by consumers;
| | - |  | --------------------------------------------



| |  |  | the perceptions of prospective tenants of the attractiveness of the properties;
| | - |  | -------------------------------------------------------------------------------



| |  |  | the success of our anchor tenants;
| | - |  | ----------------------------------



| |  |  | our ability to manage and maintain the properties and secure adequate insurance; and
| | - |  | ------------------------------------------------------------------------------------



| |  |  | increases in operating costs (including real estate taxes, insurance and utilities).
| | - |  | ------------------------------------------------------------------------------------



In addition, real estate values and income from properties are also affected by factors such as applicable
laws, including tax laws, interest rate levels and the availability of financing.



Our Potential Inability to Retain Tenants and Relet Space. We will be subject to the risks that, upon expiration or termination, leases may not be renewed, the space may not be relet or
the terms of renewal or reletting (including the cost of required renovations) may be less favorable than current lease terms. Leases covering a total of approximately 6.5% and 50.0% of the leased gross leasable area, or GLA, of our properties will
expire through the end of 2003 and 2007, respectively. We budget for renovation and reletting expenses, which takes into consideration our view of both the current and expected market conditions in the geographic regions in which our properties are
located, but budgeted amounts may be insufficient to cover these costs. Our cash flow and ability to make expected distributions to stockholders could be adversely affected, if:



| |  |  | we are unable to promptly relet or renew leases for all or a substantial portion of this space;
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | the rental rates upon renewal or reletting are significantly lower than expected; or
| | - |  | ------------------------------------------------------------------------------------



| |  |  | our budgeted amounts for these purposes prove inadequate.
| | - |  | ---------------------------------------------------------



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We may
not realize all of the anticipated benefits of the merger.The success of our acquisition of Center Trust will depend, in part, on our ability to realize the anticipated cost savings, operating efficiencies and other synergies from
integrating the properties of Center Trust into our portfolio. Our success in realizing these benefits and the timing of this realization depend upon our ability to integrate the operations of Center Trust with our own in an efficient manner. The
integration of two independent companies is a complex, costly and time-consuming process. Unforeseen difficulties in integrating these portfolios may cause disruption of, or a loss of momentum in, the activities of our business that could affect its
ability to achieve expected cost savings, operating efficiencies and other synergies in a manner that could materially harm our financial performance.



The difficulties of combining the operations of the companies include, among others:



| |  |  | following the merger, we may not achieve expected cost savings and operating efficiencies, such as the elimination of redundant administrative costs and property
management costs;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the diversion of management attention to the integration of the operations of Center Trust could have an adverse effect on our revenues, expenses and operating
results;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Center Trust portfolio may not perform as well as we anticipate due to various factors, including changes in macro-economic conditions and the demand for retail
space in Southern California and other West Coast markets in which Center Trust has a significant presence; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we may not effectively integrate Center Trusts operations.
| | - |  | -----------------------------------------------------------



We cannot guarantee that the integration of Center Trust will result in the realization of the full benefits
we had anticipated.



Dependence on Market
Conditions in the Geographic Regions. We have 40 properties with total GLA of 5,547,000 square feet located in Northern California, 19 properties with total GLA of 3,052,000 square feet located in Southern California, 19 properties with
total GLA of 2,710,000 square feet located in Oregon, 12 properties with total GLA of 2,093,000 square feet located in Nevada and 12 properties with total GLA of 2,092,000 square feet located in Washington. To the extent that general economic or
other relevant conditions in these regions decline and result in a decrease in consumer demand in these regions, the results of our operations may be adversely affected.



Potential Illiquidity of Real Estate. Equity real estate investments are relatively illiquid.
This illiquidity limits our ability to adjust our portfolio promptly in response to changes in economic or other conditions. In addition, the Internal Revenue Code limits a REITs ability to sell properties held for fewer than four years, which
may limit our ability to sell our properties at optimal times and for the highest price.



Competition with Other Developers and Real Estate Companies. There are numerous commercial developers and real estate companies that compete with us in seeking tenants for properties,
properties for acquisition and land for development. There are numerous shopping facilities that compete with our properties in attracting retailers to lease space. In addition, retailers at our properties face increasing competition from outlet
stores, discount shopping clubs, and other forms of marketing of goods, such as direct mail, internet marketing and telemarketing. This competition may reduce properties available for acquisition or development, reduce percentage rents payable to us
and may, through the introduction of competition, contribute to lease defaults or insolvency of tenants. Thus, competition could materially affect our ability to generate net income, service our debt and make distributions to our stockholders.



Cost of Compliance with Changes in
Laws. Because increases in income, service or transfer taxes are generally not passed through to tenants under leases, these increases may adversely affect our cash flow and our ability to service our debt and make distributions to
stockholders. Our properties are also subject to various federal, state and local regulatory requirements, such as requirements of the Americans with Disabilities Act of 1990 and state and local fire and life safety requirements. Failure to comply
with these requirements could result in the imposition of fines by governmental authorities or awards of damages to private litigants. In addition, these requirements may not be changed and new requirements may be imposed that would require
significant unanticipated expenditures by us. Any of these events could adversely affect our cash flow and expected distributions.



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Reliance
on Certain Tenants and Anchors. Our income and funds from operations could be adversely affected in the event of the bankruptcy or insolvency, or a downturn in the business, of any anchor store, or if any anchor tenant does not renew its
lease when it expires. If tenant sales at our properties were to decline, tenants might be unable to pay their rent or other occupancy costs. In the event of default by a tenant, delays and costs in enforcing our rights could be experienced. In
addition, the closing of one or more anchor-occupied stores or lease termination by one or more anchor tenants of a shopping center, whose leases may permit termination, could adversely impact that property and result in lease terminations or
reductions in rent by other tenants, whose leases may permit termination or rent reduction in those circumstances. This could adversely affect our ability to re-lease the space that is vacated. Each of these developments could adversely affect our
funds from operations and our ability to service our debt and make expected distributions to stockholders.



Lack of Operating History With Respect to the Recent Acquisition and Development of Properties. At December 31, 2002, we
owned and operated 105 properties, consisting of approximately 15.9 million square feet of space. Fifty-three of our properties were acquired during 2000, primarily through the acquisition of Western. In 2002, we acquired an additional 6 properties.
These properties, together with the 32 properties which we acquired in connection with our acquisition of Center Trust, may have characteristics or deficiencies currently unknown to us that affect their value or revenue potential. It is also
possible that the operating performance of these properties may decline under our management. As we acquire additional properties, we will be subject to risks associated with managing new properties, including lease-up and tenant retention. In
addition, our ability to manage our growth effectively will require us to successfully integrate our new acquisitions into our existing management structure. We may not succeed with this integration or effectively manage additional properties. Also,
newly acquired properties may not perform as expected.



Dependence on Key Management Personnel. Our executive officers have substantial experience in owning, operating, managing, acquiring and developing shopping centers. We believe that our success will depend in large part
upon their efforts. If any key management personnel do not remain in our employ, we could be materially adversely affected.



Debt Financing and Existing Debt Maturities. We are subject to risks normally associated with debt financing, including:



| |  |  | the risk that our cash flow will be insufficient to meet required payments of principal and interest;
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | the risk that existing indebtedness on our properties (which in all cases will not have been fully amortized at maturity) will not be able to be refinanced; or
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the terms of any refinancing will not be as favorable as the terms of existing indebtedness.
| | - |  | --------------------------------------------------------------------------------------------



At December 31, 2002, we had outstanding indebtedness of
approximately $734,218,000. Since we anticipate that only a small portion of the principal of the indebtedness will be repaid prior to maturity, and that we will not have funds on hand sufficient to repay the balance of the indebtedness in full at
maturity, it will be necessary for us to refinance the debt either through additional borrowings or equity or debt offerings. If principal payments due at maturity cannot be refinanced, extended or paid with proceeds of other capital transactions,
we expect that our cash flow will not be sufficient in all years to pay distributions at expected levels and to repay all of this maturing debt. Also, if prevailing interest rates or other factors at the time of refinancing (such as the reluctance
of lenders to make commercial real estate loans) result in higher interest rates upon refinancing, the interest expense relating to refinanced indebtedness would increase. This could adversely affect our cash flow and our ability to make expected
distributions to our stockholders. In addition, if we are unable to refinance the indebtedness on acceptable terms, we might dispose of properties upon disadvantageous terms, which might result in losses to us and might adversely affect funds
available for distribution to stockholders.



Potential Defaults Under Mortgage Financing. At December 31, 2002, we had approximately $239,541,000 of mortgage financing. The payment and other obligations under certain of the mortgage financing is secured by
cross-collateralized and cross-defaulted first mortgage liens in the aggregate amount of approximately $53,700,000 on four properties, $51,441,000 on four other properties, $17,058,000 on three properties and $33,064,000 on two properties. If we are
unable to meet our obligations under the mortgage financing, the properties securing that debt could be foreclosed upon. This could have a material adverse effect on us and our ability to make expected distributions and could threaten our continued
viability.



7



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Rising
Interest Rates and Variable-Rate Debt. Advances under our revolving credit agreement bear interest at a variable-rate. In addition, we may incur other variable-rate indebtedness in the future. Increases in interest rates on that indebtedness
would increase our interest expense, which could adversely affect our cash flow and our ability to service our debt and pay expected distributions to stockholders.



Tax Liabilities as a Consequence of Failure to Qualify as a REIT. Commencing with our taxable
year ended December 31, 1997, we believe that we have qualified as a REIT under the Internal Revenue Code. Qualification as a REIT involves the satisfaction of numerous requirements (some on an annual and some on a quarterly basis) established under
highly technical and complex Internal Revenue Code provisions for which there are only limited judicial and administrative interpretations. These requirements involve the determination of various facts and circumstances not entirely within our
control. Legislation, new regulations, administrative interpretations or court decisions may adversely affect, possibly retroactively, our ability to qualify as a REIT or the federal income tax consequences of such qualification.



If we fail to qualify as a REIT in any taxable year, among
other things:



| |  |  | we will not be allowed a deduction for distributions to stockholders in computing our taxable income;
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | we will be subject to federal income tax, including any applicable alternative minimum tax, on our taxable income at regular corporate rates;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we will be subject to increased state and local taxes;
| | - |  | ------------------------------------------------------



| |  |  | we will be disqualified from treatment as a real estate investment trust for the four taxable years following the year during which we lost our qualification (unless
entitled to relief under certain statutory provisions);
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | all distributions to stockholders would be subject to tax as ordinary income to the extent of our current and accumulated earnings and profits; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we would not be required to make distributions to stockholders.
| | - |  | ---------------------------------------------------------------



As a result of these factors, our failure to qualify as a real estate investment trust also could impair our
ability to expand our business and raise capital, could substantially reduce the funds available for distribution to our stockholders and could reduce the trading price of our common stock.



Effect of Distribution Requirements. To maintain
our status as a REIT for federal income tax purposes, we generally are required to distribute to our stockholders at least 90% of our REIT taxable income determined without regard to the dividends paid deduction and by excluding net capital gains
each year.



We also are subject to tax at regular
corporate rates to the extent that we distribute less than 100% of our REIT taxable income (including net capital gains) each year.



In addition, we are subject to a 4% nondeductible excise tax on the amount, if any, by which certain distributions we pay, with respect to
any calendar year, are less than the sum of 85% of our ordinary income for that calendar year, 95% of our capital gain net income for the calendar year, and any amount of that income that was not distributed in prior years.



We intend to continue to make distributions to our
stockholders to comply with the distribution requirements of the Code and to reduce exposure to federal income taxes and the nondeductible excise tax. Differences in timing between the receipt of income and the payment of expenses in arriving at
taxable income and the effect of required debt amortization payments could require us to borrow funds on a short-term basis to meet the distribution requirements that are necessary to achieve the tax benefits associated with qualifying as a REIT.



Acquisition and Development Investments
May Not Perform as Expected. We intend to continue acquiring, developing and redeveloping shopping center properties. Acquisitions of retail properties entail risks that investments will fail to perform as expected. Estimates of development
costs and costs of improvements, to bring an acquired property up to standards established for the market position intended for that property, may prove inaccurate.



8



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We intend to
expand or renovate our properties from time to time. Expansion and renovation projects generally require expenditure of capital as well as various government and other approvals, which we may not receive. While our policies with respect to expansion
and renovation activities are intended to limit some of the risks otherwise associated with such activities, we will still incur certain risks, including expenditures of funds on, and devotion of managements time to, projects that may not be
completed.



We anticipate that future
acquisitions, development and renovations will be financed through a combination of advances under our revolving credit agreement and other forms of secured or unsecured financing. If new developments are financed through construction loans, there
is a risk that, upon completion of construction, permanent financing for newly developed properties may not be available or may be available only on disadvantageous terms.



It is possible that we will expand our business to new geographic markets in the future. We will not
initially possess the same level of familiarity with new markets outside of the geographic areas in which our properties are currently located. This could adversely affect our ability to acquire, develop, manage or lease properties in any new
localities.



We also intend to develop and
construct shopping centers in accordance with our business and growth strategies. Risks associated with our development and construction activities may include:



| |  |  | abandonment of development opportunities;
| | - |  | -----------------------------------------



| |  |  | construction costs of a property exceeding original estimates, possibly making the property uneconomical;
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | occupancy rates and rents at a newly completed property may not be sufficient to make the property profitable;
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | financing may not be available on favorable terms for development of a property; and
| | - |  | ------------------------------------------------------------------------------------



| |  |  | construction and lease-up may not be completed on schedule, resulting in increased debt service expense and construction costs.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



In addition, new development activities, regardless of whether
they would ultimately be successful, typically require a substantial portion of managements time and attention. Development activities would also be subject to risks relating to our inability to obtain, or delays in obtaining, all necessary
zoning, land use, building, occupancy, and other required governmental permits and authorizations.



Our Properties May Be Subject to Unknown Environmental Liabilities. We are required to comply with federal, state and local
laws, ordinances and regulations regarding health and safety and the protection of the environment. Under various federal, state and local environmental laws, ordinances and regulations, a current or previous owner or operator of real estate may be
required to investigate and clean up hazardous or toxic substances or petroleum product releases at the property. A current or previous owner or operator may also be held liable to a governmental entity or to third parties for property damage and
for investigation and clean-up costs incurred by these parties in connection with any such contamination. These laws typically impose clean-up responsibility and liability without regard to fault or whether the owner knew of or caused the presence
of the contaminants. Liability under these laws may still be imposed even when the contaminants were associated with previous owners or operators and the liability under these laws has been interpreted to be joint and several, unless the harm is
divisible and there is a reasonable basis for allocation of responsibility. The costs of investigation, remediation or removal of these substances may be substantial, and the presence of these substances, or the failure to properly remediate the
contamination on the property, may adversely affect the owners ability to sell or rent the property or to borrow using the property as collateral. The presence of contamination at a property can impair the value of the property even if the
contamination is migrating onto the property from an adjoining property.



A current or previous owner or operator who arranges for the disposal or treatment of hazardous or toxic substances at a disposal or treatment facility may be held liable for the costs of removal or remediation of a release
of hazardous or toxic substances at the disposal or treatment facility if a leak or contamination is discovered at the disposal or treatment facility, whether or not the facility is owned or operated by them. In addition, some environmental laws
create a lien on the contaminated site in favor of the government for damages and costs incurred



9



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in connection with the
contamination. The remedy to remediate contamination may include deed restriction or institutional control which can restrict how the property may be used. Finally, the owner of a site may be subject to common law claims by third parties based on
damages and costs resulting from environmental contamination stemming from the site, including toxic tort claims.



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



The presence of hazardous substances on or under a property
may adversely affect our ability to sell that property and we may incur substantial remediation costs. Although our leases generally require our tenants to operate in compliance with all applicable federal, state and local laws, ordinance and
regulations and to indemnify us against any environmental liabilities arising from the tenants activities on the property, we could nevertheless be subject to strict liability by virtue of our ownership interest, and there can be no assurance
that our tenants would satisfy their indemnification obligations under the leases. The discovery of environmental liabilities attached to our properties could have a material adverse effect on our results of operations or financial condition or our
ability to make distributions to stockholders.



Shopping centers may have businesses such as dry cleaners and auto repair or servicing businesses that handle, store and generate small quantities of hazardous wastes. The operation may result in spills or releases that may result in
soil or groundwater contamination. Independent environmental consultants have conducted or updated Phase I Environmental Site Assessments at our properties in conformance with the scope and limitations of the American Society of Testing and
Materials Practice E1527, Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process. These Phase I Assessments have included, among other things, a visual inspection of our properties and the surrounding
area and a review of relevant state, federal and historical documents. When recommended in the Phase I Assessments, we have conducted Phase II subsurface investigations in conformance with American Society of Testing and Materials Guide E1903,
Standard Guide for Environmental Site Assessments: Phase II Environmental Site Assessment Process. The Phase I and Phase II investigations of our properties have not revealed any environmental liability that we believe would have a material adverse
effect on our business, assets or results of operations taken as a whole, nor are we aware of any material environmental liability. It is still possible that our Phase I and Phase II investigations have not revealed all environmental liabilities or
that there are material environmental liabilities of which we are unaware. Moreover, future laws, ordinances or regulations may impose material environmental liability and the current environmental condition of our properties may be affected by
tenants, by the condition of land or operations in the vicinity of our properties, such as the presence of underground storage tanks, or by third parties unrelated to us. While we believe we are in substantial compliance with applicable federal,
state and local laws, ordinances and regulations regarding health and safety and the protection of the environment, we cannot assure you that environmental matters will not rise in the future at properties where no problem is currently known to us.



No Limitation on Amount of Indebtedness We
May Incur. At December 31, 2002, our debt to total market capitalization ratio was approximately 36.9% (assuming the conversion of all operating subsidiary units). We currently have a board of directors approved policy of incurring debt only
if upon incurrence the debt to total market capitalization ratio would be 50% or less. It should be noted, however, that our organizational documents do not contain any limitation on the amount of indebtedness we may incur. Accordingly, our board of
directors could alter or eliminate this policy. If this policy were changed, we could become more highly leveraged, resulting in an increase in debt service that could adversely affect our cash flow and, consequently, reduce the amount available for
distribution to stockholders. This could also increase the risk of default on our indebtedness.



Certain Types of Losses May Exceed Insurance Coverage. We carry comprehensive liability, public area liability, fire, earthquake, flood, boiler and machinery, extended coverage and rental
loss insurance covering our properties, with policy specifications and insured limits that we believe are adequate and appropriate under the circumstances. There are, however, certain types of losses that are not generally insured because it is not
economically feasible to insure against these losses. If an uninsured loss or a loss exceeding insured limits occurs, we could lose our capital invested in the property, as well as the anticipated future revenue from the property. In the case of
debt which is with recourse to us, we would remain obligated for any mortgage debt or other financial obligations related to the property. In these circumstances, any loss would adversely affect us.



10



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Disposition of Properties with Built-In Gain. In connection with our formation in 1997, certain entities taxable as C corporations were merged either into us or into our subsidiaries which qualified as
qualified REIT subsidiaries. Certain of these entities held 13 properties with built-in gain at the time the entities were merged into us or into our subsidiaries. A property has built-in gain if (i) on the day it
was acquired, the former owners tax basis in the property was less than the propertys fair market value, and (ii) it was acquired in a transaction in which our tax basis in the property was determined by reference to the former
owners tax basis in the property. Under the applicable Treasury Regulations, if these properties are sold within 10 years of the date we acquired them, we will be required to pay taxes on the built-in gain that would have been realized if the
merging C corporation had liquidated on the day before the date of the mergers. Therefore, we may have less flexibility in determining whether or not to dispose of these properties. If we desire to dispose of these properties at some
future date within this 10 year period, we may be subject to tax on the built-in gain.



Future Acts of Terrorism or War or Risk of War.The continued threat of terrorism and the potential for military action and heightened security measures in response to this threat
may cause significant disruption to commerce. There can be no assurance that the armed hostilities will not escalate or that these terrorist attacks, or the United States responses to them, will not lead to further acts of terrorism and civil
disturbances, which may further contribute to economic instability. Any armed conflict, civil unrest or additional terrorist activities, and the attendant political instability and societal disruption, may adversely affect our results of operations,
financial condition, the ability to raise capital or our future growth.



ITEM 2.
PROPERTIES



General



As of December 31, 2002, we owned and
operated 105 neighborhood and community shopping centers containing 15.9 million square feet of which 14.2 million square feet is owned by us with the balance owned by certain retailers. These properties are primarily situated in five key Western
U.S. markets including Northern California, Southern California, Oregon, Nevada and Washington, each of which we believe has attractive economic and demographic characteristics. The largest concentration of properties, consisting of 36% of our owned
gross leasable area, is located in Northern California. Another 19% of our owned gross leasable area is located in Southern California, 18% in Oregon, 14% in Nevada and 11% in Washington. In addition, properties consisting of the remaining 2% of our
owned gross leasable area are located in New Mexico, Tennessee and Kentucky. As of December 31, 2002, 97.5% of our total owned gross leasable area was leased by 2,541 tenants.



These properties are regionally managed under active central control by our executive officers. Property
management, leasing, capital expenditures, construction and acquisition decisions are centrally administered at our corporate office. We also employ property managers at each of our regional offices to oversee and direct the day-to-day operations of
these properties, as well as on-site personnel. Property managers communicate daily with our corporate offices to implement our policies and procedures.



As a result of our in-house leasing program, these properties benefit from a diversified merchandising mix. At December 31, 2002, 60% of
the total owned gross leasable area was leased to national tenants, 20% leased to regional tenants and 20% to local tenants. To promote stability and attract non-anchor tenants, we generally enter into long-term leases (typically 15 to 20 years)
with major or anchor tenants, those with 15,000 square feet or more, which usually contain provisions permitting tenants to renew their leases at rates which often include fixed rent increases or consumer price index adjustments from the prior base
rent. At December 31, 2002, anchor tenants leased 57% of the total owned gross leasable area, with only 66% of anchor-leased gross leasable area (38% of the total owned gross leasable area) scheduled to expire within the next 10 years. To take
advantage of improving market conditions and changing retail trends, we generally enter into shorter term leases (typically three to five years) with non-anchor tenants. Our leases are generally on a triple-net basis, which require the tenants to
pay their pro rata share of all real property taxes, insurance and property operating expenses.



The following tables provide information about our properties, our tenants and lease expirations.





11



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Property
Summary

12/31/2002



|Property and Location                          |  | Year Completed /Renovated |  | Company Owned (Sq. Ft.) |  | Tenant Owned (Sq. Ft.) |  | Total (Sq. Ft.) |  | % Leased as of 12/31/2002 (4) |  | Total # Tenants 12/31/2002 (4) |  | Annual Base Rent (1) |  | Ann. Base Rent/Leased Sq. Ft. (3) |  | Major Retailers                                                         
|---------------------------------------------- |  | ------------------------- |  | ----------------------- |  | ---------------------- |  | --------------- |  | ----------------------------- |  | ------------------------------ |  | -------------------- |  | --------------------------------- |  | ------------------------------------------------------------------------
|NORTHERN CALIFORNIA                            |  |                           |  |                         |  |                        |  |                 |  |                               |  |                                |  |                      |  |                                   |  |                                                                         
|Angels Camp Town Center Angels Camp, CA        |  | 1986                      |  | 70,323                  |  | 3,000                  |  | 73,323          |  | 93.9                          |  | 10                             |  | 517,715              |  | 7.84                              |  | Save Mart Supermarket, Rite Aid                                         
|Blossom Valley Plaza Turlock, CA               |  | 1988                      |  | 111,612                 |  | 0                      |  | 111,612         |  | 100.0                         |  | 21                             |  | 1,241,070            |  | 11.12                             |  | Raleys Supermarket, Jo-Ann Fabrics& Crafts                             
|Brookvale Shopping Center Fremont, CA          |  | 1968 1989                 |  | 131,242                 |  | 0                      |  | 131,242         |  | 100.0                         |  | 19                             |  | 1,452,379            |  | 11.07                             |  | Albertsons Supermarket, Longs Drugs                                   
|Cable Park Sacramento, CA                      |  | 1987                      |  | 160,811                 |  | 0                      |  | 160,811         |  | 99.2                          |  | 33                             |  | 1,383,306            |  | 8.67                              |  | Albertsons Supermarket, Longs Drugs                                   
|Canal Farms Los Banos, CA                      |  | 1987                      |  | 110,535                 |  | 0                      |  | 110,535         |  | 100.0                         |  | 18                             |  | 940,340              |  | 8.51                              |  | Save Mart Supermarket, Rite Aid                                         
|Century Center Modesto, CA                     |  | 1979                      |  | 214,772                 |  | 0                      |  | 214,772         |  | 97.1                          |  | 33                             |  | 1,780,407            |  | 8.54                              |  | Raleys Supermarket, Gottschalks                                        
|Chico Crossroads Chico, CA                     |  | 1988 1994                 |  | 267,735                 |  | 0                      |  | 267,735         |  | 99.6                          |  | 17                             |  | 2,146,656            |  | 8.05                              |  | Food 4 Less Supermarket                                                 
|Cobblestone Redding, CA                        |  | 1984                      |  | 122,091                 |  | 0                      |  | 122,091         |  | 95.5                          |  | 27                             |  | 1,056,370            |  | 9.06                              |  | Raleys Supermarket                                                     
|Commonwealth Square Folsom, CA                 |  | 1987                      |  | 141,310                 |  | 0                      |  | 141,310         |  | 100.0                         |  | 46                             |  | 2,133,037            |  | 15.09                             |  | Raleys Supermarket                                                     
|Country Gables Shopping Center Granite Bay, CA |  | 1993                      |  | 140,184                 |  | 0                      |  | 140,184         |  | 100.0                         |  | 37                             |  | 1,697,192            |  | 12.11                             |  | Raleys Supermarket                                                     
|Creekside Center Hayward, CA                   |  | 1968                      |  | 80,911                  |  | 0                      |  | 80,911          |  | 100.0                         |  | 18                             |  | 859,717              |  | 10.63                             |  | Albertsons Supermarket, Big Lots                                       
|Currier Square Oroville, CA                    |  | 1989                      |  | 130,963                 |  | 0                      |  | 130,963         |  | 100.0                         |  | 16                             |  | 1,044,608            |  | 7.98                              |  | Raleys Supermarket                                                     
|Dublin Retail Center Dublin, CA                |  | 1980                      |  | 154,728                 |  | 0                      |  | 154,728         |  | 100.0                         |  | 7                              |  | 1,661,863            |  | 10.74                             |  | Orchard Supply, Marshalls, Ross Dress for Less, Michaels Arts & Crafts
|Eastridge Plaza Porterville, CA                |  | 1985                      |  | 81,010                  |  | 0                      |  | 81,010          |  | 96.9                          |  | 13                             |  | 547,238              |  | 6.97                              |  | Save Mart Supermarket (5), Rite Aid (5)                                 
|Elverta Crossing Sacramento, CA                |  | 1991                      |  | 119,998                 |  | 0                      |  | 119,998         |  | 100.0                         |  | 26                             |  | 1,476,226            |  | 12.30                             |  | Food 4 Less Supermarket, Rite Aid, Factory 2 U                          
|Fairmont Shopping Center Pacifica, CA          |  | 1988                      |  | 104,281                 |  | 0                      |  | 104,281         |  | 100.0                         |  | 30                             |  | 1,441,098            |  | 13.82                             |  | Albertsons Supermarket, Rite Aid                                       



