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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-K



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



For the fiscal year ended December 31, 2005



or



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15d OF THE SECURITIES EXCHANGE ACT OF 1934
|- | --------------------------------------------------------------------------------------



For the transition period from  to



Commission File Number: 001-13243



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PAN PACIFIC RETAIL PROPERTIES, INC.

(Exact Name of Registrant as Specified in Its Charter)



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|                                              |  |                                     
|--------------------------------------------- |  | ------------------------------------
|Maryland                                      |  | 33-0752457                          
|(State of Incorporation)                      |  | (I.R.S. Employer Identification No.)
|                                              | 
|1631-B South Melrose Drive, Vista, California |  | 92081                               
|(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 if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.    Yes  x    No ̈



Indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes ̈No  x



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.  x



Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.



Large accelerated filer  x            Accelerated filer ̈Non-accelerated filer ̈



Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act).     Yes ̈No  x



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 $2,679,045,000.



As of February 22, 2006,
the number of shares of the registrants common stock outstanding was 40,772,053.



DOCUMENTS INCORPORATED BY REFERENCE



Portions of Pan Pacific Retail Properties, Inc.s Definitive Proxy Statement for the 2006 annual meeting of stockholders have been incorporated by reference into Part III herein.



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PAN PACIFIC RETAIL PROPERTIES, INC.

TABLE OF CONTENTS



PART I



|                |  |                                                                                                              |  |     
|--------------- |  | ------------------------------------------------------------------------------------------------------------ |  | ----
|                |  |                                                                                                              |  | Page
|ITEM 1.         |  | BUSINESS                                                                                                     |  | 1   
|ITEM 1A.        |  | RISK FACTORS                                                                                                 |  | 4   
|ITEM 1B.        |  | UNRESOLVED STAFF COMMENTS                                                                                    |  | 11  
|ITEM 2.         |  | PROPERTIES                                                                                                   |  | 11  
|ITEM 3.         |  | LEGAL PROCEEDINGS                                                                                            |  | 27  
|ITEM 4.         |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                          |  | 27  
|               
|PART II        
|                |  |                                                                                                             
|ITEM 5.         |  | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |  | 27  
|ITEM 6.         |  | SELECTED CONSOLIDATED FINANCIAL DATA                                                                         |  | 28  
|ITEM 7.         |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                        |  | 29  
|ITEM 7A.        |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                   |  | 38  
|ITEM 8.         |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                                  |  | 38  
|ITEM 9.         |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                         |  | 38  
|ITEM 9A.        |  | CONTROLS AND PROCEDURES                                                                                      |  | 38  
|ITEM 9B.        |  | OTHER INFORMATION                                                                                            |  | 39  
|               
|PART III       
|                |  |                                                                                                             
|ITEM 10.        |  | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                                           |  | 40  
|ITEM 11.        |  | EXECUTIVE COMPENSATION                                                                                       |  | 40  
|ITEM 12.        |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS               |  | 40  
|ITEM 13.        |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                               |  | 40  
|ITEM 14.        |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                                       |  | 40  
|               
|PART IV        
|                |  |                                                                                                             
|ITEM 15.        |  | EXHIBITS, FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES                                             |  | 41  
|                | 
|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, 2005, 2004 and 2003, our total assets were
$2,098,764,000, $1,995,444,000 and $1,863,348,000, respectively. At December 31, 2005, we owned a portfolio comprised of 138 shopping center properties, of which 133 are located in the Western United States in our five key markets including 43
in Northern California, 38 in Southern California, 21 in Oregon, 16 in Washington and 15 in Nevada. The portfolio includes approximately 22.5 million square feet of retail space, which was 97.1% leased to a diverse mix of 3,468 tenants.



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 6,084,499
shares of our common stock to Center Trust stockholders and were 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. In
2003, 33,964 units were redeemed for cash of $1,246,000. No units were redeemed during 2005 and 2004.



We employed 129 people as of December 31, 2005, including 13 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 92081, 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, such as our Forms 10-K, 10-Q and 8-K as well as all amendments to those filings, 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. You can also access on our website our Code for Senior Officers, Policy for Reporting Complaints and Violations,
Corporate Governance Guidelines, Audit Committee Charter, Nominating/Corporate Governance Committee Charter and Compensation Committee Charter.



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



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



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.



We are a 50%
general partner of a joint venture that owns North Coast Health Center, a medical office building in Encinitas, California. At December 31, 2005 and 2004, the balance of the joint ventures note payable to purchase the building on the
property, which bears interest at 7%, was $17,846,000 and $17,560,000, respectively. The note payable is secured by the property and is not guaranteed by us. This is the only off-balance-sheet transaction to which we are a party. In the fourth
quarter of 2005, we assumed a note receivable as part of an agreement to extend financing to the joint venture to construct another building at the project. At December 31, 2005, the balance on this note receivable, which bears interest at 7%,
was $478,000. We account for our investment in this joint venture under the equity method.



In 2003, we received a return of capital of $5,790,000 from our investment in Plaza Escuela Holding Co., LLC. In February 2004, we received a return of capital of $600,000. We received a return of capital for our
remaining equity investment of $1,205,000 during the second quarter of 2004. We were entitled to receive 25% of the



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operating cash flows from the property through November 2008. In the fourth quarter of 2004, we agreed to receive $1,354,000 in exchange for our right to
receive these future operating cash flows. This amount was recorded as other revenue in the accompanying 2004 consolidated statement of income. Proceeds from the returns of capital and cash flow participation were used primarily to repay borrowings
under our revolving credit facility.



On November 5, 2002,
we entered into an Agreement and Plan of Merger with Center Trust, Inc., a Maryland corporation. The transaction, which closed January 17, 2003, included interests in 27 shopping centers, two regional malls and two single tenant assets. The
transaction was a stock for stock exchange, including assumption of $362,257,000 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 6,084,499 shares of our
common stock to Center Trust stockholders and 284,263 units were issued to limited partners of CT Operating Partnership, L.P. upon the exchange of operating partnership units held by them. Distributions are made to the limited partners at a rate
equal to the dividend distribution paid by us on a share of our common stock.



In June 2003, we issued $75,000,000 in aggregate principal amount of 4.70% senior notes due June 2013. We sold these notes at 99.755% of the principal amount and used the net proceeds from the offering to repay
borrowings under our line of credit.



During 2003, nine
non-strategic assets were sold, including two regional malls that were acquired as part of the Center Trust acquisition, which generated net cash proceeds of approximately $190,000,000 which were used primarily to repay borrowings under our
revolving credit facility.



In September 2004, we entered into
an amended and restated unsecured $300,000,000 revolving credit facility which bears interest, at our option, at either LIBOR plus 0.65% or a reference rate and expires in March 2007. At December 31, 2005 and 2004, the amount drawn on this line
of credit was $44,500,000 and $113,000,000, respectively, and the interest rate was 5.10% and 3.18%, respectively. The credit facility requires a quarterly fee of 0.20% per annum on the total aggregate commitment. We, at our sole option, may
increase the amount of the commitment up to $400,000,000 and extend the maturity date to March 2008, assuming satisfaction of certain conditions. We believe we are in compliance with all covenants contained in the revolving credit facility agreement
at December 31, 2005.



In February 2004, we repaid
$50,000,000 in aggregate principal amount of 7.88% senior notes on the original maturity date of the notes. We borrowed on our line of credit to fund the repayment.



In May 2004, we issued $50,000,000 in aggregate principal amount of 5.95% senior notes due June 2014. We sold these notes at
99.182% of the principal amount. In July 2004, we issued an additional $50,000,000 in aggregate principal amount of the 5.95% senior notes due June 2014. We sold these notes at 101.586% of the principal amount. The net proceeds from the offerings
were used to repay borrowings under our line of credit.



In
August 2005, we issued $100,000,000 in aggregate principal amount of 5.25% senior notes due September 2015. We sold these notes at 99.429% of the principal amount and used the net proceeds from the offering to repay a portion of the borrowings under
our line of credit.



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 or use the proceeds to paydown our line of credit.



During 2003, we disposed of two regional malls acquired in the Center Trust merger, six shopping centers and an office building parcel. We took back a
portion of the proceeds on these sales in the form of three notes receivable secured by deeds of trust, two of which were paid off by December 31, 2003. The balance of the net proceeds on the sales was received in cash. On four of the sales,
the cash proceeds 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.



During 2004, we disposed of three shopping centers and a parcel of land. We
took back a portion of the proceeds on these sales in the form of one short-term note receivable secured by a deed of trust which was paid off by December 31, 2004. The balance of the net proceeds on the sales was received in cash. On two of
the sales, the cash proceeds were placed with an exchange accommodator and used to acquire another strategic shopping center property in a like-kind exchange transaction pursuant to Section 1031 of the Internal Revenue Code.



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During 2005, we disposed of one shopping center. The net proceeds on the sale, received in cash, were
placed with an exchange accommodator and was used to acquire another strategic shopping center property in a like-kind exchange transaction 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.



Competition



There are numerous other developers and real estate companies (both public and private), financial institutions and other
investors engaged in the development, acquisition and operation of shopping centers and commercial property which compete with us in our trade areas. This results in competition for both acquisitions of existing income-producing properties and for
tenants to occupy the space that we and our competitors develop, acquire and manage.



We believe that the principal competitive factors in attracting tenants in our market areas are location, price, anchor tenants and maintenance of properties. We also believe that our competitive advantages include
the favorable locations of our properties, our ability to provide a retailer with multiple locations with anchor tenants and the practice of continuous maintenance and renovation of our properties as is appropriate.



No single competitor or group of competitors in any of our chosen markets is
believed to be dominant in that market. However, their competition may:



| |  |  | reduce the number of properties available for acquisition or development;
| | - |  | -------------------------------------------------------------------------



| |  |  | increase the cost of properties available for acquisition or development;
| | - |  | -------------------------------------------------------------------------



| |  |  | reduce rents payable to us;
| | - |  | ---------------------------



| |  |  | interfere with our ability to attract and retain tenants; and
| | - |  | -------------------------------------------------------------



| |  |  | lead to increased vacancy rates at our properties.
| | - |  | --------------------------------------------------



Retailers at our properties also 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 could contribute to lease defaults and insolvency of our tenants.



ITEM 1A. RISK FACTORS



You should
carefully consider the risks described below as well as the risks described elsewhere in this report, which risks are incorporated by reference into this section, before making an investment decision regarding our company. The risks and
uncertainties described herein are not the only ones facing us and there may be additional risks that we do not presently know of or that we currently consider not likely to have a significant impact. All of these risks could adversely affect our
business, financial condition, results of operations and cash flows.



There are Certain Risks Inherent to Investment in Real Estate. 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.



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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;
| | - |  | --------------------------------------------------------------------------------



| |  |  | our ability to collect rent from our tenants;
| | - |  | ---------------------------------------------



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



| |  |  | inability to finance property development and acquisitions on favorable terms; and
| | - |  | ----------------------------------------------------------------------------------



| |  |  | natural disasters, future acts of terrorism or war or risk of war.
| | - |  | ------------------------------------------------------------------



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.



We May be Unable 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 8.5% and 57.5% of the leased gross leasable area, or GLA, of our properties will expire through the end of 2006 and 2010, 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.
| | - |  | ---------------------------------------------------------



Changes in the Economic or Other Market Conditions in Certain Geographic Regions Could Adversely Affect Our Results of Operations. As of
December 31, 2005, we have 43 properties with total GLA of 5,762,000 square feet located in Northern California, 38 properties with total GLA of 7,486,000 square feet located in Southern California, 21 properties with total GLA of 3,414,000
square feet located in Oregon, 16 properties with total GLA of 2,673,000 square feet located in Washington and 15 properties with total GLA of 2,472,000 square feet located in Nevada. 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.



We May Not be Able to Respond Quickly to Changing Market Conditions Due to the 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.



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Competition with Other Developers and Real Estate Companies Could Materially Affect Our Ability to
Generate Net Income, Service Our Debt and Make Distributions to Our Stockholders. 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.



Compliance with Changes in Laws May Result in Significant Unexpected
Expenditures. 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.



We Rely on Certain Tenants and Anchors and the Closing of One or More Anchor-Occupied Store Could Adversely Affect that Property, Resulting in Lease
Terminations and Reductions in Rent. 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 or as a result of bankruptcy or insolvency, 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. For the year ended December 31, 2005 our annualized base rent attributable to anchor tenants was
38.5% of our total annualized base rent.



There is a Lack
of Operating History With Respect to Our Recent Acquisition and Development of Properties and We May Not Succeed in the Integration or Management of Additional Properties. At December 31, 2005, we owned and operated 138 properties,
consisting of approximately 22.5 million square feet of space. Fifty-three of our properties were acquired during 2000, primarily through the acquisition of Western. These properties, together with other individual acquisitions and the 31
properties which we acquired in 2003 in connection with our acquisition of Center Trust, some of which have been sold, 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.



Our
Indebtedness Could Adversely Affect Our Financial Results. 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.
| | - |  | --------------------------------------------------------------------------------------------



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At December 31, 2005, we had outstanding indebtedness of approximately $1,088,540,000. 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 Could
Negatively Impact Our Financial Results. At December 31, 2005, we had approximately $390,132,000 of mortgage financing and property level bonds. 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 $50,773,000 on four properties, $49,457,000 on four other properties, $48,791,000 on four other properties, $40,461,000 on three properties,
$15,172,000 on three other properties and $30,924,000 on two properties (the obligations on these two properties were subsequently paid off in January 2006). 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.



Rising Interest Rates on Our Variable-Rate Debt Could Negatively Impact our Financial Results. Advances under
our revolving credit agreement bear variable-rate interest, at our option, at either LIBOR plus 0.65% or a reference rate. At December 31, 2005, the amount drawn under our revolving credit agreement was $44,500,000 and the interest rate was
5.10%. 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.



Loss of Our
Tax Status as a Real Estate Investment Trust Would Have Significant Adverse Consequence to Us and the Value of Our Securities. Commencing with our taxable year ended December 31, 1997, we believe that we have qualified as a REIT under
the Internal Revenue Code. We have not requested and do not plan to request a ruling from the IRS that we qualify as a REIT, and the statements in the Form 10-K are not binding on the IRS or any court. We can give no assurance that we have qualified
or will continue to quality as a REIT for tax purposes. 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);
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | distributions to stockholders would be subject to tax as ordinary corporate distributions; and
| | - |  | ----------------------------------------------------------------------------------------------



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



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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.



We are Subject to Certain Distribution Requirements Which Could Require
Us to Borrow on a Short-Term Basis. 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. At least
95% of our gross income in any year must be derived from qualifying sources, and we must satisfy a number of requirements regarding the composition of our assets. 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 Internal Revenue 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 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.



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 intend to renovate properties only to the extent necessary to keep the properties in
good working order. These renovations generally involve minor as-needed projects such as painting and landscaping.



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;
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | delay or refusal in obtaining all necessary zoning, land use, building occupancy and other government permits and authorizations;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



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| |  |  | financing may not be available at all or 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 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



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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.



There is No Limitation on Amount of Indebtedness We May Incur Which Could Increase the Risk of Default on Our Indebtedness. Our total market
capitalization at December 31, 2005 was approximately $3,852,490,000, based on the market closing price of our common stock at December 31, 2005 of $66.89 per share (assuming the conversion of 619,755 operating subsidiary units to common
stock) and our debt outstanding of approximately $1,088,540,000 (exclusive of accounts payable and accrued expenses). At December 31, 2005, our debt to total market capitalization ratio was approximately 28.3% (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.



We May be Subject to Tax Upon 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. During 2002, Oregon
Real Estate Services, Inc., a C corporation, was merged into us. At the time Oregon Real Estate Services, Inc. was merged into us, it held 10 properties and land with built-in gain. 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 may 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 merger. 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 the 10 year periods, we may be subject to tax on the built-in gain.



Future Acts of Terrorism, War, Risk of War or Natural Disasters May Have a Negative Impact on Our Business.The continued threat of
terrorism and continued 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 civil unrest, additional terrorist activities, or continued armed conflict 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. In addition, natural disasters such as major floods, hurricanes and
earthquakes could also adversely impact our business and operating results.



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Ownership of Partnership Interest Could Jeopardize Our Status as a REIT. We have direct or
indirect control of certain partnerships in which we are a partner and intend to continue to operate them in a manner consistent with the requirements for qualification as a real estate investment trust. If a partnership in which we own an interest
takes or expects to take actions which could jeopardize our status as a REIT or require us to pay tax, we may be forced to dispose of our interest in that entity. In addition, it is possible that a partnership could take an action which could cause
us to fail a REIT income or asset test, and that we would not become aware of such action in a time frame which would allow us to dispose of our interest in the partnership or take other corrective action on a timely basis. In such a case, we could
fail to qualify as a REIT.



ITEM 1B. UNRESOLVED STAFF COMMENTS



Not applicable.



ITEM 2. PROPERTIES



General



As of December 31, 2005, we owned and operated 138 neighborhood and
community shopping centers containing 22.5 million square feet of which 19.8 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, Washington and Nevada, each of which we believe has attractive economic and demographic characteristics. The largest concentration of properties, consisting of 32% of our owned gross leasable area,
is located in Southern California. Another 27% of our owned gross leasable area is located in Northern California, 16% in Oregon, 12% in Nevada and 11% in Washington. In addition, properties consisting of the remaining 2% of our owned gross leasable
area are located in Arizona, New Mexico, Tennessee and Kentucky. As of December 31, 2005, 97.1% of our total owned gross leasable area was leased by tenants under 3,468 leases.



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, 2005, 58% of the total
owned and occupied gross leasable area was leased to national tenants, 19% leased to regional tenants and 23% 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, 2005, anchor tenants leased 57% of the total owned gross leasable area, with 77% of anchor-leased gross leasable area (45% 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.



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Portfolio Geographic Diversification



|                    |  |     |  |                      |  |                               |  |                                |  |                                    |  |                         |  |                              |  |                           |  |                                     
|------------------- |  | --- |  | -------------------- |  | ----------------------------- |  | ------------------------------ |  | ---------------------------------- |  | ----------------------- |  | ---------------------------- |  | ------------------------- |  | ------------------------------------
|Region              |  |     |  | Number of Properties |  | Total Gross Leasable Area (1) |  | Percentage ofPortfolio GLA (%) |  | Percentage Leased as of 12/31/2005 |  | Total Number of Tenants |  | Annualized Base Rent ($) (2) |  | % Portfolio Base Rent (%) |  | Annualized Base Rent/ Sq. Ft.($) (3)
|Northern California |  | NC  |  | 43                   |  | 5,300,379                     |  | 26.73                          |  | 98.0                               |  | 1,008                   |  | 65,275,243                   |  | 26.48                     |  | 12.57                               
|Southern California |  | SC  |  | 38                   |  | 6,292,066                     |  | 31.73                          |  | 98.3                               |  | 1,139                   |  | 88,281,283                   |  | 35.82                     |  | 14.28                               
|Pacific Northwest   |  | PNW |  | 37                   |  | 5,390,225                     |  | 27.18                          |  | 95.9                               |  | 864                     |  | 59,056,313                   |  | 23.96                     |  | 11.42                               
|Nevada/Other        |  | NVO |  | 20                   |  | 2,847,147                     |  | 14.36                          |  | 95.4                               |  | 457                     |  | 33,878,334                   |  | 13.74                     |  | 12.48                               
|Total               |  |     |  | 138                  |  | 19,829,817                    |  | 100.00                         |  | 97.1                               |  | 3,468                   |  | 246,491,172                  |  | 100.00                    |  | 12.80                               



|(1) | Represents gross leasable area (GLA) owned by the Company. Excludes 2,657,435 square feet owned by certain retailers.
|--- | -----------------------------------------------------------------------------------------------------------------------



|(2) | Annualized base rent for all leases in place at December 31, 2005 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.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | Annualized base rent divided by the owned GLA leased at December 31, 2005.
|--- | --------------------------------------------------------------------------



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Property Summary

12/31/2005



|                                               |  |                           |  |                         |  |                        |  |                |  |                               |  |                                |  |                          |  |                                       |  |                                                                                                        
|---------------------------------------------- |  | ------------------------- |  | ----------------------- |  | ---------------------- |  | -------------- |  | ----------------------------- |  | ------------------------------ |  | ------------------------ |  | ------------------------------------- |  | -------------------------------------------------------------------------------------------------------
|Property and Location                          |  | Year Completed /Renovated |  | Company Owned (Sq. Ft.) |  | Tenant Owned (Sq. Ft.) |  | Total(Sq. Ft.) |  | % Leased as of 12/31/2005 (4) |  | Total # Tenants 12/31/2005 (4) |  | Annual Base Rent ($) (1) |  | Ann. Base Rent/Leased Sq. Ft. ($) (3) |  | Major Retailers                                                                                        
|NORTHERN CALIFORNIA                            |  |                           |  |                         |  |                        |  |                |  |                               |  |                                |  |                          |  |                                       |  |                                                                                                        
|Angels Camp Town Center Angels Camp, CA        |  | 1986                      |  | 77,967                  |  | 6,300                  |  | 84,267         |  | 100.0                         |  | 11                             |  | 654,930                  |  | 8.40                                  |  | Save Mart Supermarket, Rite Aid                                                                        
|Bel Air Village SC Elk Grove, CA               |  | 1999                      |  | 89,216                  |  | 0                      |  | 89,216         |  | 100.0                         |  | 19                             |  | 1,676,390                |  | 18.79                                 |  | Bel Air Supermarket                                                                                    
|Blossom Valley Plaza Turlock, CA               |  | 1988                      |  | 111,612                 |  | 0                      |  | 111,612        |  | 100.0                         |  | 21                             |  | 1,369,157                |  | 12.27                                 |  | Raleys Supermarket                                                                                    
|Brookvale Shopping Center Fremont, CA          |  | 19681989                  |  | 131,242                 |  | 0                      |  | 131,242        |  | 96.9                          |  | 18                             |  | 1,535,713                |  | 12.08                                 |  | Albertsons Supermarket, Longs Drugs                                                                  
|Cable Park Sacramento, CA                      |  | 1987                      |  | 160,811                 |  | 0                      |  | 160,811        |  | 99.2                          |  | 32                             |  | 1,500,228                |  | 9.41                                  |  | Albertsons Supermarket, Longs Drugs                                                                  
|Canal Farms Los Banos, CA                      |  | 1987                      |  | 110,535                 |  | 0                      |  | 110,535        |  | 97.3                          |  | 17                             |  | 983,896                  |  | 9.15                                  |  | Save Mart Supermarket, Rite Aid                                                                        
|Century Center Modesto, CA                     |  | 1979                      |  | 214,772                 |  | 0                      |  | 214,772        |  | 100.0                         |  | 36                             |  | 2,060,260                |  | 9.59                                  |  | Raleys Supermarket, Gottschalks                                                                       
|Chico Crossroads Chico, CA                     |  | 19881998                  |  | 267,735                 |  | 0                      |  | 267,735        |  | 99.0                          |  | 21                             |  | 2,338,727                |  | 8.82                                  |  | FoodMaxx Supermarket, Bed Bath & Beyond, Ashley Home Furniture, Cost Plus, Barnes & Noble, Circuit City
|Cobblestone Redding, CA                        |  | 1984                      |  | 122,091                 |  | 0                      |  | 122,091        |  | 99.4                          |  | 29                             |  | 1,174,913                |  | 9.68                                  |  | Raleys Supermarket                                                                                    
|Commonwealth Square Folsom, CA                 |  | 1987                      |  | 141,310                 |  | 0                      |  | 141,310        |  | 94.9                          |  | 42                             |  | 2,146,893                |  | 16.02                                 |  | Raleys Supermarket                                                                                    
|Country Gables Shopping Center Granite Bay, CA |  | 1988                      |  | 140,184                 |  | 0                      |  | 140,184        |  | 100.0                         |  | 37                             |  | 1,896,337                |  | 13.53                                 |  | Raleys Supermarket                                                                                    
|Creekside Center Hayward, CA                   |  | 1968                      |  | 80,911                  |  | 0                      |  | 80,911         |  | 94.4                          |  | 16                             |  | 853,020                  |  | 11.17                                 |  | 99 Cents Only Stores, Big Lots                                                                         
|Dublin Retail Center Dublin, CA                |  | 1980                      |  | 154,728                 |  | 0                      |  | 154,728        |  | 100.0                         |  | 7                              |  | 1,704,222                |  | 11.01                                 |  | Orchard Supply, Marshalls, Ross Dress for Less, Michaels Arts & Crafts                               
|Eastridge Plaza Porterville, CA                |  | 1985                      |  | 81,010                  |  | 0                      |  | 81,010         |  | 93.2                          |  | 13                             |  | 861,180                  |  | 11.40                                 |  | Save Mart Supermarket (5), County of Tulare                                                            



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Property Summary

12/31/2005



|                                              |  |                           |  |                         |  |                        |  |                 |  |                               |  |                                |  |                          |  |                                       |  |                                                                          
|--------------------------------------------- |  | ------------------------- |  | ----------------------- |  | ---------------------- |  | --------------- |  | ----------------------------- |  | ------------------------------ |  | ------------------------ |  | ------------------------------------- |  | -------------------------------------------------------------------------
|Property and Location                         |  | Year Completed /Renovated |  | Company Owned (Sq. Ft.) |  | Tenant Owned (Sq. Ft.) |  | Total (Sq. Ft.) |  | % Leased as of 12/31/2005 (4) |  | Total # Tenants 12/31/2005 (4) |  | Annual Base Rent ($) (1) |  | Ann. Base Rent/Leased Sq. Ft. ($) (3) |  | Major Retailers                                                          
|Elverta Crossing Sacramento, CA               |  | 1991                      |  | 119,998                 |  | 0                      |  | 119,998         |  | 95.0                          |  | 21                             |  | 1,354,228                |  | 11.88                                 |  | FoodMaxx Supermarkets, Goodwill Industries                               
|Fairmont Shopping Center Pacifica, CA         |  | 1988                      |  | 104,281                 |  | 0                      |  | 104,281         |  | 100.0                         |  | 30                             |  | 1,609,644                |  | 15.44                                 |  | Albertsons Supermarket, Rite Aid                                        
|Fashion Faire Place San Leandro, CA           |  | 1987                      |  | 95,255                  |  | 0                      |  | 95,255          |  | 93.1                          |  | 17                             |  | 1,463,986                |  | 16.51                                 |  | Ross Dress for Less, Pier 1 Imports, Sleep Train, Michaels Arts & Crafts
|Glen Cove Center Vallejo, CA                  |  | 1990                      |  | 66,000                  |  | 0                      |  | 66,000          |  | 100.0                         |  | 11                             |  | 991,695                  |  | 15.03                                 |  | Safeway Supermarket & Drug                                               
|Glenbrook Shopping Center Sacramento, CA      |  | 19732001                  |  | 69,230                  |  | 0                      |  | 69,230          |  | 97.4                          |  | 18                             |  | 809,405                  |  | 12.00                                 |  | Big Lots                                                                 
|Heritage Park Shopping Center Suisun City, CA |  | 1989                      |  | 167,051                 |  | 0                      |  | 167,051         |  | 98.4                          |  | 38                             |  | 2,033,664                |  | 12.37                                 |  | Raleys Supermarket                                                      
|Heritage Place Tulare, CA                     |  | 1986                      |  | 119,412                 |  | 0                      |  | 119,412         |  | 92.4                          |  | 19                             |  | 1,029,654                |  | 9.33                                  |  | Save Mart Supermarket, Rite Aid                                          
|Kmart Center Sacramento, CA                   |  | 19661983                  |  | 132,630                 |  | 0                      |  | 132,630         |  | 100.0                         |  | 17                             |  | 882,362                  |  | 6.65                                  |  | K-Mart, Big Lots                                                         
|Laguna Park Village Elk Grove, CA             |  | 1999                      |  | 34,015                  |  | 0                      |  | 34,015          |  | 100.0                         |  | 16                             |  | 750,446                  |  | 22.06                                 |  | Big 5 Sporting Goods                                                     
|Laguna Village Sacramento, CA                 |  | 1996                      |  | 120,893                 |  | 0                      |  | 120,893         |  | 100.0                         |  | 21                             |  | 2,235,295                |  | 18.49                                 |  | United Artists Theatres, 24 Hour Fitness                                 
|Lakewood Shopping Center Windsor, CA          |  | 1988                      |  | 107,769                 |  | 0                      |  | 107,769         |  | 99.4                          |  | 27                             |  | 1,209,242                |  | 11.29                                 |  | Raleys Supermarket, U.S. Post Office                                    
|Lakewood Village Windsor, CA                  |  | 1992                      |  | 127,237                 |  | 0                      |  | 127,237         |  | 100.0                         |  | 40                             |  | 2,144,551                |  | 16.85                                 |  | Safeway Supermarket, Longs Drugs                                        
|Manteca Marketplace Manteca, CA               |  | 19721988                  |  | 171,953                 |  | 0                      |  | 171,953         |  | 98.5                          |  | 25                             |  | 1,961,434                |  | 11.58                                 |  | Save Mart Supermarket, Rite Aid, Stadium 10 Cinemas                      
|Mineral King Visalia, CA                      |  | 1983                      |  | 39,060                  |  | 76,276                 |  | 115,336         |  | 92.7                          |  | 14                             |  | 531,199                  |  | 14.67                                 |  | Vons Supermarket (2), Longs Drugs (2)                                    
|Mission Ridge Plaza Manteca, CA               |  | 1992                      |  | 96,657                  |  | 99,641                 |  | 196,298         |  | 100.0                         |  | 17                             |  | 1,470,843                |  | 15.22                                 |  | Safeway Supermarket (6), Wal-Mart (2), Mervyns (2), Big 5 Sporting Goods



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Property Summary

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|                                            |  |                           |  |                         |  |                        |  |                 |  |                               |  |                                |  |                         |            |                                       |   |                 |  |                                                                    
|------------------------------------------- |  | ------------------------- |  | ----------------------- |  | ---------------------- |  | --------------- |  | ----------------------------- |  | ------------------------------ |  | ----------------------- | ---------- | ------------------------------------- | - | --------------- |  | -------------------------------------------------------------------
|Property and Location                       |  | Year Completed /Renovated |  | Company Owned (Sq. Ft.) |  | Tenant Owned (Sq. Ft.) |  | Total (Sq. Ft.) |  | % Leased as of 12/31/2005 (4) |  | Total # Tenants 12/31/2005 (4) |  | Annual BaseRent ($) (1) |            | Ann. Base Rent/Leased Sq. Ft. ($) (3) |   | Major Retailers
|Monterey Plaza San Jose, CA                 |  | 1990                      |  | 183,180                 |  | 49,500                 |  | 232,680         |  | 100.0                         |  | 31                             |  |                         | 2,965,741  |                                       |   | 16.19           |  | Wal-Mart, Albertsons Supermarket (2), Walgreens                   
|Northridge Plaza Fair Oaks, CA              |  | 1990                      |  | 98,625                  |  | 0                      |  | 98,625          |  | 100.0                         |  | 21                             |  |                         | 896,851    |                                       |   | 9.09            |  | Raleys Supermarket                                                
|Olympia Place Walnut Creek, CA              |  | 2003                      |  | 114,733                 |  | 28,326                 |  | 143,059         |  | 85.2                          |  | 9                              |  |                         | 3,644,462  |                                       |   | 37.29           |  | Century Theatres, Cost Plus, Bombay, Bombay Kids                   
|Park Place Vallejo, CA                      |  | 1987                      |  | 150,766                 |  | 0                      |  | 150,766         |  | 100.0                         |  | 29                             |  |                         | 1,970,978  |                                       |   | 13.07           |  | Raleys Supermarket, 24 Hour Fitness                               
|Pine Creek Shopping Center Grass Valley, CA |  | 1988                      |  | 217,535                 |  | 0                      |  | 217,535         |  | 95.8                          |  | 36                             |  |                         | 2,458,973  |                                       |   | 11.80           |  | Raleys Supermarket, JC Penney                                     
|Plaza 580 Shopping Center Livermore, CA     |  | 1993                      |  | 104,363                 |  | 192,739                |  | 297,102         |  | 100.0                         |  | 29                             |  |                         | 2,014,229  |                                       |   | 19.30           |  | Target (2), Mervyns (2), Ross Dress for Less, Big 5 Sporting Goods
|Rheem Valley Moraga, CA                     |  | 1990                      |  | 163,975                 |  | 0                      |  | 163,975         |  | 96.5                          |  | 60                             |  |                         | 2,200,772  |                                       |   | 13.91           |  | Longs Drugs, T. J. Maxx                                            
|Shops at Bakersfield Bakersfield, CA        |  | 1978                      |  | 14,115                  |  | 0                      |  | 14,115          |  | 90.3                          |  | 7                              |  |                         | 103,212    |                                       |   | 8.10            |  |                                                                    
|Shops at Lincoln School Modesto, CA         |  | 1988                      |  | 81,443                  |  | 0                      |  | 81,443          |  | 98.5                          |  | 18                             |  |                         | 863,558    |                                       |   | 10.76           |  | Save Mart Supermarket                                              
|Sky Park Plaza Chico, CA                    |  | 1985                      |  | 186,742                 |  | 4,642                  |  | 191,384         |  | 97.2                          |  | 30                             |  |                         | 1,935,500  |                                       |   | 10.67           |  | Raleys Supermarket, Ross Dress for Less, Jo-Ann Fabrics & Crafts  
|Southpointe Plaza Sacramento, CA            |  | 1982                      |  | 189,043                 |  | 4,000                  |  | 193,043         |  | 100.0                         |  | 30                             |  |                         | 1,855,201  |                                       |   | 9.81            |  | Seafood City Supermarket, Big 5 Sporting Goods, Discount Variety   
|Ukiah Crossroads Ukiah, CA                  |  | 1986                      |  | 110,565                 |  | 0                      |  | 110,565         |  | 96.2                          |  | 19                             |  |                         | 1,077,497  |                                       |   | 10.13           |  | Raleys Supermarket                                                
|Victorian Walk Fresno, CA                   |  | 1990                      |  | 102,581                 |  | 0                      |  | 102,581         |  | 99.0                          |  | 21                             |  |                         | 957,875    |                                       |   | 9.43            |  | Save Mart Supermarket, Rite Aid (5)                                
|Yreka Junction Yreka, CA                    |  | 1984                      |  | 127,148                 |  | 0                      |  | 127,148         |  | 98.9                          |  | 18                             |  |                         | 1,096,881  |                                       |   | 8.72            |  | Raleys Supermarket, JC Penney, Wal-Mart (2)                       
|                                            |  |                           |  |                         |  |                        |  |                 |  |                               |  |                                |  |                         |            |                                       |   |                 |  |                                                                    
|Region Total/Weighted Average               |  |                           |  | 5,300,379               |  | 461,424                |  | 5,761,803       |  | 98.0                          |  | 1,008                          |  | $                       | 65,275,243 |                                       | $ | 12.57           |  |                                                                    
|                                            |  |                           |  |                         |  |                        |  |                 |  |                               |  |                                |  |                         |            |                                       |   |                 |  |                                                                    