12



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Property
Summary

12/31/2002



|Property and Location                         |  | Year Completed /Renovated |  | Company Owned (Sq. Ft.) |  | Tenant Owned (Sq. Ft.) |  | Total (Sq. Ft.) |  | % Leased as of 12/31/2002 (4) |  | Total # Tenants 12/31/2002 (4) |  | Annual Base Rent (1) |  | Ann. Base Rent/Leased Sq. Ft. (3) |  | Major Retailers                                                         
|--------------------------------------------- |  | ------------------------- |  | ----------------------- |  | ---------------------- |  | --------------- |  | ----------------------------- |  | ------------------------------ |  | -------------------- |  | --------------------------------- |  | ------------------------------------------------------------------------
|Fashion Faire Place San Leandro, CA           |  | 1987                      |  | 95,255                  |  | 0                      |  | 95,255          |  | 100.0                         |  | 17                             |  | 1,397,808            |  | 14.67                             |  | Pure Foods Supermarket, Ross Dress for Less, Michaels Arts &
Crafts    
|Glen Cove Center Vallejo, CA                  |  | 1990                      |  | 66,000                  |  | 0                      |  | 66,000          |  | 100.0                         |  | 11                             |  | 882,588              |  | 13.37                             |  | Safeway Supermarket & Drug                                              
|Glenbrook Shopping Center Sacramento, CA      |  | 1990                      |  | 69,340                  |  | 0                      |  | 69,340          |  | 97.2                          |  | 18                             |  | 769,567              |  | 11.41                             |  | Big Lots                                                                
|Heritage Park Shopping Center Suisun City, CA |  | 1989                      |  | 162,999                 |  | 0                      |  | 162,999         |  | 97.9                          |  | 35                             |  | 1,700,954            |  | 10.66                             |  | Raleys Supermarket                                                     
|Heritage Place Tulare, CA                     |  | 1986                      |  | 119,412                 |  | 0                      |  | 119,412         |  | 98.0                          |  | 21                             |  | 1,052,298            |  | 9.00                              |  | Save Mart Supermarket, Rite Aid                                         
|Kmart Center Sacramento, CA                   |  | 1966 1983                 |  | 132,630                 |  | 0                      |  | 132,630         |  | 97.9                          |  | 15                             |  | 746,425              |  | 5.75                              |  | K-Mart, Big Lots                                                        
|Laguna 99 Plaza Elk Grove, CA                 |  | 1992                      |  | 89,600                  |  | 116,200                |  | 205,800         |  | 100.0                         |  | 24                             |  | 1,536,745            |  | 17.15                             |  | Safeway Supermarket (6), Wal-Mart (2)                                   
|Laguna Village Sacramento, CA                 |  | 1996                      |  | 114,433                 |  | 0                      |  | 114,433         |  | 100.0                         |  | 16                             |  | 1,980,525            |  | 17.31                             |  | United Artists Theatres, 24 Hour Fitness                                
|Lakewood Shopping Center Windsor, CA          |  | 1988                      |  | 107,769                 |  | 0                      |  | 107,769         |  | 100.0                         |  | 28                             |  | 1,128,082            |  | 10.47                             |  | Raleys Supermarket, U.S. Post Office                                   
|Lakewood Village Windsor, CA                  |  | 1992                      |  | 127,237                 |  | 0                      |  | 127,237         |  | 100.0                         |  | 39                             |  | 2,032,701            |  | 15.98                             |  | Safeway Supermarket, Longs Drugs                                       
|Manteca Marketplace Manteca, CA               |  | 1972 1988                 |  | 172,435                 |  | 0                      |  | 172,435         |  | 100.0                         |  | 27                             |  | 1,893,667            |  | 10.98                             |  | Save Mart Supermarket, Rite Aid, Stadium 10 Cinemas, Ben Franklin Crafts
|Mission Ridge Plaza Manteca, CA               |  | 1992                      |  | 96,657                  |  | 99,641                 |  | 196,298         |  | 100.0                         |  | 16                             |  | 1,372,201            |  | 14.20                             |  | Safeway Supermarket (6), Wal-Mart (2), Mervyns (2)                     
|Monterey Plaza San Jose, CA                   |  | 1990                      |  | 183,180                 |  | 49,500                 |  | 232,680         |  | 97.0                          |  | 30                             |  | 2,716,457            |  | 15.28                             |  | Wal-Mart, Albertsons Supermarket (2), Walgreens                        
|Northridge Plaza Fair Oaks, CA                |  | 1990                      |  | 98,625                  |  | 0                      |  | 98,625          |  | 100.0                         |  | 21                             |  | 834,352              |  | 8.46                              |  | Raleys Supermarket                                                     
|Park Place Vallejo, CA                        |  | 1987                      |  | 150,766                 |  | 0                      |  | 150,766         |  | 100.0                         |  | 30                             |  | 1,833,493            |  | 12.16                             |  | Raleys Supermarket, 24 Hour Fitness                                    
|Pine Creek Shopping Center Grass Valley, CA   |  | 1988                      |  | 213,035                 |  | 0                      |  | 213,035         |  | 98.6                          |  | 36                             |  | 2,345,148            |  | 11.16                             |  | Raleys Supermarket, JC Penney                                          



13



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Property
Summary

12/31/2002



|Property and Location                   |  | Year Completed /Renovated |  | Company Owned (Sq. Ft.) |  | Tenant Owned (Sq. Ft.) |  | Total (Sq. Ft.) |  | % Leased as of 12/31/2002 (4) |  | Total # Tenants 12/31/2002 (4) |  | Annual Base Rent (1) |               | Ann. Base Rent/Leased Sq. Ft. (3) |   | Major Retailers
|--------------------------------------- |  | ------------------------- |  | ----------------------- |  | ---------------------- |  | --------------- |  | ----------------------------- |  | ------------------------------ |  | -------------------- | ------------- | --------------------------------- | - | ---------------
|Plaza 580 Shopping Center Livermore, CA |  | 1993                      |  | 104,363                 |  | 192,739                |  | 297,102         |  | 96.8                          |  | 27                             |  |                      | 1,791,960     |                                   |   | 17.73          
|Raleys Shopping Center Yuba City, CA   |  | 1983                      |  | 135,114                 |  | 0                      |  | 135,114         |  | 100.0                         |  | 17                             |  |                      | 1,109,130     |                                   |   | 8.21           
|Shops at Lincoln School Modesto, CA     |  | 1988                      |  | 81,443                  |  | 0                      |  | 81,443          |  | 94.5                          |  | 16                             |  |                      | 750,983       |                                   |   | 9.76           
|Sky Park Plaza Chico, CA                |  | 1985                      |  | 176,182                 |  | 4,642                  |  | 180,824         |  | 100.0                         |  | 29                             |  |                      | 1,667,922     |                                   |   | 9.47           
|Ukiah Crossroads Ukiah, CA              |  | 1986                      |  | 110,565                 |  | 0                      |  | 110,565         |  | 100.0                         |  | 21                             |  |                      | 1,087,628     |                                   |   | 9.84           
|Victorian Walk Fresno, CA               |  | 1990                      |  | 102,581                 |  | 0                      |  | 102,581         |  | 96.6                          |  | 21                             |  |                      | 867,442       |                                   |   | 8.75           
|Westwood Village South Redding, CA      |  | 1981 1998                 |  | 102,375                 |  | 0                      |  | 102,375         |  | 87.3                          |  | 20                             |  |                      | 672,164       |                                   |   | 7.52           
|Yreka Junction Yreka, CA                |  | 1984                      |  | 127,148                 |  | 0                      |  | 127,148         |  | 100.0                         |  | 19                             |  |                      | 1,118,537     |                                   |   | 8.80           
|                                        |  |                           |  |                         |  |                        |  |                 |  |                               |  |                                |  |                      |               |                                   |   |                
|Region Total/Weighted Average           |  |                           |  | 5,081,650               |  | 465,722                |  | 5,547,372       |  | 98.7                          |  | 925                            |  | $                    | 54,668,001.52 |                                   | $ | 10.90          
|                                        |  |                           |  |                         |  |                        |  |                 |  |                               |  |                                |  |                      |               |                                   |   |                



14



---



Property
Summary

12/31/2002



|Property and Location                     |  | Year Completed /Renovated |  | Company Owned (Sq. Ft.) |  | Tenant Owned (Sq. Ft.) |  | Total (Sq. Ft.) |  | % Leased as of 12/31/2002 (4) |  | Total # Tenants 12/31/2002 (4) |  | Annual Base Rent (1) |  | Ann. Base Rent/Leased Sq. Ft. (3) |  | Major Retailers                                                        
|----------------------------------------- |  | ------------------------- |  | ----------------------- |  | ---------------------- |  | --------------- |  | ----------------------------- |  | ------------------------------ |  | -------------------- |  | --------------------------------- |  | -----------------------------------------------------------------------
|SOUTHERN CALIFORNIA                       |  |                           |  |                         |  |                        |  |                 |  |                               |  |                                |  |                      |  |                                   |  |                                                                        
|Arlington Courtyard Riverside, CA         |  | 1991                      |  | 12,221                  |  | 0                      |  | 12,221          |  | 29.7                          |  | 2                              |  | 53,233               |  | 14.68                             |  |                                                                        
|Bixby Hacienda Plaza Hacienda Heights, CA |  | 1986                      |  | 135,012                 |  | 0                      |  | 135,012         |  | 100.0                         |  | 42                             |  | 2,383,052            |  | 17.65                             |  | Albertsons Supermarket, Washington Mutual                             
|Brookhurst Center Anaheim, CA             |  | 1982                      |  | 184,949                 |  | 0                      |  | 184,949         |  | 98.5                          |  | 43                             |  | 2,084,996            |  | 11.45                             |  | Ralphs Supermarket, Rite Aid, Jo-Ann Fabrics & Crafts                 
|Canyon Square Plaza Santa Clarita, CA     |  | 1988                      |  | 96,727                  |  | 7,472                  |  | 104,199         |  | 100.0                         |  | 31                             |  | 1,290,976            |  | 13.35                             |  | Albertsons Supermarket & Drug                                         
|Chino Town Square Chino, CA               |  | 1987                      |  | 337,687                 |  | 188,064                |  | 525,751         |  | 98.0                          |  | 50                             |  | 4,667,747            |  | 14.11                             |  | Wal-Mart (5), Ross Dress for Less Target (2), Mervyns (2)              
|Encinitas Marketplace Encinitas, CA       |  | 1981                      |  | 118,265                 |  | 0                      |  | 118,265         |  | 100.0                         |  | 26                             |  | 1,607,567            |  | 13.59                             |  | Albertsons Supermarket                                                
|Gordon Ranch Marketplace Chino Hills, CA  |  | 1991                      |  | 114,573                 |  | 0                      |  | 114,573         |  | 96.5                          |  | 39                             |  | 1,928,218            |  | 17.44                             |  | Ralphs Supermarket                                                    
|Granary Square Valencia, CA               |  | 1982                      |  | 143,333                 |  | 0                      |  | 143,333         |  | 98.1                          |  | 33                             |  | 2,222,220            |  | 15.80                             |  | Ralphs Supermarket, Longs Drugs                                      
|Larwin Square Shopping Center Tustin, CA  |  | 1977                      |  | 210,936                 |  | 0                      |  | 210,936         |  | 93.4                          |  | 57                             |  | 2,583,827            |  | 13.11                             |  | Vons Supermarket, Rite Aid, Jo-Ann Fabrics & Crafts, Big 5            
|Laurentian Center Ontario, CA             |  | 1988                      |  | 97,131                  |  | 0                      |  | 97,131          |  | 94.5                          |  | 23                             |  | 1,211,779            |  | 13.20                             |  | Pep Boys, 24 Hour Fitness                                              
|Marina Village Huntington Beach, CA       |  | 1996                      |  | 149,107                 |  | 0                      |  | 149,107         |  | 100.0                         |  | 34                             |  | 1,857,797            |  | 12.46                             |  | Vons Supermarket, Sav-on Drugs                                        
|Melrose Village Plaza Vista, CA           |  | 1990                      |  | 136,922                 |  | 0                      |  | 136,922         |  | 98.0                          |  | 34                             |  | 1,721,770            |  | 12.83                             |  | Albertsons Supermarket, Sav-on Drugs                                  
|Palmdale Center Palmdale, CA              |  | 1975                      |  | 81,050                  |  | 0                      |  | 81,050          |  | 100.0                         |  | 14                             |  | 579,386              |  | 7.15                              |  | Smart & Final, Dollar Tree, Big Lots                                   
|Pavilions Place Westminister, CA          |  | 1986                      |  | 208,823                 |  | 100,750                |  | 309,573         |  | 90.9                          |  | 43                             |  | 3,362,192            |  | 17.71                             |  | Vons, Easy Life Furniture                                              
|Rancho Las Palmas Rancho Mirage, CA       |  | 1980                      |  | 165,156                 |  | 10,815                 |  | 175,971         |  | 94.7                          |  | 39                             |  | 2,267,188            |  | 14.49                             |  | Vons Supermarket, Longs Drugs                                        
|San Dimas Marketplace San Dimas, CA       |  | 1997                      |  | 154,020                 |  | 117,000                |  | 271,020         |  | 99.0                          |  | 21                             |  | 2,275,012            |  | 14.92                             |  | Trader Joes Market, Target (2), Ross Dress for Less, Office Max,
Petco



15



---



Property
Summary

12/31/2002



|Property and Location                     |  | Year Completed /Renovated |  | Company Owned (Sq. Ft.) |  | Tenant Owned (Sq. Ft.) |  | Total (Sq. Ft.) |  | % Leased as of 12/31/2002 (4) |  | Total # Tenants 12/31/2002 (4) |  | Annual Base Rent (1) |  | Ann. Base Rent/Leased Sq. Ft. (3) |  | Major Retailers                                           
|----------------------------------------- |  | ------------------------- |  | ----------------------- |  | ---------------------- |  | --------------- |  | ----------------------------- |  | ------------------------------ |  | -------------------- |  | --------------------------------- |  | ----------------------------------------------------------
|Sycamore Plaza Anaheim, CA                |  | 1976                      |  | 105,085                 |  | 0                      |  | 105,085         |  | 100.0                         |  | 26                             |  | 918,274              |  | 8.74                              |  | Stater Bros. Supermarket, Sav-on Drugs                    
|Tustin Heights Shopping Center Tustin, CA |  | 1983                      |  | 131,518                 |  | 0                      |  | 131,518         |  | 100.0                         |  | 21                             |  | 1,706,655            |  | 12.98                             |  | Ralphs Supermarket, Longs Drugs, Michaels Arts & Crafts
|Vineyard Village Ontario, CA              |  | 1992                      |  | 45,075                  |  | 0                      |  | 45,075          |  | 100.0                         |  | 4                              |  | 402,630              |  | 8.93                              |  | Sears, Dunn Edwards Paints                                
|                                          |  |                           |  |                         |  |                        |  |                 |  |                               |  |                                |  |                      |  |                                   |  |                                                           
|Region Total/Weighted Average             |  |                           |  | 2,627,590               |  | 424,101                |  | 3,051,691       |  | 97.1                          |  | 582                            |  | 35,124,517.54        |  | 13.77                             |  |                                                           
|                                          |  |                           |  |                         |  |                        |  |                 |  |                               |  |                                |  |                      |  |                                   |  |                                                           



16



---



Property
Summary

12/31/2002



|Property and Location                  |  | Year Completed /Renovated |  | Company Owned (Sq. Ft.) |  | Tenant Owned (Sq. Ft.) |  | Total (Sq. Ft.) |  | % Leased as of 12/31/2002 (4) |  | Total # Tenants 12/31/2002 (4) |  | Annual Base Rent (1) |               | Ann. Base Rent/Leased Sq. Ft. (3) |   | Major Retailers
|-------------------------------------- |  | ------------------------- |  | ----------------------- |  | ---------------------- |  | --------------- |  | ----------------------------- |  | ------------------------------ |  | -------------------- | ------------- | --------------------------------- | - | ---------------
|WASHINGTON                             |  |                           |  |                         |  |                        |  |                 |  |                               |  |                                |  |                      |               |                                   |   |                
|Auburn North Auburn, WA                |  | 1977 1999                 |  | 171,032                 |  | 0                      |  | 171,032         |  | 100.0                         |  | 25                             |  |                      | 1,393,755     |                                   |   | 8.15           
|Blaine International Center Blaine, WA |  | 1991                      |  | 127,572                 |  | 0                      |  | 127,572         |  | 81.1                          |  | 16                             |  |                      | 944,596       |                                   |   | 9.13           
|Canyon Ridge Plaza Kent, WA            |  | 1995                      |  | 86,909                  |  | 181,300                |  | 268,209         |  | 100.0                         |  | 19                             |  |                      | 1,079,238     |                                   |   | 12.42          
|Claremont Village Plaza Everett, WA    |  | 1955 1994                 |  | 88,770                  |  | 0                      |  | 88,770          |  | 100.0                         |  | 16                             |  |                      | 1,265,617     |                                   |   | 14.26          
|Garrison Square Vancouver, WA          |  | 1989                      |  | 69,790                  |  | 0                      |  | 69,790          |  | 100.0                         |  | 15                             |  |                      | 717,628       |                                   |   | 10.28          
|Gateway Shopping Center Mill Creek, WA |  | 1995                      |  | 96,671                  |  | 0                      |  | 96,671          |  | 96.8                          |  | 20                             |  |                      | 1,666,990     |                                   |   | 17.82          
|Olympia Square Olympia, WA             |  | 1988                      |  | 168,209                 |  | 0                      |  | 168,209         |  | 98.1                          |  | 37                             |  |                      | 2,090,809     |                                   |   | 12.67          
|Olympia West Center Olympia, WA        |  | 1980 1995                 |  | 69,212                  |  | 3,800                  |  | 73,012          |  | 100.0                         |  | 6                              |  |                      | 1,286,737     |                                   |   | 18.59          
|Pacific Commons Spanaway, WA           |  | 1987                      |  | 151,233                 |  | 55,241                 |  | 206,474         |  | 98.8                          |  | 22                             |  |                      | 1,541,600     |                                   |   | 10.32          
|Panther Lake Kent, WA                  |  | 1989                      |  | 69,090                  |  | 44,237                 |  | 113,327         |  | 100.0                         |  | 22                             |  |                      | 899,059       |                                   |   | 13.01          
|Sunset Square Bellingham, WA           |  | 1989                      |  | 376,023                 |  | 10,634                 |  | 386,657         |  | 98.8                          |  | 41                             |  |                      | 3,167,929     |                                   |   | 8.52           
|Tacoma Central Tacoma, WA              |  | 1987 1994                 |  | 156,916                 |  | 165,519                |  | 322,435         |  | 100.0                         |  | 22                             |  |                      | 2,005,796     |                                   |   | 12.78          
|                                       |  |                           |  |                         |  |                        |  |                 |  |                               |  |                                |  |                      |               |                                   |   |                
|Region Total/Weighted Average          |  |                           |  | 1,631,427               |  | 460,731                |  | 2,092,158       |  | 97.8                          |  | 261                            |  | $                    | 18,059,753.52 |                                   | $ | 11.32          
|                                       |  |                           |  |                         |  |                        |  |                 |  |                               |  |                                |  |                      |               |                                   |   |                



17



---



Property
Summary

12/31/2002



|Property and Location                       |  | Year Completed /Renovated |  | Company Owned (Sq. Ft.) |  | Tenant Owned (Sq. Ft.) |  | Total (Sq. Ft.) |  | % Leased as of 12/31/2002 (4) |  | Total # Tenants 12/31/2002 (4) |  | Annual Base Rent (1) |  | Ann. Base Rent/Leased Sq. Ft.s (3) |  | Major Retailers                                                                            
|------------------------------------------- |  | ------------------------- |  | ----------------------- |  | ---------------------- |  | --------------- |  | ----------------------------- |  | ------------------------------ |  | -------------------- |  | ---------------------------------- |  | -------------------------------------------------------------------------------------------
|OREGON                                      |  |                           |  |                         |  |                        |  |                 |  |                               |  |                                |  |                      |  |                                    |  |                                                                                            
|Albany Plaza Albany, OR                     |  | 1977 1998                 |  | 114,465                 |  | 30,998                 |  | 145,463         |  | 93.8                          |  | 19                             |  | 854,169              |  | 7.95                               |  | Albertsons Supermarket, Rite Aid, Big Lots, Dollar Tree, Factory 2 U                      
|Bear Creek Plaza Medford, OR                |  | 1977 1998                 |  | 183,850                 |  | 0                      |  | 183,850         |  | 96.8                          |  | 26                             |  | 1,359,312            |  | 7.64                               |  | Bi-Mart Drug, TJ Maxx, Big Lots, Factory 2 U                                               
|Canby Square Shopping Center Canby, OR      |  | 1993                      |  | 115,701                 |  | 0                      |  | 115,701         |  | 97.6                          |  | 12                             |  | 1,082,522            |  | 9.58                               |  | Safeway Supermarket, Rite Aid, Factory 2 U                                                 
|East Burnside Plaza Portland, OR            |  | 1999                      |  | 38,363                  |  | 0                      |  | 38,363          |  | 100.0                         |  | 7                              |  | 618,918              |  | 16.13                              |  | QFC Supermarket                                                                            
|Hermiston Plaza Hermiston, OR               |  | 1998                      |  | 150,396                 |  | 0                      |  | 150,396         |  | 94.8                          |  | 23                             |  | 928,584              |  | 6.51                               |  | Safeway Supermarket & Drug, Big Lots, Dollar Tree                                          
|Hood River Shopping Center Hood River, OR   |  | 1967 1999                 |  | 108,554                 |  | 0                      |  | 108,554         |  | 100.0                         |  | 12                             |  | 946,722              |  | 8.72                               |  | Rosauers Supermarket, Hi School Pharmacy                                                  
|Menlo Park Plaza Portland, OR               |  | 1995                      |  | 112,755                 |  | 0                      |  | 112,755         |  | 94.8                          |  | 18                             |  | 1,303,977            |  | 12.19                              |  | Walgreens, Staples                                                                         
|Milwaukie Marketplace Milwaukie, OR         |  | 1989                      |  | 185,859                 |  | 10,323                 |  | 196,182         |  | 97.8                          |  | 28                             |  | 1,679,051            |  | 9.23                               |  | Albertsons Supermarket, Rite Aid, Jo-Ann Fabrics & Crafts                                 
|Oregon City Shopping Center Oregon City, OR |  | 1999                      |  | 246,855                 |  | 0                      |  | 246,855         |  | 95.1                          |  | 37                             |  | 1,981,637            |  | 8.44                               |  | Emporium, Rite Aid, Fishermans
Marine Supply, Michaels Arts & Crafts                     
|Oregon Trail Center Gresham, OR             |  | 1977 1999                 |  | 208,316                 |  | 0                      |  | 208,316         |  | 98.5                          |  | 30                             |  | 2,067,325            |  | 10.07                              |  | Natures Supermarket, Office Depot, Big 5 Sporting Goods, Big Lots, Michaels Arts &
Crafts
|Pioneer Plaza Springfield, OR               |  | 1988                      |  | 96,027                  |  | 4,294                  |  | 100,321         |  | 100.0                         |  | 23                             |  | 950,120              |  | 9.89                               |  | Safeway Supermarket & Drug                                                                 
|Powell Valley Junction Gresham, OR          |  | 1990                      |  | 107,583                 |  | 0                      |  | 107,583         |  | 95.2                          |  | 7                              |  | 897,286              |  | 8.76                               |  | Food 4 Less Supermarket, Cascade Athletic Club                                             
|Powell Villa Portland, OR                   |  | 1997                      |  | 61,884                  |  | 0                      |  | 61,884          |  | 100.0                         |  | 10                             |  | 791,721              |  | 12.79                              |  | Ace Hardware                                                                               
|Rockwood Plaza Gresham, OR                  |  | 2000                      |  | 92,872                  |  | 0                      |  | 92,872          |  | 96.5                          |  | 15                             |  | 761,292              |  | 8.49                               |  | Dollar Tree                                                                                
|Sandy Marketplace Sandy, OR                 |  | 1985                      |  | 101,438                 |  | 0                      |  | 101,438         |  | 100.0                         |  | 21                             |  | 971,772              |  | 9.58                               |  | Danielsons Supermarket, Hi School Pharmacy, Factory 2 U                                   
|Southgate Shopping Center Milwaukie, OR     |  | 1986                      |  | 50,862                  |  | 0                      |  | 50,862          |  | 100.0                         |  | 10                             |  | 652,279              |  | 12.82                              |  | Office Max                                                                                 



18



---



Property
Summary

12/31/2002



|Property and Location             |  | Year Completed /Renovated |  | Company Owned (Sq. Ft.) |  | Tenant Owned (Sq. Ft.) |  | Total (Sq. Ft.) |  | % Leased as of 12/31/2002 (4) |  | Total # Tenants 12/31/2002 (4) |  | Annual Base Rent (1) |               | Ann. Base Rent/Leased Sq. Ft. (3) |   | Major Retailers
|--------------------------------- |  | ------------------------- |  | ----------------------- |  | ---------------------- |  | --------------- |  | ----------------------------- |  | ------------------------------ |  | -------------------- | ------------- | --------------------------------- | - | ---------------
|Sunset Esplanade Hillsboro, OR    |  | 1989                      |  | 256,034                 |  | 101,909                |  | 357,943         |  | 100.0                         |  | 44                             |  |                      | 3,012,048     |                                   |   | 11.76          
|Sunset Mall Portland, OR          |  | 1997                      |  | 115,635                 |  | 2,500                  |  | 118,135         |  | 97.3                          |  | 29                             |  |                      | 1,232,648     |                                   |   | 10.96          
|Tanasbourne Village Hillsboro, OR |  | 1990                      |  | 210,992                 |  | 1,209                  |  | 212,201         |  | 100.0                         |  | 41                             |  |                      | 3,152,945     |                                   |   | 14.94          
|                                  |  |                           |  |                         |  |                        |  |                 |  |                               |  |                                |  |                      |               |                                   |   |                
|Region Total/Weighted Average     |  |                           |  | 2,558,441               |  | 151,233                |  | 2,709,674       |  | 97.7                          |  | 412                            |  | $                    | 25,244,326.72 |                                   | $ | 10.10          
|                                  |  |                           |  |                         |  |                        |  |                 |  |                               |  |                                |  |                      |               |                                   |   |                



19



---



Property
Summary

12/31/2002



|Property and Location                     |  | Year Completed /Renovated |  | Company Owned (Sq. Ft.) |  | Tenant Owned (Sq. Ft.) |  | Total (Sq. Ft.) |  | % Leased as of 12/31/2002 (4) |  | Total # Tenants 12/31/2002 (4) |  | Annual Base Rent (1) |               | Ann. Base Rent/Leased Sq. Ft. (3) |   | Major Retailers
|----------------------------------------- |  | ------------------------- |  | ----------------------- |  | ---------------------- |  | --------------- |  | ----------------------------- |  | ------------------------------ |  | -------------------- | ------------- | --------------------------------- | - | ---------------
|NEVADA                                    |  |                           |  |                         |  |                        |  |                 |  |                               |  |                                |  |                      |               |                                   |   |                
|Caughlin Ranch Reno, NV                   |  | 1990 1991                 |  | 113,488                 |  | 0                      |  | 113,488         |  | 96.5                          |  | 27                             |  |                      | 1,550,532     |                                   |   | 14.16          
|Cheyenne Commons Las Vegas, NV            |  | 1992                      |  | 362,758                 |  | 0                      |  | 362,758         |  | 97.8                          |  | 45                             |  |                      | 4,431,448     |                                   |   | 12.49          
|Decatur Meadows Las Vegas, NV             |  | 1979                      |  | 111,245                 |  | 0                      |  | 111,245         |  | 93.0                          |  | 12                             |  |                      | 965,988       |                                   |   | 9.34           
|Eagle Station Carson City, NV             |  | 1982 1994                 |  | 114,258                 |  | 60,000                 |  | 174,258         |  | 95.3                          |  | 26                             |  |                      | 1,067,989     |                                   |   | 9.81           
|Elko Junction Shopping Center Elko, NV    |  | 1996 1997                 |  | 170,812                 |  | 0                      |  | 170,812         |  | 94.2                          |  | 17                             |  |                      | 1,576,585     |                                   |   | 9.80           
|Green Valley Town & Country Henderson, NV |  | 1990                      |  | 130,722                 |  | 0                      |  | 130,722         |  | 95.9                          |  | 35                             |  |                      | 1,913,705     |                                   |   | 15.27          
|Mira Loma Center Reno, NV                 |  | 1985                      |  | 96,907                  |  | 0                      |  | 96,907          |  | 98.6                          |  | 18                             |  |                      | 985,706       |                                   |   | 10.32          
|Rainbow Promenade Las Vegas, NV           |  | 1995 1997                 |  | 228,279                 |  | 0                      |  | 228,279         |  | 100.0                         |  | 27                             |  |                      | 3,310,336     |                                   |   | 14.50          
|Sahara Pavilion North Las Vegas, NV       |  | 1989                      |  | 333,679                 |  | 0                      |  | 333,679         |  | 94.6                          |  | 60                             |  |                      | 4,366,056     |                                   |   | 13.84          
|Sahara Pavilion South Las Vegas, NV       |  | 1990                      |  | 160,891                 |  | 0                      |  | 160,891         |  | 91.9                          |  | 24                             |  |                      | 2,166,580     |                                   |   | 14.65          
|West Town Winnemucca, NV                  |  | 1978 1991                 |  | 65,424                  |  | 0                      |  | 65,424          |  | 96.3                          |  | 1                              |  |                      | 433,500       |                                   |   | 6.88           
|Winterwood Pavilion Las Vegas, NV         |  | 1990                      |  | 144,653                 |  | 0                      |  | 144,653         |  | 90.9                          |  | 24                             |  |                      | 1,333,218     |                                   |   | 10.13          
|                                          |  |                           |  |                         |  |                        |  |                 |  |                               |  |                                |  |                      |               |                                   |   |                
|Region Total/Weighted Average             |  |                           |  | 2,033,116               |  | 60,000                 |  | 2,093,116       |  | 95.7                          |  | 316                            |  | $                    | 24,101,643.74 |                                   | $ | 12.39          
|                                          |  |                           |  |                         |  |                        |  |                 |  |                               |  |                                |  |                      |               |                                   |   |                





20



---



Property
Summary

12/31/2002



|Property and Location                |  | Year Completed /Renovated |  | Company Owned (Sq. Ft.) |  | Tenant Owned (Sq. Ft.) |  | Total (Sq. Ft.) |  | % Leased as of 12/31/2002 (4) |  | Total # Tenants 12/31/2002 (4) |  | Annual Base Rent (1) |                | Ann. Base Rent/Leased Sq. Ft. (3) |   | Major Retailers
|------------------------------------ |  | ------------------------- |  | ----------------------- |  | ---------------------- |  | --------------- |  | ----------------------------- |  | ------------------------------ |  | -------------------- | -------------- | --------------------------------- | - | ---------------
|OTHER                                |  |                           |  |                         |  |                        |  |                 |  |                               |  |                                |  |                      |                |                                   |   |                
|Country Club Center Albuquerque, NM  |  | 1988 1998                 |  | 57,631                  |  | 63,000                 |  | 120,631         |  | 63.9                          |  | 17                             |  |                      | 445,761        |                                   |   | 12.11          
|Maysville Marketsquare Maysville, KY |  | 1991 1993                 |  | 126,507                 |  | 89,612                 |  | 216,119         |  | 97.8                          |  | 18                             |  |                      | 916,111        |                                   |   | 7.41           
|Memphis Retail Center Memphis, TN    |  | 1990                      |  | 51,542                  |  | 40,000                 |  | 91,542          |  | 78.8                          |  | 10                             |  |                      | 412,627        |                                   |   | 10.16          
|                                     |  |                           |  |                         |  |                        |  |                 |  |                               |  |                                |  |                      |                |                                   |   |                
|Region Total/Weighted Average        |  |                           |  | 235,680                 |  | 192,612                |  | 428,292         |  | 85.3                          |  | 45                             |  | $                    | 1,774,498.66   |                                   | $ | 8.82           
|                                     |  |                           |  |                         |  |                        |  |                 |  |                               |  |                                |  |                      |                |                                   |   |                
|                                     |  |                           |  |                         |  |                        |  |                 |  |                               |  |                                |  |                      |                |                                   |   |                
|                                     |  |                           |  |                         |  |                        |  |                 |  |                               |  |                                |  |                      |                |                                   |   |                
|Portfolio Total/Weighted Average     |  |                           |  | 14,167,904              |  | 1,754,399              |  | 15,922,303      |  | 97.5                          |  | 2,541                          |  | $                    | 158,972,741.70 |                                   | $ | 11.51          
|                                     |  |                           |  |                         |  |                        |  |                 |  |                               |  |                                |  |                      |                |                                   |   |                



|(1) |  | Annualized base rent for all leases in place at December 31, 2002 is calculated as follows: total base rent to be received during the entire term of each lease,
divided by the terms in months for such leases, multiplied by 12.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | These retailers own their own space and are not tenants of the company.
|--- |  | -----------------------------------------------------------------------

|(3) |  | Annualized base rent divided by the owned GLA leased at December 31, 2002.
|--- |  | --------------------------------------------------------------------------

|(4) |  | Percent leased and total number of tenants includes month to month leases.
|--- |  | --------------------------------------------------------------------------

|(5) |  | Tenant is dark.
|--- |  | ---------------

|(6) |  | Tenant is Pak N Save, a division of Safeway.
|--- |  | ----------------------------------------------