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Property Summary

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|                                          |  |                           |  |                         |  |                        |  |                 |  |                               |  |                                |  |                          |  |                                       |  |                                                           
|----------------------------------------- |  | ------------------------- |  | ----------------------- |  | ---------------------- |  | --------------- |  | ----------------------------- |  | ------------------------------ |  | ------------------------ |  | ------------------------------------- |  | ----------------------------------------------------------
|Property and Location                     |  | Year Completed /Renovated |  | Company Owned (Sq. Ft.) |  | Tenant Owned (Sq. Ft.) |  | Total (Sq. Ft.) |  | % Leased as of 12/31/2005 (4) |  | Total # Tenants 12/31/2005 (4) |  | Annual Base Rent ($) (1) |  | Ann. Base Rent/Leased Sq. Ft. ($) (3) |  | Major Retailers                                           
|NEVADA/OTHER                              |  |                           |  |                         |  |                        |  |                 |  |                               |  |                                |  |                          |  |                                       |  |                                                           
|Alamosa Plaza Las Vegas, NV               |  | 19862002                  |  | 77,650                  |  | 0                      |  | 77,650          |  | 93.1                          |  | 10                             |  | 1,747,853                |  | 24.17                                 |  | Albertsons Supermarket                                   
|Caughlin Ranch Reno, NV                   |  | 19901991                  |  | 113,488                 |  | 0                      |  | 113,488         |  | 96.8                          |  | 29                             |  | 1,532,072                |  | 13.94                                 |  | Scolaris Supermarket                                     
|Cheyenne Commons Las Vegas, NV            |  | 1992                      |  | 362,758                 |  | 0                      |  | 362,758         |  | 99.0                          |  | 47                             |  | 4,809,742                |  | 13.39                                 |  | Wal-Mart, 24 Hour Fitness, Marshalls, Ross Dress for Less
|Country Club Center Albuquerque, NM       |  | 19881998                  |  | 57,631                  |  | 63,000                 |  | 120,631         |  | 67.5                          |  | 17                             |  | 452,895                  |  | 11.65                                 |  | Raleys Supermarket (2)                                   
|Decatur Meadows Las Vegas, NV             |  | 1979                      |  | 111,245                 |  | 0                      |  | 111,245         |  | 97.5                          |  | 16                             |  | 1,112,570                |  | 10.26                                 |  | Vons Supermarket, Dollar Tree Cort Furniture Rental      
|Eagle Station Carson City, NV             |  | 19821994                  |  | 114,258                 |  | 60,000                 |  | 174,258         |  | 89.6                          |  | 21                             |  | 978,978                  |  | 9.56                                  |  | Raleys Supermarket, Mervyns (2)                         
|Elko Junction Shopping Center Elko, NV    |  | 19961997                  |  | 170,812                 |  | 0                      |  | 170,812         |  | 92.9                          |  | 15                             |  | 1,521,245                |  | 9.59                                  |  | Raleys Supermarket, Builders Mart                       
|Foothills Park Place Phoenix, AZ          |  | 1990                      |  | 104,880                 |  | 0                      |  | 104,880         |  | 100.0                         |  | 1                              |  | 727,872                  |  | 6.94                                  |  | J. C. Penney                                              
|Green Valley Town & Country Henderson, NV |  | 1990                      |  | 130,773                 |  | 0                      |  | 130,773         |  | 91.2                          |  | 33                             |  | 1,549,879                |  | 13.00                                 |  | Albertsons/Sav-On Superstore                             
|Maysville Marketsquare Maysville, KY      |  | 19911993                  |  | 126,507                 |  | 89,612                 |  | 216,119         |  | 96.4                          |  | 17                             |  | 906,320                  |  | 7.43                                  |  | Kroger Supermarket, JC Penney                             
|Memphis Retail Center Memphis, TN         |  | 1990                      |  | 51,542                  |  | 40,000                 |  | 91,542          |  | 97.1                          |  | 12                             |  | 411,690                  |  | 8.23                                  |  | Hancock Fabrics, Family Dollar                            
|Mira Loma Center Reno, NV                 |  | 1985                      |  | 102,907                 |  | 0                      |  | 102,907         |  | 100.0                         |  | 22                             |  | 1,261,837                |  | 12.26                                 |  | Scolaris Supermarket, Longs Drugs, Dollar Tree          
|North Mountain Village Phoenix, AZ        |  | 1985                      |  | 94,379                  |  | 53,131                 |  | 147,510         |  | 99.0                          |  | 25                             |  | 1,042,729                |  | 11.16                                 |  | Frys Supermarket (2), T. J. Maxx                         
|North Reno Reno, NV                       |  | 1964                      |  | 126,840                 |  | 0                      |  | 126,840         |  | 96.8                          |  | 15                             |  | 814,463                  |  | 6.63                                  |  | Sak n Save                                               



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Property Summary

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|                                    |  |                           |  |                         |  |                        |  |                 |  |                               |  |                                |  |                         |            |                                       |   |                 |  |                                                                                  
|----------------------------------- |  | ------------------------- |  | ----------------------- |  | ---------------------- |  | --------------- |  | ----------------------------- |  | ------------------------------ |  | ----------------------- | ---------- | ------------------------------------- | - | --------------- |  | ---------------------------------------------------------------------------------
|Property and Location               |  | Year Completed /Renovated |  | Company Owned (Sq. Ft.) |  | Tenant Owned (Sq. Ft.) |  | Total (Sq. Ft.) |  | % Leased as of 12/31/2005 (4) |  | Total # Tenants 12/31/2005 (4) |  | Annual BaseRent ($) (1) |            | Ann. Base Rent/Leased Sq. Ft. ($) (3) |   | Major Retailers
|Rainbow Promenade Las Vegas, NV     |  | 19951997                  |  | 228,279                 |  | 0                      |  | 228,279         |  | 100.0                         |  | 27                             |  |                         | 3,354,872  |                                       |   | 14.70           |  | United Artists Theatres, Barnes & Noble, Linens 'N Things, Office Max, Cost Plus 
|Renaissance West Las Vegas, NV      |  | 1987                      |  | 168,600                 |  | 0                      |  | 168,600         |  | 98.2                          |  | 37                             |  |                         | 2,835,705  |                                       |   | 17.13           |  | Food 4 Less                                                                      
|Sahara Pavilion North Las Vegas, NV |  | 1989                      |  | 333,679                 |  | 0                      |  | 333,679         |  | 96.1                          |  | 65                             |  |                         | 4,720,875  |                                       |   | 14.72           |  | Vons Supermarket, T.J. Maxx, Sheplers, Borders Books, Golds Gym, Floors N More
|Sahara Pavilion South Las Vegas, NV |  | 1990                      |  | 160,842                 |  | 0                      |  | 160,842         |  | 92.5                          |  | 22                             |  |                         | 2,255,158  |                                       |   | 15.16           |  | Sports Authority, Office Max, Pier One                                           
|West Town Winnemucca, NV            |  | 19781991                  |  | 65,424                  |  | 0                      |  | 65,424          |  | 100.0                         |  | 2                              |  |                         | 463,244    |                                       |   | 7.08            |  | Raleys Supermarket                                                              
|Winterwood Pavilion Las Vegas, NV   |  | 1990                      |  | 144,653                 |  | 0                      |  | 144,653         |  | 83.8                          |  | 24                             |  |                         | 1,378,332  |                                       |   | 11.37           |  | Vons Supermarket & Drug, Aaron Rents                                            
|                                    |  |                           |  |                         |  |                        |  |                 |  |                               |  |                                |  |                         |            |                                       |   |                 |  |                                                                                  
|Region Total/Weighted Average       |  |                           |  | 2,847,147               |  | 305,743                |  | 3,152,890       |  | 95.4                          |  | 457                            |  | $                       | 33,878,334 |                                       | $ | 12.48           |  |                                                                                  
|                                    |  |                           |  |                         |  |                        |  |                 |  |                               |  |                                |  |                         |            |                                       |   |                 |  |                                                                                  



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Property Summary

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|                                               |  |                          |  |                       |  |                      |  |                |  |                              |  |                              |  |                         |  |                                     |  |                                                              
|---------------------------------------------- |  | ------------------------ |  | --------------------- |  | -------------------- |  | -------------- |  | ---------------------------- |  | ---------------------------- |  | ----------------------- |  | ----------------------------------- |  | -------------------------------------------------------------
|Property and Location                          |  | YearCompleted /Renovated |  | CompanyOwned(Sq. Ft.) |  | TenantOwned(Sq. Ft.) |  | Total(Sq. Ft.) |  | % Leased as of12/31/2005 (4) |  | Total #Tenants12/31/2005 (4) |  | AnnualBase Rent ($) (1) |  | Ann. BaseRent/LeasedSq. Ft. ($) (3) |  | Major Retailers                                              
|PACIFIC NORTHWEST                              |  |                          |  |                       |  |                      |  |                |  |                              |  |                              |  |                         |  |                                     |  |                                                              
|Albany Plaza Albany, OR                        |  | 19772003                 |  | 109,891               |  | 30,998               |  | 140,889        |  | 100.0                        |  | 20                           |  | 926,669                 |  | 8.43                                |  | Albertsons Supermarket (2), Rite Aid, Big Lots, Dollar Tree 
|Auburn North Auburn, WA                        |  | 19781998                 |  | 171,032               |  | 0                    |  | 171,032        |  | 99.3                         |  | 24                           |  | 1,444,931               |  | 8.51                                |  | Albertsons Supermarket, Rite Aid, Office Depot, Craft Outlet
|Bear Creek Plaza Medford, OR                   |  | 19771998                 |  | 183,850               |  | 0                    |  | 183,850        |  | 88.0                         |  | 26                           |  | 1,306,309               |  | 8.08                                |  | Bi-Mart Drug, TJ Maxx, Big Lots, Dollar Tree                 
|Blaine International Center Blaine, WA         |  | 1991                     |  | 127,572               |  | 0                    |  | 127,572        |  | 86.3                         |  | 17                           |  | 960,136                 |  | 8.72                                |  | Cost Cutter Supermarket, Rite Aid                            
|Canby Square Shopping Center Canby, OR         |  | 19762002                 |  | 115,701               |  | 0                    |  | 115,701        |  | 100.0                        |  | 14                           |  | 1,184,692               |  | 10.24                               |  | Safeway Supermarket, Rite Aid                                
|Canyon Ridge Plaza Kent, WA                    |  | 1996                     |  | 86,909                |  | 181,300              |  | 268,209        |  | 100.0                        |  | 19                           |  | 1,125,127               |  | 12.95                               |  | Target (2), Top Foods Supermarket (2), Ross Dress for Less   
|Claremont Village Plaza Everett, WA            |  | 19551996                 |  | 88,770                |  | 0                    |  | 88,770         |  | 100.0                        |  | 15                           |  | 1,250,309               |  | 14.08                               |  | QFC Supermarket & Drug (8)                                   
|East Burnside Plaza Portland, OR               |  | 1999                     |  | 38,363                |  | 0                    |  | 38,363         |  | 100.0                        |  | 7                            |  | 618,918                 |  | 16.13                               |  | QFC Supermarket & Drug (8)                                   
|Frontier Village Shopping Ctr Lake Stevens, WA |  | 19502002                 |  | 195,937               |  | 0                    |  | 195,937        |  | 100.0                        |  | 33                           |  | 2,768,343               |  | 14.13                               |  | Safeway Supermarket, Bartell Drugs, GI Joes                 
|Garrison Square Vancouver, WA                  |  | 19622003                 |  | 69,790                |  | 0                    |  | 69,790         |  | 95.4                         |  | 14                           |  | 745,523                 |  | 11.20                               |  | Ace Hardware, Supermax                                       
|Gateway Shopping Center Mill Creek, WA         |  | 19951998                 |  | 96,671                |  | 0                    |  | 96,671         |  | 89.9                         |  | 19                           |  | 1,580,316               |  | 18.18                               |  | Safeway Supermarket                                          
|Gresham Town Fair Gresham, OR                  |  | 1988                     |  | 265,765               |  | 0                    |  | 265,765        |  | 96.2                         |  | 38                           |  | 2,570,707               |  | 10.06                               |  | Ross Dress for Less, GI Joes, PetsMart Craft Warehouse      
|Hermiston Plaza Hermiston, OR                  |  | 19741999                 |  | 150,396               |  | 0                    |  | 150,396        |  | 93.3                         |  | 20                           |  | 908,277                 |  | 6.47                                |  | Safeway Supermarket & Drug, Big Lots, Dollar Tree            
|Hood River Shopping Center Hood River, OR      |  | 19702000                 |  | 108,554               |  | 0                    |  | 108,554        |  | 100.0                        |  | 12                           |  | 988,534                 |  | 9.11                                |  | Rosauers Supermarket, Hi School Pharmacy                    



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Property Summary

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|                                            |  |                          |  |                       |  |                      |  |                |  |                              |  |                               |  |                         |  |                                     |  |                                                                                                
|------------------------------------------- |  | ------------------------ |  | --------------------- |  | -------------------- |  | -------------- |  | ---------------------------- |  | ----------------------------- |  | ----------------------- |  | ----------------------------------- |  | -----------------------------------------------------------------------------------------------
|Property and Location                       |  | YearCompleted /Renovated |  | CompanyOwned(Sq. Ft.) |  | TenantOwned(Sq. Ft.) |  | Total(Sq. Ft.) |  | % Leased as of12/31/2005 (4) |  | Total # Tenants12/31/2005 (4) |  | AnnualBase Rent ($) (1) |  | Ann. BaseRent/LeasedSq. Ft. ($) (3) |  | Major Retailers                                                                                
|Jefferson Square Seattle, WA                |  | 1985                     |  | 146,829               |  | 0                    |  | 146,829        |  | 92.2                         |  | 40                            |  | 2,457,415               |  | 18.15                               |  | Safeway, Bartell Drug                                                                          
|Medford Center Medford, OR                  |  | 19592004                 |  | 330,568               |  | 84,746               |  | 415,314        |  | 99.3                         |  | 45                            |  | 3,427,594               |  | 10.44                               |  | Tinseltown, Sears, Rite Aid (2), Safeway (2), Circuit City, 24 Hour Fitness, Ashleys Furniture
|Menlo Park Plaza Portland, OR               |  | 19572001                 |  | 112,755               |  | 0                    |  | 112,755        |  | 98.7                         |  | 18                            |  | 1,343,611               |  | 12.07                               |  | Walgreens, Staples                                                                             
|Milwaukie Marketplace Milwaukie, OR         |  | 1989                     |  | 185,859               |  | 10,323               |  | 196,182        |  | 100.0                        |  | 29                            |  | 1,744,599               |  | 9.39                                |  | Albertsons Supermarket, Rite Aid, Jo-Ann Fabrics & Crafts                                     
|Olympia Square Olympia, WA                  |  | 1988                     |  | 168,209               |  | 0                    |  | 168,209        |  | 98.3                         |  | 38                            |  | 2,237,597               |  | 13.54                               |  | Albertsons Supermarket & Drug, Ross Dress for Less                                            
|Olympia West Center Olympia, WA             |  | 1995                     |  | 69,212                |  | 3,800                |  | 73,012         |  | 100.0                        |  | 6                             |  | 1,358,164               |  | 19.62                               |  | Barnes & Noble, Good Guys (5), Petco                                                           
|Oregon City Shopping Center Oregon City, OR |  | 19611999                 |  | 246,855               |  | 0                    |  | 246,855        |  | 96.9                         |  | 37                            |  | 2,345,740               |  | 9.81                                |  | Rite Aid, Fishermans Marine Supply, Michaels Arts & Crafts, Coastal Farm and Home            
|Oregon Trail Center Gresham, OR             |  | 19771999                 |  | 208,276               |  | 0                    |  | 208,276        |  | 90.7                         |  | 32                            |  | 2,063,792               |  | 10.92                               |  | Wild Oats Supermarket, Office Depot, Big 5 Sporting Goods, Big Lots, Michaels Arts & Crafts   
|Pacific Commons Spanaway, WA                |  | 19881990                 |  | 151,233               |  | 55,241               |  | 206,474        |  | 90.3                         |  | 21                            |  | 1,477,234               |  | 10.81                               |  | The Marketplace Supermarket, K-Mart (2)                                                        
|Panther Lake Kent, WA                       |  | 19881992                 |  | 69,090                |  | 44,237               |  | 113,327        |  | 100.0                        |  | 22                            |  | 945,033                 |  | 13.68                               |  | Albertsons Supermarket (2), Rite Aid                                                          
|Pioneer Plaza Springfield, OR               |  | 1988                     |  | 96,027                |  | 4,294                |  | 100,321        |  | 93.8                         |  | 18                            |  | 901,161                 |  | 10.00                               |  | Safeway Supermarket & Drug                                                                     
|Powell Valley Junction Gresham, OR          |  | 19901999                 |  | 107,583               |  | 0                    |  | 107,583        |  | 100.0                        |  | 9                             |  | 964,763                 |  | 8.97                                |  | Food 4 Less Supermarket, Cascade Athletic Club                                                 
|Rockwood Plaza Gresham, OR                  |  | 19652000                 |  | 92,872                |  | 0                    |  | 92,872         |  | 100.0                        |  | 16                            |  | 785,631                 |  | 8.46                                |  | Dollar Tree, Volunteers of America                                                             
|Sandy Marketplace Sandy, OR                 |  | 19851997                 |  | 101,438               |  | 0                    |  | 101,438        |  | 62.7                         |  | 19                            |  | 707,762                 |  | 11.12                               |  | Hi School Pharmacy, Dollar Tree                                                                
|Silverdale Plaza Silverdale, WA             |  | 19812001                 |  | 170,332               |  | 0                    |  | 170,332        |  | 100.0                        |  | 19                            |  | 2,280,407               |  | 13.39                               |  | Safeway Supermarket, Rite Aid, Staples                                                         