21



---



National,
Regional and Local Tenant Mix

12/31/2002



|                               |  | National Tenants (1)     |  | Regional Tenants (1)             |  | Local Tenants (1)       
|------------------------------ |  | ------------------------ |  | -------------------------------- |  | ------------------------
|Property                       |  | % of Property Leased GLA |  | % of Property Ann. Base Rent (2) |  | % of Property Leased GLA
|NORTHERN CALIFORNIA            |  |                          |  |                                  |  |                         
|Angels Camp Town Center        |  | 30.53                    |  | 29.18                            |  | 51.95                   
|Blossom Valley Plaza           |  | 27.56                    |  | 35.62                            |  | 58.34                   
|Brookvale Shopping Center      |  | 89.11                    |  | 75.56                            |  | 0.00                    
|Cable Park                     |  | 83.15                    |  | 65.76                            |  | 1.26                    
|Canal Farms                    |  | 53.93                    |  | 50.66                            |  | 34.59                   
|Century Center                 |  | 15.75                    |  | 33.12                            |  | 66.55                   
|Chico Crossroads               |  | 98.54                    |  | 97.44                            |  | 0.00                    
|Cobblestone                    |  | 28.81                    |  | 44.70                            |  | 51.47                   
|Commonwealth Square            |  | 18.07                    |  | 24.70                            |  | 44.24                   
|Country Gables Shopping Center |  | 16.33                    |  | 19.78                            |  | 45.59                   
|Creekside Center               |  | 77.62                    |  | 61.38                            |  | 0.00                    
|Currier Square                 |  | 15.89                    |  | 20.72                            |  | 45.73                   
|Dublin Retail Center           |  | 80.32                    |  | 73.82                            |  | 0.00                    
|Eastridge Plaza                |  | 27.93                    |  | 27.64                            |  | 58.04                   
|Elverta Crossing               |  | 83.67                    |  | 76.41                            |  | 1.33                    
|Fairmont Shopping Center       |  | 64.94                    |  | 44.04                            |  | 11.67                   
|Fashion Faire Place            |  | 88.25                    |  | 80.59                            |  | 0.00                    
|Glen Cove Center               |  | 81.39                    |  | 72.72                            |  | 1.77                    
|Glenbrook Shopping Center      |  | 66.41                    |  | 55.90                            |  | 0.00                    
|Heritage Park Shopping Center  |  | 25.55                    |  | 29.91                            |  | 46.02                   
|Heritage Place                 |  | 50.84                    |  | 47.10                            |  | 33.86                   
|Kmart Center                   |  | 88.62                    |  | 75.05                            |  | 0.00                    
|Laguna 99 Plaza                |  | 76.12                    |  | 59.27                            |  | 2.12                    
|Laguna Village                 |  | 78.27                    |  | 73.94                            |  | 4.19                    
|Lakewood Shopping Center       |  | 20.06                    |  | 31.56                            |  | 52.41                   
|Lakewood Village               |  | 70.47                    |  | 67.70                            |  | 0.00                    
|Manteca Marketplace            |  | 42.96                    |  | 38.64                            |  | 43.54                   
|Mission Ridge Plaza            |  | 93.42                    |  | 90.05                            |  | 2.21                    
|Monterey Plaza                 |  | 88.04                    |  | 78.29                            |  | 1.67                    
|Northridge Plaza               |  | 7.95                     |  | 16.29                            |  | 67.66                   



|(1) |  | The company defines national tenants as any tenant that operates in at least four metropolitan areas located in more than one region, (i.e. northwest, northeast,
midwest, southwest or southeast); regional tenants as any tenant that operates in two or more metropolitan areas located within the same region; local tenants as any tenant that operates stores only within the same metropolitan area as the shopping
center.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Annualized base rent for all leases in place is calculated as follows: total base rent, calculated in accordance with GAAP, to be received during the entire term of
each lease, divided by the terms in months for such leases, multiplied by 12.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



22



---



National,
Regional and Local Tenant Mix

12/31/2002



|                               |  | National Tenants (1)     |  | Regional Tenants (1)             |  | Local Tenants (1)       
|------------------------------ |  | ------------------------ |  | -------------------------------- |  | ------------------------
|Property                       |  | % of Property Leased GLA |  | % of Property Ann. Base Rent (2) |  | % of Property Leased GLA
|Park Place                     |  | 35.70                    |  | 42.33                            |  | 40.67                   
|Pine Creek Shopping Center     |  | 41.60                    |  | 40.30                            |  | 30.02                   
|Plaza 580 Shopping Center      |  | 65.13                    |  | 61.61                            |  | 1.78                    
|Raleys Shopping Center        |  | 49.52                    |  | 63.31                            |  | 45.77                   
|Shops at Lincoln School        |  | 20.11                    |  | 34.32                            |  | 54.75                   
|Sky Park Plaza                 |  | 52.14                    |  | 55.21                            |  | 34.65                   
|Ukiah Crossroads               |  | 27.57                    |  | 37.81                            |  | 58.44                   
|Victorian Walk                 |  | 46.25                    |  | 45.24                            |  | 36.06                   
|Westwood Village               |  | 38.67                    |  | 44.88                            |  | 41.84                   
|Yreka Junction                 |  | 44.49                    |  | 53.46                            |  | 52.19                   
|Region Total/Weighted Average  |  | 53.41                    |  | 53.94                            |  | 27.98                   
|SOUTHERN CALIFORNIA            |  |                          |  |                                  |  |                         
|Arlington Courtyard            |  | 0.00                     |  | 0.00                             |  | 0.00                    
|Bixby Hacienda Plaza           |  | 48.14                    |  | 41.46                            |  | 1.56                    
|Brookhurst Center              |  | 40.72                    |  | 45.76                            |  | 25.60                   
|Canyon Square Plaza            |  | 55.59                    |  | 42.84                            |  | 1.96                    
|Chino Town Square              |  | 70.13                    |  | 67.47                            |  | 7.70                    
|Encinitas Marketplace          |  | 78.10                    |  | 69.59                            |  | 6.96                    
|Gordon Ranch Marketplace       |  | 50.49                    |  | 46.02                            |  | 0.00                    
|Granary Square                 |  | 49.27                    |  | 46.26                            |  | 34.76                   
|Larwin Square Shopping Center  |  | 65.76                    |  | 50.06                            |  | 0.00                    
|Laurentian Center              |  | 50.04                    |  | 48.24                            |  | 18.41                   
|Marina Village                 |  | 59.74                    |  | 49.59                            |  | 17.32                   
|Melrose Village Plaza          |  | 76.55                    |  | 67.75                            |  | 0.00                    
|Palmdale Center                |  | 86.67                    |  | 75.38                            |  | 0.00                    
|Pavilions Place                |  | 51.59                    |  | 36.77                            |  | 3.25                    
|Rancho Las Palmas              |  | 60.35                    |  | 40.53                            |  | 4.27                    
|San Dimas Marketplace          |  | 93.25                    |  | 89.65                            |  | 1.21                    
|Sycamore Plaza                 |  | 34.67                    |  | 28.23                            |  | 39.43                   
|Tustin Heights Shopping Center |  | 54.32                    |  | 60.72                            |  | 36.46                   
|Vineyard Village               |  | 86.52                    |  | 80.67                            |  | 0.00                    



|(1) |  | The company defines national tenants as any tenant that operates in at least four metropolitan areas located in more than one region, (i.e. northwest, northeast,
midwest, southwest or southeast); regional tenants as any tenant that operates in two or more metropolitan areas located within the same region; local tenants as any tenant that operates stores only within the same metropolitan area as the shopping
center.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Annualized base rent for all leases in place is calculated as follows: total base rent, calculated in accordance with GAAP, to be received during the entire term of
each lease, divided by the terms in months for such leases, multiplied by 12.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





23



---



National,
Regional and Local Tenant Mix

12/31/2002



|                              |  | National Tenants (1)     |  | Regional Tenants (1)             |  | Local Tenants (1)       
|----------------------------- |  | ------------------------ |  | -------------------------------- |  | ------------------------
|Property                      |  | % of Property Leased GLA |  | % of Property Ann. Base Rent (2) |  | % of Property Leased GLA
|Region Total/Weighted Average |  | 61.20                    |  | 53.80                            |  | 10.97                   
|                             
|WASHINGTON                    |  |                          |  |                                  |  |                         
|Auburn North                  |  | 84.77                    |  | 74.14                            |  | 11.78                   
|Blaine International Center   |  | 41.35                    |  | 41.75                            |  | 45.95                   
|Canyon Ridge Plaza            |  | 83.15                    |  | 76.45                            |  | 0.00                    
|Claremont Village Plaza       |  | 32.52                    |  | 34.50                            |  | 44.61                   
|Garrison Square               |  | 0.00                     |  | 0.00                             |  | 66.81                   
|Gateway Shopping Center       |  | 74.48                    |  | 69.10                            |  | 0.00                    
|Olympia Square                |  | 76.14                    |  | 67.67                            |  | 11.92                   
|Olympia West Center           |  | 71.95                    |  | 75.85                            |  | 11.09                   
|Pacific Commons               |  | 43.09                    |  | 44.76                            |  | 8.64                    
|Panther Lake                  |  | 61.83                    |  | 55.59                            |  | 6.08                    
|Sunset Square                 |  | 61.83                    |  | 50.62                            |  | 26.71                   
|Tacoma Central                |  | 75.04                    |  | 69.16                            |  | 20.38                   
|Region Total/Weighted Average |  | 61.99                    |  | 57.66                            |  | 20.67                   
|                             
|OREGON                        |  |                          |  |                                  |  |                         
|Albany Plaza                  |  | 78.37                    |  | 66.81                            |  | 5.08                    
|Bear Creek Plaza              |  | 88.06                    |  | 80.32                            |  | 5.82                    
|Canby Square Shopping Center  |  | 89.55                    |  | 87.94                            |  | 0.00                    
|East Burnside Plaza           |  | 14.45                    |  | 20.58                            |  | 81.29                   
|Hermiston Plaza               |  | 77.70                    |  | 58.41                            |  | 8.23                    
|Hood River Shopping Center    |  | 18.46                    |  | 15.37                            |  | 66.11                   
|Menlo Park Plaza              |  | 55.63                    |  | 63.94                            |  | 0.00                    
|Milwaukie Marketplace         |  | 86.57                    |  | 70.34                            |  | 4.28                    
|Oregon City Shopping Center   |  | 67.88                    |  | 50.55                            |  | 19.55                   
|Oregon Trail Center           |  | 71.15                    |  | 65.18                            |  | 3.68                    
|Pioneer Plaza                 |  | 69.70                    |  | 54.23                            |  | 12.16                   
|Powell Valley Junction        |  | 65.43                    |  | 63.38                            |  | 0.00                    
|Powell Villa                  |  | 23.53                    |  | 13.04                            |  | 0.00                    
|Rockwood Plaza                |  | 24.57                    |  | 16.08                            |  | 0.00                    



|(1) |  | The company defines national tenants as any tenant that operates in at least four metropolitan areas located in more than one region, (i.e. northwest, northeast,
midwest, southwest or southeast); regional tenants as any tenant that operates in two or more metropolitan areas located within the same region; local tenants as any tenant that operates stores only within the same metropolitan area as the shopping
center.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Annualized base rent for all leases in place is calculated as follows: total base rent, calculated in accordance with GAAP, to be received during the entire term of
each lease, divided by the terms in months for such leases, multiplied by 12.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



24



---





National, Regional and Local Tenant Mix

12/31/2002



|                                 |  | National Tenants (1)     |  | Regional Tenants (1)             |  | Local Tenants (1)       
|-------------------------------- |  | ------------------------ |  | -------------------------------- |  | ------------------------
|Property                         |  | % of Property Leased GLA |  | % of Property Ann. Base Rent (2) |  | % of Property Leased GLA
|Sandy Marketplace                |  | 41.63                    |  | 52.43                            |  | 51.78                   
|Southgate Shopping Center        |  | 70.63                    |  | 60.06                            |  | 0.00                    
|Sunset Esplanade                 |  | 76.31                    |  | 64.37                            |  | 12.73                   
|Sunset Mall                      |  | 72.20                    |  | 54.42                            |  | 8.99                    
|Tanasbourne Village              |  | 70.46                    |  | 60.34                            |  | 6.57                    
|Region Total/Weighted Average    |  | 67.03                    |  | 57.51                            |  | 12.51                   
|NEVADA                           |  |                          |  |                                  |  |                         
|Caughlin Ranch                   |  | 16.59                    |  | 24.01                            |  | 50.91                   
|Cheyenne Commons                 |  | 77.18                    |  | 70.93                            |  | 13.53                   
|Decatur Meadows                  |  | 76.06                    |  | 57.13                            |  | 15.86                   
|Eagle Station                    |  | 25.06                    |  | 37.44                            |  | 60.89                   
|Elko Junction Shopping Center    |  | 16.11                    |  | 20.90                            |  | 37.92                   
|Green Valley Town & Country      |  | 53.26                    |  | 38.78                            |  | 8.30                    
|Mira Loma Center                 |  | 41.35                    |  | 35.07                            |  | 38.93                   
|Rainbow Promenade                |  | 87.57                    |  | 80.57                            |  | 0.88                    
|Sahara Pavilion North            |  | 72.96                    |  | 61.33                            |  | 10.79                   
|Sahara Pavilion South            |  | 79.30                    |  | 74.65                            |  | 0.00                    
|West Town                        |  | 0.00                     |  | 0.00                             |  | 100.00                  
|Winterwood Pavilion              |  | 86.82                    |  | 76.87                            |  | 1.37                    
|Region Total/Weighted Average    |  | 61.28                    |  | 57.55                            |  | 20.36                   
|OTHER                            |  |                          |  |                                  |  |                         
|Country Club Center              |  | 40.60                    |  | 50.29                            |  | 0.00                    
|Maysville Marketsquare           |  | 88.23                    |  | 83.60                            |  | 2.91                    
|Memphis Retail Center            |  | 65.30                    |  | 65.32                            |  | 0.00                    
|Region Total/Weighted Average    |  | 74.88                    |  | 70.98                            |  | 1.79                    
|Portfolio Total/Weighted Average |  | 59.73                    |  | 55.63                            |  | 19.74                   



|(1) |  | The company defines national tenants as any tenant that operates in at least four metropolitan areas located in more than one region, (i.e. northwest, northeast,
midwest, southwest or southeast); regional tenants as any tenant that operates in two or more metropolitan areas located within the same region; local tenants as any tenant that operates stores only within the same metropolitan area as the shopping
center.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Annualized base rent for all leases in place is calculated as follows: total base rent, calculated in accordance with GAAP, to be received during the entire term of
each lease, divided by the terms in months for such leases, multiplied by 12.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





25



---



Anchor and
Non-Anchor Tenant Mix

12/31/2002



|                               |  | Anchor Tenants (1) |  | Non-Anchor Tenants (1)          
|------------------------------ |  | ------------------ |  | --------------------------------
|Property                       |  | % of Leased GLA    |  | % of Property Ann. Base Rent (2)
|NORTHERN CALIFORNIA            |  |                    |  |                                 
|Angels Camp Town Center        |  | 80.90              |  | 61.97                           
|Blossom Valley Plaza           |  | 53.86              |  | 36.33                           
|Brookvale Shopping Center      |  | 73.59              |  | 44.92                           
|Cable Park                     |  | 68.30              |  | 35.56                           
|Canal Farms                    |  | 63.06              |  | 49.56                           
|Century Center                 |  | 65.99              |  | 32.20                           
|Chico Crossroads               |  | 85.50              |  | 75.16                           
|Cobblestone                    |  | 51.47              |  | 34.65                           
|Commonwealth Square            |  | 42.54              |  | 21.00                           
|Country Gables Shopping Center |  | 42.88              |  | 26.56                           
|Creekside Center               |  | 65.05              |  | 32.69                           
|Currier Square                 |  | 45.73              |  | 48.74                           
|Dublin Retail Center           |  | 91.15              |  | 85.87                           
|Eastridge Plaza                |  | 65.64              |  | 56.99                           
|Elverta Crossing               |  | 58.29              |  | 38.53                           
|Fairmont Shopping Center       |  | 50.12              |  | 22.81                           
|Fashion Faire Place            |  | 48.00              |  | 32.04                           
|Glen Cove Center               |  | 76.30              |  | 66.17                           
|Glenbrook Shopping Center      |  | 51.58              |  | 32.28                           
|Heritage Park Shopping Center  |  | 47.74              |  | 32.27                           
|Heritage Place                 |  | 54.10              |  | 39.33                           
|Kmart Center                   |  | 74.18              |  | 49.65                           
|Laguna 99 Plaza                |  | 65.96              |  | 42.31                           
|Laguna Village                 |  | 73.30              |  | 67.85                           
|Lakewood Shopping Center       |  | 52.41              |  | 29.74                           
|Lakewood Village               |  | 57.03              |  | 49.79                           
|Manteca Marketplace            |  | 55.98              |  | 47.35                           
|Mission Ridge Plaza            |  | 60.10              |  | 50.45                           
|Monterey Plaza                 |  | 57.11              |  | 28.07                           
|Northridge Plaza               |  | 60.06              |  | 35.96                           
|Park Place                     |  | 54.46              |  | 38.17                           



|(1) |  | Anchors defined as single tenants which lease 15,000 square feet or more, non-anchors defined as tenants which lease less than 15,000 square feet.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Annualized base rent for all leases in place is calculated as follows: total base rent, calculated in accordance with GAAP, to be received during the entire term of
each lease, divided by the terms in months for such leases, multiplied by 12.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



26



---



Anchor and
Non-Anchor Tenant Mix

12/31/2002



|                               |  | Anchor Tenants (1) |  | Non-Anchor Tenants (1)          
|------------------------------ |  | ------------------ |  | --------------------------------
|Property                       |  | % of Leased GLA    |  | % of Property Ann. Base Rent (2)
|Pine Creek Shopping Center     |  | 46.63              |  | 31.16                           
|Plaza 580 Shopping Center      |  | 23.75              |  | 12.72                           
|Raleys Shopping Center        |  | 69.34              |  | 40.92                           
|Shops at Lincoln School        |  | 54.75              |  | 37.92                           
|Sky Park Plaza                 |  | 61.34              |  | 44.20                           
|Ukiah Crossroads               |  | 55.21              |  | 42.48                           
|Victorian Walk                 |  | 67.82              |  | 51.59                           
|Westwood Village               |  | 56.48              |  | 39.95                           
|Yreka Junction                 |  | 64.65              |  | 38.81                           
|Region Total/Weighted Average  |  | 60.29              |  | 41.37                           
|                              
|SOUTHERN CALIFORNIA            |  |                    |  |                                 
|Arlington Courtyard            |  | 0.00               |  | 0.00                            
|Bixby Hacienda Plaza           |  | 32.68              |  | 19.47                           
|Brookhurst Center              |  | 34.71              |  | 28.65                           
|Canyon Square Plaza            |  | 42.13              |  | 26.04                           
|Chino Town Square              |  | 59.75              |  | 49.52                           
|Encinitas Marketplace          |  | 45.66              |  | 20.05                           
|Gordon Ranch Marketplace       |  | 40.71              |  | 32.80                           
|Granary Square                 |  | 40.68              |  | 21.20                           
|Larwin Square Shopping Center  |  | 39.08              |  | 12.14                           
|Laurentian Center              |  | 39.64              |  | 32.08                           
|Marina Village                 |  | 40.86              |  | 28.33                           
|Melrose Village Plaza          |  | 51.40              |  | 34.19                           
|Palmdale Center                |  | 75.79              |  | 51.32                           
|Pavilions Place                |  | 46.05              |  | 32.93                           
|Rancho Las Palmas              |  | 35.21              |  | 9.67                            
|San Dimas Marketplace          |  | 47.34              |  | 38.93                           
|Sycamore Plaza                 |  | 62.27              |  | 21.33                           
|Tustin Heights Shopping Center |  | 62.36              |  | 39.77                           
|Vineyard Village               |  | 57.68              |  | 43.02                           
|Region Total/Weighted Average  |  | 46.83              |  | 29.95                           



|(1) |  | Anchors defined as single tenants which lease 15,000 square feet or more, non-anchors defined as tenants which lease less than 15,000 square feet.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Annualized base rent for all leases in place is calculated as follows: total base rent, calculated in accordance with GAAP, to be received during the entire term of
each lease, divided by the terms in months for such leases, multiplied by 12.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



27



---



Anchor and
Non-Anchor Tenant Mix

12/31/2002



|                              |  | Anchor Tenants (1) |  | Non-Anchor Tenants (1)          
|----------------------------- |  | ------------------ |  | --------------------------------
|Property                      |  | % of Leased GLA    |  | % of Property Ann. Base Rent (2)
|WASHINGTON                    |  |                    |  |                                 
|Auburn North                  |  | 65.47              |  | 42.92                           
|Blaine International Center   |  | 72.49              |  | 68.53                           
|Canyon Ridge Plaza            |  | 31.30              |  | 17.30                           
|Claremont Village Plaza       |  | 44.61              |  | 42.71                           
|Garrison Square               |  | 56.91              |  | 47.68                           
|Gateway Shopping Center       |  | 59.08              |  | 50.00                           
|Olympia Square                |  | 46.06              |  | 30.81                           
|Olympia West Center           |  | 56.65              |  | 61.20                           
|Pacific Commons               |  | 51.06              |  | 47.30                           
|Panther Lake                  |  | 33.84              |  | 18.84                           
|Sunset Square                 |  | 75.92              |  | 56.74                           
|Tacoma Central                |  | 70.23              |  | 54.15                           
|Region Total/Weighted Average |  | 59.94              |  | 46.30                           
|OREGON                        |  |                    |  |                                 
|Albany Plaza                  |  | 44.95              |  | 33.47                           
|Bear Creek Plaza              |  | 70.04              |  | 51.99                           
|Canby Square Shopping Center  |  | 65.30              |  | 68.57                           
|East Burnside Plaza           |  | 78.49              |  | 69.90                           
|Hermiston Plaza               |  | 51.72              |  | 28.17                           
|Hood River Shopping Center    |  | 62.69              |  | 60.67                           
|Menlo Park Plaza              |  | 34.73              |  | 42.26                           
|Milwaukie Marketplace         |  | 49.81              |  | 26.48                           
|Oregon City Shopping Center   |  | 71.26              |  | 44.59                           
|Oregon Trail Center           |  | 64.76              |  | 51.76                           
|Pioneer Plaza                 |  | 48.96              |  | 32.24                           
|Powell Valley Junction        |  | 79.72              |  | 67.93                           
|Powell Villa                  |  | 39.35              |  | 47.32                           
|Rockwood Plaza                |  | 48.70              |  | 33.16                           
|Sandy Marketplace             |  | 49.31              |  | 34.95                           
|Southgate Shopping Center     |  | 58.98              |  | 43.39                           
|Sunset Esplanade              |  | 58.94              |  | 36.00                           



|(1) |  | Anchors defined as single tenants which lease 15,000 square feet or more, non-anchors defined as tenants which lease less than 15,000 square feet.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Annualized base rent for all leases in place is calculated as follows: total base rent, calculated in accordance with GAAP, to be received during the entire term of
each lease, divided by the terms in months for such leases, multiplied by 12.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





28



---



Anchor and
Non-Anchor Tenant Mix

12/31/2002



|                                 |  | AnchorTenant (1) |  | Non-Anchor Tenant (1)           
|-------------------------------- |  | ---------------- |  | --------------------------------
|Property                         |  | % of Leased GLA  |  | % of Property Ann. Base Rent (2)
|Sunset Mall                      |  | 42.67            |  | 17.83                           
|Tanasbourne Village              |  | 47.62            |  | 26.82                           
|Region Total/Weighted Average    |  | 56.94            |  | 40.67                           
|NEVADA                           |  |                  |  |                                 
|Caughlin Ranch                   |  | 46.08            |  | 37.65                           
|Cheyenne Commons                 |  | 65.88            |  | 43.30                           
|Decatur Meadows                  |  | 56.42            |  | 32.26                           
|Eagle Station                    |  | 54.22            |  | 30.32                           
|Elko Junction Shopping Center    |  | 66.96            |  | 54.72                           
|Green Valley Town & Country      |  | 39.17            |  | 19.36                           
|Mira Loma Center                 |  | 53.40            |  | 47.27                           
|Rainbow Promenade                |  | 65.13            |  | 55.08                           
|Sahara Pavilion North            |  | 50.98            |  | 30.16                           
|Sahara Pavilion South            |  | 52.74            |  | 33.56                           
|West Town                        |  | 100.00           |  | 100.00                          
|Winterwood Pavilion              |  | 51.56            |  | 27.39                           
|Region Total/Weighted Average    |  | 57.99            |  | 39.43                           
|OTHER                            |  |                  |  |                                 
|Country Club Center              |  | 0.00             |  | 0.00                            
|Maysville Marketsquare           |  | 64.14            |  | 54.79                           
|Memphis Retail Center            |  | 0.00             |  | 0.00                            
|Region Total/Weighted Average    |  | 39.45            |  | 28.31                           
|Portfolio Total/Weighted Average |  | 56.53            |  | 38.84                           



|(1) |  | Anchors defined as single tenants which lease 15,000 square feet or more, non-anchors defined as tenants which lease less than 15,000 square feet.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Annualized base rent for all leases in place is calculated as follows: total base rent, calculated in accordance with GAAP, to be received during the entire term of
each lease, divided by the terms in months for such leases, multiplied by 12.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





29



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Major Tenants*
as of December 31, 2002



|                            |  |                  |  |                      |  |                      |   |  | Annualized Base Rent in Place at 12/31/2002 |           
|--------------------------- |  | ---------------- |  | -------------------- |  | -------------------- | - |  | ------------------------------------------- | ----------
|Tenants                     |  | Number of Leases |  | Leased GLA (Sq. Ft.) |  | % of Total Owned GLA |   |  | Total Ann. Base Rent ($) (1)                |           
|VONS/SAFEWAY/PAK N SAVE    |  | 18               |  | 879,076              |  | 6.33                 | % |  |                                             | 7,342,193 
|RALEYS                     |  | 18               |  | 1,073,053            |  | 7.72                 |   |  |                                             | 7,225,132 
|KROGER/RALPHS/QFC/FOOD4LESS |  | 10               |  | 448,778              |  | 3.23                 |   |  |                                             | 4,222,944 
|ALBERTSONS/SAVON            |  | 15               |  | 622,638              |  | 4.48                 |   |  |                                             | 4,043,665 
|RITE AID                    |  | 21               |  | 513,133              |  | 3.69                 |   |  |                                             | 3,429,560 
|WAL-MART                    |  | 3                |  | 316,588              |  | 2.28                 |   |  |                                             | 2,836,963 
|BLOCKBUSTER VIDEO           |  | 23               |  | 126,908              |  | 0.91                 |   |  |                                             | 2,403,731 
|ROSS DRESS FOR LESS         |  | 9                |  | 238,551              |  | 1.72                 |   |  |                                             | 2,080,474 
|HOLLYWOOD VIDEO             |  | 15               |  | 94,684               |  | 0.68                 |   |  |                                             | 1,772,839 
|SAVE MART                   |  | 7                |  | 250,914              |  | 1.81                 |   |  |                                             | 1,643,682 
|DOLLAR TREE                 |  | 23               |  | 225,974              |  | 1.63                 |   |  |                                             | 1,613,727 
|                            |  |                  |  |                      |  |                      |   |  |                                             |           
|Total:                      |  | 162              |  | 4,790,297            |  | 34.48                | % |  | $                                           | 38,614,910
|                            |  |                  |  |                      |  |                      |   |  |                                             |           



|* |  | Tenants which individually account for 1% or more of annualized base rent.
|- |  | --------------------------------------------------------------------------



|(1) |  | Annualized base rent for all leases in place at quarter end calculated as follows: total base rent, calculated in accordance with GAAP, to be received during the
entire term of each lease, divided by the terms in months for such leases, multiplied by 12.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Annualized base rent divided by gross leasable area.
|--- |  | ----------------------------------------------------



30



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Page: 36



Lease Expiration Analysis *



As of 12/31/2002



|                          |  |                       |   |            |                           |        |                                    |  |                       |   |        | Annualized Base Rent in Place at 12/31/2002
|------------------------- |  | --------------------- | - | ---------- | ------------------------- | ------ | ---------------------------------- |  | --------------------- | - | ------ | -------------------------------------------
|                          |  | Lease Expiration Year |   |            | Number of Leases Expiring |        | GLA Under Expiring Leases (Sq.Ft.) |  | % of Total Leased GLA |   |        | Total Ann. Base Rent ($) (2)               
|All Anchor Leases (1)     |  |                       |   |            |                           |        |                                    |  |                       |   |        |                                            
|1                         |  | 2003                  |   |            | 5                         |        | 126,417                            |  | 0.93                  | % |        | 885,194                                    
|2                         |  | 2004                  |   |            | 11                        |        | 413,381                            |  | 3.03                  | % |        | 2,253,254                                  
|3                         |  | 2005                  |   |            | 22                        |        | 491,403                            |  | 3.60                  | % |        | 3,933,297                                  
|4                         |  | 2006                  |   |            | 24                        |        | 942,816                            |  | 6.91                  | % |        | 7,849,594                                  
|5                         |  | 2007                  |   |            | 15                        |        | 432,731                            |  | 3.17                  | % |        | 2,706,733                                  
|6                         |  | 2008                  |   |            | 19                        |        | 667,041                            |  | 4.89                  | % |        | 4,658,099                                  
|7                         |  | 2009                  |   |            | 13                        |        | 445,054                            |  | 3.26                  | % |        | 3,529,436                                  
|8                         |  | 2010                  |   |            | 13                        |        | 423,325                            |  | 3.10                  | % |        | 3,693,025                                  
|9                         |  | 2011                  |   |            | 16                        |        | 495,760                            |  | 3.63                  | % |        | 4,285,276                                  
|10                        |  | 2012                  |   |            | 21                        |        | 735,521                            |  | 5.39                  | % |        | 6,077,649                                  
|11                        |  | 2013                  | + |            | 65                        |        | 2,632,128                          |  | 19.30                 | % |        | 22,249,463                                 
|                          |  |                       |   |            |                           |        |                                    |  |                       |   |        |                                            
|TOTAL/WEIGHTED AVERAGE    |  | 224                   |   | 7,805,577  |                           | 57.23  | %                                  |  | 62,121,020            |   | 39.46  | %                                          
|                          |  |                       |   |            |                           |        |                                    |  |                       |   |        |                                            
|                         
|All Non-Anchor Leases (1) |  |                       |   |            |                           |        |                                    |  |                       |   |        |                                            
|1                         |  | 2003                  |   |            | 341                       |        | 766,056                            |  | 5.62                  | % |        | 11,356,033                                 
|2                         |  | 2004                  |   |            | 402                       |        | 958,770                            |  | 7.03                  | % |        | 14,760,551                                 
|3                         |  | 2005                  |   |            | 412                       |        | 999,343                            |  | 7.33                  | % |        | 16,246,597                                 
|4                         |  | 2006                  |   |            | 336                       |        | 841,646                            |  | 6.17                  | % |        | 14,199,992                                 
|5                         |  | 2007                  |   |            | 349                       |        | 848,328                            |  | 6.22                  | % |        | 14,143,316                                 
|6                         |  | 2008                  |   |            | 129                       |        | 484,259                            |  | 3.55                  | % |        | 7,001,802                                  
|7                         |  | 2009                  |   |            | 59                        |        | 251,008                            |  | 1.84                  | % |        | 4,503,592                                  
|8                         |  | 2010                  |   |            | 54                        |        | 189,561                            |  | 1.39                  | % |        | 3,656,056                                  
|9                         |  | 2011                  |   |            | 33                        |        | 98,429                             |  | 0.72                  | % |        | 2,506,474                                  
|10                        |  | 2012                  |   |            | 56                        |        | 193,651                            |  | 1.42                  | % |        | 3,520,667                                  
|11                        |  | 2013                  | + |            | 56                        |        | 202,867                            |  | 1.49                  | % |        | 3,406,556                                  
|                          |  |                       |   |            |                           |        |                                    |  |                       |   |        |                                            
|TOTAL/WEIGHTED AVERAGE    |  | 2,227                 |   | 5,833,918  |                           | 42.77  | %                                  |  | 95,301,635            |   | 60.54  | %                                          
|                          |  |                       |   |            |                           |        |                                    |  |                       |   |        |                                            
|                         
|All Leases                |  |                       |   |            |                           |        |                                    |  |                       |   |        |                                            
|1                         |  | 2003                  |   |            | 346                       |        | 892,473                            |  | 6.54                  | % |        | 12,241,227                                 
|2                         |  | 2004                  |   |            | 413                       |        | 1,372,151                          |  | 10.06                 | % |        | 17,013,805                                 
|3                         |  | 2005                  |   |            | 434                       |        | 1,490,746                          |  | 10.93                 | % |        | 20,179,894                                 
|4                         |  | 2006                  |   |            | 360                       |        | 1,784,462                          |  | 13.08                 | % |        | 22,049,586                                 
|5                         |  | 2007                  |   |            | 364                       |        | 1,281,059                          |  | 9.39                  | % |        | 16,850,049                                 
|6                         |  | 2008                  |   |            | 148                       |        | 1,151,300                          |  | 8.44                  | % |        | 11,659,900                                 
|7                         |  | 2009                  |   |            | 72                        |        | 696,062                            |  | 5.10                  | % |        | 8,033,027                                  
|8                         |  | 2010                  |   |            | 67                        |        | 612,886                            |  | 4.49                  | % |        | 7,349,081                                  
|9                         |  | 2011                  |   |            | 49                        |        | 594,189                            |  | 4.36                  | % |        | 6,791,751                                  
|10                        |  | 2012                  |   |            | 77                        |        | 929,172                            |  | 6.81                  | % |        | 9,598,316                                  
|11                        |  | 2013                  | + |            | 121                       |        | 2,834,995                          |  | 20.79                 | % |        | 25,656,019                                 
|                          |  |                       |   |            |                           |        |                                    |  |                       |   |        |                                            
|TOTAL/WEIGHTED AVERAGE    |  | 2,451                 |   | 13,639,495 |                           | 100.00 | %                                  |  | 157,422,656           |   | 100.00 | %                                          
|                          |  |                       |   |            |                           |        |                                    |  |                       |   |        |                                            



Note: Number of Leases
expiring does not include tenants on a month-to-month agreement, whose combined occupancy total 153,669 sq. ft.



* Assumes no renewal options are exercised.



|(1) |  | The company defines anchors as single tenants which lease 15,000 square feet or more, non-anchors defined as tenants which lease less than 15,000 square feet.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Annualized base rent for all leases in place at report date calculated as follows: total base rent, calculated in accorance with GAAP, to be received during the
entire term of each lease, divided by the term in months for such leases, multiplied by 12.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Annualized base rent divided by gross leaseable area as of report date.
|--- |  | -----------------------------------------------------------------------



31



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ITEM 3.
LEGAL PROCEEDINGS



On
November 8, 2000, Bryant M. Bennett, as Trustee of the Bryant M. Bennett and Inga A. Bennett Trust U/A October 25, 1990, known as The Bennett Family Trust, filed a class action complaint in the Superior Court of the State of California, County of
Alameda, on behalf of himself and all others similarly situated, against us; Western, WPT; Bradley N. Blake; L. Gerald Hunt; Dennis D. Ryan; James L. Stell; Reginald B. Oliver; L. Michael Foley; Joseph P. Colmery; Revenue Properties (U.S.), Inc.;
and Stuart A. Tanz.



The allegations of the
complaint arise from our November 2000 acquisition of Western. Plaintiffs complaint alleges that the merger terms between us and Western were unfair and violated the defendants fiduciary obligations to Westerns shareholders. On
February 22, 2002, the Court granted Plaintiffs motion to certify a plaintiff class.



On October 25, 2002, the Court dismissed the fraud-based claims, the claims for breach of fiduciary duty in abuse of control and unjust enrichment, and dismissed in part the claim for breach of
fiduciary duty. On or about December 10, 2002, the parties reached a final agreement in principle to resolve the litigation. The proposed settlement provides for payment by us to the plaintiff class in the amount of $975,000. Our settlement proposal
is pending final approval by the Court. We intend to pursue collection of the settlement amount and the related legal costs from our insurance carriers.



In addition, we are a party to legal proceedings that arise in the normal course of business, which matters are generally covered by
insurance. The resolution of these matters cannot be predicted with certainty. However, in the opinion of management, based upon currently available information, any liability resulting from such proceedings, either individually or in the aggregate,
will not have a material adverse effect on our consolidated financial statements taken as a whole.



ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS



During the fourth quarter of 2002, no matters were submitted to a vote of our stockholders.



PART II



ITEM 5.
MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS



Our common stock began trading on the New York Stock Exchange on August 8, 1997, under the symbol PNP. On March 7, 2002
we had approximately 1,340 stockholders of record and approximately 14,100 beneficial owners. The following table sets forth, for the periods indicated, the high and low sales prices as reported by the New York Stock Exchange and the dividends
declared by us.



|                    |  | High |       | Low |   | Dividends Declared
|------------------- |  | ---- | ----- | --- | - | ------------------
|First Quarter 2001  |  | $    | 23.25 |     | $ | 21.55             
|Second Quarter 2001 |  | $    | 26.00 |     | $ | 21.95             
|Third Quarter 2001  |  | $    | 27.08 |     | $ | 25.10             
|Fourth Quarter 2001 |  | $    | 28.80 |     | $ | 26.40             
|First Quarter 2002  |  | $    | 30.87 |     | $ | 28.13             
|Second Quarter 2002 |  | $    | 34.18 |     | $ | 30.42             
|Third Quarter 2002  |  | $    | 34.75 |     | $ | 29.80             
|Fourth Quarter 2002 |  | $    | 36.85 |     | $ | 31.90             



The
fourth quarter 2001 and 2002 dividends on an annualized basis amount to $1.82 and $1.90 per share, respectively. All dividends will be made by us at the discretion of our board of directors and will depend upon our earnings, our financial condition
and any other factors our board of directors deems relevant. In order to qualify for the beneficial tax treatment accorded to REITs under the Internal Revenue Code, we are required to make distributions to holders of our shares in an amount at least
equal to 90% of our real estate investment trust taxable income, as defined in Section 857 of the Internal Revenue Code.



32



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ITEM 6.
SELECTED CONSOLIDATED FINANCIAL DATA



The following table sets forth our selected financial data on a historical basis. The following data should be read in connection with managements discussion and analysis of financial condition and results of operations and the
consolidated financial statements and notes thereto located elsewhere in this report.



SELECTED CONSOLIDATED FINANCIAL DATA

(In thousands, except share
data)



|                                                  |  | Years Ended December 31,
|------------------------------------------------- |  | ------------------------
|                                                  |  | 2002                    
|                                                  |  |                         
|STATEMENTS OF INCOME DATA:                        |  |                         
|Total revenue                                     |  | $                       
|Operating and general and administrative expenses |  |                         
|Merger related expenses                           |  |                         
|Depreciation and amortization                     |  |                         
|Interest expense                                  |  |                         
|Income from continuing operations (2)             |  |                         
|Discontinued operations                           |  |                         
|Net income                                        |  |                         
|Per share data:                                   |  |                         
|Income from continuing operation  diluted        |  |                         
|Discontinued operations  diluted                 |  |                         
|Net income  diluted                              |  |                         
|Distributions declared                            |  |                         



|                                     |  | As of December 31,
|------------------------------------ |  | ------------------
|                                     |  | 2002              
|BALANCE SHEET DATA:                  |  |                   
|Properties, net                      |  | $                 
|Total assets                         |  |                   
|Notes payable                        |  |                   
|Line of credit and term loan payable |  |                   
|Senior notes                         |  |                   
|Minority interests                   |  |                   
|Stockholders equity                 |  |                   



|(1) |  | Our consolidated statements of income and consolidated statements of cash flows have been revised from those originally reported for the years ended December 31,
2001, 2000, 1999 and 1998 to separately reflect the results of discontinued operations for properties that were sold during the year ended December 31, 2002. The revision had no impact on our consolidated balance sheets or statements of
stockholders equity. The revision had no impact on net income or net income per share of common stock for the years ended December 31, 2001, 2000, 1999 and 1998.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) |  | Income from continuing operations includes minority interests and gain on sale of real estate (excluding the amount included in discontinued operations in 2002).
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



33



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|ITEM 7. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- |  | -------------------------------------------------------------------------------------



Revision of Consolidated Statements of Income and Consolidated Statements of Cash Flows



Our consolidated statements of income and consolidated
statements of cash flows have been revised from those originally reported for the years ended December 31, 2001 and 2000 to separately reflect the results of discontinued operations for properties that were sold during the year ended December 31,
2002. The revision had no impact on our consolidated balance sheets or statements of stockholders equity. The revision had no impact on net income or net income per share of common stock for the years ended December 31, 2001 and 2000. See the
discussions of discontinued operations in the Results of Operations section below.



Cautionary Language



The discussions in Managements Discussion and Analysis of Financial Condition and Results of Operations contain forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 which reflect managements current views with respect to future events and financial performance. Forward-looking statements are subject to risks and uncertainties. Factors that could cause actual results to differ
materially from expectations include market valuations of our stock, financial performance and operations of our shopping centers, real estate conditions, execution of shopping center development programs, successful completion of renovations,
completion of pending acquisitions, changes in the availability of additional acquisitions, changes in local or national economic conditions, acts of terrorism or war and other risks detailed from time to time in reports filed with the Securities
and Exchange Commission.



Critical Accounting Policies



The following discussion and analysis of
financial condition and results of operations are based upon our consolidated financial statements, and the notes thereto, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The
preparation of these consolidated financial statements requires us to make a number of estimates and assumptions that affect the reported amounts and disclosures in the consolidated financial statements. On an ongoing basis, we evaluate our
estimates and assumptions based upon historical experience and various other factors and circumstances. We believe that our estimates and assumptions are reasonable for our current circumstances; however, actual results may differ from these
estimates and assumptions under different future conditions.



We believe that the estimates and assumptions that are most important to the portrayal of our financial condition and results of operations, in that they require our most subjective judgments, form the basis for the accounting
policies deemed to be most critical. These critical accounting policies include our estimates of useful lives in calculating depreciation expense on our shopping center properties and the ultimate recoverability, or impairment, of each shopping
center asset. If actual useful lives are different from our estimates this could result in changes to the results of our operations. Future adverse changes in market conditions or poor operating results of our shopping center properties could result
in losses or an inability to recover the carrying value of the properties that may not be reflected in the properties current carrying value, thereby possibly requiring an impairment charge in the future.



Overview



We receive income primarily from rental revenue from shopping center properties, including recoveries from
tenants, offset by operating and overhead expenses. Primarily as a result of our acquisition program, including the acquisition of Western Properties Trust described below, which included interests in 50 shopping centers, the financial data shows
increases in total revenue and total expenses from period to period.



During the year ended December 31, 2002, nine non-strategic assets were sold. During the year ended December 31, 2001, eight non-strategic assets were sold. The cash proceeds were used toward the purchase of six shopping
center assets in 2002 and four shopping center assets in 2001.



On November 13, 2000, we acquired Western Properties Trust, a California real estate investment trust. The transaction was a stock for stock exchange whereby Western common shares and units were exchanged for newly issued shares of
our common stock and operating subsidiary units, based upon a fixed exchange ratio of 0.62 of a share of our common stock per Western share or operating subsidiary unit. As a result, we issued 10,754,776 shares



34



---



of our common stock to holders
of Western common shares. We are also currently obligated to issue 54,869 shares of our common stock upon the exchange of operating subsidiary units held by limited partners of Pan Pacific (Pinecreek), L.P., formerly Western/Pinecreek, L.P., or pay
a cash amount, at our discretion. In connection with this transaction, we assumed $135,000,000 of Westerns debt obligations.



On November 5, 2002, we entered into an Agreement and Plan of Merger with Center Trust, Inc., a Maryland corporation. The transaction,
which closed on January 17, 2003, was a stock for stock exchange including assumption of debt whereby each share of Center Trust common stock was exchanged for 0.218 newly issued shares of our common stock. As a result, we issued 6,084,748 shares of
our common stock to Center Trust stockholders and are obligated to issue up to 284,263 shares of our common stock to limited partners of CT Operating Partnership, L.P. upon the exchange of operating partnership units held by them. The transaction
included interests in 27 shopping centers, two regional malls and two single tenant assets. We expect that the more significant part of our growth in the next year or two will come from rent increases from the re-leasing and re-tenanting initiatives
of the assets acquired in the Center Trust acquisition, additional acquisitions and the stabilization of other properties acquired during 2002 and 2001.



Results of Operations



Comparison of the Year Ended December 31, 2002 to the Year Ended December 31, 2001.



Total revenue increased by $13,997,000, or 7.8%, to
$192,993,000 for the year ended December 31, 2002, from $178,996,000 for the year ended December 31, 2001.



Rental revenue, which includes base rent and percentage rent, increased by $11,911,000, or 8.6%, to $150,244,000 for the year ended
December 31, 2002, from $138,333,000 for the year ended December 31, 2001. The increase in rental revenue resulted principally from portfolio occupancy increases and re-leasing and re-tenanting initiatives of six property acquisitions in 2002, four
property acquisitions in 2001 and the properties acquired through the Western transaction in November 2000.



Recoveries from tenants, which represents reimbursements from tenants for property operating expenses and property taxes, increased by
$4,644,000, or 14.6%, to $36,552,000 for the year ended December 31, 2002, from $31,908,000 for the year ended December 31, 2001. This increase resulted primarily from portfolio occupancy increases and re-leasing and re-tenanting initiatives of six
property acquisitions in 2002, four property acquisitions in 2001 and the properties acquired through the Western transaction in November 2000. In addition, recoveries from tenants increased because recoverable expenses increased. Recoveries from
tenants were 91.8% for the year ended December 31, 2002 compared to 90.9% for the year ended December 31, 2001.



Other income decreased by $1,875,000, or 23.7%, to $6,043,000 for the year ended December 31, 2002, from $7,918,000 for the year ended
December 31, 2001. The decrease resulted principally from a reduction of interest income on corporate notes receivable as certain notes were repaid in the fourth quarter of 2001 and during 2002 as well as a reduction in management fees which
resulted from an increase in our ownership percentage of certain subsidiary entities. The decrease also resulted from a reduction in lease termination fee income compared to prior year and an increase in common area maintenance billing adjustments
for 2001 that were credited back to tenants.



Property operating expenses increased by $3,048,000, or 14.1%, to $24,697,000 for the year ended December 31, 2002, from $21,649,000 for the year ended December 31, 2001. This increase resulted primarily from six property
acquisitions in 2002, four property acquisitions in 2001 as well as an increase in insurance costs as a result of added coverage. Property taxes increased by $1,675,000, or 12.5%, to $15,120,000 from $13,445,000 for the year ended December 31, 2002,
compared to the year ended December 31, 2001. The increase in property taxes was primarily the result of property tax re-assessments on the assets acquired in the Western transaction as well as property tax expense for the assets acquired in 2002
and 2001.



Depreciation and amortization
increased by $2,270,000, or 8.0%, to $30,763,000 for the year ended December 31, 2002, from $28,493,000 for the year ended December 31, 2001. This was primarily due to additional depreciation expense on tenant improvements, building renovations and
pad build-out expenditures incurred during 2001 and 2002 as well as depreciation expense on the assets acquired during 2002 and 2001.



Interest expense decreased by $270,000, or 0.6%, to $45,926,000 for the year ended December 31, 2002, from $46,196,000 for the year ended
December 31, 2001. The decrease was primarily the result of a reduction in the



35



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LIBOR component of our
borrowing cost under our revolving credit facility over the comparable period in the prior year. This decrease in our borrowing cost was partially offset by an increase in interest expense as a result of additional amounts drawn on our revolving
credit facility to finance properties acquired during 2002 and 2001. Interest expense also increased as a result of our issuance of $150,000,000, in aggregate principal amount, of senior notes in April 2001, our issuance of $55,000,000, in aggregate
principal amount, of senior notes in June 2002 and our issuance of $100,000,000, in aggregate principal amount, of senior notes in December 2002. The stated interest rates of 7.95%, 5.75% and 6.125% on the senior note issuances, respectively, are
higher than our cost to borrow funds under our revolving credit facility and term credit loan which were paid down with the net proceeds of the notes offerings.



General and administrative expenses increased by $258,000, or 2.8%, to $9,426,000 for the year ended December
31, 2002, from $9,168,000 for the year ended December 31, 2001. This increase resulted primarily from annual compensation increases during 2002. As a percentage of total revenue, general and administrative expenses were 4.9% for the year ended
December 31, 2002 as compared to 5.1% for the year ended December 31, 2001.



Gain on sale of real estate totaling $4,129,000 in 2001 resulted from the sale of eight non-strategic assets during the year ended December 31, 2001. Gain on sales of non-strategic assets in 2002 are
reported under discontinued operations.



Discontinued operations for the years ended December 31, 2002 and 2001 of $12,400,000 and $4,143,000, respectively, reflect the operating results of the nine non-strategic assets that were sold during the year ended December 31,
2002. Included in the discontinued operations of $12,400,000 for 2002 are gains on sales of real estate of $8,702,000.



Comparison of the Year Ended December 31, 2001 to the Year Ended December 31, 2000.



Total revenue increased by $59,859,000, or 50.2%, to
$178,996,000 for the year ended December 31, 2001, from $119,137,000 for the year ended December 31, 2000.



Rental revenue, which includes base rent and percentage rent, increased by $44,712,000, or 47.8%, to $138,333,000 for the year ended
December 31, 2001, from $93,621,000 for the year ended December 31, 2000. The increase in rental revenue resulted principally from four property acquisitions in 2001, three property acquisitions in 2000 and the acquisition of Western in November
2000.



Recoveries from tenants, which represents
reimbursements from tenants for property operating expenses and property taxes, increased by $10,476,000, or 48.9%, to $31,908,000 for the year ended December 31, 2001, from $21,432,000 for the year ended December 31, 2000. This increase resulted
primarily from the 2001 and 2000 acquisitions including Western. Recoveries from tenants were 90.9% of property operating expenses and property taxes for the year ended December 31, 2001 compared to 93.3% for the year ended December 31, 2000. The
decrease in the recovery percentage from prior year was primarily the result of a decrease in average portfolio occupancy during 2001 as a result of the Western acquisition. In addition, the Western lease agreements do not provide for as many costs
to be recoverable from tenants as the Pan Pacific lease agreements.



Other income increased by $4,198,000, or 112.8%, to $7,918,000 for the year ended December 31, 2001, from $3,720,000 for the year ended December 31, 2000. The increase resulted principally from approximately $3,674,000 of
interest income on corporate notes receivable related to real estate activities that were acquired as part of the Western acquisition.



Property operating expenses increased by $7,526,000, or 53.3%, to $21,649,000 for the year ended December 31, 2001, from $14,123,000 for
the year ended December 31, 2000. The increase in property operating expenses was primarily attributable to the 2001 and 2000 acquisitions, including Western. Property taxes increased by $4,590,000, or 51.8%, to $13,445,000 from $8,855,000 for the
year ended December 31, 2001, compared to the year ended December 31, 2000. The increase in property taxes was also primarily the result of the 2001 and 2000 acquisitions including Western.



Depreciation and amortization increased by $8,324,000, or
41.3%, to $28,493,000 for the year ended December 31, 2001, from $20,169,000 for the year ended December 31, 2000. This was primarily due to the 2001 and 2000 acquisitions, including Western.



36



---



Interest
expense increased by $14,084,000, or 43.9%, to $46,196,000 for the year ended December 31, 2001, from $32,112,000 for the year ended December 31, 2000, primarily as a result of the debt obligations assumed upon the acquisition of Western and
interest expense relating to funds drawn on our revolving credit facility to finance the seven other properties acquired during 2001 and 2000. Interest expense also increased as a result of our issuance of $150,000,000, in aggregate principal
amount, of senior notes in April 2001. The stated interest rate of 7.95% on the senior notes is higher than our cost to borrow funds under our revolving credit facility and term credit loan which were paid down with the net proceeds of the notes
offering. These increases were partially offset by a reduction in the LIBOR component of our borrowing cost under the revolving credit facility and term credit loan over the comparable period in the prior year.



General and administrative expenses increased by $4,063,000,
or 79.6%, to $9,168,000 for the year ended December 31, 2001, from $5,105,000 for the year ended December 31, 2000. This increase resulted primarily from an increase in salaries and benefits and other related expenses resulting from the acquisition
of Western as well as annual compensation increases during 2001. As a percentage of total revenue, general and administrative expenses were 5.1% for the year ended December 31, 2001 as compared to 4.3% for the year ended December 31, 2000.



Gain on sale of real estate totaling $4,129,000
resulted from the sale of eight non-strategic assets during the year ended December 31, 2001.



Discontinued operations for the years ended December 31, 2001 and 2000 of $4,143,000 and $906,000, respectively, reflect the operating results of the nine non-strategic assets that were sold during the
year ended December 31, 2002.



Funds from Operations



The White Paper on Funds from Operations
approved by the Board of Governors of the National Association of Real Estate Investment Trusts (NAREIT) in April 2002 (the White Paper) defines Funds from Operations as net income (loss) (computed in accordance with
accounting principles generally accepted in the United States of America, GAAP), excluding gains (or losses) sales of property, plus depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures.
We consider Funds from Operations an appropriate measure of performance of an equity REIT because it is predicated on cash flow analyses. We compute Funds from Operations in accordance with standards established by the White Paper. Our computation
of Funds from Operations may, however, differ from the methodology for calculating Funds from Operations used by other equity REITs and, therefore, may not be comparable to these other REITs. Funds from Operations should not be considered as an
alternative to net income (computed in accordance with GAAP) as a measure of our profitability, or as an alternative to cash flow from operations (computed in accordance with GAAP) as a measure of our liquidity, nor is it indicative of funds
available to fund our cash needs, including our ability to make distributions.



37



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The following
table presents our Funds from Operations:



|                                                                                  |  | For the years ended December 31, |            
|--------------------------------------------------------------------------------- |  | -------------------------------- | -----------
|                                                                                  |  | 2002                             |            
|Net income                                                                        |  | $                                | 77,652,000 
|Add:                                                                              |  |                                  |            
|Depreciation and amortization                                                     |  |                                  | 30,763,000 
|Depreciation on discontinued operations                                           |  |                                  | 567,000    
|Depreciation of unconsolidated entities                                           |  |                                  | 197,000    
|Operating subsidiary minority interests                                           |  |                                  | 1,457,000  
|Provision for loss on impairment                                                  |  |                                  |           
|Less:                                                                             |  |                                  |            
|Net gain on sale of real estate                                                   |  |                                  | (8,702,000 
|Depreciation of non-real estate corporate assets                                  |  |                                  | (560,000   
|                                                                                  |  |                                  |            
|Funds from Operations                                                             |  | $                                | 101,374,000
|                                                                                  |  |                                  |            
|Weighted average number of shares of common stock outstanding (assuming dilution) |  |                                  | 34,431,113 



Cash Flows



Comparison of the Year
Ended December 31, 2002 to the Year Ended December 31, 2001.



Net cash provided by operating activities increased by $8,650,000 to $83,190,000 for the year ended December 31, 2002, as compared to $74,540,000 for the year ended December 31, 2001. The increase was primarily the result of an
increase in operating income due to property acquisitions. This increase was offset by an increase in income from discontinued operations including the gain thereon, a decrease in the change in other assets and a decrease in accounts payable,
accrued expenses and other liabilities.



Net cash
used in investing activities increased by $56,708,000 to $103,019,000 for the year ended December 31, 2002, as compared to $46,311,000 for the year ended December 31, 2001. The increase was primarily the result of an increase in acquisitions of and
additions to properties, an increase in funds held in escrow pending property acquisitions and an increase in redemption of operating subsidiary units. These increases were offset by an increase in proceeds from sale of real estate, an increase in
collections of notes receivable and a decrease in the issuance of notes receivable.



Net cash provided by financing activities increased by $44,648,000 to $13,631,000 for the year ended December 31, 2002, as compared to net cash used in financing activities of $31,017,000 for the year
ended December 31, 2001. The increase primarily resulted from an increase in notes payable proceeds, an increase in line of credit proceeds, an increase in issuance of senior notes, a decrease in repurchase of common shares and an increase in
issuance of common shares. These increases were offset by an increase in line of credit payments and an increase in distributions paid.



Comparison of the Year Ended December 31, 2001 to the Year Ended December 31, 2000.



Net cash provided by operating activities increased by
$19,931,000 to $74,540,000 for the year ended December 31, 2001, as compared to $54,609,000 for the year ended December 31, 2000. The increase was primarily the result of an increase in operating income due to property acquisitions including
Western. This increase was offset by an increase in accrued interest to note receivable, an increase in other assets and an increase in net gain on sale of real estate.



38



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Net cash used
in investing activities decreased by $27,734,000 to $46,311,000 for the year ended December 31, 2001, as compared to $74,045,000 for the year ended December 31, 2000. The decrease was primarily the result of an increase in proceeds from sale of real
estate, a decrease in costs associated with the acquisition of Western and a decrease in other assets, offset by an increase in acquisitions of and additions to properties and an increase in notes receivable.



Net cash used in financing activities increased by $49,629,000
to $31,017,000 for the year ended December 31, 2001, as compared to net cash provided by financing activities of $18,612,000 for the year ended December 31, 2000. The increase primarily resulted from a decrease in line of credit proceeds, an
increase in repurchase of common stock and an increase in distributions paid, offset by an increase in issuance of senior notes and issuance of common stock.