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Property Summary

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|                                          |  |                          |  |                        |  |                      |  |                 |  |                              |  |                              |  |                          |            |                                     |   |                 |  |                                                                                                    
|----------------------------------------- |  | ------------------------ |  | ---------------------- |  | -------------------- |  | --------------- |  | ---------------------------- |  | ---------------------------- |  | ------------------------ | ---------- | ----------------------------------- | - | --------------- |  | ---------------------------------------------------------------------------------------------------
|Property and Location                     |  | YearCompleted /Renovated |  | CompanyOwned (Sq. Ft.) |  | TenantOwned(Sq. Ft.) |  | Total (Sq. Ft.) |  | % Leased as of12/31/2005 (4) |  | Total #Tenants12/31/2005 (4) |  | Annual Base Rent ($) (1) |            | Ann. BaseRent/LeasedSq. Ft. ($) (3) |   | Major Retailers
|Silverdale Shopping Center Silverdale, WA |  | 1990                     |  | 67,287                 |  | 0                    |  | 67,287          |  | 98.6                         |  | 21                           |  |                          | 1,038,554  |                                     |   | 15.66           |  | Ross Dress for Less                                                                                
|Southgate Shopping Center Milwaukie, OR   |  | 19561999                 |  | 50,862                 |  | 0                    |  | 50,862          |  | 100.0                        |  | 10                           |  |                          | 723,785    |                                     |   | 14.23           |  | Office Max                                                                                         
|Sunset Esplanade Hillsboro, OR            |  | 1989                     |  | 256,034                |  | 101,909              |  | 357,943         |  | 100.0                        |  | 45                           |  |                          | 3,055,187  |                                     |   | 11.93           |  | Safeway Supermarket, Target (2), Petco, Dollar Tree, Jo-Ann Fabrics & Crafts, Rite Aid, Staples (5)
|Sunset Mall Portland, OR                  |  | 19731996                 |  | 115,635                |  | 2,500                |  | 118,135         |  | 97.3                         |  | 28                           |  |                          | 1,324,528  |                                     |   | 11.77           |  | Safeway Supermarket & Drug                                                                         
|Sunset Square Bellingham, WA              |  | 1989                     |  | 376,023                |  | 10,634               |  | 386,657         |  | 99.5                         |  | 42                           |  |                          | 3,291,053  |                                     |   | 8.80            |  | Cost Cutter Supermarket, K-Mart, Jo-Ann Fabrics & Crafts, Rite Aid, Office Max                     
|Tacoma Central Tacoma, WA                 |  | 19871994                 |  | 156,916                |  | 165,519              |  | 322,435         |  | 100.0                        |  | 22                           |  |                          | 2,095,006  |                                     |   | 13.35           |  | Target (2), Top Food & Drug (2), Petsmart, Office Depot, TJ Maxx                                   
|Tanasbourne Village Hillsboro, OR         |  | 1990                     |  | 210,992                |  | 1,209                |  | 212,201         |  | 98.9                         |  | 41                           |  |                          | 3,379,174  |                                     |   | 16.20           |  | Safeway Supermarket, Rite Aid, Hillsboro Library                                                   
|Troutdale Market Troutdale, OR            |  | 19842001                 |  | 90,137                 |  | 0                    |  | 90,137          |  | 62.1                         |  | 8                            |  |                          | 729,730    |                                     |   | 13.04           |  | Lambs Thriftway (5)                                                                               
|                                          |  |                          |  |                        |  |                      |  |                 |  |                              |  |                              |  |                          |            |                                     |   |                 |  |                                                                                                    
|Region Total/Weighted Average             |  |                          |  | 5,390,225              |  | 696,710              |  | 6,086,935       |  | 95.9                         |  | 864                          |  | $                        | 59,056,313 |                                     | $ | 11.42           |  |                                                                                                    
|                                          |  |                          |  |                        |  |                      |  |                 |  |                              |  |                              |  |                          |            |                                     |   |                 |  |                                                                                                    



20



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##### Table of Contents

Property Summary

12/31/2005



|                                          |  |                           |  |                         |  |                        |  |                 |  |                               |  |                                |  |                         |  |                                     |  |                                                                                                           
|----------------------------------------- |  | ------------------------- |  | ----------------------- |  | ---------------------- |  | --------------- |  | ----------------------------- |  | ------------------------------ |  | ----------------------- |  | ----------------------------------- |  | ----------------------------------------------------------------------------------------------------------
|Property and Location                     |  | Year Completed /Renovated |  | Company Owned (Sq. Ft.) |  | Tenant Owned (Sq. Ft.) |  | Total (Sq. Ft.) |  | % Leased as of 12/31/2005 (4) |  | Total # Tenants 12/31/2005 (4) |  | AnnualBase Rent ($) (1) |  | Ann. BaseRent/LeasedSq. Ft. ($) (3) |  | Major Retailers                                                                                           
|SOUTHERN CALIFORNIA                       |  |                           |  |                         |  |                        |  |                 |  |                               |  |                                |  |                         |  |                                     |  |                                                                                                           
|Anaheim Plaza Anaheim, CA                 |  | 1995                      |  | 345,708                 |  | 146,000                |  | 491,708         |  | 100.0                         |  | 32                             |  | 4,651,947               |  | 13.46                               |  | Gigante Supermarket, Wal-Mart (3), Mervyns, Ross Dress for Less, Smart & Final, Comp USA, Crazy Q Bargain
|Bixby Hacienda Plaza Hacienda Heights, CA |  | 1986                      |  | 135,012                 |  | 0                      |  | 135,012         |  | 100.0                         |  | 42                             |  | 2,530,503               |  | 18.74                               |  | Albertsons Supermarket                                                                                   
|Brookhurst Center Anaheim, CA             |  | 1982                      |  | 185,247                 |  | 0                      |  | 185,247         |  | 96.6                          |  | 42                             |  | 2,321,389               |  | 12.98                               |  | Ralphs Supermarket, Rite Aid                                                                             
|Canyon Square Plaza Santa Clarita, CA     |  | 1988                      |  | 96,727                  |  | 7,472                  |  | 104,199         |  | 100.0                         |  | 31                             |  | 1,443,017               |  | 14.92                               |  | Albertsons Supermarket & Drug                                                                            
|Chino Town Square Chino, CA               |  | 1987                      |  | 337,687                 |  | 188,064                |  | 525,751         |  | 94.2                          |  | 49                             |  | 4,536,668               |  | 14.26                               |  | Target (2), Mervyns (2), Wal-Mart (5), Ross Dress for Less                                                
|Country Fair Shopping Center Chino, CA    |  | 1992                      |  | 168,264                 |  | 43,440                 |  | 211,704         |  | 100.0                         |  | 27                             |  | 2,477,018               |  | 14.72                               |  | Albertsons Supermarket (2), Rite Aid, Petsmart                                                           
|Date Palm Center Cathedral City, CA       |  | 1987                      |  | 117,356                 |  | 0                      |  | 117,356         |  | 97.9                          |  | 11                             |  | 1,982,397               |  | 17.25                               |  | Sams Club                                                                                                
|Del Norte Plaza Escondido, CA             |  | 1986                      |  | 231,157                 |  | 0                      |  | 231,157         |  | 100.0                         |  | 50                             |  | 3,632,769               |  | 15.72                               |  | Vons Supermarket, Sav-on Drugs, LA Fitness                                                               
|El Camino North Oceanside, CA             |  | 19822003                  |  | 367,031                 |  | 126,500                |  | 493,531         |  | 99.2                          |  | 63                             |  | 5,678,543               |  | 15.60                               |  | Barnes & Noble, Michaels Arts & Crafts, Petco (2), Ross Dress for Less, Stein Mart, Mervyns (2)         
|Encinitas Marketplace Encinitas, CA       |  | 1981                      |  | 119,738                 |  | 0                      |  | 119,738         |  | 99.5                          |  | 27                             |  | 1,805,278               |  | 15.15                               |  | Albertsons Supermarket                                                                                   
|Fire Mountain Oceanside, CA               |  | 1987                      |  | 92,378                  |  | 0                      |  | 92,378          |  | 87.1                          |  | 18                             |  | 1,925,172               |  | 23.92                               |  | Trader Joes Market, Aaron Bros., Lamps Plus                                                              
|Foothill Marketplace Rancho Cucamonga, CA |  | 1994                      |  | 286,824                 |  | 248,488                |  | 535,312         |  | 95.4                          |  | 34                             |  | 4,080,350               |  | 14.91                               |  | Food 4 Less, Petsmart, Office Depot, Sport Chalet, Circuit City (5), Wal-Mart Living Spaces Furniture     
|Fullerton Town Center Fullerton, CA       |  | 1987                      |  | 270,647                 |  | 146,880                |  | 417,527         |  | 99.5                          |  | 31                             |  | 4,576,657               |  | 16.99                               |  | Costco (2), AMC Theatres, Toys R Us, Office Depot                                                       
|Gardena Gateway Center Gardena, CA        |  | 1990                      |  | 65,987                  |  | 0                      |  | 65,987          |  | 100.0                         |  | 13                             |  | 1,193,192               |  | 18.08                               |  | 99 Ranch Market, Marukai Stores                                                                           



21



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##### Table of Contents

Property Summary

12/31/2005



|                                         |  |                           |  |                         |  |                        |  |                 |  |                               |  |                                |  |                          |  |                                       |  |                                                               
|---------------------------------------- |  | ------------------------- |  | ----------------------- |  | ---------------------- |  | --------------- |  | ----------------------------- |  | ------------------------------ |  | ------------------------ |  | ------------------------------------- |  | --------------------------------------------------------------
|Property and Location                    |  | Year Completed /Renovated |  | Company Owned (Sq. Ft.) |  | Tenant Owned (Sq. Ft.) |  | Total (Sq. Ft.) |  | % Leased as of 12/31/2005 (4) |  | Total # Tenants 12/31/2005 (4) |  | Annual Base Rent ($) (1) |  | Ann. Base Rent/Leased Sq. Ft. ($) (3) |  | Major Retailers                                               
|Gordon Ranch Marketplace Chino Hills, CA |  | 1991                      |  | 114,573                 |  | 0                      |  | 114,573         |  | 99.1                          |  | 41                             |  | 2,139,402                |  | 18.83                                 |  | Ralphs Supermarket                                           
|Granary Square Valencia, CA              |  | 1982                      |  | 143,333                 |  | 0                      |  | 143,333         |  | 100.0                         |  | 32                             |  | 2,446,624                |  | 17.07                                 |  | Ralphs Supermarket, Longs Drugs                             
|Kenneth Hahn Los Angeles, CA             |  | 1987                      |  | 165,195                 |  | 0                      |  | 165,195         |  | 100.0                         |  | 32                             |  | 1,755,155                |  | 10.62                                 |  | Food 4 Less Supermarket, Rite Aid, Factory 2 U                
|La Verne Towne Center La Verne, CA       |  | 1986                      |  | 231,376                 |  | 0                      |  | 231,376         |  | 98.4                          |  | 26                             |  | 1,656,276                |  | 7.28                                  |  | Vons Supermarket, Target                                     
|Lakewood Plaza Bellflower, CA            |  | 19871989                  |  | 113,511                 |  | 0                      |  | 113,511         |  | 100.0                         |  | 11                             |  | 1,345,746                |  | 11.86                                 |  | Stater Bros. Supermarket, Staples                             
|Larwin Square Shopping Center Tustin, CA |  | 1977                      |  | 210,936                 |  | 0                      |  | 210,936         |  | 99.7                          |  | 60                             |  | 3,055,747                |  | 14.54                                 |  | Vons Supermarket, Rite Aid, Big 5 Sporting Goods, The Red Bee
|Loma Square San Diego, CA                |  | 1980                      |  | 210,704                 |  | 0                      |  | 210,704         |  | 100.0                         |  | 30                             |  | 3,241,641                |  | 15.38                                 |  | Henrys Market, Sav-on Drugs, T.J. Maxx, Circuit City         
|Marina Village Huntington Beach, CA      |  | 19961998                  |  | 149,107                 |  | 0                      |  | 149,107         |  | 97.4                          |  | 33                             |  | 1,945,301                |  | 13.39                                 |  | Vons Supermarket, Sav-on Drugs                               
|Melrose Village Plaza Vista, CA          |  | 1990                      |  | 136,922                 |  | 0                      |  | 136,922         |  | 100.0                         |  | 35                             |  | 1,733,511                |  | 12.66                                 |  | Albertsons Supermarket, Sav-on Drugs                         
|Mountain Square Upland, CA               |  | 19882002                  |  | 273,167                 |  | 0                      |  | 273,167         |  | 99.5                          |  | 31                             |  | 3,547,329                |  | 13.05                                 |  | Pavilions Supermarket (5), Home Depot, Staples                
|North County Plaza Carlsbad, CA          |  | 1987                      |  | 160,925                 |  | 0                      |  | 160,925         |  | 91.1                          |  | 32                             |  | 2,444,908                |  | 16.67                                 |  | Marshalls, Dollar Tree, Tuesday Morning                      
|Oceanside Town & Country Oceanside, CA   |  | 1971                      |  | 88,414                  |  | 0                      |  | 88,414          |  | 92.3                          |  | 22                             |  | 656,508                  |  | 8.05                                  |  | Vons Supermarket, Longs Drugs,                              
|Palmdale Center Palmdale, CA             |  | 1975                      |  | 81,050                  |  | 0                      |  | 81,050          |  | 100.0                         |  | 14                             |  | 651,237                  |  | 8.04                                  |  | Smart & Final, Dollar Tree, Big Lots                          
|Palomar Village SC Temecula, CA          |  | 1991                      |  | 139,130                 |  | 9,015                  |  | 148,145         |  | 100.0                         |  | 37                             |  | 2,121,485                |  | 15.25                                 |  | Albertsons Supermarket, Longs Drugs                         
|Pavilions Place Huntington Beach, CA     |  | 19862002                  |  | 208,660                 |  | 100,750                |  | 309,410         |  | 100.0                         |  | 49                             |  | 4,053,264                |  | 19.43                                 |  | Pavilions Supermarket, Target (2), Easy Life Furniture        



22



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##### Table of Contents

Property Summary

12/31/2005



|                                             |  |                           |  |                         |  |                        |  |                 |  |                               |  |                                |  |                          |             |                                       |   |                 |  |                                                                        
|-------------------------------------------- |  | ------------------------- |  | ----------------------- |  | ---------------------- |  | --------------- |  | ----------------------------- |  | ------------------------------ |  | ------------------------ | ----------- | ------------------------------------- | - | --------------- |  | -----------------------------------------------------------------------
|Property and Location                        |  | Year Completed /Renovated |  | Company Owned (Sq. Ft.) |  | Tenant Owned (Sq. Ft.) |  | Total (Sq. Ft.) |  | % Leased as of 12/31/2005 (4) |  | Total # Tenants 12/31/2005 (4) |  | Annual Base Rent ($) (1) |             | Ann. Base Rent/Leased Sq. Ft. ($) (3) |   | Major Retailers
|Rancho Las Palmas Rancho Mirage, CA          |  | 19802001                  |  | 165,156                 |  | 10,815                 |  | 175,971         |  | 89.8                          |  | 42                             |  |                          | 2,280,366   |                                       |   | 15.38           |  | Vons Supermarket, Longs Drugs                                        
|Sam's Club Downey Downey, CA                 |  | 1987                      |  | 114,722                 |  | 0                      |  | 114,722         |  | 100.0                         |  | 2                              |  |                          | 753,133     |                                       |   | 6.56            |  | Sams Club (5)                                                         
|San Dimas Marketplace San Dimas, CA          |  | 1997                      |  | 154,020                 |  | 117,000                |  | 271,020         |  | 100.0                         |  | 23                             |  |                          | 2,480,136   |                                       |   | 16.10           |  | Trader Joes Market, Target (2), Ross Dress for Less, Office Max, Petco
|Sycamore Plaza Anaheim, CA                   |  | 1976                      |  | 105,085                 |  | 0                      |  | 105,085         |  | 100.0                         |  | 26                             |  |                          | 996,550     |                                       |   | 9.48            |  | Stater Bros. Supermarket, Sav-on Drugs                                 
|Tustin Heights Shopping Center Tustin, CA    |  | 1983                      |  | 138,348                 |  | 0                      |  | 138,348         |  | 100.0                         |  | 22                             |  |                          | 2,102,332   |                                       |   | 15.20           |  | Ralphs Supermarket, Longs Drugs, Michaels Arts & Crafts             
|Vermont-Slauson Shopping Ctr Los Angeles, CA |  | 1981                      |  | 169,744                 |  | 0                      |  | 169,744         |  | 99.1                          |  | 17                             |  |                          | 1,306,628   |                                       |   | 7.77            |  | Superior Supermarket, Sav-on Drugs, Kmart                              
|Vineyard Village Ontario, CA                 |  | 1988                      |  | 97,131                  |  | 0                      |  | 97,131          |  | 100.0                         |  | 26                             |  |                          | 1,357,937   |                                       |   | 13.98           |  | Pep Boys, 24 Hour Fitness                                              
|Vineyard Village East Ontario, CA            |  | 1992                      |  | 45,075                  |  | 0                      |  | 45,075          |  | 100.0                         |  | 4                              |  |                          | 398,624     |                                       |   | 8.84            |  | Sears, Dunn Edwards Paints                                             
|Vineyards Marketplace Rancho Cucamonga, CA   |  | 1991                      |  | 56,019                  |  | 49,134                 |  | 105,153         |  | 100.0                         |  | 22                             |  |                          | 976,541     |                                       |   | 17.43           |  | Albertsons Supermarket (2), Sav-on Drugs                              
|                                             |  |                           |  |                         |  |                        |  |                 |  |                               |  |                                |  |                          |             |                                       |   |                 |  |                                                                        
|Region Total/Weighted Average                |  |                           |  | 6,292,066               |  | 1,193,558              |  | 7,485,624       |  | 98.3                          |  | 1,139                          |  | $                        | 88,281,283  |                                       | $ | 14.28           |  |                                                                        
|                                             |  |                           |  |                         |  |                        |  |                 |  |                               |  |                                |  |                          |             |                                       |   |                 |  |                                                                        
|Portfolio Total/Weighted Average             |  |                           |  | 19,829,817              |  | 2,657,435              |  | 22,487,252      |  | 97.1                          |  | 3,468                          |  | $                        | 246,491,172 |                                       | $ | 12.80           |  |                                                                        
|                                             |  |                           |  |                         |  |                        |  |                 |  |                               |  |                                |  |                          |             |                                       |   |                 |  |                                                                        



|(1) | Annualized base rent for all leases in place at December 31, 2005 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, 2005.
|--- | --------------------------------------------------------------------------



|(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.
|--- | ----------------------------------------------



|(7) | Sak n Save is a division of Scolaris Supermarket.
|--- | ---------------------------------------------------



|(8) | QFC is a division of Kroger.
|--- | ----------------------------



23



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##### Table of Contents

Tenant Diversification Summary



|               |  |                                   |  |                                    |  |                                        |  |                                                    |  |        |  |      
|-------------- |  | --------------------------------- |  | ---------------------------------- |  | -------------------------------------- |  | -------------------------------------------------- |  | ------ |  | -----
|Tenant Type    |  | Total Gross Leased Area (sq. ft.) |  | Number of Tenants as of 12/31/2005 |  | % of Total Leased GLA as of 12/31/2005 |  | Annualized Base Rent in Place at December 31, 2005
|               |  |                                   |  | Total Annualized Base Rent ($) (3) |  | Percentage of Total (%)                |  | Annualized Base Rent/ Leased Sq. ft. ($) (4)      
|National (1)   |  | 11,258,042                        |  | 1,376                              |  | 58.45                                  |  | 130,980,505                                        |  | 53.14  |  | 11.63
|Regional (1)   |  | 3,673,734                         |  | 301                                |  | 19.07                                  |  | 38,873,365                                         |  | 15.77  |  | 10.58
|Local (1)      |  | 4,329,855                         |  | 1,791                              |  | 22.48                                  |  | 76,637,302                                         |  | 31.09  |  | 17.70
|Total          |  | 19,261,631                        |  | 3,468                              |  | 100.00                                 |  | 246,491,172                                        |  | 100.00 |  | 12.80
|Anchor (2)     |  | 11,011,529                        |  | 309                                |  | 57.17                                  |  | 94,999,497                                         |  | 38.54  |  | 8.63 
|Non-Anchor (2) |  | 8,250,102                         |  | 3,159                              |  | 42.83                                  |  | 151,491,675                                        |  | 61.46  |  | 18.36
|Total          |  | 19,261,631                        |  | 3,468                              |  | 100.00                                 |  | 246,491,172                                        |  | 100.00 |  | 12.80



|(1) | The company defines a national tenant 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 tenant as any tenant that operates in two or more metropolitan areas located within the same region; local tenant as any tenant that operates stores only within the same metropolitan area as the shopping center.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | The Company defines anchors as tenants which lease 15,000 square feet or more and non-anchors as tenants which lease less than 15,000 square feet.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | 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.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | Annualized base rent divided by GLA leased.
|--- | -------------------------------------------



24



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##### Table of Contents

Pan Pacific Retail Properties

Major Tenants as of December 31, 2005



|                            |  |                |  |                             |  |                               |   |                         |                                             |            |  |   |       |  |       |  
|--------------------------- |  | -------------- |  | --------------------------- |  | ----------------------------- | - | ----------------------- | ------------------------------------------- | ---------- |  | - | ----- |  | ----- | -
|Tenants                     |  | NumberofLeases |  | Leased GLA(Sq. Ft.)         |  | % of TotalOwnedGLA            |   |                         | Annualized Base Rent in Place at Period End |           
|                            |  |                |  | Total Ann. BaseRent ($) (1) |  | Ann. BaseRent/Sq. Ft. ($) (2) |   | % of TotalAnn. BaseRent |                                            
|VONS/SAFEWAY/PAK N SAVE    |  | 24             |  | 1,097,005                   |  | 5.68                          | % |                         | $                                           | 8,823,834  |  | $ | 8.04  |  | 3.58  | %
|RALEYS/BEL AIR             |  | 17             |  | 1,007,761                   |  | 5.22                          |   |                         |                                             | 7,141,523  |  |   | 7.09  |  | 2.90  |  
|ALBERTSONS/SAVON            |  | 20             |  | 800,940                     |  | 4.15                          |   |                         |                                             | 5,910,770  |  |   | 7.38  |  | 2.40  |  
|WAL-MART                    |  | 5              |  | 527,329                     |  | 2.73                          |   |                         |                                             | 5,273,351  |  |   | 10.00 |  | 2.14  |  
|KROGER/RALPHS/QFC/FOOD4LESS |  | 11             |  | 402,175                     |  | 2.08                          |   |                         |                                             | 3,835,668  |  |   | 9.54  |  | 1.56  |  
|RITE AID                    |  | 22             |  | 550,460                     |  | 2.85                          |   |                         |                                             | 3,730,246  |  |   | 6.78  |  | 1.51  |  
|ROSS DRESS FOR LESS         |  | 13             |  | 351,717                     |  | 1.82                          |   |                         |                                             | 3,353,563  |  |   | 9.53  |  | 1.36  |  
|HOLLYWOOD VIDEO             |  | 22             |  | 141,321                     |  | 0.73                          |   |                         |                                             | 2,758,715  |  |   | 19.52 |  | 1.12  |  
|BLOCKBUSTER VIDEO           |  | 24             |  | 132,118                     |  | 0.68                          |   |                         |                                             | 2,637,062  |  |   | 19.96 |  | 1.07  |  
|SAVE MART/FOODMAXX          |  | 9              |  | 362,747                     |  | 1.88                          |   |                         |                                             | 2,469,073  |  |   | 6.81  |  | 1.00  |  
|                            |  |                |  |                             |  |                               |   |                         |                                             |            |  |   |       |  |       |  
|Total:                      |  | 167            |  | 5,373,573                   |  | 27.82                         | % |                         | $                                           | 45,933,805 |  | $ | 8.55  |  | 18.64 | %
|                            |  |                |  |                             |  |                               |   |                         |                                             |            |  |   |       |  |       |  



|(1) | Annualized base rent for all leases in place at 12/31/2005 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.
|--- | ----------------------------------------------------



25



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##### Table of Contents

Lease Expiration Analysis *

As of 12/31/2005



|                          |  |                     |   |  |                            |  |                                 |  |                    |                             |  |                                             |  |        |   |  |      
|------------------------- |  | ------------------- | - |  | -------------------------- |  | ------------------------------- |  | ------------------ | --------------------------- |  | ------------------------------------------- |  | ------ | - |  | -----
|                          |  | LeaseExpirationYear |   |  | Number ofLeasesExpiring    |  | GLA UnderExpiringLeases(Sq.Ft.) |  | % ofTotalLeasedGLA |                             |  | Annualized Base Rent in Place at 12/31/2005
|                          |  |                     |   |  | Total Ann.Base Rent ($)(2) |  | % ofTotal Ann.Base Rent         |  |                    | Ann. BaseRent ($/Sq.Ft.)(3)
|All Anchor Leases (1)     |  |                     |   |  |                            |  |                                 |  |                    |                             |  |                                             |  |        |   |  |      
|1                         |  | 2006                |   |  | 13                         |  | 578,983                         |  | 3.05               | %                           |  | 6,412,890                                   |  | 2.63   | % |  | 11.08
|2                         |  | 2007                |   |  | 20                         |  | 709,425                         |  | 3.73               | %                           |  | 4,380,053                                   |  | 1.80   | % |  | 6.17 
|3                         |  | 2008                |   |  | 31                         |  | 884,841                         |  | 4.66               | %                           |  | 6,688,080                                   |  | 2.74   | % |  | 7.56 
|4                         |  | 2009                |   |  | 36                         |  | 1,438,481                       |  | 7.57               | %                           |  | 10,028,410                                  |  | 4.11   | % |  | 6.97 
|5                         |  | 2010                |   |  | 34                         |  | 962,595                         |  | 5.07               | %                           |  | 9,078,111                                   |  | 3.72   | % |  | 9.43 
|6                         |  | 2011                |   |  | 29                         |  | 923,194                         |  | 4.86               | %                           |  | 7,393,491                                   |  | 3.03   | % |  | 8.01 
|7                         |  | 2012                |   |  | 30                         |  | 1,006,821                       |  | 5.30               | %                           |  | 9,616,255                                   |  | 3.94   | % |  | 9.55 
|8                         |  | 2013                |   |  | 20                         |  | 644,790                         |  | 3.39               | %                           |  | 4,932,870                                   |  | 2.02   | % |  | 7.65 
|9                         |  | 2014                |   |  | 18                         |  | 649,651                         |  | 3.42               | %                           |  | 5,471,955                                   |  | 2.24   | % |  | 8.42 
|10                        |  | 2015                |   |  | 18                         |  | 665,658                         |  | 3.50               | %                           |  | 6,386,420                                   |  | 2.62   | % |  | 9.59 
|11                        |  | 2016                | + |  | 57                         |  | 2,490,022                       |  | 13.11              | %                           |  | 24,742,458                                  |  | 10.14  | % |  | 9.94 
|                          |  |                     |   |  |                            |  |                                 |  |                    |                             |  |                                             |  |        |   |  |      
|TOTAL/WEIGHTED AVERAGE    |  |                     |   |  | 306                        |  | 10,954,461                      |  | 57.66              | %                           |  | 95,130,992                                  |  | 38.99  | % |  | 8.68 
|                          |  |                     |   |  |                            |  |                                 |  |                    |                             |  |                                             |  |        |   |  |      
|All Non-Anchor Leases (1) |  |                     |   |  |                            |  |                                 |  |                    |                             |  |                                             |  |        |   |  |      
|1                         |  | 2006                |   |  | 464                        |  | 1,043,302                       |  | 5.49               | %                           |  | 19,200,364                                  |  | 7.87   | % |  | 18.40
|2                         |  | 2007                |   |  | 626                        |  | 1,468,513                       |  | 7.73               | %                           |  | 25,761,969                                  |  | 10.56  | % |  | 17.54
|3                         |  | 2008                |   |  | 550                        |  | 1,376,430                       |  | 7.24               | %                           |  | 23,917,676                                  |  | 9.80   | % |  | 17.38
|4                         |  | 2009                |   |  | 450                        |  | 1,288,632                       |  | 6.78               | %                           |  | 22,750,384                                  |  | 9.32   | % |  | 17.65
|5                         |  | 2010                |   |  | 468                        |  | 1,174,223                       |  | 6.18               | %                           |  | 22,859,900                                  |  | 9.37   | % |  | 19.47
|6                         |  | 2011                |   |  | 146                        |  | 479,442                         |  | 2.52               | %                           |  | 9,933,160                                   |  | 4.07   | % |  | 20.72
|7                         |  | 2012                |   |  | 84                         |  | 288,078                         |  | 1.52               | %                           |  | 5,166,983                                   |  | 2.12   | % |  | 17.94
|8                         |  | 2013                |   |  | 90                         |  | 317,139                         |  | 1.67               | %                           |  | 7,048,881                                   |  | 2.89   | % |  | 22.23
|9                         |  | 2014                |   |  | 67                         |  | 242,094                         |  | 1.27               | %                           |  | 5,104,685                                   |  | 2.09   | % |  | 21.09
|10                        |  | 2015                |   |  | 44                         |  | 131,484                         |  | 0.69               | %                           |  | 3,071,222                                   |  | 1.26   | % |  | 23.36
|11                        |  | 2016                | + |  | 67                         |  | 235,705                         |  | 1.24               | %                           |  | 4,056,480                                   |  | 1.66   | % |  | 17.21
|                          |  |                     |   |  |                            |  |                                 |  |                    |                             |  |                                             |  |        |   |  |      
|TOTAL/WEIGHTED AVERAGE    |  |                     |   |  | 3,056                      |  | 8,045,042                       |  | 42.34              | %                           |  | 148,871,704                                 |  | 61.01  | % |  | 18.50
|                          |  |                     |   |  |                            |  |                                 |  |                    |                             |  |                                             |  |        |   |  |      
|All Leases                |  |                     |   |  |                            |  |                                 |  |                    |                             |  |                                             |  |        |   |  |      
|1                         |  | 2006                |   |  | 477                        |  | 1,622,285                       |  | 8.54               | %                           |  | 25,613,254                                  |  | 10.50  | % |  | 15.79
|2                         |  | 2007                |   |  | 646                        |  | 2,177,938                       |  | 11.46              | %                           |  | 30,142,022                                  |  | 12.35  | % |  | 13.84
|3                         |  | 2008                |   |  | 581                        |  | 2,261,271                       |  | 11.90              | %                           |  | 30,605,756                                  |  | 12.54  | % |  | 13.53
|4                         |  | 2009                |   |  | 486                        |  | 2,727,113                       |  | 14.35              | %                           |  | 32,778,794                                  |  | 13.43  | % |  | 12.02
|5                         |  | 2010                |   |  | 502                        |  | 2,136,818                       |  | 11.25              | %                           |  | 31,938,011                                  |  | 13.09  | % |  | 14.95
|6                         |  | 2011                |   |  | 175                        |  | 1,402,636                       |  | 7.38               | %                           |  | 17,326,650                                  |  | 7.10   | % |  | 12.35
|7                         |  | 2012                |   |  | 114                        |  | 1,294,899                       |  | 6.82               | %                           |  | 14,783,238                                  |  | 6.06   | % |  | 11.42
|8                         |  | 2013                |   |  | 110                        |  | 961,929                         |  | 5.06               | %                           |  | 11,981,751                                  |  | 4.91   | % |  | 12.46
|9                         |  | 2014                |   |  | 85                         |  | 891,745                         |  | 4.69               | %                           |  | 10,576,640                                  |  | 4.33   | % |  | 11.86
|10                        |  | 2015                |   |  | 62                         |  | 797,142                         |  | 4.20               | %                           |  | 9,457,642                                   |  | 3.88   | % |  | 11.86
|11                        |  | 2016                | + |  | 124                        |  | 2,725,727                       |  | 14.35              | %                           |  | 28,798,938                                  |  | 11.80  | % |  | 10.57
|                          |  |                     |   |  |                            |  |                                 |  |                    |                             |  |                                             |  |        |   |  |      
|TOTAL/WEIGHTED AVERAGE    |  |                     |   |  | 3,362                      |  | 18,999,503                      |  | 100.00             | %                           |  | 244,002,696                                 |  | 100.00 | % |  | 12.84
|                          |  |                     |   |  |                            |  |                                 |  |                    |                             |  |                                             |  |        |   |  |      



Note: Number of Leases expiring does
not include tenants on a month-to-month agreement, whose combined occupancy totals 256,428 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 accordance 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.
|--- | -----------------------------------------------------------------------



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##### Table of Contents

ITEM 3. LEGAL PROCEEDINGS



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 2005, no matters were submitted to a vote of our stockholders.