Liquidity and Capital Resources



Our total market capitalization at December 31, 2002, was approximately $1,990,348,000, based on the market
closing price of our common stock at December 31, 2002 of $36.53 per share (assuming the conversion of 802,073 operating subsidiary units to common stock) and our debt outstanding of approximately $734,218,000 (exclusive of accounts payable and
accrued expenses). As a result, our debt to total market capitalization ratio was approximately 36.9% at December 31, 2002. Our board of directors adopted a policy of limiting our indebtedness to approximately 50% of our total market capitalization.
However, our board of directors may from time to time modify our debt policy in light of current economic or market conditions including but not limited to the relative costs of debt and equity capital, market conditions for debt and equity
securities and fluctuations in the market price of our common stock. Accordingly, we may increase or decrease our debt to market capitalization ratio beyond the limit described above.



In connection with our acquisition of Western in November 2000, we entered into a new financing arrangement
including a $300,000,000 revolving credit facility and a $100,000,000 term credit loan. Our revolving credit facility matures in January 2004 and our term credit loan was paid in full in July 2001. We expect to renegotiate our revolving credit
facility and extend its maturity date during 2003. At December 31, 2002, we had $234,000,000 available under our revolving credit facility. At our option, amounts borrowed under our revolving credit facility bear interest at either LIBOR plus 1.10%
or a reference rate. At our option, amounts borrowed under our term credit loan bore interest at either LIBOR plus 1.20% or a reference rate. The weighted average interest rate for short-term LIBOR contracts under our revolving credit facility at
December 31, 2002 was 2.97%. We will continue to use our revolving credit facility to take advantage of select acquisition opportunities as well as to provide funds for general corporate purposes. In April 2001, we issued $150,000,000 of 7.95%
senior notes due April 15, 2011. The net proceeds were used to repay borrowings under our revolving credit facility and our term credit loan. In June 2002, we issued $55,000,000 of 5.75% senior notes due June 29, 2007. In December 2002, we issued
$100,000,000 of 6.125% senior notes due January 15, 2013. The net proceeds were used to repay borrowings under our revolving credit facility.



We are the managing member of a joint venture, created for the purpose of developing Olympic Place in Walnut Creek, California. The joint
venture entered into a construction loan agreement in December 2001 to borrow up to $25,800,000 to fund the development. At December 31, 2002 and December 31, 2001, $15,601,000 and $0, respectively, had been drawn on the construction loan. At our
option, amounts borrowed under the construction loan bear interest at either LIBOR plus 1.95% or a reference rate. The loan is secured by the property and is guaranteed by us. We consolidate this joint venture.



We could enter into derivative financial instruments such as
interest rate swaps, caps and treasury locks in order to mitigate our interest rate risk on a related financial instrument. We are not a party to any derivative financial instruments at December 31, 2002. Further, we do not enter into derivative or
interest rate transactions for speculative or trading purposes nor do we enter into energy or commodity contracts.



We have entered into certain related party transactions with executive officers and affiliates of the Company. We believe that all related
party agreements were entered into at arms length. Information on these related party transactions can be found in our consolidated financial statements, and the notes thereto, appearing elsewhere in this report.



39



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We expect to
make distributions from net cash provided by operations. Operating cash flows in excess of amounts to be used for distributions will be invested primarily in short-term investments such as collateralized securities of the United States government or
its agencies, high-grade commercial paper and bank deposits or used to pay down outstanding balances on our revolving credit facility, if any.



The following table provides recent historical distribution information:



|Quarter Ended      |  | Date Declared      |  | Record Date        |  | Date Paid          |  | Distribution Per Share |      
|------------------ |  | ------------------ |  | ------------------ |  | ------------------ |  | ---------------------- | -----
|March 31, 2000     |  | February 9, 2000   |  | March 17, 2000     |  | April 14, 2000     |  | $                      | 0.420
|June 30, 2000      |  | June 13, 2000      |  | June 26, 2000      |  | July 21, 2000      |  | $                      | 0.420
|September 30, 2000 |  | September 15, 2000 |  | September 25, 2000 |  | October 20, 2000   |  | $                      | 0.420
|December 31, 2000  |  | October 30, 2000   |  | November 3, 2000   |  | November 15, 2000  |  | $                      | 0.280
|March 31, 2001     |  | January 30, 2001   |  | February 16, 2001  |  | March 15, 2001     |  | $                      | 0.455
|June 30, 2001      |  | May 16, 2001       |  | May 25, 2001       |  | June 15, 2001      |  | $                      | 0.455
|September 30, 2001 |  | August 14, 2001    |  | August 31, 2001    |  | September 14, 2001 |  | $                      | 0.455
|December 31, 2001  |  | November 13, 2001  |  | November 30, 2001  |  | December 14, 2001  |  | $                      | 0.455
|March 31, 2002     |  | February 7, 2002   |  | February 22, 2002  |  | March 15, 2002     |  | $                      | 0.475
|June 30, 2002      |  | May 9, 2002        |  | May 31, 2002       |  | June 14, 2002      |  | $                      | 0.475
|September 30, 2002 |  | August 15, 2002    |  | August 30, 2002    |  | September 13, 2002 |  | $                      | 0.475
|December 31, 2002  |  | October 30, 2002   |  | November 29, 2002  |  | December 13, 2002  |  | $                      | 0.475



|(1) |  | During the fourth quarter of 2000 we distributed a special, two-month dividend of $0.28 a share. This dividend was in connection with the Western acquisition, and
was paid to our stockholders of record before the merger transaction was closed to address the two-month shift in timing for the payment of our normal quarterly dividend in future periods.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We expect to meet our short-term liquidity requirements
generally through our current working capital and net cash provided by operations. We believe that our net cash provided by operations will be sufficient to allow us to make the distributions necessary to enable us to continue to qualify as a REIT.
We also believe that the foregoing sources of liquidity will be sufficient to fund our short-term liquidity needs for the foreseeable future.



We expect to meet our long-term liquidity requirements such as property acquisition and development, scheduled debt maturities,
renovations, expansions and other non-recurring capital improvements through long-term secured and unsecured indebtedness, the issuance of additional equity or debt securities and the use of net proceeds from the disposition of non-strategic assets.
We also expect to use funds available under our revolving credit facility to finance acquisition and development activities and capital improvements on an interim basis.



Off-Balance Sheet Arrangements



On September 30, 2002, Plaza Escuela Holding, Co., LLC completed a financing transaction with an initial
funding of $38,087,000, bearing interest at 6.8%, wherein we received a partial payoff of $36,754,000 on our note receivable of $44,349,000 on the Plaza Escuela property in Walnut Creek, California. The remaining balance of our note of $7,595,000
was converted to a 49% non-managing member interest in Plaza Escuela Holding Co., LLC, the entity that owns the property. Our equity position will earn a preferred return of 12%. In addition, we are entitled to receive 25% of the operating cash
flows from the property through November 2008. Proceeds from the note repayment and cash flow participation will be used primarily to repay borrowings under our revolving credit facility. At December 31, 2002, the balance of the loan was
$41,936,000. The loan is secured by the property and is not guaranteed by us. We account for this joint venture under the equity method. This unconsolidated debt is one of two off-balance-sheet financings to which we are a party.



We are a 50% general partner of a joint venture, which owns a
medical office building in Encinitas, California, North Coast Health Center. During the second quarter of 2002, the joint venture entered into a loan agreement for $18,000,000, bearing interest at 7%, to purchase the building on the property. At
December 31, 2002, the balance of the loan was $17,901,472. The loan is secured by the property and is not guaranteed by us. We account for this joint venture under the equity method. This unconsolidated debt is one of two off-balance sheet
financings to which we are a party.



40



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Contractual Obligations and
Contingent Liabilities



All of our
indebtedness is disclosed in our consolidated financial statements, and the notes thereto, appearing elsewhere in this report. Our indebtedness outstanding at December 31, 2002 includes regularly scheduled principal reductions, balloon payments,
scheduled senior note redemptions and amounts due on our revolving credit facility and our joint venture construction loan agreement as follows:



|Year                |  | Amount
|------------------- |  | ------
|2003                |  | $     
|2004                |  | $     
|2005                |  | $     
|2006                |  | $     
|2007                |  | $     
|2008                |  | $     
|2009                |  | $     
|2010                |  | $     
|2011                |  | $     
|2012 and thereafter |  | $     



The
payments due in the year 2003 include the balance drawn on our joint venture construction loan agreement at December 31, 2002 of $15,601,000. Payments due in the year 2004 include the balance drawn on our revolving credit facility at December 31,
2002 of $66,000,000 and senior note redemptions of $50,000,000. Payments due in 2006, 2007, 2008, 2010, 2011 and 2013 include senior note redemptions of $25,000,000, $55,000,000, $25,000,000, $25,000,000, $150,000,000 and $100,000,000, respectively.
With regard to the payments noted above, it is likely that we will not have sufficient funds on hand to repay these amounts at maturity. Therefore, we expect to refinance this debt either through additional debt financings secured by individual
properties or groups of properties, by unsecured private or public debt offerings or by additional equity offerings.



We have future obligations relating to leases for real estate and office equipment under operating leases expiring at various dates
through 2021. Rental expense was $348,000, $770,000 and $892,000 for the years ended December 31, 2002, 2001 and 2000, respectively. Minimum rentals under noncancellable operating leases in effect at December 31, 2002 were as follows:



|2003                |  | $ | 205,000  
|------------------- |  | - | ---------
|2004                |  |   | 200,000  
|2005                |  |   | 199,000  
|2006                |  |   | 198,000  
|2007                |  |   | 198,000  
|2008 and subsequent |  |   | 2,450,000
|                    |  |   |          
|                    |  | $ | 3,450,000
|                    |  |   |          



Inflation



Substantially all of our leases provide for
the recovery of real estate taxes and operating expenses we incur. In addition, many of the leases provide for fixed base rent increases or indexed escalations (based on the consumer price index or other measures) and percentage rent. We believe
that inflationary increases in expenses will be substantially offset by expense reimbursements, contractual rent increases and percentage rent.



Our revolving credit facility bears interest at a variable rate, which will be influenced by changes in short-term interest rates, and
will be sensitive to inflation.



Impact of Accounting
Pronouncements Issued but not Adopted by the Company



In June 2002, the Financial Accounting Standards Board (FASB) issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS No. 146 addresses financial accounting and reporting for costs associated with
exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain



41



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Costs Incurred in a
Restructuring). The provisions of this statement are effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. This statement will only have an effect on our consolidated financial
statements to the extent future exit or disposal activities relevant to SFAS No. 146 occur.



In October 2002, the FASB issued SFAS No. 147, Acquisitions of Certain Financial Institutions. This statement is not relevant to our operations and will not have an impact on our consolidated financial
statements.



In December 2002, the FASB issued
SFAS No. 148, Accounting for Stock-Based Compensation- Transition and Disclosure. This statement amends SFAS No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value
based method of accounting for stock-based employee compensation. In addition, this statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method used on reported results. This statement is effective for financial statements for fiscal years ending after December 15, 2002. SFAS No. 148 does not require a change in
the current accounting treatment used by us under SFAS No. 123, however, SFAS No. 148 will require additional disclosures within the notes to our consolidated financial statements.



In December 2002, the FASB issued Financial Interpretation No. 45 (FIN 45), Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN 45 requires guarantors to determine and recognize the fair value of a guarantee at the issuance date. In addition, FIN 45 contains detailed
disclosure requirements. The initial recognition and measurement provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002 and the disclosure requirements are effective for financial
statements of interim or annual periods ending after December 15, 2002. We are still in the process of determining the impact of FIN 45, but we believe that it will not require additional financial statement disclosure.



In January 2003, the FASB issued Financial Interpretation No.
46 (FIN 46), Consolidation of Variable Interest Entities (VIE). The FASB has transformed its exposure draft on accounting for special purpose entities into this interpretation on variable interest entities. FIN 46 provides new guidance on
consolidation of controlled entities, irrespective of voting interests. The financial statement disclosure requirements of FIN 46 are effective immediately and the new accounting requirements under FIN 46 are applicable to new VIEs created after
January 31, 2003. We are still in the process of determining the impact of FIN 46 but we believe that it will not have a material impact on our consolidated financial statements.



Controls and Procedures



Evaluation of Disclosure Controls and Procedures



We maintain disclosure controls and procedures that are designed to ensure that information required to be
disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms, and that such information is accumulated and communicated to
our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized
that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures. Also, we have investments in certain unconsolidated entities. As we do not control or manage these entities, our disclosure controls and procedures with respect to such entities are
necessarily substantially more limited than those we maintain with respect to our consolidated subsidiaries.



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



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



42



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ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



We are exposed to interest rate changes primarily as a result of our credit agreements and long-term debt used to maintain liquidity and fund capital expenditures and expansion of our real estate
investment portfolio and operations. Our interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs. To achieve our objectives, we borrow primarily at
fixed rates, although we use our line of credit for short-term borrowing purposes, and could enter into derivative financial instruments such as interest rate swaps, caps and treasury locks in order to mitigate our interest rate risk on a related
financial instrument. We are not a party to any derivative financial instruments at December 31, 2002. We do not enter into derivative or interest rate transactions for speculative or trading purposes nor do we enter into energy or commodity
contracts. Additionally, we do not believe that the interest rate risk represented by our floating rate debt is material as of December 31, 2002 in relation to total assets of $1,424,240,000 and a market capitalization of $1,256,130,000.



Our interest rate risk is monitored using a
variety of techniques. The table below presents the principal amounts, weighted average interest rates, fair values and other terms required by year of expected maturity to evaluate the expected cash flows and sensitivity to interest rate changes.



|                             |  | 2003 |        |   | 2004 |   |        | 2005 |  |   | 2006   |   |  | 2007 |        |   | Thereafter |   |         | Total |  |   | Fair Value(3) |  
|---------------------------- |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | - |  | ---- | ------ | - | ---------- | - | ------- | ----- |  | - | ------------- | -
|Fixed-rate debt (1)(2)       |  | $    | 4,760  |   |      | $ | 66,807 |      |  | $ | 11,563 |   |  | $    | 58,912 |   |            | $ | 131,277 |       |  | $ | 379,472       |  
|Average interest rate        |  |      | 7.68   | % |      |   | 7.78   | %    |  |   | 7.76   | % |  |      | 7.19   | % |            |   | 7.21    | %     |  |   | 7.34          | %
|Variable-rate LIBOR debt (1) |  | $    | 15,601 |   |      | $ | 66,000 |      |  |   |       |   |  |      |       |   |            |   |        |       |  |   |              |  
|Average interest rate        |  |      | 3.47   | % |      |   | 2.97   | %    |  |   |       |   |  |      |       |   |            |   |        |       |  |   |              |  



|(1) |  | Principal amounts shown are in thousands.
|--- |  | -----------------------------------------



|(2) |  | Excludes unamortized discounts on senior notes, net of unamortized premiums on notes payable, of $174,000.
|--- |  | ----------------------------------------------------------------------------------------------------------



|(3) |  | The fair value of notes payable, line of credit and senior notes payable approximates the carrying amount based on the current rates offered for loans with similar
risks and maturities.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The table
incorporates only those exposures that exist as of December 31, 2002, and does not consider those exposures or positions which could arise after that date. Moreover, because firm commitments are not presented in the table above, the information
presented therein has limited predictive value. As a result, our interest rate fluctuations will depend on the exposures that arise during the period and interest rates.



ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



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



ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND

FINANCIAL DISCLOSURE



Not applicable.



PART III



Certain information required by Part III is omitted from this
annual report on Form 10-K in that we will file a definitive proxy statement within 120 days after the end of our fiscal year pursuant to Regulation 14A for our Annual Meeting of Stockholders to be held in May 2003 (the Proxy Statement)
and the information included therein is incorporated herein by reference.



ITEM 10.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT



The information contained in the sections captioned Proposal One; Election of Directors and Compliance with Federal Securities Laws of the Proxy Statement is incorporated herein
by reference.



43



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ITEM 11.
EXECUTIVE COMPENSATION



The information contained in the section captioned Executive Compensation of the Proxy Statement is incorporated herein by reference.



ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT



The information contained in the section captioned Security Ownership of Certain Beneficial Owners and Management of the Proxy Statement is incorporated herein by reference.



ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS



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



ITEM 14.
CONTROLS AND PROCEDURES



We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act 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 Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In
designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and
management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Also, we have investments in certain unconsolidated entities. As we do not control or manage these entities,
our disclosure controls and procedures with respect to such entities are necessarily substantially more limited than those we maintain with respect to our consolidated subsidiaries.



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



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



44



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PART IV



ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K



| | (a) |  | Financial Statements and Schedules
| | --- |  | ----------------------------------



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



| | 1. |  | Consolidated Financial Statements:
| | -- |  | ----------------------------------



|                                                                                                     |  | Page (s)
|---------------------------------------------------------------------------------------------------- |  | --------
|Independent Auditors Report                                                                         |  | F-1     
|Consolidated Balance Sheets as of December 31, 2002 and 2001                                         |  | F-2     
|Consolidated Statements of Income for the years ended December 31, 2002, 2001 and
2000               |  | F-3     
|Consolidated Statements of Stockholders Equity for the years ended December 31,
2002, 2001 and 2000 |  | F-4     
|Consolidated Statements of Cash Flows for the years ended December 31, 2002, 2001 and
2000           |  | F-5     
|Notes to Consolidated Financial Statements                                                           |  | F-7     



| | 2. |  | Consolidated Financial Statement Schedule:
| | -- |  | ------------------------------------------



|Schedule IIIProperties and Accumulated Depreciation |  | F-26
|---------------------------------------------------- |  | ----





45



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Exhibits



|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                     
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|           
|3.1         |  | Articles of Amendment and Restatement of the Company (previously filed as Exhibit 3.1
to Pan Pacific Retail Properties, Inc.s Registration Statement on Form S-11 (Registration No. 333-28715) and incorporated herein by reference).                                                                                                                                                                          
|           
|3.2         |  | Amended and Restated Bylaws of the Company (previously filed as Exhibit 3.2 to Pan
Pacific Retail Properties, Inc.s Registration Statement on Form S-11 (Registration No. 333-28715) and incorporated herein by reference).                                                                                                                                                                                    
|           
|4.1         |  | Form of Certificate of Common Stock (previously filed as Exhibit 4.1 to Pan Pacific
Retail Properties, Inc.s Registration Statement on Form S-11 (Registration No. 333- 28715) and incorporated herein by reference).                                                                                                                                                                                          
|           
|4.2         |  | Form of Indenture relating to the Senior Notes (previously filed as Exhibit 4.1 to
Western Properties Trusts Registration Statement on Form S-3 (Registration No. 333-32721) and incorporated herein by reference).                                                                                                                                                                                            
|           
|4.3         |  | Form of Senior Notes (previously filed as Exhibit 4.1 to Western Properties
Trusts Registration Statement on Form S-3 (Registration No. 333-32721) and incorporated herein by reference).                                                                                                                                                                                                                      
|           
|4.4         |  | Form of Supplemental Indenture relating to the 7.1% Senior Notes due 2006 (previously
filed as Exhibit 4.5 to Western Properties Trusts Form 8-K dated September 24, 1997, and incorporated herein by reference).                                                                                                                                                                                              
|           
|4.5         |  | Form of Supplemental Indenture relating to the 7.2% Senior Notes due 2008 (previously
filed as Exhibit 4.6 to Western Properties Trusts Form 8-K, dated September 24, 1997, and incorporated herein by reference).                                                                                                                                                                                             
|           
|4.6         |  | Form of Supplemental Indenture relating to the 7.3% Senior Notes due 2010 (previously
filed as Exhibit 4.7 to Western Properties Trusts Form 8-K, dated September 24, 1997, and incorporated herein by reference).                                                                                                                                                                                             
|           
|4.7         |  | Form of Supplemental Indenture relating to the assumption by Pan Pacific Retail
Properties, Inc. of the Indenture relating to the 7.1% Senior Notes due 2006, the 7.2% Senior Notes due 2008 and the 7.3% Senior Notes due 2010 (previously filed as Exhibit 4.7 to Pan Pacific Retail Properties, Inc.s Registration Statement on
Form S-3 (Registration No. 333-51230) and incorporated herein by reference).
|           
|4.8         |  | Form of Indenture relating to the 7.875% Senior Notes due 2004 (previously filed as
Exhibit 4.2 to Western Properties Trust Registration Statement on Form S-3 (Registration No. 333-71270) and incorporated herein by reference).                                                                                                                                                                              
|           
|4.9         |  | Form of Supplemental Indenture relating to the assumption by Pan Pacific Retail
Properties, Inc. of the Indenture relating to the 7.875% Senior Notes due 2004 (previously filed as Exhibit 4.9 to Pan Pacific Retail Properties, Inc.s Registration Statement on Form S-3 (Registration No. 333-51230) and incorporated herein by
reference).                                                                 
|           
|4.10        |  | Form of Indenture relating to the Notes (previously filed as Exhibit 4.2 to Pan
Pacific Retail Properties, Inc.s Form 8-K, filed on April 10, 2001, and incorporated herein by reference).                                                                                                                                                                                                                     



46



---



|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|           
|4.11        |  | Form of 7.95% Notes due 2011 (previously filed as Exhibit 4.1 to Pan Pacific Retail
Properties, Inc.s Form 8-K, filed on April 10, 2001, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|           
|4.12        |  | Minutes of a meeting of the Pricing Committee held on April 6, 2001 designating the
terms of 7.95% Notes due 2011 (previously filed as Exhibit 4.3 to Pan Pacific Retail Properties, Inc.s Form 8-K, filed on April 10, 2001, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|           
|4.13        |  | Form of 5.75% Note due 2007 (previously filed as Exhibit 4.1 to Pan Pacific Retail
Properties, Inc.s Current Report on Form 8-K, dated June 20, 2002, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|           
|4.14        |  | Minutes of a meeting of the Pricing Committee held on June 13, 2002 designating the
terms of the 5.75% Notes Due 2007 (previously filed as Exhibit 4.3 of Pan Pacific Retail Properties, Inc.s Current Report on Form 8-K, dated June 20, 2002, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|           
|4.15        |  | Form of 6.125% Notes due 2013 (previously filed as Exhibit 4.1 to Pan Pacific Retail
Properties, Inc.s Form 8-K, filed on December 16, 2002, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|           
|4.16        |  | Minutes of a meeting of the Pricing Committee held on December 12, 2002 designating
the terms of 6.125% Notes due 2013 (previously filed as Exhibit 4.3 to Pan Pacific Retail Properties, Inc.s Form 8-K, filed on December 16, 2002, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|           
|4.17        |  | Stockholders Rights Agreement, dated as of November 5, 2002, by and among Pan
Pacific Retail Properties, Inc., Lazard Frères Real Estate Investors L.L.C., LF Strategic Realty Investors L.P., Prometheus Western Retail Trust and Prometheus Western Retail, LLC (previously filed as Exhibit 4.1 to Pan Pacific Retail
Properties, Inc.s Current Report on Form 8-K, dated November 7, 2002 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|           
|4.18        |  | Registration Rights Agreement dated as of January 17, 2003 by and among Pan Pacific
Retail Properties, Inc. and Myrtle Gronske, the Harry J. Frank, Jr. and Margaret S. Frank Family Trust U/A 5/9/91, Hughes Investments, Visalia MKP, Inc., HI-Loma, HI-NC, Hughes Milliken Associates, CJJ Limited Partnership, Bartfam, Cecile C.
Bartman, Trustee under the Will of Bernard Citron, Deceased, Cecile Citron Bartman Trust dated September 26, 2001, Rebecca Jean Speer Trust U/A/D November 9, 1994, Doreann Speer Gibson Trust U/A/D October 13, 1989, William A. Speer, Jr. Irrevocable
Trust U/A/D October 18, 1988 F/B/O Rebecca Speer, William A. Speer, Jr. Irrevocable Trust U/A/D October 18, 1988 F/B/O Linda Speer Fortune, Trust D, created under the Will of W. Arnet Speer aka William A. Speer, deceased, under the
preliminary decree of distribution of his estate, entered on December 15, 1978, in Judgment Book 1193, page 428, Superior Court of the State of California, County of San Diego, Case No. 114411 and Trust A, created under the Will of W.
Arnet Speer aka William A. Speer, deceased, under the preliminary decree of distribution of his estate, entered on December 15, 1978, in Judgment Book 1193, page 428, Superior Court of the State of California, County of San Diego, Case No. 114411
(previously filed as Exhibit 4.18 to Pan Pacific Retail Properties, Inc.s Registration Statement on Form S-3 (Registration No. 333- 103498) and incorporated herein by reference).



47



---



|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|           
|4.19        |  | Registration Rights Agreement dated as of January 17, 2003 by and among Pan Pacific
Retail Properties, Inc. and Saul Kreshek, Ernest Grossman and Margaret Lewicki (previously filed as Exhibit 4.19 to Pan Pacific Retail Properties, Inc.s Registration Statement on Form S-3 (Registration No. 333-103498) and incorporated herein
by reference).                                                                                                                                                                                                                                                                                                                 
|           
|10.1        |  | The 1997 Stock Option and Incentive Plan of Pan Pacific Retail Properties, Inc.
(previously filed as Exhibit 10.1 to Pan Pacific Retail Properties, Inc.s Registration Statement on Form S-11 (Registration No. 333-28715) and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                    
|           
|10.2        |  | The 2000 Stock Incentive Plan of Pan Pacific Retail Properties, Inc. (previously
filed as Appendix A to Pan Pacific Retail Properties, Inc.s Proxy Statement for the 2000 Annual Meeting of Stockholders).                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|           
|10.3        |  | Form of Officers and Directors Indemnification Agreement (previously filed as Exhibit
10.2 to Pan Pacific Retail Properties, Inc.s Registration Statement on Form S-11 Registration No. 333-28715) and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                            
|           
|10.4        |  | Form of Non-Competition Agreement (previously filed as Exhibit 10.7 to Pan Pacific
Retail Properties, Inc.s Registration Statement on Form S-11 (Registration No. 333- 28715) and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|           
|10.5        |  | Revolving credit facility, dated as of November 13, 2000, by and among Pan Pacific
Retail Properties, Inc., certain subsidiaries of Pan Pacific Retail Properties, Inc. and Bank of America, N.A., as Administrative Agent, First Union National Bank, as Syndication Agent, and U.S. Bank, National Association, as Documentation Agent,
Dresdner Bank AG, New York and Grand Cayman Branches, Guaranty Federal Banks, F.S.B., as Co- Agent and Wells Fargo Bank, N.A., as Co-Agent (previously filed as Exhibit 10.9 to Pan Pacific Retail Properties, Inc.s Registration Statement on Form
S-3 (Registration No. 333-51230) and incorporated herein by reference).
|           
|10.6        |  | Term credit loan, dated as of November 13, 2000, by and among Pan Pacific Retail
Properties, Inc., certain subsidiaries of Pan Pacific Retail Properties, Inc. and Bank of America, N.A., as Administrative Agent (previously filed as Exhibit 10.10 to Pan Pacific Retail Properties, Inc.s Registration Statement on Form S-3
(Registration No. 333- 51230) and incorporated herein by reference).                                                                                                                                                                                                                                                                 
|           
|10.7        |  | Members Interest Purchase Agreement, dated as of August 13, 1999, by and among
Pan Pacific Retail Properties, Inc., Pan Pacific (RLP), Inc. and Stanley W. Gribble (previously filed as Exhibit 10.15 to Pan Pacific Retail Properties, Inc.s Registration Statement on Form S-4 (Registration No. 333-45944) and incorporated
herein by reference).                                                                                                                                                                                                                                                                                                                
|           
|10.8        |  | Loan Assumption and Modification Agreement, dated as of September 23, 1999, by and
between Pan Pacific Retail Properties, Inc. and La Salle National Bank (previously filed as Exhibit 10.16 to Pan Pacific Retail Properties, Inc.s Registration Statement on Form S-4 (Registration No. 333-45944) and incorporated herein by
reference).                                                                                                                                                                                                                                                                                                                          
|           
|10.9        |  | Operating Agreement of Pan Pacific (Rancho Las Palmas), LLC, dated as of September
23, 1999 (previously filed as Exhibit 10.17 to Pan Pacific Retail Properties, Inc.s Registration Statement on Form S-4 (Registration No. 333-45944) and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                        



48



---



|Exhibit No. |   |  | Description                                                                                                                                                                                                                                                                                                                                               
|----------- | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|           
|10.10       |   |  | Contribution Agreement and Escrow Instructions, dated as of August 13, 1999, by and
between Pan Pacific Retail Properties, Inc. and Rancho Las Palmas Center Associates (previously filed as Exhibit 10.18 to Pan Pacific Retail Properties, Inc.s Registration Statement on Form S-4 (Registration No. 333-45944) and incorporated
herein by reference).
|           
|10.11       |   |  | Form of Second Amended and Restated Employment Agreement, dated as of October 29,
2001, between Pan Pacific Retail Properties, Inc. and Mr. Stuart A. Tanz (previously filed as Exhibit 10.11 to Pan Pacific Retail Properties, Inc.s Annual Report on Form 10-K for the year ended December 31, 2001 and incorporated herein by
reference).             
|           
|10.12       |   |  | Form of Employment Agreement, dated as of October 29, 2001, between Pan Pacific
Retail Properties, Inc. and Mr. Joseph B. Tyson (previously filed as Exhibit 10.11 to Pan Pacific Retail Properties, Inc.s Annual Report on Form 10-K for the year ended December 31, 2001 and incorporated herein by
reference).                                        
|           
|10.13       |   |  | Form of Second Amended and Restated Employment Agreement, dated as of October 30,
2001, between Pan Pacific Retail Properties, Inc. and Mr. Jeffrey S. Stauffer (previously filed as Exhibit 10.11 to Pan Pacific Retail Properties, Inc.s Annual Report on Form 10-K for the year ended December 31, 2001 and incorporated herein by
reference).        
|           
|10.14       |   |  | Form of Restricted Stock Agreement between Pan Pacific Retail Properties, Inc. and
each of Messrs. Stuart A. Tanz, Jeffrey S. Stauffer and Joseph B. Tyson (previously filed as Exhibit 10.11 to Pan Pacific Retail Properties, Inc.s Annual Report on Form 10-K for the year ended December 31, 2001 and incorporated herein by
reference).             
|           
|10.15       |   |  | Second Amended and Restated Agreement of Limited Partnership of CT Operating
Partnership, L.P., dated as of January 17, 2003 (previously filed as Exhibit 10.1 to Pan Pacific Retail Properties, Inc.s Registration Statement on Form S-3 (Registration No. 333-103498) and incorporated herein by
reference).                                           
|           
|21.1        | * |  | Subsidiaries of the Registrant.                                                                                                                                                                                                                                                                                                                           
|           
|23.1        | * |  | Consent of KPMG LLP.                                                                                                                                                                                                                                                                                                                                      



|* |  | Filed Herewith
|- |  | --------------

|
|



(b) Reports on
Form 8-K.



The Company filed three Current
Reports on Form 8-K during the quarter ended December 31, 2002.



The report filed on November 7, 2002 reported under Item 5 that the Company entered into an Agreement and Plan of Merger, dated November 5, 2002 (the Merger Agreement). Pursuant to the Merger Agreement, holders of
outstanding shares of Center Trust common stock would receive 0.218 shares of Pan Pacific common stock in exchange for each share of Center Trust common stock held by them. The Company also reported on November 7, 2002 that it had entered into a
Stockholder Voting Agreement with certain executive officers of Center Trust (the Officer Voting Agreement) pursuant to which such executive officers, among other things, agreed to vote in favor of the merger. Additionally, the Company
reported that it had entered into a Stockholder Voting Agreement (the Lazard Voting Agreement) with Lazard Frères Real Estate Investors L.L.C., a New York limited liability company, LF Strategic Realty Investors L.P., a Delaware
limited partnership, Prometheus Western Retail Trust, a Maryland real estate investment trust, Prometheus Western Retail, LLC, a Delaware limited liability company (the Lazard Entities) pursuant to which the Lazard Entities, among other
things, agreed to vote shares representing 48.07% of Center Trusts outstanding common stock in favor of the merger. Finally, the report



49



---



provided that the Company had
entered into a Stockholders Rights Agreement (the Rights Agreement) with the Lazard Entities. Pursuant to the Rights Agreement, the Company agreed to file a shelf registration statement relating to the resale of the shares of Pan
Pacific common stock issued to the Lazard Entities in connection with the merger.



The report filed on December 11, 2002 reported under Item 5 that the date of the Center Trust special meeting of stockholders at which the Center Trust stockholders would be asked to consider and vote
upon a proposal to approve the merger for Center Trust, would be scheduled for January 15, 2003. The report further included Pan Pacifics unaudited pro forma condensed consolidated balance sheet as of September 30, 2002 and Pan Pacifics
unaudited pro forma condensed consolidated statements of income for the year ended December 31, 2001 and the nine months ended September 30, 2002 and notes thereto as Exhibit 99.1 and Pacifics pro forma ratio of earnings to fixed charges for
the year ended December 31, 2001 and the nine months ended September 30, 2002 as Exhibit 99.2.



The report filed on December 16, 2002 reported under Item 5 that Pan Pacific had executed a terms agreement, which included the provisions of an underwriting agreement, for the issuance and sale of a
$100,000,000 aggregate principal amount of its 6.125% Notes due 2013.





50



---



SIGNATURES



Pursuant to the requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on March 14, 2003.



|    |  | PAN PACIFIC RETAIL PROPERTIES, INC.                                      |  |  |  |    
|--- |  | ------------------------------------------------------------------------ |  |  |  | ---
|   
|By: |  | /s/    STUART A.
TANZ                                                    |  |  |  | By:
|    |  | Stuart A. Tanz Director, Chairman, Chief Executive Officer
and President |  |  |  |    



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



|Signature                                   |  | Title    |  | Date          
|------------------------------------------- |  | -------- |  | --------------
|                                           
|/s/    MARK J.
RIEDYMark J. Riedy           |  | Director |  | March 14, 2003
|                                           
|/s/    BERNARD M. FELDMANBernard M.
Feldman |  | Director |  | March 14, 2003
|                                           
|/s/    DAVID P.
ZIMELDavid P. Zimel         |  | Director |  | March 14, 2003
|                                           
|/s/    JOSEPH P.
COLMERYJoseph P. Colmery   |  | Director |  | March 14, 2003



51



---



CERTIFICATIONS



I, Stuart A. Tanz, certify
that:



1. I have reviewed this annual report on Form 10-K of Pan
Pacific Retail Properties, Inc.;



2. Based on my knowledge, this
annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this annual report;



3. Based on my knowledge,
the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented
in this annual report;



4. The registrants other certifying
officer and I are responsible for establishing and maintaining the disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:



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



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



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



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



a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants ability to record, process, summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and



b) any fraud, whether or not material, that
involves management or other employees who have a significant role in the registrants internal controls; and



6. The registrants other certifying officer and I have indicated in this annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.



|                   
|-------------------
|Date: March 7, 2003
|                   



52



---



I, Joseph B. Tyson, certify
that:



1. I have reviewed this annual report on Form 10-K of Pan
Pacific Retail Properties, Inc.;



2. Based on my knowledge, this
annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this annual report;



3. Based on my knowledge,
the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented
in this annual report;



4. The registrants other certifying
officer and I are responsible for establishing and maintaining the disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:



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



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



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



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



a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants ability to record, process, summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and



b) any fraud, whether or not material, that
involves management or other employees who have a significant role in the registrants internal controls; and



6. The registrants other certifying officer and I have indicated in this annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.



|                   
|-------------------
|Date: March 7, 2003
|                   





53



---



INDEPENDENT
AUDITORS REPORT



The Board
of Directors

Pan Pacific Retail Properties, Inc.:



We have audited the accompanying consolidated balance sheets
of Pan Pacific Retail Properties, Inc. and subsidiaries as of December 31, 2002 and 2001, and the related consolidated statements of income, stockholders equity and cash flows for each of the years in the three-year period ended December 31,
2002. In connection with our audits of the consolidated financial statements, we also have audited the accompanying financial statement schedule III. These consolidated financial statements and financial statement schedule are the responsibility of
the Companys management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.



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



In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Pan Pacific Retail Properties, Inc. and subsidiaries as of December 31, 2002 and 2001, and
the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the
related financial statement schedule III, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.



KPMG LLP



San Diego, California

January 31, 2003



F-1



---



PAN PACIFIC
RETAIL PROPERTIES, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)



|                                                                                                                                                                                                                           |  | December 31, 2002 |           |   | December 31, 2001 |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | --------- | - | ----------------- | -
|ASSETS:                                                                                                                                                                                                                    |  |                   |           |   |                   |  
|Properties, at cost:                                                                                                                                                                                                       |  |                   |           |   |                   |  
|Land                                                                                                                                                                                                                       |  | $                 | 371,427   |   |                   | $
|Buildings and improvements                                                                                                                                                                                                 |  |                   | 1,018,837 |   |                   |  
|Tenant improvements                                                                                                                                                                                                        |  |                   | 40,826    |   |                   |  
|                                                                                                                                                                                                                           |  |                   |           |   |                   |  
|                                                                                                                                                                                                                           |  |                   | 1,431,090 |   |                   |  
|Less accumulated depreciation and amortization                                                                                                                                                                             |  |                   | (125,057  | ) |                   |  
|                                                                                                                                                                                                                           |  |                   |           |   |                   |  
|                                                                                                                                                                                                                           |  |                   | 1,306,033 |   |                   |  
|Investments in unconsolidated entities                                                                                                                                                                                     |  |                   | 9,050     |   |                   |  
|Cash and cash equivalents                                                                                                                                                                                                  |  |                   | 1,284     |   |                   |  
|Accounts receivable (net of allowance for doubtful accounts of $1,879 and $1,680,
respectively)                                                                                                                            |  |                   | 10,142    |   |                   |  
|Accrued rent receivable (net of allowance for doubtful accounts of $2,130 and $1,928,
respectively)                                                                                                                        |  |                   | 19,167    |   |                   |  
|Notes receivable                                                                                                                                                                                                           |  |                   | 15,891    |   |                   |  
|Deferred lease commissions (including unamortized related party amounts of $5,189 and
$4,279, respectively, and net of accumulated amortization of $4,087 and $3,368, respectively)                                        |  |                   | 7,398     |   |                   |  
|Prepaid expenses                                                                                                                                                                                                           |  |                   | 10,397    |   |                   |  
|Other assets                                                                                                                                                                                                               |  |                   | 44,878    |   |                   |  
|                                                                                                                                                                                                                           |  |                   |           |   |                   |  
|                                                                                                                                                                                                                           |  | $                 | 1,424,240 |   |                   | $
|                                                                                                                                                                                                                           |  |                   |           |   |                   |  
|LIABILITIES AND STOCKHOLDERS EQUITY:                                                                                                                                                                                      |  |                   |           |   |                   |  
|Notes payable                                                                                                                                                                                                              |  | $                 | 239,541   |   |                   | $
|Line of credit payable                                                                                                                                                                                                     |  |                   | 66,000    |   |                   |  
|Senior notes                                                                                                                                                                                                               |  |                   | 428,677   |   |                   |  
|Accounts payable, accrued expenses and other liabilities                                                                                                                                                                   |  |                   | 25,583    |   |                   |  
|                                                                                                                                                                                                                           |  |                   |           |   |                   |  
|                                                                                                                                                                                                                           |  |                   | 759,801   |   |                   |  
|Minority interests                                                                                                                                                                                                         |  |                   | 15,804    |   |                   |  
|                                                                                                                                                                                                                           |  |                   |           |   |                   |  
|Stockholders equity:                                                                                                                                                                                                      |  |                   |           |   |                   |  
|Preferred stock par value $.01 per share, 30,000,000 authorized shares, no shares issued
and outstanding at December 31, 2002 and 2001, respectively                                                                       |  |                   |          |   |                   |  
|Common stock par value $.01 per share, 100,000,000 authorized shares, 33,584,186 and
32,789,913 shares issued and outstanding, net of 1,187,999 and 1,000,000 treasury shares, at December 31, 2002 and 2001, respectively |  |                   | 336       |   |                   |  
|Paid in capital in excess of par value                                                                                                                                                                                     |  |                   | 731,069   |   |                   |  
|Deferred compensation                                                                                                                                                                                                      |  |                   | (4,345    | ) |                   |  
|Accumulated deficit                                                                                                                                                                                                        |  |                   | (78,425   | ) |                   |  
|                                                                                                                                                                                                                           |  |                   |           |   |                   |  
|                                                                                                                                                                                                                           |  |                   | 648,635   |   |                   |  
|                                                                                                                                                                                                                           |  |                   |           |   |                   |  
|                                                                                                                                                                                                                           |  | $                 | 1,424,240 |   |                   | $
|                                                                                                                                                                                                                           |  |                   |           |   |                   |  



See
accompanying notes to consolidated financial statements.



F-2



---



PAN PACIFIC
RETAIL PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except share data)



|                                                                                                                     |  | For the Years Ended December 31, |        
|-------------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | -------
|                                                                                                                     |  | 2002                             |        
|REVENUE:                                                                                                             |  |                                  |        
|Base rent                                                                                                            |  | $                                | 148,135
|Percentage rent                                                                                                      |  |                                  | 2,109  
|Recoveries from tenants                                                                                              |  |                                  | 36,552 
|Income from unconsolidated entities                                                                                  |  |                                  | 154    
|Other                                                                                                                |  |                                  | 6,043  
|                                                                                                                     |  |                                  |        
|                                                                                                                     |  |                                  | 192,993
|                                                                                                                     |  |                                  |        
|EXPENSES:                                                                                                            |  |                                  |        
|Property operating                                                                                                   |  |                                  | 24,697 
|Property taxes                                                                                                       |  |                                  | 15,120 
|Depreciation and amortization                                                                                        |  |                                  | 30,763 
|Interest                                                                                                             |  |                                  | 45,926 
|General and administrative                                                                                           |  |                                  | 9,426  
|Merger related expenses                                                                                              |  |                                  |       
|Other                                                                                                                |  |                                  | 352    
|                                                                                                                     |  |                                  |        
|                                                                                                                     |  |                                  | 126,284
|                                                                                                                     |  |                                  |        
|INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY INTERESTS, GAIN ON SALE OF REAL ESTATE
AND DISCONTINUED OPERATIONS |  |                                  | 66,709 
|Minority interests                                                                                                   |  |                                  | (1,457 
|Gain on sale of real estate                                                                                          |  |                                  |       
|Discontinued operations                                                                                              |  |                                  | 12,400 
|                                                                                                                     |  |                                  |        
|NET INCOME                                                                                                           |  | $                                | 77,652 
|                                                                                                                     |  |                                  |        
|Basic earnings per share:                                                                                            |  |                                  |        
|Income from continuing operations                                                                                    |  | $                                | 1.95   
|Discontinued operations                                                                                              |  | $                                | 0.37   
|Net income                                                                                                           |  | $                                | 2.32   
|Diluted earnings per share:                                                                                          |  |                                  |        
|Income from continuing operations                                                                                    |  | $                                | 1.94   
|Discontinued operations                                                                                              |  | $                                | 0.36   
|Net income                                                                                                           |  | $                                | 2.30   



See
accompanying notes to consolidated financial statements.



F-3



---



PAN PACIFIC
RETAIL PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

(In thousands, except share data)



|                                                         |  | Common stock |   |  | Paid in capital in excess of par value |     |   | Deferred compensation |   |         | Accumulated deficit |  |   | Total  |  
|-------------------------------------------------------- |  | ------------ | - |  | -------------------------------------- | --- | - | --------------------- | - | ------- | ------------------- |  | - | ------ | -
|                                                         |  | Shares       |   |  | Amount                                 |     |   |                       |   |        
|Balance at December 31, 1999                             |  | 21,252,512   |   |  | $                                      | 213 |   |                       | $ | 482,927 |                     |  | $ | (1,615 | )
|Vesting of restricted stock                              |  |             |   |  |                                        |    |   |                       |   |        |                     |  |   | 1,615  |  
|Stock issued in acquisition of Western                   |  | 10,754,256   |   |  |                                        | 107 |   |                       |   | 221,027 |                     |  |   |       |  
|Stock grant                                              |  | 6,000        |   |  |                                        |    |   |                       |   | 120     |                     |  |   |       |  
|Options exercised                                        |  | 61,600       |   |  |                                        | 1   |   |                       |   | 1,191   |                     |  |   |       |  
|Net income                                               |  |             |   |  |                                        |    |   |                       |   |        |                     |  |   |       |  
|Cash distributions paid and declared                     |  |             |   |  |                                        |    |   |                       |   |        |                     |  |   |       |  
|                                                         |  |              |   |  |                                        |     |   |                       |   |         |                     |  |   |        |  
|Balance at December 31, 2000                             |  | 32,074,368   |   |  |                                        | 321 |   |                       |   | 705,265 |                     |  |   |       |  
|Repurchase of common stock                               |  | (1,000,000   | ) |  |                                        | (10 | ) |                       |   | (20,840 | )                   |  |   |       |  
|Conversion of operating subsidiary units to common stock |  | 921,322      |   |  |                                        | 9   |   |                       |   | 18,252  |                     |  |   |       |  
|Stock issued in acquisition of Western                   |  | 520          |   |  |                                        |    |   |                       |   | 11      |                     |  |   |       |  
|Issuance and vesting of restricted stock                 |  | 217,800      |   |  |                                        | 2   |   |                       |   | 4,830   |                     |  |   | (3,910 | )
|Stock issued on exercise of options                      |  | 575,903      |   |  |                                        | 6   |   |                       |   | 11,007  |                     |  |   |       |  
|Net income                                               |  |             |   |  |                                        |    |   |                       |   |        |                     |  |   |       |  
|Cash distributions paid and declared                     |  |             |   |  |                                        |    |   |                       |   |        |                     |  |   |       |  
|                                                         |  |              |   |  |                                        |     |   |                       |   |         |                     |  |   |        |  
|Balance at December 31, 2001                             |  | 32,789,913   |   |  |                                        | 328 |   |                       |   | 718,525 |                     |  |   | (3,910 | )
|Repurchase of common stock                               |  | (187,999     | ) |  |                                        | (2  | ) |                       |   | (5,787  | )                   |  |   |       |  
|Redemption of operating subsidiary units                 |  |             |   |  |                                        |    |   |                       |   | (1,909  | )                   |  |   |       |  
|Issuance and vesting of restricted stock                 |  | 53,900       |   |  |                                        | 1   |   |                       |   | 1,665   |                     |  |   | (435   | )
|Stock issued on exercise of options                      |  | 928,372      |   |  |                                        | 9   |   |                       |   | 18,575  |                     |  |   |       |  
|Net income                                               |  |             |   |  |                                        |    |   |                       |   |        |                     |  |   |       |  
|Cash distributions paid and declared                     |  |             |   |  |                                        |    |   |                       |   |        |                     |  |   |       |  
|                                                         |  |              |   |  |                                        |     |   |                       |   |         |                     |  |   |        |  
|Balance at December 31, 2002                             |  | 33,584,186   |   |  | $                                      | 336 |   |                       | $ | 731,069 |                     |  | $ | (4,345 | )
|                                                         |  |              |   |  |                                        |     |   |                       |   |         |                     |  |   |        |  



See
accompanying notes to consolidated financial statements.



F-4



---



PAN PACIFIC
RETAIL PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)



|                                                                                             |  | For the Years Ended December 31, |         
|-------------------------------------------------------------------------------------------- |  | -------------------------------- | --------
|                                                                                             |  | 2002                             |         
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                        |  |                                  |         
|Net income                                                                                   |  | $                                | 77,652  
|Adjustments to reconcile net income to net cash provided by operating
activities:            |  |                                  |         
|Depreciation and amortization                                                                |  |                                  | 30,763  
|Amortization of prepaid financing costs                                                      |  |                                  | 1,052   
|Gain on sale of real estate                                                                  |  |                                  |        
|Income from unconsolidated entities                                                          |  |                                  | (154    
|Income from discontinued operations                                                          |  |                                  | (12,400 
|Minority interests                                                                           |  |                                  | 1,457   
|Vesting of restricted stock                                                                  |  |                                  | 1,231   
|Stock grant                                                                                  |  |                                  |        
|Changes in assets and liabilities, net of the effects of the acquisition of Western in
2000: |  |                                  |         
|Increase in accounts receivable                                                              |  |                                  | (2,148  
|Increase in accrued rent receivable                                                          |  |                                  | (1,816  
|Increase in accrued interest on notes receivable                                             |  |                                  | (3,202  
|Increase in deferred lease commissions                                                       |  |                                  | (2,723  
|Increase in prepaid expenses                                                                 |  |                                  | (1,182  
|Increase in other assets                                                                     |  |                                  | (3,074  
|(Decrease) increase in accounts payable, accrued expenses and other
liabilities              |  |                                  | (2,266  
|                                                                                             |  |                                  |         
|Net cash provided by operating activities                                                    |  |                                  | 83,190  
|                                                                                             |  |                                  |         
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                        |  |                                  |         
|Acquisitions of and additions to properties                                                  |  |                                  | (133,008
|Funds held in escrow pending property acquisitions                                           |  |                                  | (39,774 
|Proceeds from sale of real estate                                                            |  |                                  | 46,605  
|Distributions from unconsolidated entities                                                   |  |                                  | 299     
|Acquisition of Western                                                                       |  |                                  |        
|Redemption of operating subsidiary units                                                     |  |                                  | (6,721  
|Acquisition of minority interests                                                            |  |                                  |        
|Increase in other assets                                                                     |  |                                  |        
|Collections of notes receivable                                                              |  |                                  | 39,855  
|Increases in notes receivable                                                                |  |                                  | (10,275 
|                                                                                             |  |                                  |         
|Net cash used in investing activities                                                        |  |                                  | (103,019
|                                                                                             |  |                                  |         
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                        |  |                                  |         
|Notes payable proceeds                                                                       |  |                                  | 15,601  
|Notes payable payments                                                                       |  |                                  | (4,981  
|Line of credit proceeds                                                                      |  |                                  | 206,250 
|Line of credit payments                                                                      |  |                                  | (305,550
|Prepaid financing costs                                                                      |  |                                  |        
|Issuance of senior notes                                                                     |  |                                  | 154,701 
|Repurchase of common shares                                                                  |  |                                  | (5,789  
|Issuance of common shares                                                                    |  |                                  | 18,584  
|Distributions paid                                                                           |  |                                  | (65,185 
|                                                                                             |  |                                  |         
|Net cash provided by (used in) financing activities                                          |  |                                  | 13,631  
|                                                                                             |  |                                  |         
|DECREASE IN CASH AND CASH EQUIVALENTS                                                        |  |                                  | (6,198  
|Cash from discontinued operations                                                            |  |                                  | 4,053   
|                                                                                             |  |                                  |         
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                         |  |                                  | (2,145  
|CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                               |  |                                  | 3,429   
|                                                                                             |  |                                  |         
|CASH AND CASH EQUIVALENTS AT END OF YEAR                                                     |  | $                                | 1,284   
|                                                                                             |  |                                  |         



(Continued)





F-5



---



PAN PACIFIC
RETAIL PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(In thousands)



|                                                                                             |  | For the Years Ended December 31,
|-------------------------------------------------------------------------------------------- |  | --------------------------------
|                                                                                             |  | 2002                            
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                                            |  |                                 
|Cash paid for interest (net of amounts capitalized of $1,796, $1,539 and $202,
respectively) |  | $                               
|SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:                      |  |                                 
|Transfer of note receivable to investment in unconsolidated entity                           |  | $                               
|Transfer of other assets to properties                                                       |  | $                               
|Transfer of note receivable to property                                                      |  | $                               
|Notes receivable issued upon sales of properties                                             |  | $                               
|Conversion of operating subsidiary units to common stock                                     |  | $                               
|Stock issued in acquisition of Western                                                       |  | $                               
|Assumption of senior notes and line of credit                                                |  | $                               
|Notes payable assumed upon acquisition of properties and Western                             |  | $                               
|Minority interest from acquisition of properties and Western                                 |  | $                               
|Accrued liability for acquisition of partnership interests                                   |  | $                               
|Exchange of note receivable for properties                                                   |  | $                               



See
accompanying notes to consolidated financial statements.



F-6



---



PAN PACIFIC
RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2002, 2001 and 2000

(Tabular amounts are in thousands, except unit, option and share data)



1. Organization and basis of presentation



Pan Pacific Retail Properties, Inc. (together with its subsidiaries, the Company) is an equity real estate investment trust
(REIT) that owns, leases and manages neighborhood and community shopping centers. As of December 31, 2002, the Company owned a portfolio comprised of 105 properties located primarily in the Western region of the United States. The
Company believes it qualifies as a REIT under Sections 856 through 860 of the Internal Revenue Code.



In accordance with SFAS No. 144, our consolidated statements of income and consolidated statements of cash flows have been revised from
those originally reported for the years ended December 31, 2001 and 2000 to separately reflect the results of discontinued operations for properties that were sold during the year ended December 31, 2002. The revision had no impact on our
consolidated balance sheets or statements of stockholders equity. The revision had no impact on net income or net income per share of common stock for the years ended December 31, 2001 or 2000. See Note 3 to the consolidated financial
statements.



In 1998 and 1999, the Company formed
certain operating subsidiaries to acquire shopping center properties. The Company is the managing member and in exchange for the properties which were contributed to the operating subsidiaries, units were issued to the non-managing members. These
operating subsidiaries were primarily formed for tax planning purposes for the non-managing members who contributed the properties. A non-managing member can seek redemption of the units after the first anniversary of the date of issuance. The
Company, at its option, may redeem the units by either (i) issuing common stock at the rate of one share of common stock for each unit, or (ii) paying cash to the non-managing member based on the average trading price of its common stock.
Distributions are made to the non-managing members at a rate equal to the distribution being paid by the Company on a share of common stock. Net income or loss is allocated to the non-managing members in an amount equal to the cumulative
distributions earned by such members. All remaining net income or loss is allocated to the Company as the managing member. The following table summarizes the activity for these operating subsidiaries as of December 31, 2002:



|Operating subsidiary                 |  | Units originally issued |  | Units converted |  | Units outstanding
|------------------------------------ |  | ----------------------- |  | --------------- |  | -----------------
|Pan Pacific (Portland), LLC          |  | 832,617                 |  | 400,000         |  | 432,617          
|Pan Pacific (Rancho Las Palmas), LLC |  | 314,587                 |  | 0               |  | 314,587          



On
November 13, 2000, the Company acquired Western Properties Trust (Western), a real estate investment trust, at a cost of approximately $440,000,000. The transaction was a stock for stock exchange including assumption of debt whereby
Western common shares and units were exchanged into newly issued Company common shares and units, based upon a price of $20.5625 per share/unit issued and a 0.62 exchange ratio. As a result, the Company issued 10,754,776 common shares and 911,934
operating subsidiary units to Westerns equity holders. The Company accounted for this transaction using the purchase method of accounting; accordingly, the Companys results of operations subsequent to November 13, 2000 include Western.



F-7



---



PAN PACIFIC
RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2002, 2001 and 2000

(Tabular amounts are in thousands, except unit, option and share data)



1. Organization and basis of presentation (continued)



In connection with the acquisition of Western, the Company has an investment in certain operating partnerships. Pan Pacific (Kienows),
L.P., formerly Western/Kienow, L.P., issued units convertible into shares of Company common stock or cash, at the Companys option. Distributions are made to the limited partners at a rate equal to the distribution being paid by the Company on
a share of common stock. Net income or loss is allocated to the limited partners in an amount equal to the cumulative distributions earned by such partners. All remaining net income or loss is allocated to the Company as general partner. Pan Pacific
(Pinecreek), L.P., formerly Western/Pinecreek, L.P., issued units convertible into shares of Company common stock or cash, at the Companys option. Distributions are made to the limited partners after a 10% preferred return to the Company as
general partner. Net income is allocated to the Company, as general partner, and to the limited partners in amounts equal to the cumulative distributions earned by such partners and thereafter based on their ownership interests. Losses are allocated
99% to the Company as general partner and 1% to the limited partners. The following table summarizes the activity for these operating subsidiaries as of December 31, 2002:



|Operating subsidiary          |  | Units originally issued |  | Units converted |  | Units outstanding
|----------------------------- |  | ----------------------- |  | --------------- |  | -----------------
|Pan Pacific (Kienows), L.P.   |  | 857,065                 |  | 857,065         |  | 0                
|Pan Pacific (Pinecreek), L.P. |  | 54,869                  |  | 0               |  | 54,869           



Unaudited pro forma information reflecting the acquisition of Western is presented in the following table. The amounts included therein assume that the acquisition had taken place at January 1, 2000.



|                           |  | For the year ended December 31, 2000
|-------------------------- |  | ------------------------------------
|                           |  | (Pro forma, unaudited)              
|Total revenue              |  | $                                   
|Total expenses             |  | $                                   
|Net income                 |  | $                                   
|Basic earnings per share   |  | $                                   
|Diluted earnings per share |  | $                                   



On
January 17, 2003, the Company acquired Center Trust, Inc. (see Note 16).



F-8



---



PAN PACIFIC
RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2002, 2001 and 2000

(Tabular amounts are in thousands, except unit, option and share data)



2. Summary of significant accounting policies and practices



(a) Principles of consolidation



The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.
All material intercompany transactions and balances have been eliminated. The Company consolidates entities the Company controls and records a minority interest for the portions not owned by the Company.



(b) Cash and cash equivalents



For purposes of reporting cash flows, highly liquid
investments with an original maturity of three months or less are considered cash equivalents. Restricted cash totaled $223,000 and $252,000 at December 31, 2002 and 2001, respectively.



(c) Income recognition



Rental revenue is recognized on a straight-line basis over the terms of the leases, less an allowance for doubtful accounts relating to
accounts receivable and accrued rent receivable for amounts deemed uncollectible and for leases which may be terminated before the end of the contracted term. The Company considers tenant specific issues such as financial stability and ability to
pay rent when determining collectibility of accounts receivable and appropriate allowances to record. The Company considers tenant retention in determining an appropriate allowance to record for the accrued rent receivable recorded in recognizing
rental income on a straight-line basis. If an account receivable is determined to be uncollectible it is written off as bad debt expense. Percentage rent is recorded at the time tenants meet specified sales thresholds. The Company receives
reimbursement for real estate taxes and certain other operating expenses. Such reimbursements are generally recognized at the time the related expenses are incurred.



Bad debt expense, included in property operating expenses in the Companys financial statements, was
$1,529,000, $1,765,000 and $441,000 for the years ended December 31, 2002, 2001 and 2000, respectively.



(d) Capitalization of costs



The Company capitalizes certain acquisition and development related costs to the carrying costs of the property acquired or developed. These costs are being depreciated over the estimated useful lives
of the properties commencing at the time the property is ready for its intended use. The capitalized costs associated with unsuccessful acquisitions are charged to expense when the acquisition is abandoned.



(e) Depreciation and amortization



Depreciation on buildings and improvements is provided using
a forty-year straight-line basis. Management believes forty years is an appropriate estimated useful life for buildings and improvements. Tenant improvements and costs incurred in obtaining leases are depreciated on a straight-line basis over the
lives of the respective leases.