PART II



ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES



Our common stock began trading on the New York Stock Exchange on August 8, 1997, under the symbol PNP. On February 16, 2006, we had
approximately 1,201 stockholders of record and approximately 20,750 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 2005  |  | $    | 61.93 |     | $ | 56.25              |  | $ | 0.5900
|Second Quarter 2005 |  | $    | 68.00 |     | $ | 56.10              |  | $ | 0.5900
|Third Quarter 2005  |  | $    | 70.49 |     | $ | 64.15              |  | $ | 0.5900
|Fourth Quarter 2005 |  | $    | 68.30 |     | $ | 60.25              |  | $ | 0.5900
|First Quarter 2004  |  | $    | 52.60 |     | $ | 47.85              |  | $ | 0.5425
|Second Quarter 2004 |  | $    | 53.16 |     | $ | 41.80              |  | $ | 0.5425
|Third Quarter 2004  |  | $    | 54.46 |     | $ | 48.88              |  | $ | 0.5425
|Fourth Quarter 2004 |  | $    | 62.70 |     | $ | 54.81              |  | $ | 0.5425



The fourth quarter
2005 and 2004 dividends on an annualized basis amount to $2.36 and $2.17 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.



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##### Table of Contents

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,
|                                                 |  | 2005                     |           | 2004          |   | 2003          |  | 2002          |           | 2001         
|                                                 |  |                          |           | (revised) (1) |   | (revised) (1) |  | (revised) (1) |           | (revised) (1)
|STATEMENTS OF INCOME DATA:                       |  |                          |           |               |   |               |  |               |           |               |   |           |  |   |          
|Total revenue                                    |  | $                        | 308,439   |               | $ | 286,650       |  | $             | 258,950   |               | $ | 186,877   |  | $ | 173,766  
|Property and general and administrative expenses |  |                          | 83,742    |               |   | 82,101        |  |               | 72,409    |               |   | 48,546    |  |   | 45,090   
|Depreciation and amortization                    |  |                          | 56,103    |               |   | 48,011        |  |               | 39,266    |               |   | 29,976    |  |   | 27,773   
|Interest expense                                 |  |                          | 69,352    |               |   | 62,619        |  |               | 58,473    |               |   | 45,926    |  |   | 46,196   
|Income from continuing operations (2)            |  |                          | 96,838    |               |   | 91,580        |  |               | 86,348    |               |   | 60,972    |  |   | 56,315   
|Discontinued operations                          |  |                          | 14,467    |               |   | 10,409        |  |               | 18,088    |               |   | 16,680    |  |   | 7,907    
|Net income                                       |  |                          | 111,305   |               |   | 101,989       |  |               | 104,436   |               |   | 77,652    |  |   | 64,222   
|Basic earnings per share:                        |  |                          |           |               |   |               |  |               |           |               |   |           |  |   |          
|Income from continuing operations                |  |                          | 2.40      |               |   | 2.28          |  |               | 2.19      |               |   | 1.82      |  |   | 1.77     
|Discontinued operations                          |  |                          | 0.35      |               |   | 0.26          |  |               | 0.46      |               |   | 0.50      |  |   | 0.25     
|Net income                                       |  |                          | 2.75      |               |   | 2.54          |  |               | 2.65      |               |   | 2.32      |  |   | 2.02     
|Diluted earnings per share:                      |  |                          |           |               |   |               |  |               |           |               |   |           |  |   |          
|Income from continuing operations                |  |                          | 2.38      |               |   | 2.26          |  |               | 2.16      |               |   | 1.81      |  |   | 1.73     
|Discontinued operations                          |  |                          | 0.35      |               |   | 0.26          |  |               | 0.45      |               |   | 0.49      |  |   | 0.24     
|Net income                                       |  |                          | 2.73      |               |   | 2.52          |  |               | 2.61      |               |   | 2.30      |  |   | 1.97     
|Distributions declared per share                 |  |                          | 2.36      |               |   | 2.17          |  |               | 2.03      |               |   | 1.90      |  |   | 1.82     
|                                                 | 
|                                                 |  | As of December 31,      
|                                                 |  | 2005                     |           | 2004          |   | 2003          |  | 2002          |           | 2001         
|BALANCE SHEET DATA:                              |  |                          |           |               |   |               |  |               |           |               |   |           |  |   |          
|Properties, net                                  |  | $                        | 1,982,153 |               | $ | 1,892,131     |  | $             | 1,773,894 |               | $ | 1,306,033 |  | $ | 1,233,189
|Total assets                                     |  |                          | 2,098,764 |               |   | 1,995,444     |  |               | 1,863,348 |               |   | 1,424,240 |  |   | 1,339,290
|Notes payable                                    |  |                          | 390,132   |               |   | 343,736       |  |               | 345,077   |               |   | 239,541   |  |   | 229,135  
|Line of credit payable                           |  |                          | 44,500    |               |   | 113,000       |  |               | 48,250    |               |   | 66,000    |  |   | 165,300  
|Senior notes                                     |  |                          | 653,908   |               |   | 554,290       |  |               | 503,708   |               |   | 428,677   |  |   | 273,800  
|Minority interests                               |  |                          | 28,794    |               |   | 30,079        |  |               | 32,325    |               |   | 15,804    |  |   | 20,748   
|Stockholders equity                             |  |                          | 938,043   |               |   | 915,134       |  |               | 892,285   |               |   | 648,635   |  |   | 622,458  

---

|(1) | Our consolidated statements of income and consolidated statements of cash flows have been revised from those originally reported to separately reflect the results of discontinued
operations for properties that were sold during the years ended December 31, 2005, 2004, 2003 and 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, 2004, 2003, 2002 and 2001.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Income from continuing operations includes minority interests and gain on sale of real estate (excluding the amount included in discontinued operations in 2005, 2004 and 2003).
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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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, pursuant to SFAS
No. 144, from those originally reported for the years ended December 31, 2004 and 2003 to separately reflect the results of discontinued operations for properties that have since been sold or classified as held for sale. The revision had
no impact on our consolidated balance sheets or our 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, 2004 and 2003. 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 market conditions, execution of shopping center development programs, successful completion of renovations, completion of pending acquisitions and dispositions,
including the completion of customary due diligence and closing conditions, the Companys ability to successfully integrate acquired assets, changes in the availability of additional acquisitions and disposition opportunities, changes in local
or national economic conditions, changes in tax laws, 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 U.S. generally accepted accounting principles. 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, the financial data shows increases in total revenue and total expenses from period to period.



During the year ended December 31, 2005, six shopping center assets were
acquired and one non-strategic asset was sold, the proceeds of which were used to pay down a portion of the borrowings under our revolving credit facility. During the year ended December 31, 2004, four non-strategic assets were sold. The cash
proceeds were used toward the purchase of two shopping center assets and to pay down a portion of the borrowings under our revolving credit facility.



A significant portion of our historic growth has come through acquisitions. However, the acquisition environment has become more competitive over the last
several years and it has become increasingly difficult to find



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##### Table of Contents

acquisitions that meet our financial return objectives. Given this difficult acquisition market and our current expectations, we anticipate a slower growth
rate over the next year or two. We will continue to strategically manage our portfolio by selectively pursuing acquisitions in markets where attractive opportunities exist and upgrading our portfolio by disposing of underperforming properties.



Results of Operations



Comparison of the Year ended December 31, 2005 to the Year ended December 31,
2004



Revenue



|                                    |  |                                 |         |   |                    |   |         |                       |  |   |        |   |  |       |   
|----------------------------------- |  | ------------------------------- | ------- | - | ------------------ | - | ------- | --------------------- |  | - | ------ | - |  | ----- | --
|                                    |  | For the Year Ended December 31, |         |   | Increase(Decrease) |   |         | % Increase (Decrease) | 
|(dollars in thousands)              |  | 2005                            |         |   | 2004               |   |         |                      
|Base rent                           |  | $                               | 237,554 |   |                    | $ | 217,726 |                       |  | $ | 19,828 |   |  | 9.1   | % 
|Percentage rent                     |  |                                 | 2,856   |   |                    |   | 2,800   |                       |  |   | 56     |   |  | 2.0   | % 
|Recoveries from tenants             |  |                                 | 62,619  |   |                    |   | 57,237  |                       |  |   | 5,382  |   |  | 9.4   | % 
|Income from unconsolidated entities |  |                                 | 418     |   |                    |   | 438     |                       |  |   | (20    | ) |  | (4.6  | )%
|Other                               |  |                                 | 4,992   |   |                    |   | 8,449   |                       |  |   | (3,457 | ) |  | (40.9 | )%
|                                    |  |                                 |         |   |                    |   |         |                       |  |   |        |   |  |       |   
|Total revenue                       |  | $                               | 308,439 |   |                    | $ | 286,650 |                       |  | $ | 21,789 |   |  | 7.6   | % 
|                                    |  |                                 |         |   |                    |   |         |                       |  |   |        |   |  |       |   
|Tenant recovery percentage          |  |                                 | 92.3    | % |                    |   | 87.5    | %                     |  |   |        |   |  |       |   



The increase in rental
revenue, which includes base rent and percentage rent, resulted principally from the increase in rental rates we are achieving through our leasing initiatives and the acquisitions of six shopping center assets in 2005 and five shopping center assets
in 2004.



The increase in recoveries from tenants, which
represents reimbursements from tenants for property operating expenses and property taxes, resulted primarily from the acquisitions of shopping center assets in 2005 and 2004. In addition, recoveries from tenants increased because recoverable
expenses increased. The increase in the tenant recovery percentage is due to lower bad debt expense, which is non-recoverable, and stronger expense recovery language in leases that we renew.



The decrease in other income resulted primarily from miscellaneous income
recorded in 2004 that related to future cash flow participation in a property that was paid off in advance as well as income from the reversal of the remaining balance of a general legal accrual that was established at the time of the Center Trust
acquisition. Additionally, the decrease is attributable to a decrease in income related to tenants who have defaulted on their leases and income on a miscellaneous note receivable recorded in 2004. These decreases are offset by an increase due to
the reduction of a portion of the environmental reserves that had been recorded upon the acquisition of certain properties.



Expenses



|                              |  |                                 |         |                    |   |         |                      |   |        |   |  |        |   
|----------------------------- |  | ------------------------------- | ------- | ------------------ | - | ------- | -------------------- | - | ------ | - |  | ------ | --
|                              |  | For the Year Ended December 31, |         | Increase(Decrease) |   |         | % Increase(Decrease) |  
|(dollars in thousands)        |  | 2005                            |         | 2004               |   |        
|Property operating            |  | $                               | 42,331  |                    | $ | 41,430  |                      | $ | 901    |   |  | 2.2    | % 
|Property taxes                |  |                                 | 25,481  |                    |   | 24,011  |                      |   | 1,470  |   |  | 6.1    | % 
|Depreciation and amortization |  |                                 | 56,103  |                    |   | 48,011  |                      |   | 8,092  |   |  | 16.9   | % 
|Interest                      |  |                                 | 69,352  |                    |   | 62,619  |                      |   | 6,733  |   |  | 10.8   | % 
|General and administrative    |  |                                 | 14,999  |                    |   | 13,027  |                      |   | 1,972  |   |  | 15.1   | % 
|Impairment loss               |  |                                 |        |                    |   | 642     |                      |   | (642   | ) |  | (100.0 | )%
|Other                         |  |                                 | 931     |                    |   | 2,991   |                      |   | (2,060 | ) |  | (68.9  | )%
|                              |  |                                 |         |                    |   |         |                      |   |        |   |  |        |   
|Total expenses                |  | $                               | 209,197 |                    | $ | 192,731 |                      | $ | 16,466 |   |  | 8.5    | % 
|                              |  |                                 |         |                    |   |         |                      |   |        |   |  |        |   



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The increase in property operating expenses was primarily due to the acquisitions of shopping center
assets in 2005 and 2004, as well as increases in common area costs, including cleaning costs, repairs and grounds maintenance, general building expenses, insurance costs, security costs and utilities. These increases were offset by decreases in bad
debt expense and legal costs.



The increase in property taxes
was primarily the result of the acquisitions of shopping center assets in 2005 and 2004.



The increase in depreciation and amortization was primarily due to the amortization of the value of the leases in place for properties acquired in 2005 and 2004, as well as depreciation related to properties acquired
in 2005 and 2004.



The increase in interest expense was a
result of additional amounts drawn on our revolving credit facility to finance property acquisitions during 2005 and 2004. In addition, our cost to borrow funds under our revolving credit facility has been increasing due to the Federal Reserve
raising interest rates. Interest expense also increased as a result of our issuance of $100,000,000 in aggregate principal amount of senior notes in August 2005, our issuance of $50,000,000 in aggregate principal amount of senior notes in July 2004
and our issuance of $50,000,000 in aggregate principal amount of senior notes in May 2004. The stated interest rates of 5.25%, 5.95% and 5.95%, respectively, on the senior notes, and the related amortization of prepaid financing costs, are higher
than our cost to borrow funds under our revolving credit facility which was paid down with the net proceeds of the notes offerings. The borrowing on our credit line had a weighted average interest rate of 5.10% at December 31, 2005.



The increase in general and administrative expenses resulted primarily
from an increase in compensation costs and an increase in audit expense recognized related to Sarbanes-Oxley 404 compliance work. These increases were offset by a decrease in consultant fees related to Sarbanes-Oxley 404 compliance work. As a
percentage of total revenue, general and administrative expenses were 4.9% for the year ended December 31, 2005 as compared to 4.5% for the year ended December 31, 2004.



The impairment loss of $642,000 for the year ended December 31, 2004 represents a charge related to a parcel of land in
Reno, Nevada, originally acquired in the Western Properties Trust merger transaction, that had been held for potential development. In the third quarter of 2004, we sold the land parcel for less than the recorded book value, which resulted in the
impairment loss.



The decrease in other expense resulted
primarily from the write down during the year ended December 31, 2004, of a receivable related to a lawsuit we brought against insurance carriers to recover our legal and settlement expenses incurred in connection with a shareholder
suit related to our acquisition of Western Properties Trust in November 2000. This decrease was offset by higher costs in 2005 related to potential property acquisitions that we did not complete.



Discontinued operations for the year ended December 31, 2005 of
$14,467,000 reflects the operating results of one non-strategic asset that was sold during 2005 and one non-strategic asset that was classified as held for sale at December 31, 2005. Included in this amount is gain on the sale of the asset of
$13,087,000. Discontinued operations for the year ended December 31, 2004 of $10,409,000 reflects the operating results of three of four non-strategic assets that were sold during 2004. Included in this amount is gain on the sales of the four
assets of $8,245,000.



31



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##### Table of Contents

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



Revenue



|                                    |  |                                |         |   |                    |   |         |                      |  |   |        |   |  |       |   
|----------------------------------- |  | ------------------------------ | ------- | - | ------------------ | - | ------- | -------------------- |  | - | ------ | - |  | ----- | --
|                                    |  | For the Year EndedDecember 31, |         |   | Increase(Decrease) |   |         | % Increase(Decrease) | 
|(dollars in thousands)              |  | 2004                           |         |   | 2003               |   |         |                     
|Base rent                           |  | $                              | 217,726 |   |                    | $ | 199,321 |                      |  | $ | 18,405 |   |  | 9.2   | % 
|Percentage rent                     |  |                                | 2,800   |   |                    |   | 2,669   |                      |  |   | 131    |   |  | 4.9   | % 
|Recoveries from tenants             |  |                                | 57,237  |   |                    |   | 50,833  |                      |  |   | 6,404  |   |  | 12.6  | % 
|Income from unconsolidated entities |  |                                | 438     |   |                    |   | 802     |                      |  |   | (364   | ) |  | (45.4 | )%
|Other                               |  |                                | 8,449   |   |                    |   | 5,325   |                      |  |   | 3,124  |   |  | 58.7  | % 
|                                    |  |                                |         |   |                    |   |         |                      |  |   |        |   |  |       |   
|Total revenue                       |  | $                              | 286,650 |   |                    | $ | 258,950 |                      |  | $ | 27,700 |   |  | 10.7  | % 
|                                    |  |                                |         |   |                    |   |         |                      |  |   |        |   |  |       |   
|Tenant recovery percentage          |  |                                | 87.5    | % |                    |   | 86.0    | %                    |  |   |        |   |  |       |   



The increase in rental
revenue, which includes base rent and percentage rent, resulted principally from the acquisition and lease-up of the Center Trust portfolio, the addition of Olympia Place as an operating property which had been under development in 2003, and was
placed into service in January 2004, and the acquisitions of seven other shopping center assets in 2004 and 2003.



The increase in recoveries from tenants resulted primarily from the acquisition of the Center Trust portfolio, the addition of Olympia Place as an
operating property which had been under development in 2003 and the acquisitions of seven other shopping center assets in 2004 and 2003. In addition, recoveries from tenants increased because recoverable expenses increased. The increase in recovery
percentage compared to the prior year period reflects the impact of the lease-up and re-leasing of the Center Trust portfolio.



The increase in other income resulted primarily from miscellaneous income related to future cash flow participation in a property that was paid off in
advance as well as income from the reversal of the remaining balance of a general legal accrual that was established at the time of the Center Trust acquisition.