Prepaid
financing costs are amortized over the lives of the loans and the related amortization expense is included as a component of interest expense. Premiums and discounts on indebtedness are amortized over the life of the related debt using the
straight-line method, which approximates the effective interest method.



F-9



---



PAN PACIFIC
RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2002, 2001 and 2000

(Tabular amounts are in thousands, except unit, option and share data)



2. Summary of significant accounting policies and practices (continued)



(f) Impairment of long-lived assets and long-lived assets to be disposed of



The Company reviews long-lived assets and certain
identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount
of an asset to future net cash flows, undiscounted and without interest, expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of
the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.



(g) Income taxes



As of April 16, 1997, the Company elected to be taxed as a REIT pursuant to the Internal Revenue Code, as amended. In general, a
corporation that distributes at least 90% of its REIT taxable income to stockholders in any taxable year and complies with certain other requirements (relating primarily to the nature of its assets and the sources of its revenue) is not subject to
federal income taxation to the extent of the income which it distributes. Management believes that the Company has qualified and intends for it to continue to qualify as a REIT in the future. As discussed more fully in Note 9, management also does
not expect that the Company will pay income taxes on built-in gains on certain of its assets. Based on these considerations, management does not believe that the Company will be liable for income taxes at the federal level or in most of
the states in which it operates in future years.



(h) Credit
and concentration risk



The Company
predominantly operates in one industry segment: real estate ownership, management and development. No single tenant accounts for 10% or more of rental revenue. Financial instruments which potentially subject the Company to concentrations of credit
risk consist principally of temporary cash investments and receivables. The Company places its temporary cash investments with financial institutions which the Company believes are of high credit quality. Concentration of credit risk with respect to
receivables is limited due to the large number of tenants comprising the Companys customer base, and their dispersion across many areas within the Western region of the United States. At December 31, 2002 and 2001, the Company had no
significant concentration of credit risk.



|(i) |  | Net income per share
|--- |  | --------------------



Basic earnings per share (EPS) is computed by dividing earnings available to common stockholders during the period by the
weighted average number of common shares outstanding during each period. Diluted EPS is computed by dividing the adjusted amount of earnings available to common stockholders during the period by the weighted average number of shares that would have
been outstanding assuming the issuance of common shares for all dilutive potential common shares outstanding during the reporting period, net of shares assumed to be repurchased using the treasury stock method.



F-10



---



PAN PACIFIC
RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2002, 2001 and 2000

(Tabular amounts are in thousands, except unit, option and share data)



2. Summary of significant accounting policies and practices (continued)



The following is a reconciliation of the numerator and denominator for the calculation of basic and diluted
EPS (all net income is available to common stockholders for the periods presented):



|                                                                 |  | For the years ended December 31,
|---------------------------------------------------------------- |  | --------------------------------
|                                                                 |  | 2002                            
|Income available to common stockholders:                         |  |                                 
|Basic                                                            |  | $                               
|                                                                
|Add-back income allocated to dilutive operating subsidiary units |  |                                 
|                                                                 |  |                                 
|                                                                
|Diluted                                                          |  | $                               
|                                                                 |  |                                 
|                                                                
|Weighted average shares:                                         |  |                                 
|Basic                                                            |  |                                 
|                                                                
|Incremental shares from assumed:                                 |  |                                 
|Exercise of dilutive stock options                               |  |                                 
|                                                                
|Conversion of dilutive operating subsidiary units                |  |                                 
|                                                                 |  |                                 
|                                                                
|Diluted                                                          |  |                                 
|                                                                 |  |                                 



At
December 31, 2002 and 2001, no stock options were excluded from the calculation of diluted weighted average shares because they were anti-dilutive. At December 31, 2002 and 2001, 0 and 314,587 operating subsidiary units were excluded from the
calculation of diluted weighted average shares because they were anti-dilutive.



The Company issued additional common shares and operating subsidiary units in January 2003 in connection with an acquisition (see Note 16).



|(j) |  | Stock plans
|--- |  | -----------



The Company accounts for its stock plans in accordance with the provisions of Accounting Principles Board (APB) Opinion No.
25, Accounting for Stock Issued to Employees, and related interpretations. As such, compensation expense is recorded on the date of option grants only if the current market price of the underlying stock exceeds the exercise price.
Compensation expense for restricted stock grants is determined on the grant date based on the market price and is recognized over the vesting period. Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation (SFAS No. 123), permits entities to recognize as expense over the vesting period the fair value of all stock-based awards on the date of grant. Alternatively, SFAS No. 123 allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net income and pro forma earnings per share disclosures for employee stock option grants made as if the fair-value-based method defined in SFAS No. 123 had been applied. The Company has elected
to, for all periods presented, apply the provisions of APB Opinion No. 25 and provide the annual pro forma disclosures required by SFAS No. 123, as amended by Statement of Financial Accounting Standards No. 148, Accounting for Stock-Based
CompensationTransition and Disclosure (SFAS No. 148).



F-11



---



PAN PACIFIC
RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2002, 2001 and 2000

(Tabular amounts are in thousands, except unit, option and share data)



2. Summary of significant accounting policies and practices (continued)



As a result of the disclosure requirements in SFAS No. 148, the following table shows the Companys pro
forma net income had the Company determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123:



|                                       |  | 2002 |        |   | 2001 |   |        | 2000 | 
|-------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | ---- | 
|Net income as reported                 |  | $    | 77,652 |   |      | $ | 64,222 |      | 
|Pro forma option expense               |  | $    | (527   | ) |      | $ | (427   | )    | 
|Pro forma net income                   |  | $    | 77,125 |   |      | $ | 63,795 |      | 
|Diluted earnings per share as reported |  | $    | 2.30   |   |      | $ | 1.97   |      | 
|Pro forma diluted earnings per share   |  | $    | 2.28   |   |      | $ | 1.96   |      | 



Net
income as reported includes compensation expense relating to our restricted stock plan of $1,231,000, $922,000 and $310,000 for the years ended December 31, 2002, 2001 and 2000, respectively. Pro forma net income reflects options granted since
adoption of the 1997 Plan and the 2000 Plan.



|(k) |  | Use of estimates
|--- |  | ----------------



Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial statements and the reporting of revenue and expenses during the reporting period to prepare these financial statements in conformity with accounting principles generally
accepted in the United States of America. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities and reported amounts of revenue and expenses that are not readily apparent from other sources. Actual results could differ from those estimates under different assumptions or conditions.



Management considers those estimates and
assumptions that are most important to the portrayal of the Companys financial condition and results of operations, in that they require managements most subjective judgments, to form the basis for the accounting policies deemed to be
most critical to the Company. These critical accounting policies include managements estimates of useful lives in calculating depreciation expense on its shopping center properties and the ultimate recoverability (or impairment) of each
shopping center asset. If the useful lives of buildings and improvements are different from 40 years, it could result in changes to the future results of operations of the Company. Future adverse changes in market conditions or poor operating
results of shopping center properties could result in losses or an inability to recover the carrying value of the properties that may not be reflected in the properties current carrying value, thereby possibly requiring an impairment charge in
the future.



|(l) |  | Reclassifications
|--- |  | -----------------



Certain reclassifications of 2001 and 2000 amounts have been made in order to conform to 2002 presentation.



F-12



---



PAN PACIFIC
RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2002, 2001 and 2000

(Tabular amounts are in thousands, except unit, option and share data)



3. Discontinued operations



In August 2001, the Financial Accounting Standards Board issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets (SFAS No. 144). In accordance with SFAS No. 144, we report each individual property as a component for determining discontinued operations. The operating results of nine properties sold during the year ended December 31, 2002 were reported as
income from discontinued operations in 2002, and their respective 2001 and 2000 results of operations were reclassified to income from discontinued operations. The following is a summary of our income from discontinued operations for the years ended
December 31, 2002, 2001 and 2000:



|                                       |  | For the years ended December 31,
|-------------------------------------- |  | --------------------------------
|                                       |  | 2002                            
|Revenue                                |  | $                               
|Property operating expenses            |  |                                 
|Depreciation and amortization expenses |  |                                 
|Gain on sale of real estate            |  |                                 
|                                       |  |                                 
|Discontinued operations                |  | $                               
|                                       |  |                                 



The
carrying values of the nine properties sold (including the related asset groups, as defined in SFAS No. 144) were as follows:



|                                                             |  | As of December 31,
|------------------------------------------------------------ |  | ------------------
|                                                             |  | 2001              
|Properties, net of accumulated depreciation and amortization |  | $                 
|Accounts receivable                                          |  | $                 
|Accrued rent receivable                                      |  | $                 
|Deferred lease commissions                                   |  | $                 
|Prepaid expenses                                             |  | $                 
|Accounts payable, accrued expenses and other liabilities     |  | $                 



4. Investments in
unconsolidated entities



The accompanying
consolidated financial statements include investments in entities in which the Company does not own a controlling interest. At December 31, 2002, the Company owned a 49% non-managing member interest in Plaza Escuela and a 50% general partner
interest in North Coast Health Center. At December 31, 2001, the Company owned the 50% general partner interest in North Coast Health Center. During the second quarter of 2002, North Coast Health Center acquired a building financed through a note
payable. During 2001 and 2000, the Company also owned a 30% interest in Serra Center. This 30% interest was sold in December 2001. These investments are reported using the equity method.



F-13



---



PAN PACIFIC
RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2002, 2001 and 2000

(Tabular amounts are in thousands, except unit, option and share data)



4. Investments in unconsolidated entities (continued)



Summarized financial information for the entities is presented below:



|                                                        |  | December 31, 2002 |        | December 31, 2001
|------------------------------------------------------- |  | ----------------- | ------ | -----------------
|Properties                                              |  | $                 | 79,764 |                  
|Other assets                                            |  |                   | 8,581  |                  
|                                                        |  |                   |        |                  
|                                                       
|Total assets                                            |  | $                 | 88,345 |                  
|                                                        |  |                   |        |                  
|                                                       
|Notes payable                                           |  | $                 | 59,838 |                  
|Other liabilities                                       |  |                   | 2,553  |                  
|Partners capital/members equity:                      |  |                   |        |                  
|The Companys share                                     |  |                   | 9,050  |                  
|Other partners/members                                  |  |                   | 16,904 |                  
|                                                        |  |                   |        |                  
|                                                       
|Total liabilities and partners capital/members equity |  | $                 | 88,345 |                  
|                                                        |  |                   |        |                  



|                                   |  | For the years ended December 31,
|---------------------------------- |  | --------------------------------
|                                   |  | 2002                            
|Revenue                            |  | $                               
|Expenses                           |  |                                 
|                                   |  |                                 
|                                  
|Net income                         |  | $                               
|                                   |  |                                 
|                                  
|The Companys equity in net income |  | $                               



F-14



---



PAN PACIFIC
RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2002, 2001 and 2000

(Tabular amounts are in thousands, except unit, option and share data)



5. Indebtedness



(a) Notes payable



|                                                                                                                                                                     |  | December 31,
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------
|                                                                                                                                                                     |  | 2002        
|Notes payable secured by properties consist of the following:                                                                                                        |  |             
|Bank notes payable, secured by deeds of trust, bearing interest at 7.10% with monthly
principal and interest payments of $391, due in August 2009                    |  | $           
|Bank notes payable, secured by a mortgage and deeds of trust, bearing interest at 8.17%
with monthly principal and interest payments of $404, due in January 2007    |  |             
|Bank notes payable, secured by deeds of trust, bearing interest at 7.21% with monthly
principal and interest payments of $252, due in July 2006                      |  |             
|Bank note payable, secured by a deed of trust, bearing interest at 7.72% with monthly
principal and interest payments of $190, due in January 2010                   |  |             
|Bank note payable, secured by deeds of trust, bearing interest at 8.73% with monthly
principal and interest payments of $144, due in February 2007 (a)               |  |             
|Bank note payable, secured by a deed of trust, bearing interest at 8.10% with monthly
principal and interest payments of $94, due in August 2007                     |  |             
|Bank note payable, secured by a deed of trust, bearing interest at 7.80% with monthly
principal and interest payments of $107, due in December 2005                  |  |             
|Bank note payable, secured by a deed of trust, bearing interest at 7.61% with monthly
principal and interest payments of $80, due in May 2004                        |  |             
|Bank note payable, secured by a deed of trust, bearing interest at 7.65% with monthly
principal and interest payments of $54, due in October 2012 (b)                |  |             
|Bank note payable, secured by a deed of trust, bearing interest at 7.00% with monthly
principal and interest payments of $37, due in March 2004                      |  |             
|Bank note payable, secured by a deed of trust, bearing interest at 7.88% with monthly
principal and interest payments of $56, due in August 2008                     |  |             
|Bank note payable, secured by a deed of trust, bearing interest at LIBOR plus 1.95% or a
reference rate with payments on this construction loan due in December 2003 |  |             
|                                                                                                                                                                     |  |             
|                                                                                                                                                                     |  |             
|Unamortized note payable premiums                                                                                                                                    |  |             
|                                                                                                                                                                     |  |             
|                                                                                                                                                                     |  | $           
|                                                                                                                                                                     |  |             



|(a) |  | Excludes unamortized note payable premium of $890 and $1,082 at December 31, 2002 and 2001, respectively.
|--- |  | ---------------------------------------------------------------------------------------------------------

|(b) |  | Excludes unamortized note payable premium of $259 and $281 at December 31, 2002 and 2001, respectively.
|--- |  | -------------------------------------------------------------------------------------------------------



The net carrying value of properties secured by these notes
payable is $370,408,000 and $356,618,000 at December 31, 2002 and 2001, respectively.



F-15



---



PAN PACIFIC
RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2002, 2001 and 2000

(Tabular amounts are in thousands, except unit, option and share data)



5. Indebtedness (continued)



Principal payments under these notes payable are due as follows:



|2003                |  | $ | 20,361 
|------------------- |  | - | -------
|2004                |  |   | 16,824 
|2005                |  |   | 11,563 
|2006                |  |   | 33,927 
|2007                |  |   | 76,545 
|2008 and subsequent |  |   | 79,172 
|                    |  |   |        
|                    |  | $ | 238,392
|                    |  |   |        



|(b) |  | Line of credit payable
|--- |  | ----------------------



In November 2000, the Company entered into an unsecured $300,000,000 revolving credit facility which bears interest, at the Companys
option, at either LIBOR plus 1.10% or a reference rate and expires in January 2004. At December 31, 2002 and 2001, the amount drawn on this line of credit was $66,000,000 and $165,300,000, respectively, and the interest rate was 2.97% and 3.23%,
respectively. The credit facility requires a quarterly fee of 0.20% per annum on the total aggregate commitment.



|(c) |  | Senior notes
|--- |  | ------------



In December 2002, the Company issued $100,000,000 in aggregate principal amount of 6.125% senior notes due January 2013. The Company sold
these notes at par value and used the net proceeds from the offering to repay borrowings under its line of credit. In June 2002, the Company issued $55,000,000 in aggregate principal amount of 5.75% senior notes due June 2007. The Company sold these
notes at 99.458% of the principal amount. The Company used the net proceeds from the offering to repay borrowings under its line of credit.



In April 2001, the Company issued $150,000,000 in aggregate principal amount of 7.95% senior notes due April 2011. The Company sold these
notes at 99.225% of the principal amount. The Company used the net proceeds from the offering to repay borrowings under its term loan and line of credit.



In November 2000, in connection with the acquisition of Western, the Company assumed $49,952,000 of 7.88% senior notes due 2004,
$24,977,000 of 7.10% senior notes due 2006, $24,958,000 of 7.20% senior notes due 2008 and $24,958,000 of 7.30% senior notes due 2010. The senior notes were assumed net of a $155,000 discount which represents the amount of the principal reduction
recorded by Western to achieve the required yield at pricing of the debt. The effective yields approximated fair value at the date of the merger.



6. Financial instruments



The following methods and assumptions were used to estimate fair value of each class of financial instruments:



|(a) |  | Cash and cash equivalents, accounts receivable, accounts payable and accrued expenses and other liabilities
|--- |  | -----------------------------------------------------------------------------------------------------------



The carrying amounts approximate fair values because of the
short-term nature of these instruments.



F-16



---



PAN PACIFIC
RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2002, 2001 and 2000

(Tabular amounts are in thousands, except unit, option and share data)



6. Financial instruments (continued)



|(b) |  | Notes receivable
|--- |  | ----------------



The carrying amounts of notes receivable with balances of $231,000 and $859,000 at December 31, 2002 and 2001, respectively, approximate
fair values because of the short-term nature of these instruments.



It was not practicable to estimate the fair value of a note receivable with a balance of $556,000 at December 31, 2002 and notes receivable with balances of $41,784,000 at December 31, 2001, due to the uncertainty of the
timing of repayment. One of the notes had a balance of $41,127,000 at December 31, 2001. We received a partial repayment of $36,754,000 on September 30, 2002. The balance of the note of $7,595,000 was converted to a 49% non-managing member interest
in the entity that owns the underlying asset.



The fair value of notes receivable with balances of $15,104,000 and $5,249,000 at December 31, 2002 and 2001, respectively, approximates the carrying amounts based on market rates for the same or other instruments with similar risk,
security and remaining maturities.



|(c) |  | Notes payable, line of credit and senior notes payable
|--- |  | ------------------------------------------------------



The fair value of notes payable, line of credit and senior notes payable approximates the carrying amount
based on the current rates offered for loans with similar risks and maturities.



7. Gain on sale of real estate



The Company recorded a gain on sale of real estate of $8,702,000 during the year ended December 31, 2002. The gain is included in discontinued operations and related to the sale of seven shopping centers, two single tenant assets and
one parcel of land. The total sales proceeds of $49,375,000 were received in cash and three notes receivable.



The Company recorded a gain on sale of real estate of $4,129,000 during the year ended December 31, 2001. The gain related to the sale of
a non-strategic shopping center, five single tenant assets, a 30% interest in a shopping center (Note 4) and four parcels of land. The total sales proceeds of $38,823,000 were received in cash and a note receivable.



8. Stock plans



In August 1997, the Company established the 1997 Stock Option
and Incentive Plan (the 1997 Plan) pursuant to which the Companys Board of Directors may grant stock, restricted stock awards and stock options to officers, directors and key employees. The 1997 Plan authorizes grants of stock,
restricted stock and options to purchase up to 1,620,000 shares of authorized but unissued common stock. In March 2000, the Company established the 2000 Stock Incentive Plan (the 2000 Plan) pursuant to which the Companys Board of
Directors may grant stock, restricted stock awards and stock options to officers, directors and key employees. The 2000 Plan authorizes grants of stock, restricted stock and options to purchase up to 489,971 shares of authorized but unissued common
stock. The 2000 Plan was approved by the Companys stockholders at the annual meeting held in May 2000. In November 2000, the number of shares available for grant pursuant to the 2000 Plan was increased to 1,786,695 shares upon approval by the
Companys stockholders in connection with the merger with Western. At December 31, 2002, there were 796,342 additional shares available for grant under the 1997 Plan and the 2000 Plan.



F-17



---



PAN PACIFIC
RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2002, 2001 and 2000

(Tabular amounts are in thousands, except unit, option and share data)



8. Stock plans (continued)



|(a) |  | Stock options
|--- |  | -------------



Stock options are granted with an exercise price equal to the stocks fair value at the date of grant. The stock options have
seven-year terms and vest 331/3% per year over three years from the date of grant, except for the options
granted to the independent directors which vest 331/3% immediately, with the remainder vesting ratably over two
years. In connection with the acquisition of Western, all issued and outstanding stock options became fully vested.



The per share weighted average fair value of stock options granted during 2002, 2001 and 2000 were $3.24, $2.14 and $1.71, respectively,
on the dates of grant using the Black-Scholes option-pricing model using the following weighted average assumptions:



|                            |  | 2002  |   |  | 2001  |   |  | 2000  |  
|--------------------------- |  | ----- | - |  | ----- | - |  | ----- | -
|Expected distribution yield |  | 5.10  | % |  | 7.80  | % |  | 8.30  | %
|Risk-free interest rate     |  | 3.00  | % |  | 5.00  | % |  | 5.00  | %
|Expected volatility         |  | 20.59 | % |  | 22.48 | % |  | 22.88 | %
|Expected life (years)       |  | 7.0   |   |  | 6.8   |   |  | 5.9   |  



The
Company applied APB Opinion No. 25 in accounting for the 1997 Plan and 2000 Plan and, accordingly, no compensation cost has been recognized for its stock options in the financial statements. Had the Company determined compensation cost based on the
fair value at the grant date for its stock options under SFAS No. 123, the Companys net income would have been reduced to the pro forma amounts indicated below:



|                                       |  | 2002 |        |   | 2001 |   |        | 2000 | 
|-------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | ---- | 
|Net income as reported                 |  | $    | 77,652 |   |      | $ | 64,222 |      | 
|Pro forma option expense               |  | $    | (527   | ) |      | $ | (427   | )    | 
|Pro forma net income                   |  | $    | 77,125 |   |      | $ | 63,795 |      | 
|Diluted earnings per share as reported |  | $    | 2.30   |   |      | $ | 1.97   |      | 
|Pro forma diluted earnings per share   |  | $    | 2.28   |   |      | $ | 1.96   |      | 



Pro
forma net income reflects options granted since adoption of the 1997 Plan and the 2000 Plan.



F-18



---



PAN PACIFIC
RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2002, 2001 and 2000

(Tabular amounts are in thousands, except unit, option and share data)



8. Stock plans (continued)



Stock option activity during the periods presented is as follows:



|                             |  | Number of Options |   |  | Weighted Average Exercise Price
|---------------------------- |  | ----------------- | - |  | -------------------------------
|Balance at December 31, 1999 |  | 1,477,834         |   |  | $                              
|Granted                      |  | 173,000           |   |  | $                              
|Exercised                    |  | (61,600           | ) |  | $                              
|Forfeited                    |  | (15,333           | ) |  | $                              
|Expired                      |  | (10,667           | ) |  | $                              
|                             |  |                   |   |  |                                
|Balance at December 31, 2000 |  | 1,563,234         |   |  | $                              
|Granted                      |  | 425,486           |   |  | $                              
|Exercised                    |  | (575,903          | ) |  | $                              
|Forfeited                    |  | (7,000            | ) |  | $                              
|Expired                      |  | (8,000            | ) |  | $                              
|                             |  |                   |   |  |                                
|Balance at December 31, 2001 |  | 1,397,817         |   |  | $                              
|Granted                      |  | 213,500           |   |  | $                              
|Exercised                    |  | (928,372          | ) |  | $                              
|Forfeited                    |  | (9,332            | ) |  | $                              
|Expired                      |  |                  |   |  |                                
|                             |  |                   |   |  |                                
|Balance at December 31, 2002 |  | 673,613           |   |  | $                              
|                             |  |                   |   |  |                                



At
December 31, 2002 six stock option grants had shares outstanding as follows:



|                                    |  | 1997 |        | 1998 |   | 1999    |  | 2000 |        | 2001 |   | 2002  
|----------------------------------- |  | ---- | ------ | ---- | - | ------- |  | ---- | ------ | ---- | - | ------
|Granted options outstanding         |  |      | 70,758 |      |   | 73,000  |  |      | 8,999  |      |   | 6,000 
|Exercise price                      |  | $    | 19.50  |      | $ | 22.1875 |  | $    | 17.625 |      | $ | 18.625
|Remaining contractual life in years |  |      | 1.6    |      |   | 2.3     |  |      | 3.3    |      |   | 4.3   
|Options exercisable                 |  |      | 70,758 |      |   | 73,000  |  |      | 8,999  |      |   | 6,000 
|Options unexercisable               |  |      |       |      |   |        |  |      |       |      |   |      



|(b) |  | Restricted stock and stock grants
|--- |  | ---------------------------------



During 2002, the Company granted 52,500 shares of restricted stock to certain officers and key employees pursuant to the 1997 Plan. The
restricted shares vest over seven years from the date of grant. During 2002, the Company granted 2,400 shares of restricted stock to three independent directors of the Board pursuant to the 1997 Plan. The restricted shares vest over three years from
the date of grant. Compensation expense for the portion of restricted stock grants that vested during 2002 of $1,231,000 has been recognized in general and administrative expenses. Compensation expense related to these grants and the grants from
2001 to be recognized in future periods is $4,345,000 at December 31, 2002.



F-19



---



PAN PACIFIC
RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2002, 2001 and 2000

(Tabular amounts are in thousands, except unit, option and share data)



8. Stock plans (continued)



During 2001, the Company granted 212,000 shares of restricted stock to certain officers and key employees pursuant to the 1997 Plan and
the 2000 Plan. The restricted shares vest over five years from the date of grant. During 2001, the Company granted 5,000 shares of restricted stock to the independent directors of the Board pursuant to the 1997 Plan. The restricted shares vest over
one year from the date of grant. During 2001, the Company granted 800 shares of restricted stock to an independent director of the Board pursuant to the 1997 Plan. The restricted shares vest 33 1/3% immediately, with the remainder vesting ratably
over two years. Compensation expense for the portion that vested during 2001 of $922,000 has been recognized in general and administrative expenses. Compensation expense related to these grants to be recognized in future periods is $3,910,000 at
December 31, 2001.



In November 2000, the
Companys Board of Directors granted a total of 6,000 shares of stock to the independent directors of the Board. Expense related to this grant has been recognized in merger related expenses. During 1999, the Company granted 90,500 shares of
restricted stock to certain officers and key employees pursuant to the 1997 Plan. The restricted shares vest over five years from the date of grant. Compensation expense, for the portion that vested during 2000 prior to the acquisition of Western of
$310,000, has been recognized in general and administrative expenses. In connection with the acquisition of Western, the restricted shares became fully vested and the remaining compensation expense of $1,305,000 has been recognized in merger related
expenses.



9. Income taxes



As discussed in Note 2(g), the Company elected to be taxed as
a REIT, effective April 16, 1997. Management believes that the Company qualified and managements intent is to continue to qualify as a REIT and therefore does not expect the Company will be liable for income taxes at the federal level or in
most states in future years. Accordingly, for the years ended December 31, 2002, 2001 and 2000, no provision was recorded for federal or substantially all state income taxes.



In connection with its election to be taxed as a REIT, the Company also elected to be subject to the
built-in gain rules. Under these rules, taxes may be payable at the time and to the extent that the net unrealized gains on the Companys assets at the date of conversion to REIT status are recognized in taxable dispositions of such
assets in the ten-year period following conversion. Such net unrealized gains were approximately $80,000,000, $50,000,000 and $50,000,000 at December 31, 2002, 2001 and 2000, respectively. Management believes that the Company will not be required to
make payments of income taxes on built-in gains during the ten-year period ending December 31, 2007. It is the intent and ability of the Company to defer asset dispositions to periods when related gains will not be subject to the built-in gains
income taxes or to use tax planning ideas available to defer recognition of the built-in gains. However, it may be necessary to recognize a liability for such income taxes in the future if managements plans and intentions with respect to asset
dispositions, or the related tax laws, change.



F-20



---



PAN PACIFIC
RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2002, 2001 and 2000

(Tabular amounts are in thousands, except unit, option and share data)



9. Income taxes (continued)



The following unaudited table reconciles the Companys book net income to REIT taxable income before dividends paid deduction:



|                                                                        |  | For the years ended December 31, |        
|----------------------------------------------------------------------- |  | -------------------------------- | -------
|                                                                        |  | 2002                             |        
|                                                                        |  | Estimate                         |        
|Book net income                                                         |  | $                                | 77,652 
|Less: Differences between book and tax net income for REIT subsidiaries |  |                                  | (1,333 
|                                                                        |  |                                  |        
|                                                                        |  |                                  | 76,319 
|Add: Book depreciation and amortization (a)                             |  |                                  | 28,526 
|Less: Tax depreciation and amortization                                 |  |                                  | (29,543
|Less: Straight-line rent adjustments                                    |  |                                  | (2,373 
|Book/tax difference on gains/losses from capital transactions           |  |                                  | (8,999 
|Other book/tax differences, net                                         |  |                                  | 135    
|                                                                        |  |                                  |        
|Taxable ordinary income before adjustments                              |  |                                  | 64,065 
|Less: Other adjustments (b)                                             |  |                                  |       
|                                                                        |  |                                  |        
|REIT taxable income before dividends paid deduction                     |  | $                                | 64,065 
|                                                                        |  |                                  |        



|(a) |  | Includes depreciation of properties in discontinued operations (see Note 3).
|--- |  | ----------------------------------------------------------------------------

|(b) |  | Based on other adjustments permitted by the Internal Revenue Code.
|--- |  | ------------------------------------------------------------------



The Company pays distributions quarterly to the stockholders. The following presents the federal income tax
characterization of distributions paid or deemed to be paid to stockholders:



|                  |  | For the years ended December 31, |     
|----------------- |  | -------------------------------- | ----
|                  |  | 2002                             |     
|Ordinary income   |  | $                                | 1.90
|Return of capital |  |                                  |    
|                  |  |                                  |     
|                  |  | $                                | 1.90
|                  |  |                                  |     



10. Future lease
revenue



Total future minimum lease receipts
under noncancellable operating tenant leases in effect at December 31, 2002 are as follows:



|2003                |  | $ | 150,255
|------------------- |  | - | -------
|2004                |  |   | 137,129
|2005                |  |   | 119,978
|2006                |  |   | 99,929 
|2007                |  |   | 80,215 
|2008 and subsequent |  |   | 357,144
|                    |  |   |        
|                    |  | $ | 944,650
|                    |  |   |        



F-21



---



PAN PACIFIC
RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2002, 2001 and 2000

(Tabular amounts are in thousands, except unit, option and share data)



11. Related party transactions



(a)In August 2002, the Company purchased 61,333 shares of its common stock from executive officers. The Company purchased the stock at fair value
at a price of $34.40 per share, which was the closing stock price on the day the transaction was agreed to, and financed the transaction through operating cash flow. In February 2002, the Company purchased 126,666 shares of its common stock from an
executive officer. The Company purchased the stock at fair value at a price of $29.05 per share and financed the transaction through operating cash flow. In January 2001, the Company purchased 1,000,000 shares of its common stock from Revenue
Properties (U.S.), Inc., an affiliate of the Company. The Company purchased the stock at fair value at a price of $20.85 per share and financed the transaction through a draw under its line of credit.