Expenses



|                              |  |                                 |         |                    |   |                      |  |   |        |  |       |  
|----------------------------- |  | ------------------------------- | ------- | ------------------ | - | -------------------- |  | - | ------ |  | ----- | -
|                              |  | For the Year Ended December 31, |         | Increase(Decrease) |   | % Increase(Decrease) | 
|(dollars in thousands)        |  | 2004                            |         | 2003               |   |                     
|Property operating            |  | $                               | 41,430  |                    | $ | 37,961               |  | $ | 3,469  |  | 9.1   | %
|Property taxes                |  |                                 | 24,011  |                    |   | 21,162               |  |   | 2,849  |  | 13.5  | %
|Depreciation and amortization |  |                                 | 48,011  |                    |   | 39,266               |  |   | 8,745  |  | 22.3  | %
|Interest                      |  |                                 | 62,619  |                    |   | 58,473               |  |   | 4,146  |  | 7.1   | %
|General and administrative    |  |                                 | 13,027  |                    |   | 12,600               |  |   | 427    |  | 3.4   | %
|Impairment loss               |  |                                 | 642     |                    |   |                     |  |   | 642    |  | 100.0 | %
|Other                         |  |                                 | 2,991   |                    |   | 686                  |  |   | 2,305  |  | 336.0 | %
|                              |  |                                 |         |                    |   |                      |  |   |        |  |       |  
|Total expenses                |  | $                               | 192,731 |                    | $ | 170,148              |  | $ | 22,583 |  | 13.3  | %
|                              |  |                                 |         |                    |   |                      |  |   |        |  |       |  



The increase in
property taxes was primarily the result of the addition of Olympia Place as an operating property which had been under development in 2003 and the acquisitions of other shopping center assets in 2004 and 2003.



The increase in depreciation and amortization was primarily due to
depreciation on Olympia Place and expansion space at El Camino North which were under development in 2003, amortization of in-place lease value as well as depreciation on properties acquired in 2004 and 2003.



The increase in interest expense was partially the result of the debt we
assumed in the Center Trust acquisition as well as amounts we borrowed on our revolving credit facility to repay Center Trusts line of credit and to pay off certain notes payable. The increase was also a result of additional amounts drawn on
our revolving credit facility to finance properties acquired during 2004 and 2003. Our cost to borrow funds under our revolving credit facility has been increasing due to the Federal Reserve raising interest rates. Interest expense also increased as
a result of our



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issuance of $75,000,000 in aggregate principal amount of senior notes in June 2003, our issuance of $50,000,000 in aggregate principal amount of senior notes
in May 2004 and our issuance of $50,000,000 in aggregate principal amount of senior notes in July 2004. The stated interest rates of 4.70%, 5.95% and 5.95%, respectively, on the senior notes, and the related amortization of prepaid financing costs,
are higher than our cost to borrow funds under our revolving credit facility which was paid down with the net proceeds of the notes offerings. These increases in interest expense were partially offset by a decrease in interest expense resulting from
the payoff of $50,000,000 of 7.88% senior notes in February 2004 with a borrowing on our credit line which had a weighted average interest rate of 3.18% at December 31, 2004.



The increase in general and administrative expenses resulted primarily from annual compensation increases. As a percentage
of total revenue, general and administrative expenses were 4.5% for the year ended December 31, 2004 as compared to 4.9% for the year ended December 31, 2003.



The impairment loss of $642,000 represents a charge related to a parcel of land in Reno, Nevada, originally acquired in the
Western Properties Trust merger transaction, that had been held for potential development. In the third quarter of 2004, we sold the land parcel for less than the recorded book value which resulted in the impairment loss.



The increase in other expense resulted primarily from a write down of a
receivable related to a lawsuit we brought against insurance carriers to recover our legal and settlement expenses incurred in connection with a shareholder suit related to our acquisition of Western Properties Trust in November 2000.



Discontinued operations for the year ended December 31, 2004 of
$10,409,000 reflects the operating results of three of four non-strategic assets that were sold during 2004. Included in this amount is gain on sale of $8,245,000. Discontinued operations for the year ended December 31, 2003 of $18,088,000
reflects the operating results of eight of nine non-strategic assets that were sold during 2003 and three of four non-strategic assets that were sold during 2004. Included in this amount is gain on sale of $10,571,000.



Cash Flows



Comparison of the Year ended December 31, 2005 to the Year ended December 31, 2004



Net cash provided by continuing operating activities increased by
$19,302,000 to $151,425,000 for the year ended December 31, 2005, as compared to $132,123,000 for the year ended December 31, 2004. The increase was primarily the result of operating income arising from properties acquired in 2005 and 2004
and an increase in accounts payable, accrued expenses and other liabilities, offset by a decrease in accounts receivable.



Net cash used in continuing investing activities decreased by $76,580,000 to $98,918,000 for the year ended December 31, 2005, as compared to
$175,498,000 for the year ended December 31, 2004. The decrease was primarily due to a decrease in acquisitions of and additions to properties and acquired lease-related intangibles and an increase in the collections of notes receivable.



Net cash used in financing activities increased by $90,842,000
to $79,194,000 for the year ended December 31, 2005, as compared to net cash provided by financing activities of $11,648,000 for the year ended December 31, 2004. The increase primarily resulted from a net reduction in line of credit
borrowings and an increase in distributions paid, offset by a decrease in notes payable payments and the repayment of senior notes during the year ended December 31, 2004.



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



Net cash provided by continuing operating activities increased by $6,986,000
to $132,123,000 for the year ended December 31, 2004, as compared to $125,137,000 for the year ended December 31, 2003. The increase was primarily the result of operating income arising from properties acquired in 2004 and 2003, offset by
an increase in prepaid expenses and a decrease in accounts payable, accrued expenses and other liabilities.



Net cash used in continuing investing activities increased by $101,345,000 to $175,498,000 for the year ended December 31, 2004, as compared to
$74,153,000 for the year ended December 31, 2003. The increase was primarily the result of an increase in acquisitions of and additions to properties and acquired lease-related intangibles and a decrease in the collections of notes receivable,
offset by a decrease in cash used in the acquisition of Center Trust.



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##### Table of Contents

Net cash provided by financing activities increased by $255,598,000 to $11,648,000 for the year ended
December 31, 2004, as compared to net cash used in financing activities of $243,950,000 for the year ended December 31, 2003. The increase primarily resulted from a decrease in notes payable payments, an increase in line of credit proceeds
and an increase in issuance of senior notes offset by an increase in line of credit payments, a repayment of senior notes and an increase in distributions paid.



Liquidity and Capital Resources



Our total market capitalization at December 31, 2005 was approximately $3,852,490,000, based on the market closing price of our common stock at
December 31, 2005 of $66.89 per share (assuming the conversion of 619,755 operating subsidiary units to common stock) and our debt outstanding of approximately $1,088,540,000 (exclusive of accounts payable and accrued expenses). As a result,
our debt to total market capitalization ratio was approximately 28.3% at December 31, 2005. 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 September 2004, we entered into an amended and restated $300,000,000 revolving credit facility with a maturity date of March 2007. At December 31,
2005, we had $44,500,000 drawn on our revolving credit facility leaving $255,500,000 available to borrow. At our option, amounts borrowed under our revolving credit facility bear interest at either LIBOR plus 0.65% or a reference rate. The weighted
average interest rate for short-term LIBOR contracts under our revolving credit facility at December 31, 2005 was 5.10%. 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. The amended and restated revolving credit facility contains certain financial and other covenants which we believe we are in compliance with at December 31, 2005.



In August 2005, we issued $100,000,000 of 5.25% senior notes due
September 1, 2015. In May 2004, we issued $50,000,000 of 5.95% senior notes due June 1, 2014. In July 2004, we issued an additional $50,000,000 of the 5.95% senior notes due June 1, 2014. In June 2003, we issued $75,000,000 of 4.70%
senior notes due June 1, 2013. The net proceeds from the offerings were used to repay a portion of the borrowings under our revolving credit facility. Consistent with senior notes previously issued by us, we are bound by certain financial
covenants which we believe we are in compliance with at December 31, 2005.



We may in the future 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; however, we are not
a party to any derivative financial instruments at December 31, 2005. 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 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 be used to pay down outstanding balances on our revolving credit facility, if any.



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The following table provides recent historical distribution information:



|                   |  |                   |  |                   |  |                    |  |                       
|------------------ |  | ----------------- |  | ----------------- |  | ------------------ |  | ----------------------
|Quarter ended      |  | Date declared     |  | Record date       |  | Date paid          |  | Distribution per share
|March 31, 2003     |  | January 7, 2003   |  | January 14, 2003  |  | February 14, 2003  |  | $0.5000               
|June 30, 2003      |  | May 12, 2003      |  | May 23, 2003      |  | June 13, 2003      |  | $0.5100               
|September 30, 2003 |  | August 14, 2003   |  | August 29, 2003   |  | September 15, 2003 |  | $0.5100               
|December 31, 2003  |  | November 4, 2003  |  | November 28, 2003 |  | December 15, 2003  |  | $0.5100               
|March 31, 2004     |  | February 5, 2004  |  | February 27, 2004 |  | March 15, 2004     |  | $0.5425               
|June 30, 2004      |  | May 17, 2004      |  | May 28, 2004      |  | June 15, 2004      |  | $0.5425               
|September 30, 2004 |  | August 4, 2004    |  | August 27, 2004   |  | September 15, 2004 |  | $0.5425               
|December 31, 2004  |  | November 11, 2004 |  | November 26, 2004 |  | December 15, 2004  |  | $0.5425               
|March 31, 2005     |  | February 17, 2005 |  | February 25, 2005 |  | March 15, 2005     |  | $0.5900               
|June 30, 2005      |  | April 29, 2005    |  | May 27, 2005      |  | June 15, 2005      |  | $0.5900               
|September 30, 2005 |  | August 16, 2005   |  | August 26, 2005   |  | September 15, 2005 |  | $0.5900               
|December 31, 2005  |  | October 27, 2005  |  | November 23, 2005 |  | December 15, 2005  |  | $0.5900               



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 acquisitions and developments, 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



In 2003, we received a return of capital of $5,790,000 from our investment
in Plaza Escuela Holding Co., LLC. In February 2004, we received a return of capital of $600,000. We received a return of capital for our remaining equity investment of $1,205,000 during the second quarter of 2004. We were entitled to receive 25% of
the operating cash flows from the property through November 2008. In the fourth quarter of 2004, we agreed to receive $1,354,000 in exchange for our right to receive these future operating cash flows. This amount was recorded as other revenue in the
accompanying 2004 consolidated statement of income. Proceeds from the returns of capital and cash flow participation were used primarily to repay borrowings under our revolving credit facility.



We are a 50% general partner of a joint venture that owns North Coast Health
Center, a medical office building in Encinitas, California. At December 31, 2005, the balance of the joint ventures note payable to purchase the building on the property, which bears interest at 7%, was $17,846,000. The note payable is
secured by the property and is not guaranteed by us. This is the only off-balance sheet transaction to which we are a party. In the fourth quarter of 2005, we assumed a note receivable as part of an agreement to extend financing to the joint venture
to construct another building at the project. At December 31, 2005, the balance on this note receivable, which bears interest at 7%, was $478,000. We account for this joint venture under the equity method.



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Contractual Obligations and Contingent Liabilities



Our indebtedness outstanding at December 31, 2005, which includes debt discounts and premiums of $200,000 and excludes
interest, representing regularly scheduled principal reductions, balloon payments, scheduled senior note redemptions and amounts due on our revolving credit facility, is as follows:



|                                        |  |                       |          
|--------------------------------------- |  | --------------------- | ---------
|Year                                    |  | Amount (in thousands)
|2006                                    |  | $                     | 61,379   
|2007                                    |  | $                     | 179,033  
|2008                                    |  | $                     | 30,071   
|2009                                    |  | $                     | 139,865  
|2010                                    |  | $                     | 50,053   
|2011                                    |  | $                     | 172,280  
|2012                                    |  | $                     | 48,006   
|2013                                    |  | $                     | 175,528  
|2014                                    |  | $                     | 100,557  
|2015                                    |  | $                     | 131,568  
|                                        |  |                       |          
|                                        |  | $                     | 1,088,340
|Unamortized premiums and discounts, net |  | $                     | 200      
|                                        |  |                       |          
|                                        |  | $                     | 1,088,540
|                                        |  |                       |          



Payments due in 2006
include senior note redemptions of $25,000,000. Payments due in 2007 include the balance drawn on our revolving credit facility at December 31, 2005 of $44,500,000 and senior note redemptions of $55,000,000. Payments due in 2008, 2010, 2011,
2013, 2014 and 2015 include senior note redemptions of $25,000,000, $25,000,000, $150,000,000, $175,000,000, $100,000,000 and $100,000,000, respectively. Payments due in 2015 also include property level bonds of $6,000,000. 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 construction contracts and leases for real estate and office equipment under operating leases expiring at various dates through 2084. Rental expense was $1,729,000, $2,038,000
and $1,782,000 for the years ended December 31, 2005, 2004 and 2003, respectively. Committed amounts under construction contracts due in 2006 total approximately $3,322,000. Committed amounts under construction contracts and minimum rentals
under noncancellable operating leases in effect at December 31, 2005 were as follows:



|                    |  |                       |       
|------------------- |  | --------------------- | ------
|Year                |  | Amount (in thousands)
|2006                |  | $                     | 4,831 
|2007                |  |                       | 1,506 
|2008                |  |                       | 1,526 
|2009                |  |                       | 1,387 
|2010                |  |                       | 1,252 
|2011 and subsequent |  |                       | 44,059
|                    |  |                       |       
|                    |  | $                     | 54,561
|                    |  |                       |       



Inflation



Substantially all of our leases provide for the recovery of all or a
significant portion of all 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.



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Impact of New Accounting Pronouncements



In December 2004, the FASB issued SFAS No. 123R, Share-Based Payment. This Statement is a revision of SFAS
No. 123, Accounting for Stock-Based Compensation. SFAS No. 123R supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. SFAS No. 123R requires all share-based payments to employees, including grants of employee
stock options, to be recorded as an expense based on their fair values. The grant-date fair value of employee share options and similar instruments will be estimated using an option-pricing model adjusted for any unique characteristics of a
particular instrument. If an equity award is modified after the grant date, incremental compensation cost will be recognized in an amount equal to the excess of the fair value of the modified award over the fair value of the original award
immediately before the modification. In April 2005, the Securities and Exchange Commission delayed the effective date of required adoption of SFAS No. 123R to the first fiscal year beginning after June 15, 2005. The adoption of this
Statement will not have a material effect on our financial position or results of operations.



In March 2005, the FASB issued Interpretation No. 47, Accounting for Conditional Asset Retirement Obligationsan interpretation of FASB Statement No. 143 (FIN 47). FIN 47 clarifies the term conditional
asset retirement obligation and requires a liability to be recorded if the fair value of the obligation can be reasonably estimated. The types of asset retirement obligations that are covered by FIN 47 are those for which an entity has a legal
obligation to perform an asset retirement activity; however, the timing and/or method of settling the obligation are conditional on a future event that may or may not be within the control of the entity. FIN 47 also clarifies when an entity would
have sufficient information to reasonably estimate the fair value of an asset retirement obligation. FIN 47 is effective for fiscal years ending after December 15, 2005. The adoption of FIN 47 did not have a material effect on our financial
position or results of operations.



In May 2005, the FASB
issued SFAS No. 154, Accounting Changes and Error Corrections. SFAS No. 154 replaces Accounting Principle Board Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements.
SFAS No. 154 changes the requirements for the accounting for and reporting of a change in accounting principles. It requires retrospective application to prior periods financial statements of changes in accounting principle, unless it is
impracticable to determine either the period-specific effects or the cumulative effect of the change. The statement is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The
adoption of SFAS No. 154 did not have a material effect on our financial position or results of operations.



Emerging Issues Task Force (EITF) Issue 04-5, Determining Whether a General Partner or the General Partners, as a Group, Controls a Limited Partnership or
Similar Entity When the Limited Partners have Certain Rights was ratified by the FASB in June 2005. At issue is what rights held by the limited partner(s) preclude consolidation in circumstances in which the sole general partner would consolidate
the limited partnership in accordance with U.S. generally accepted accounting principles. The assessment of limited partners rights and their impact on the presumption of control of the limited partnership by the sole general partner should be
made when an investor becomes the sole general partner and should be reassessed if (a) there is a change to the terms or in the exercisability of the rights of the limited partners, (b) the sole general partner increases or decreases its
ownership of limited partnership interests, or (c) there is an increase or decrease in the number of outstanding limited partnership interests. This Issue is effective no later than for fiscal years beginning after December 15, 2005 and as
of June 29, 2005 for new or modified arrangements. We will not be required to consolidate our current unconsolidated investment nor will this EITF have a material effect on our financial position or results of operations.



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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, 2005. 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, 2005 in relation to total assets of $2,098,764,000 and
an equity market capitalization of $2,763,949,000 (assuming the conversion of 619,755 operating subsidiary units to common stock).