(b)Distributions on common stock paid to Revenue Properties (U.S.),
Inc., an affiliate of the Company, during 2002 and 2001 were $0 and $7,004,000, respectively.



(c)The Company had notes receivable of $0 and $735,000 due from executive officers at December 31, 2002 and 2001, respectively. These notes were part of the acquisition of Western and replaced
notes previously held by officers of Western. These notes bore interest at 7.50% and were repaid in January 2002. In addition, the Company had notes receivable of $231,000 and $124,000 due from executive officers at December 31, 2002 and 2001,
respectively. These notes, which bear interest at 7.00%, are due on demand. In addition, during 2000 notes receivable of $297,000 were issued to executive officers. These notes bore interest at 7.00% and were forgiven in November 2000 as a result of
the acquisition of Western and were a component of merger related expenses. The Company had notes receivable at December 31, 1999 of $260,000 due from executive officers. The notes bore interest at 7.00% and were forgiven in 2000 as a component of
annual compensation.



12. Employee benefit plan



All employees of the Company who meet
certain minimum age and period of service requirements are eligible to participate in a Section 401(k) plan as defined by the Internal Revenue Code. The employee benefit plan, sponsored by the Company, allows eligible employees to defer a percentage
of compensation on a pre-tax basis up to a maximum of $11,000 in 2002. Employees over 50 years of age may add an additional $1,000 in 2002. Prior to 2002, eligible employees were allowed to defer up to 15% of their annual compensation. The amounts
contributed by employees are immediately vested and non-forfeitable. The Company, at managements discretion, may match employee contributions. The Companys cost for the years ended December 31, 2002, 2001 and 2000 was approximately
$77,000, $64,000 and $58,000, respectively.



13. Commitments
and contingencies



(a)The Company leases certain
real estate and office equipment under operating leases expiring at various dates through 2021. Rental expense was $348,000, $770,000 and $892,000 for the years ended December 31, 2002, 2001 and 2000, respectively. Minimum rentals under
noncancellable operating leases in effect at December 31, 2002 were as follows:



|2003                |  | $ | 205  
|------------------- |  | - | -----
|2004                |  |   | 200  
|2005                |  |   | 199  
|2006                |  |   | 198  
|2007                |  |   | 198  
|2008 and subsequent |  |   | 2,450
|                    |  |   |      
|                    |  | $ | 3,450
|                    |  |   |      



F-22



---



PAN PACIFIC
RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2002, 2001 and 2000

(Tabular amounts are in thousands, except unit, option and share data)



13. Commitments and contingencies (continued)



(b)In connection with the acquisition of Western, the Company was named in a complaint alleging, among other things, that the merger terms between
the Company and Western were unfair and violated fiduciary obligations to Westerns shareholders. The Court dismissed the fraud-based claims, the claims for breach of fiduciary duty in abuse of control and unjust enrichment, and dismissed in
part the claim for breach of fiduciary duty. The parties reached a final agreement in principle to resolve the litigation and the proposed settlement provides for payment by the Company to the plaintiff class in the amount of $975,000. The
Companys settlement proposal is pending final approval by the Court. The Company intends to pursue collection of the settlement amount and the related legal costs, which total approximately $979,000, from its insurance carriers. Although the
Company believes these amounts are covered by its existing coverage, and therefore has not reflected the proposed settlement in its financial statements, one of the insurance carriers has disputed the claim and the Company can not be assured that it
will be successful in collecting the full amount.



(c)Various claims and legal proceedings arise in the ordinary course of business. The ultimate amount of liability from all claims and actions cannot be determined with certainty, but in the opinion of management, the ultimate liability from all
pending and threatened legal claims will not materially affect the consolidated financial statements taken as a whole.



14. Segment reporting



The Company operates in one industry segmentreal estate ownership, management and development. As of December 31, 2002 and 2001, the Company owned
105 and 108 community shopping centers, respectively, primarily located in the Western United States (see Note 1). Management reviews operating and financial data for each property separately and independently from all other properties when making
resource allocation decisions and measuring performance. Therefore, the Company defines operating segments as individual properties with no segment representing more than 10% of the net operating income of the Company. No single tenant accounts for
10% or more of rental revenue and none of the shopping centers are located in a foreign country.



23



---



PAN PACIFIC
RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2002, 2001 and 2000

(Tabular amounts are in thousands, except unit, option and share data)



15. Quarterly financial data (unaudited)



The following summarizes the condensed quarterly financial information for the Company:



|                                                                                        |  | Quarters ended 2002 |       
|--------------------------------------------------------------------------------------- |  | ------------------- | ------
|                                                                                        |  | December 31         |       
|Revenue                                                                                 |  | $                   | 50,243
|Expenses                                                                                |  |                     | 32,673
|                                                                                        |  |                     |       
|Income from continuing operations before minority interests and discontinued
operations |  |                     | 17,570
|Minority interests                                                                      |  |                     | (372  
|Discontinued operations                                                                 |  |                     | 6,626 
|                                                                                        |  |                     |       
|Net income                                                                              |  | $                   | 23,824
|                                                                                        |  |                     |       
|Basic earnings per share:                                                               |  |                     |       
|Income from continuing operations                                                       |  | $                   | 0.51  
|Discontinued operations                                                                 |  | $                   | 0.20  
|Net income                                                                              |  | $                   | 0.71  
|Diluted earnings per share:                                                             |  |                     |       
|Income from continuing operations                                                       |  | $                   | 0.51  
|Discontinued operations                                                                 |  | $                   | 0.19  
|Net income                                                                              |  | $                   | 0.70  



|                                                                                                                     |  | Quarters ended 2001 |       
|-------------------------------------------------------------------------------------------------------------------- |  | ------------------- | ------
|                                                                                                                     |  | December 31         |       
|Revenue                                                                                                              |  | $                   | 46,521
|Expenses                                                                                                             |  |                     | 30,890
|                                                                                                                     |  |                     |       
|Income from continuing operations before minority interests, gain on sale of real estate
and discontinued operations |  |                     | 15,631
|Minority interests                                                                                                   |  |                     | (478  
|Gain (loss) on sale of real estate                                                                                   |  |                     | 785   
|Discontinued operations                                                                                              |  |                     | 873   
|                                                                                                                     |  |                     |       
|Net income                                                                                                           |  | $                   | 16,811
|                                                                                                                     |  |                     |       
|Basic earnings per share:                                                                                            |  |                     |       
|Income from continuing operations                                                                                    |  | $                   | 0.49  
|Discontinued operations                                                                                              |  | $                   | 0.03  
|Net income                                                                                                           |  | $                   | 0.52  
|Diluted earnings per share:                                                                                          |  |                     |       
|Income from continuing operations                                                                                    |  | $                   | 0.48  
|Discontinued operations                                                                                              |  | $                   | 0.03  
|Net income                                                                                                           |  | $                   | 0.51  



F-24



---



PAN PACIFIC
RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2002, 2001 and 2000

(Tabular amounts are in thousands, except unit, option and share data)



16. Subsequent event



On January 17, 2003, the Company acquired Center Trust, Inc. (Center Trust), a real estate investment trust, at a cost of
approximately $600,000,000. The transaction was a stock for stock exchange including assumption of debt whereby Center Trust common shares and units were exchanged into newly issued Company common shares and units, based upon a price of $34.24 per
share/unit issued and a 0.218 exchange ratio. As a result, the Company issued 6,084,748 common shares and 284,263 operating subsidiary units to Center Trusts equity holders. The Company will account for this transaction using the purchase
method of accounting.



F-25



---



PAN PACIFIC
RETAIL PROPERTIES, INC.

SCHEDULE III

PROPERTIES AND ACCUMULATED DEPRECIATION

December 31, 2002

(In thousands)



|                                        |  |              |        | Initial Costs |   | Costs Capitalized Subsequent to Acquisition |  | Total Costs     |        |                |   |        | 
|--------------------------------------- |  | ------------ | ------ | ------------- | - | ------------------------------------------- |  | --------------- | ------ | -------------- | - | ------ | 
|Description                             |  | Encumbrances |        | Land          |   | Buildings and Improvements (2)              |  | Improvements(2) |        | Carrying Costs |   | Land   | 
|PROPERTIES:                             |  |              |        |               |   |                                             |  |                 |        |                |   |        | 
|Albany Plaza Albany, OR                 |  | $            |       |               | $ | 1,525                                       |  | $               | 4,606  |                | $ | 1,231  | 
|Angels Camp Town Center Angels Camp, CA |  |              |       |               |   | 1,153                                       |  |                 | 3,485  |                |   | 20     | 
|Arlington Courtyard Riverside, CA       |  |              |       |               |   | 401                                         |  |                 | 753    |                |   | 91     | 
|Auburn North Auburn, WA                 |  |              |       |               |   | 2,275                                       |  |                 | 6,876  |                |   | 2,796  | 
|Bear Creek Plaza Medford, OR            |  |              |       |               |   | 3,275                                       |  |                 | 10,076 |                |   | 1,347  | 
|Bixby Hacienda Hacienda Heights, CA     |  |              |       |               |   | 6,859                                       |  |                 | 16,012 |                |   | 78     | 
|Blaine International Center Blaine, WA  |  |              |       |               |   | 1,951                                       |  |                 | 5,255  |                |   | 66     | 
|Blossom Valley Turlock, CA              |  |              |       |               |   | 2,494                                       |  |                 | 7,483  |                |   | 17     | 
|Brookhurst Anaheim, CA                  |  |              |       |               |   | 6,152                                       |  |                 | 14,359 |                |   | 604    | 
|Brookvale Center Fremont, CA            |  |              |       |               |   | 3,161                                       |  |                 | 9,555  |                |   | 930    | 
|Cable Park Orangevale, CA               |  |              |       |               |   | 3,042                                       |  |                 | 9,192  |                |   | 26     | 
|Canal Farms Las Brunos, CA              |  |              |       |               |   | 1,576                                       |  |                 | 4,728  |                |   | 54     | 
|Canby Square Canby, OR                  |  |              |       |               |   | 2,503                                       |  |                 | 7,518  |                |   | 1,619  | 
|Canyon Ridge Plaza Kent, WA             |  |              |       |               |   | 2,905                                       |  |                 |       |                |   | 8,195  | 
|Canyon Square Plaza Santa Clarita, CA   |  |              |       |               |   | 2,725                                       |  |                 | 8,327  |                |   | 116    | 
|Caughlin Ranch Reno, NV                 |  |              |       |               |   | 2,283                                       |  |                 | 6,852  |                |   | 1,062  | 
|Century Center Modesto, CA              |  |              |       |               |   | 4,780                                       |  |                 | 14,337 |                |   | 639    | 
|Cheyenne Commons Las Vegas, NV          |  |              |       |               |   | 8,540                                       |  |                 | 27,937 |                |   | 2,247  | 
|Chico Crossroads Chico, CA              |  |              |       |               |   | 3,600                                       |  |                 | 17,071 |                |   | 303    | 
|Chino Town Square Chino, CA             |  |              | 25,808 |               |   | 8,801                                       |  |                 | 10,466 |                |   | 15,734 | 
|Claremont Village Everett, WA           |  |              |       |               |   | 2,319                                       |  |                 | 7,035  |                |   | 203    | 
|Cobblestone Redding, CA                 |  |              |       |               |   | 1,869                                       |  |                 | 5,609  |                |   | 80     | 
|Commonwealth Square Folsom, CA          |  |              |       |               |   | 4,425                                       |  |                 | 13,274 |                |   | 128    | 
|Country Club Center Rio Rancho, NM      |  |              | 3,132  |               |   | 566                                         |  |                 | 1,518  |                |   | 1,924  | 
|Country Gables Granite Bay, CA          |  |              |       |               |   | 4,621                                       |  |                 | 10,806 |                |   | 94     | 
|Creekside Center Hayward, CA            |  |              |       |               |   | 1,500                                       |  |                 | 4,545  |                |   | 602    | 
|Currier Square Oroville, CA             |  |              |       |               |   | 1,591                                       |  |                 | 4,771  |                |   | 134    | 



(Continued)



F-26



---



PAN PACIFIC
RETAIL PROPERTIES, INC.

SCHEDULE III

PROPERTIES AND ACCUMULATED DEPRECIATION (Continued)

December 31,
2002

(In thousands)



|                                          |  |              |  | Initial Costs |  | Costs Capitalized Subsequent to Acquisition |  | Total Costs     |  |                |  |       | 
|----------------------------------------- |  | ------------ |  | ------------- |  | ------------------------------------------- |  | --------------- |  | -------------- |  | ----- | 
|Description                               |  | Encumbrances |  | Land          |  | Buildings and Improvements (2)              |  | Improvements(2) |  | Carrying Costs |  | Land  | 
|PROPERTIES:                               |  |              |  |               |  |                                             |  |                 |  |                |  |       | 
|Decatur Meadows Las Vegas, NV             |  |             |  | 2,752         |  | 6,424                                       |  | 154             |  |               |  | 2,752 | 
|Dublin Retail Center Dublin, CA           |  |             |  | 4,063         |  | 12,159                                      |  | 276             |  |               |  | 4,063 | 
|Eagle Station Carson City, NV             |  |             |  | 2,455         |  | 7,363                                       |  | 67              |  |               |  | 2,457 | 
|East Burnside Portland, OR                |  |             |  | 1,583         |  | 3,691                                       |  | 213             |  |               |  | 1,597 | 
|Eastridge Plaza Porterville, CA           |  |             |  | 1,170         |  | 3,513                                       |  | 4               |  |               |  | 1,170 | 
|Elko Junction Elko, NV                    |  |             |  | 3,274         |  | 9,822                                       |  | 43              |  |               |  | 3,274 | 
|Elverta Crossing Sacramento, CA           |  |             |  | 3,080         |  | 9,236                                       |  | 112             |  |               |  | 3,080 | 
|Encinitas Marketplace Encinitas, CA       |  |             |  | 3,529         |  | 8,281                                       |  | 663             |  |               |  | 3,529 | 
|Fairmont Shopping Center Fairmont, CA     |  |             |  | 3,420         |  | 8,023                                       |  | 335             |  |               |  | 3,420 | 
|Fashion Faire San Leandro, CA             |  |             |  | 2,862         |  | 8,695                                       |  | 148             |  |               |  | 2,863 | 
|Garrison Square Vancouver, WA             |  |             |  | 1,462         |  | 4,391                                       |  | 199             |  |               |  | 1,482 | 
|Gateway Shopping Center Mill Creek, WA    |  |             |  | 3,937         |  | 12,032                                      |  | 66              |  |               |  | 3,938 | 
|Glenbrook Center Sacramento, CA           |  |             |  | 1,538         |  | 3,588                                       |  | 931             |  |               |  | 1,538 | 
|Glen Cove Center Vallejo, CA              |  |             |  | 1,925         |  | 5,807                                       |  | 26              |  |               |  | 1,925 | 
|Gordon Ranch Chino Hills, CA              |  |             |  | 5,623         |  | 13,120                                      |  | 54              |  |               |  | 5,623 | 
|Granary Square Valencia, CA               |  |             |  | 5,479         |  | 12,832                                      |  | 419             |  |               |  | 5,479 | 
|Green Valley Town & Country Henderson, NV |  |             |  | 4,096         |  | 12,343                                      |  | 141             |  |               |  | 4,096 | 
|Heritage Park Suison City, CA             |  |             |  | 3,449         |  | 10,348                                      |  | 135             |  |               |  | 3,449 | 
|Heritage Place Tulare, CA                 |  |             |  | 2,098         |  | 6,298                                       |  | 28              |  |               |  | 2,098 | 
|Hermiston Plaza Hermiston, OR             |  |             |  | 1,930         |  | 6,145                                       |  | 1,210           |  |               |  | 1,930 | 
|Hood River Center Hood River, OR          |  |             |  | 1,169         |  | 3,699                                       |  | 3,157           |  |               |  | 1,169 | 
|Kmart Center Sacramento, CA               |  |             |  | 1,130         |  | 3,392                                       |  | 148             |  |               |  | 1,130 | 
|Laguna 99 Plaza Elk Grove, CA             |  |             |  | 3,244         |  | 9,730                                       |  | 7               |  |               |  | 3,244 | 
|Laguna Village Sacramento, CA             |  |             |  | 3,448         |  |                                            |  | 17,619          |  |               |  | 3,448 | 
|Lakewood Shopping Center Lakewood, CA     |  |             |  | 2,363         |  | 7,141                                       |  | 21              |  |               |  | 2,363 | 
|Lakewood Village Windsor, CA              |  | 9,105        |  | 5,347         |  | 12,476                                      |  | 107             |  |               |  | 5,347 | 
|Larwin Square Tustin, CA                  |  |             |  | 8,617         |  | 20,106                                      |  | 12              |  |               |  | 8,617 | 



(Continued)



F-27



---



PAN PACIFIC
RETAIL PROPERTIES, INC.

SCHEDULE III

PROPERTIES AND ACCUMULATED DEPRECIATION (Continued)

December 31,
2002

(In thousands)



|                                             |  |              |  | Initial Costs |  | Costs Capitalized Subsequent to Acquisition |  | Total Costs     |   |  |                |  |       |  |                           
|-------------------------------------------- |  | ------------ |  | ------------- |  | ------------------------------------------- |  | --------------- | - |  | -------------- |  | ----- |  | --------------------------
|Description                                  |  | Encumbrances |  | Land          |  | Buildings and Improvements (2)              |  | Improvements(2) |   |  | Carrying Costs |  | Land  |  | Buildings and Improvements
|PROPERTIES:                                  |  |              |  |               |  |                                             |  |                 |   |  |                |  |       |  |                           
|Laurentian Center Ontario, CA                |  | 4,250        |  | 2,767         |  | 6,411                                       |  | (391            | ) |  |               |  | 2,767 |  | 6,020                     
|Manteca Marketplace Manteca, CA              |  |             |  | 3,904         |  | 11,908                                      |  | 426             |   |  |               |  | 3,904 |  | 12,334                    
|Marina Village Huntington Beach, CA          |  |             |  | 3,531         |  | 10,660                                      |  | 626             |   |  |               |  | 3,531 |  | 11,286                    
|Maysville Marketsquare Maysville, KY         |  | 5,125        |  | 3,435         |  | 2,001                                       |  | 3,857           |   |  |               |  | 3,299 |  | 5,858                     
|Melrose Village Vista, CA                    |  | 8,799        |  | 5,125         |  | 11,621                                      |  | 161             |   |  |               |  | 5,125 |  | 11,782                    
|Memphis Retail Center Memphis, TN            |  |             |  | 1,204         |  | 3,784                                       |  | (23             | ) |  |               |  | 1,204 |  | 3,761                     
|Menlo Park Portland, OR                      |  |             |  | 3,056         |  | 7,134                                       |  | 1,563           |   |  |               |  | 3,100 |  | 8,697                     
|Milwaukie Marketplace Milwaukie, OR          |  |             |  | 3,184         |  | 9,717                                       |  | 415             |   |  |               |  | 3,184 |  | 10,132                    
|Mira Loma Shopping Center Reno, NV           |  |             |  | 1,925         |  | 5,810                                       |  | 272             |   |  |               |  | 1,925 |  | 6,082                     
|Mission Ridge Plaza Manteca, CA              |  |             |  | 2,880         |  | 8,640                                       |  | 2               |   |  |               |  | 2,880 |  | 8,642                     
|Monterey Plaza San Jose, CA                  |  | 16,692       |  | 7,688         |  | 18,692                                      |  | 559             |   |  |               |  | 7,702 |  | 19,251                    
|North Hills Reno, NV                         |  |             |  | 2,500         |  |                                            |  |                |   |  |               |  | 2,500 |  |                          
|Northridge Plaza Fair Oaks, CA               |  |             |  | 1,658         |  | 4,977                                       |  | 98              |   |  |               |  | 1,658 |  | 5,075                     
|Olympia Square Olympia, WA                   |  | 13,477       |  | 3,737         |  | 11,580                                      |  | 1,127           |   |  |               |  | 3,737 |  | 12,707                    
|Olympia West Center Olympia, WA              |  | 703          |  | 2,736         |  | 8,278                                       |  | 160             |   |  |               |  | 2,736 |  | 8,438                     
|Olympic Place Walnut Creek, CA               |  | 15,601       |  | 9,681         |  | 9,427                                       |  | 18,737          |   |  |               |  | 9,681 |  | 28,164                    
|Oregon City Shopping Center Oregon City, OR  |  | 9,553        |  | 4,426         |  | 13,424                                      |  | 2,521           |   |  |               |  | 4,426 |  | 15,945                    
|Oregon Trail Gresham, OR                     |  |             |  | 3,593         |  | 11,501                                      |  | 2,742           |   |  |               |  | 3,593 |  | 14,243                    
|Pacific Commons Shopping Center Spanaway, WA |  |             |  | 3,419         |  | 10,307                                      |  | 85              |   |  |               |  | 3,419 |  | 10,392                    
|Palmdale Center Palmdale, CA                 |  |             |  | 1,150         |  | 3,509                                       |  | 223             |   |  |               |  | 1,150 |  | 3,732                     
|Panther Lake Shopping Center Kent, WA        |  |             |  | 1,950         |  | 5,901                                       |  | 298             |   |  |               |  | 1,950 |  | 6,199                     
|Park Place Vallejo, CA                       |  |             |  | 4,020         |  | 9,381                                       |  | 15              |   |  |               |  | 4,020 |  | 9,396                     
|Pine Creek Shopping Center Grass Valley, CA  |  |             |  | 5,000         |  | 15,000                                      |  | 185             |   |  |               |  | 5,000 |  | 15,185                    
|Pioneer Plaza Springfield, OR                |  |             |  | 1,864         |  | 5,707                                       |  | 19              |   |  |               |  | 1,864 |  | 5,726                     
|Plaza 580 Livermore, CA                      |  |             |  | 4,010         |  | 12,031                                      |  | 129             |   |  |               |  | 4,010 |  | 12,160                    
|Powell Valley Junction Gresham, OR           |  |             |  | 1,546         |  | 4,747                                       |  | 1,571           |   |  |               |  | 1,546 |  | 6,318                     
|Powell Villa Portland, OR                    |  |             |  | 825           |  | 2,478                                       |  | 274             |   |  |               |  | 836   |  | 2,752                     



(Continued)



F-28



---



PAN PACIFIC
RETAIL PROPERTIES, INC.

SCHEDULE III

PROPERTIES AND ACCUMULATED DEPRECIATION (Continued)

December 31,
2002

(In thousands)



|                                             |  |              |         | Initial Costs |   | Costs Capitalized Subsequent to Acquisition |  | Total Costs      |         |                |   |         | 
|-------------------------------------------- |  | ------------ | ------- | ------------- | - | ------------------------------------------- |  | ---------------- | ------- | -------------- | - | ------- | 
|Description                                  |  | Encumbrances |         | Land          |   | Buildings and Improvements (2)              |  | Improvements (2) |         | Carrying Costs |   | Land    | 
|PROPERTIES:                                  |  |              |         |               |   |                                             |  |                  |         |                |   |         | 
|Rainbow Promenade Las Vegas, NV              |  |              | 18,893  |               |   | 9,381                                       |  |                  | 21,933  |                |   | 146     | 
|Raleys Shopping Center Yuba City, CA        |  |              |        |               |   | 2,107                                       |  |                  | 6,321   |                |   | 24      | 
|Rancho Las Palmas Rancho Mirage, CA          |  |              | 12,082  |               |   | 5,025                                       |  |                  | 15,235  |                |   | 870     | 
|Rockwood Plaza Gresham, OR                   |  |              |        |               |   | 1,179                                       |  |                  | 3,540   |                |   | 1,231   | 
|Sahara Pavilion North Las Vegas, NV          |  |              | 29,707  |               |   | 11,920                                      |  |                  | 28,652  |                |   | 841     | 
|Sahara Pavilion South Las Vegas, NV          |  |              |        |               |   | 4,833                                       |  |                  | 12,988  |                |   | 1,306   | 
|San Dimas Market Place San Dimas, CA         |  |              | 14,170  |               |   | 5,699                                       |  |                  | 17,315  |                |   |        | 
|Sandy Marketplace Sandy, OR                  |  |              | 4,435   |               |   | 2,046                                       |  |                  | 6,132   |                |   | 377     | 
|Shops at Lincoln School Modesto, CA          |  |              |        |               |   | 1,672                                       |  |                  | 5,067   |                |   | 18      | 
|Sky Park Plaza Chico, CA                     |  |              |        |               |   | 3,566                                       |  |                  | 10,700  |                |   | 45      | 
|Southgate Center Milwaukie, OR               |  |              | 3,070   |               |   | 1,423                                       |  |                  | 4,319   |                |   | 447     | 
|Sunset Esplanade Hillsboro, OR               |  |              |        |               |   | 8,610                                       |  |                  | 20,090  |                |   | 10      | 
|Sunset Mall Portland, OR                     |  |              | 7,493   |               |   | 2,996                                       |  |                  | 9,089   |                |   | 93      | 
|Sunset Square Bellingham, WA                 |  |              |        |               |   | 6,100                                       |  |                  | 18,647  |                |   | 2,476   | 
|Sycamore Plaza Anaheim, CA                   |  |              |        |               |   | 1,856                                       |  |                  | 5,589   |                |   | 78      | 
|Tacoma Central Tacoma, WA                    |  |              | 9,237   |               |   | 5,314                                       |  |                  | 16,219  |                |   | 589     | 
|Tanasbourne Village Hillsboro, OR            |  |              | 17,979  |               |   | 5,573                                       |  |                  | 13,861  |                |   | 1,177   | 
|Tustin Heights Tustin, CA                    |  |              | 10,230  |               |   | 3,675                                       |  |                  | 11,089  |                |   | 169     | 
|Ukiah Crossroads Ukiah, CA                   |  |              |        |               |   | 1,869                                       |  |                  | 5,609   |                |   | 16      | 
|Victorian Walk Fresno, CA                    |  |              |        |               |   | 1,676                                       |  |                  | 5,025   |                |   | 135     | 
|Vineyard Village East Ontario, CA            |  |              |        |               |   | 649                                         |  |                  | 2,716   |                |   | 323     | 
|West Town Winnemucca, NV                     |  |              |        |               |   | 1,085                                       |  |                  | 3,258   |                |   | 4       | 
|Westwood Village Shopping Center Redding, CA |  |              |        |               |   | 1,131                                       |  |                  | 3,411   |                |   | 396     | 
|Winterwood Pavilion Las Vegas, NV            |  |              |        |               |   | 4,573                                       |  |                  | 13,015  |                |   | 1,748   | 
|Yreka Junction Yreka, CA                     |  |              |        |               |   | 2,436                                       |  |                  | 7,304   |                |   | 7       | 
|                                             |  |              |         |               |   |                                             |  |                  |         |                |   |         | 
|                                             |  | $            | 239,541 |               | $ | 359,143                                     |  | $                | 944,851 |                | $ | 114,812 | 
|                                             |  |              |         |               |   |                                             |  |                  |         |                |   |         | 



(Continued)



F-29



---



PAN PACIFIC
RETAIL PROPERTIES, INC.

SCHEDULE III

PROPERTIES AND ACCUMULATED DEPRECIATION (Continued)

December 31,
2002

(In thousands)



Notes:



|(1) |  | The aggregate gross cost of the properties owned by Pan Pacific Retail Properties, Inc. for federal income tax purposes, approximated $1,316,492 as of December 31,
2002.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) |  | Net of write-offs of fully depreciated assets.
|--- |  | ----------------------------------------------



|(3) |  | The following table reconciles the historical cost and related accumulated depreciation and amortization of Pan Pacific Retail Properties, Inc. from January 1, 2000
through December 31, 2002:
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                                                             |  | For the years ended December 31, |          
|------------------------------------------------------------------------------------------------------------ |  | -------------------------------- | ---------
|Cost of properties                                                                                           |  | 2002                             |          
|Balance, beginning of year                                                                                   |  | $                                | 1,331,951
|Additions (acquisition, improvements, etc.)                                                                  |  |                                  | 130,425  
|Interest capitalized                                                                                         |  |                                  | 1,796    
|Deductions (write-off of tenant improvements, cost of real estate sold and provision for
loss on impairment) |  |                                  | (33,082  
|                                                                                                             |  |                                  |          
|Balance, end of year                                                                                         |  | $                                | 1,431,090
|                                                                                                             |  |                                  |          



|                                                                                                       |  | For the years ended December 31, |        
|------------------------------------------------------------------------------------------------------ |  | -------------------------------- | -------
|Accumulated depreciation and amortization                                                              |  | 2002                             |        
|Balance, beginning of year                                                                             |  | $                                | 98,762 
|Additions (depreciation and amortization expense)                                                      |  |                                  | 28,526 
|Deductions (write-off of accumulated depreciation of tenant improvements and cost of
real estate sold) |  |                                  | (2,231 
|                                                                                                       |  |                                  |        
|Balance, end of year                                                                                   |  | $                                | 125,057
|                                                                                                       |  |                                  |        



See
accompanying independent auditors report.



F-30