Our interest rate risk is monitored using a variety of techniques. The table below presents the principal amounts, weighted average interest rates, fair
values as of December 31, 2005 and other terms required by year of expected maturity to evaluate the expected cash flows and sensitivity to interest rate changes.



|                       |  |      |        |   |      |   |         |      |  |   |        |   |  |      |         |   |            |   |        |       |  |   |            |   |  |   |           |   |  |   |           |  
|---------------------- |  | ---- | ------ | - | ---- | - | ------- | ---- |  | - | ------ | - |  | ---- | ------- | - | ---------- | - | ------ | ----- |  | - | ---------- | - |  | - | --------- | - |  | - | --------- | -
|                       |  | 2006 |        |   | 2007 |   |         | 2008 |  |   | 2009   |   |  | 2010 |         |   | Thereafter |   |        | Total |  |   | Fair Value |  
|Fixed-rate debt (1)(2) |  | $    | 61,379 |   |      | $ | 134,533 |      |  | $ | 30,071 |   |  | $    | 139,865 |   |            | $ | 50,053 |       |  | $ | 621,939    |   |  | $ | 1,037,840 |   |  | $ | 1,042,441 |  
|Average interest rate  |  |      | 7.17   | % |      |   | 7.19    | %    |  |   | 7.16   | % |  |      | 7.11    | % |            |   | 7.47   | %     |  |   | 6.31       | % |  |   | 6.66      | % |  |   | 5.34      | %
|                       |  |      |        |   |      |   |         |     
|Variable-rate debt (1) |  |      |       |   |      | $ | 44,500  |      |  |   |       |   |  |      |        |   |            |   |       |       |  | $ | 6,000      |   |  | $ | 50,500    |   |  | $ | 50,500    |  
|Average interest rate  |  |      |       |   |      |   | 5.10    | %    |  |   |       |   |  |      |        |   |            |   |       |       |  |   | 3.41       | % |  |   | 4.90      | % |  |   | 4.90      | %

---

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

|(2) | Excludes unamortized discounts and premium on senior notes, net of unamortized discounts and premiums on notes payable, of $(200,000).
|--- | --------------------------------------------------------------------------------------------------------------------------------------



The table incorporates only those exposures that exist as of
December 31, 2005, 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 and are hereby incorporated herein by reference.



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



Not applicable.



ITEM 9A. 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 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 an investment in an unconsolidated entity. As we do not control or manage this entity, our disclosure controls and
procedures with respect to such entity are necessarily substantially more limited than those we maintain with respect to our consolidated subsidiaries.



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As required by Rule 13(a)-15(b) under the Securities Exchange Act of 1934, 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, as of the end of the period covered by this report, our disclosure controls and procedures were effective and were operating at a reasonable assurance level.



Changes in Internal Control Over Financial Reporting



There have been no significant changes in our internal controls over
financial reporting during the quarter ended December 31, 2005, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.



Managements Report on Internal Control Over Financial Reporting



Management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act of 1934 Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer,
we conducted an evaluation of the effectiveness of our internal control over financial reporting. Our management has used the framework set forth in the report entitled Internal Control-Integrated Framework published by the Committee of
Sponsoring Organizations (COSO) of the Treadway Commission to evaluate the effectiveness of the Companys internal control over financial reporting. Based on our evaluation, management has concluded that the Companys internal
control over financial reporting was effective as of December 31, 2005. KPMG LLP, our independent registered public accounting firm, has issued an attestation report on managements assessment of the Companys internal control over
financial reporting as of December 31, 2005, as stated in their report which is included herein.



Limitations of Internal Control



Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human
diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations,
there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is
possible to design safeguards into the process to reduce, though not eliminate, this risk.



ITEM 9B. OTHER INFORMATION



Not
applicable.



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##### Table of Contents

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
April 2006 (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 section captioned Proposal One: Election of Directors of the Proxy Statement is incorporated herein by reference.



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 AND RELATED STOCKHOLDER MATTERS



The information contained in the section captioned Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters 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. PRINCIPAL ACCOUNTANT FEES AND SERVICES



The information contained in the section captioned Principal Accountant Fees and Services of the Proxy Statement is incorporated herein by reference.



40



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##### Table of Contents

PART IV



ITEM 15. EXHIBITS, FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES



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



The following consolidated financial information is filed as a part of and is included in Item 8 of this Annual Report on Form 10-K.



1. Consolidated Financial Statements:



|                                                                                                     |  |         
|---------------------------------------------------------------------------------------------------- |  | --------
|                                                                                                     |  | Page (s)
|                                                                                                     | 
|Reports of Independent Registered Public Accounting Firm                                             |  | F-1     
|Consolidated Balance Sheets as of December 31, 2005 and 2004                                         |  | F-4     
|Consolidated Statements of Income for the years ended December 31, 2005, 2004 and 2003               |  | F-5     
|Consolidated Statements of Stockholders Equity for the years ended December 31, 2005, 2004 and 2003 |  | F-6     
|Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003           |  | F-7     
|Notes to Consolidated Financial Statements                                                           |  | F-9     



2. Consolidated
Financial Statement Schedule:



|                                                     |  |     
|---------------------------------------------------- |  | ----
|Schedule IIIProperties and Accumulated Depreciation |  | F-29



41



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##### Table of Contents

3. Exhibits:



|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                               
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                   
|3.1         |  | Articles of Amendment and Restatement of Pan Pacific Retail Properties, Inc. dated August 11, 1997, as amended by the Articles of Amendment to the Articles of Amendment and Restatement of Pan
Pacific Retail dated May 20, 2004 (previously filed as Exhibit 3.1 to Pan Pacific Retail Properties, Inc.s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005 and incorporated herein by this 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 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).                                                                                                                                                                                                                                   
|            | 
|4.9         |  | 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).                                                                                                                                                                                                                                              
|            | 
|4.10        |  | 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).                                                                                                                                                         



42



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##### Table of Contents

|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                      
|4.11        |  | 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, filed on June 20, 2002, and incorporated herein by
reference).                                                                                                                                                                                                                                                 
|            | 
|4.12        |  | 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, filed on June 20, 2002, and incorporated herein by reference).                                                                                                                                                       
|            | 
|4.13        |  | 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).                                                                                                                                                                                                                                                             
|            | 
|4.14        |  | 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).                                                                                                                                                                    
|            | 
|4.15        |  | Form of 4.70% Note due 2013 (previously filed as Exhibit 4.1 to Pan Pacific Retail Properties, Inc.s Form 8-K, filed on May 30, 2003, and incorporated herein by
reference).                                                                                                                                                                                                                                                                    
|            | 
|4.16        |  | Minutes of a meeting of the Pricing Committee held on May 28, 2003 designating the terms of the 4.70% Note due 2013 (previously filed as Exhibit 4.3 to Pan Pacific Retail Properties,
Inc.s Form 8-K, filed on May 30, 2003, and incorporated herein by reference).                                                                                                                                                                            
|            | 
|4.17        |  | Form of 5.95% Note due 2014 (previously filed as Exhibit 4.1 to Pan Pacific Retail Properties, Inc.s Form 8-K, filed on May 26, 2004, and
incorporated herein by reference).                                                                                                                                                                                                                                                                    
|            | 
|4.18        |  | Minutes of a meeting of the Pricing Committee held on May 21, 2004 designating the terms of the 5.95% Note due 2014 (previously filed as Exhibit 4.3 to Pan Pacific Retail Properties,
Inc.s Form 8-K, filed on May 26, 2004, and incorporated herein by reference).                                                                                                                                                                            
|            | 
|4.19        |  | Form of 5.95% Note due 2014 (previously filed as Exhibit 4.1 to Pan Pacific Retail Properties, Inc.s Form 8-K, filed on July 20, 2004, and incorporated herein by
reference).                                                                                                                                                                                                                                                                   
|            | 
|4.20        |  | Minutes of a meeting of the Pricing Committee held on July 14, 2004 designating the terms of the 5.95% Note due 2014 (previously Filed as Exhibit 4.3 to Pan Pacific Retail Properties,
Inc.s Form 8-K, filed on July 20, 2004, and incorporated herein by reference).                                                                                                                                                                          
|            | 
|4.21        |  | Form of 5.25% Note due 2015 (previously filed as Exhibit 4.2 to Pan Pacific Retail Properties, Inc.s Form 8-K, filed on August 23, 2005 and incorporated herein by
reference).                                                                                                                                                                                                                                                                  
|            | 
|4.22        |  | Officers Certificate pursuant to Section 201, 301 and 303 of the Indenture, dated April 6, 2001, between Pan Pacific Retail Properties, Inc. and the Bank of New York Trust Company,
N.A., as Trustee, establishing a series of securities entitled 5.25% Senior Unsecured Notes due 2015 (previously filed as Exhibit 4.3 to Pan Pacific Retail Properties, Inc.s Form 8-K, filed on August 23, 2005, and incorporated
herein by reference).



43



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|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|4.23        |  | 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).
|            | 
|4.24        |  | 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        |  | 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).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|            | 
|10.6        |  | 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).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    



44



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|            |  |                                                                                                                                                                                                                                                                                                                                                           
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                               
|10.7        |  | 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).                                                                            
|            | 
|10.8        |  | 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).
|            | 
|10.9        |  | 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).*            
|            | 
|10.10       |  | 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 10.12 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).*                                        
|            | 
|10.11       |  | 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
10.13 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 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 10.14
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       |  | 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).                                           
|            | 
|10.14       |  | Form of Restricted Stock Agreement between Stuart A. Tanz and Pan Pacific Retail Properties, Inc. (previously filed as Exhibit 10.1 to Pan Pacific Retail Properties, Inc.s Quarterly
Report on Form 10-Q for the quarter ended September 30, 2003 and incorporated herein by reference).*                                                               
|            | 
|10.15       |  | Form of Restricted Stock Agreement between Joseph B. Tyson and Pan Pacific Retail Properties, Inc. (previously filed as Exhibit 10.2 to Pan Pacific Retail Properties, Inc.s Quarterly
Report on Form 10-Q for the quarter ended September 30, 2003 and incorporated herein by reference).*                                                              
|            | 
|10.16       |  | Form of Restricted Stock Agreement between Jeffrey S. Stauffer and Pan Pacific Retail Properties, Inc. (previously filed as Exhibit 10.3 to Pan Pacific Retail Properties, Inc.s
Quarterly Report on Form 10-Q for the quarter ended September 30, 2003 and incorporated herein by reference).*                                                          



45



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|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|10.17       |  | Restricted Stock Agreement, dated as of February 5, 2004, between Pan Pacific Retail Properties, Inc. and Stuart A. Tanz (previously filed as Exhibit 10.1 to Pan Pacific Retail Properties,
Inc.s Form 10-Q for the quarter ended March 31, 2004 and incorporated herein by reference).*                                                                                                                                                                                                                                                                                                                                                                                                                          
|            | 
|10.18       |  | Restricted Stock Agreement, dated as of February 5, 2004, between Pan Pacific Retail Properties, Inc. and Joseph B. Tyson (previously filed as Exhibit 10.2 to Pan Pacific Retail Properties,
Inc.s Form 10-Q for the quarter ended March 31, 2004 and incorporated herein by reference).*                                                                                                                                                                                                                                                                                                                                                                                                                         
|            | 
|10.19       |  | Restricted Stock Agreement, dated as of February 5, 2004, between Pan Pacific Retail Properties, Inc. and Jeffrey S. Stauffer (previously filed as Exhibit 10.3 to Pan Pacific Retail
Properties, Inc.s Form 10-Q for the quarter ended March 31, 2004 and incorporated herein by reference).*                                                                                                                                                                                                                                                                                                                                                                                                                     
|            | 
|10.20       |  | Amendment to the 2000 Stock Incentive Plan of Pan Pacific Retail Properties, Inc. (previously filed as Exhibit 10.4 to Pan Pacific Retail Properties, Inc.s Form 10-Q for the quarter
ended March 31, 2004 and incorporated herein by reference).*                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|            | 
|10.21       |  | Second Amended and Restated Revolving Credit Agreement dated as of September 3, 2004 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, Wells Fargo Bank, National Association and US Bank, National Association as Co-Syndication Agents, Wachovia Bank, National Association as Documentation Agent, AmSouth Bank, PNC Bank, National
Association and Eurohypo AG, New York Branch as Co-Agents and the other lenders as identified therein (previously filed as Exhibit 10.1 to Pan Pacific Retail Properties, Inc.s Form 8-K, filed on September 8, 2004, and incorporated herein by
reference).
|            | 
|10.22       |  | First Amendment to Second Amended and Restated Employment Agreement, dated as of March 24, 2005, between Pan Pacific Retail Properties, Inc. and Jeffrey S. Stauffer (previously filed as
Exhibit 10.1 to Pan Pacific Retail Properties, Inc.s Form 8-K, filed on March 25, 2005, and incorporated herein by reference).*                                                                                                                                                                                                                                                                                                                                                                                          
|            | 
|10.23       |  | First Amendment to Second Amended and Restated Employment Agreement, dated as of March 24, 2005, between Pan Pacific Retail Properties, Inc. and Stuart A. Tanz (previously filed as Exhibit
10.2 to Pan Pacific Retail Properties, Inc.s Form 8-K, filed on March 25, 2005, and incorporated herein by reference).*                                                                                                                                                                                                                                                                                                                                                                                               
|            | 
|10.24       |  | First Amendment to Employment Agreement, dated as of March 24, 2005, between Pan Pacific Retail Properties, Inc. and Joseph B. Tyson (previously filed as Exhibit 10.3 to Pan Pacific Retail
Properties, Inc.s Form 8-K, filed on March 25, 2005, and incorporated herein by reference).*                                                                                                                                                                                                                                                                                                                                                                                                                          
|            | 
|10.25       |  | Restricted Stock Agreement, dated as of August 15, 2005, between Pan Pacific Retail Properties, Inc. and Jeffrey S. Stauffer (previously filed as Exhibit 10.1 to Pan Pacific Retail
Properties, Inc.s Form 8-K, filed on August 16, 2005, and incorporated herein by reference).*                                                                                                                                                                                                                                                                                                                                                                                                                                 
|            | 
|10.26       |  | Restricted Stock Agreement, dated as of August 15, 2005, between Pan Pacific Retail Properties, Inc. and Stuart A. Tanz (previously filed as Exhibit 10.2 to Pan Pacific Retail Properties,
Inc.s Form 8-K, filed on August 16, 2005, and incorporated herein by reference).*                                                                                                                                                                                                                                                                                                                                                                                                                                      



46



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|            |  |                                                                                                                                                                                                                                                                                
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                    
|10.27       |  | Restricted Stock Agreement, dated as of August 15, 2005, between Pan Pacific Retail Properties, Inc. and Joseph B. Tyson (previously filed as Exhibit 10.3 to Pan Pacific Retail Properties,
Inc.s Form 8-K, filed on August 16, 2005, and incorporated herein by reference).*
|            | 
|12.1**      |  | Statement Regarding Computation of Ratios of Earnings to Fixed Charges.                                                                                                                                                                                                        
|            | 
|21.1**      |  | Subsidiaries of the Registrant.                                                                                                                                                                                                                                                
|            | 
|23.1**      |  | Consent of KPMG LLP.                                                                                                                                                                                                                                                           
|            | 
|31.1**      |  | Section 302 Certifications, as filed by the Chief Executive Officer and the Chief Financial Officer, pursuant to SEC Release No. 33-8212, 34-47551.                                                                                                                            
|            | 
|32.1**      |  | Section 906 Certifications, as furnished by the Chief Executive Officer and the Chief Financial Officer, pursuant to SEC Release No. 33-8212, 34-47551.                                                                                                                        

---

|* | Management contract or compensatory plan or arrangement
|- | -------------------------------------------------------

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



(b) Item 601 Exhibits

Reference is hereby made to the Index of Exhibits under
Item 15(a)(3) of Part IV of this report.



47



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##### Table of Contents

SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized on February 21, 2006.



|    |  |                                                           |  |     |  |                                                                                                             
|--- |  | --------------------------------------------------------- |  | --- |  | ------------------------------------------------------------------------------------------------------------
|    |  | PAN PACIFIC RETAIL PROPERTIES, INC.                       |  |     |  |                                                                                                             
|    |  |                                                           | 
|By: |  | /s/ Stuart A. Tanz                                        |  | By: |  | /s/ Joseph B. Tyson                                                                                         
|    |  | Stuart A. Tanz                                            |  |     |  | Joseph B. Tyson, CPA                                                                                        
|    |  | Director, Chairman, Chief Executive Officer and President |  |     |  | Executive Vice President, Chief Financial Officer and Secretary (Principal Financial and Accounting
Officer)



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



|                       |  |          |  |                  
|---------------------- |  | -------- |  | -----------------
|Signature              |  | Title    |  | Date             
|/s/ Mark J. Riedy      |  | Director |  | February 21, 2006
|Mark J. Riedy          |  |          |  |                  
|                       |  |         
|/s/ Bernard M. Feldman |  | Director |  | February 21, 2006
|Bernard M. Feldman     |  |          |  |                  
|                       |  |         
|/s/ David P. Zimel     |  | Director |  | February 21, 2006
|David P. Zimel         |  |          |  |                  
|                       |  |         
|/s/ Joseph P. Colmery  |  | Director |  | February 21, 2006
|Joseph P. Colmery      |  |          |  |                  



48



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Report of Independent Registered Public Accounting Firm



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,
2005 and 2004, 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, 2005. In connection with our audits of the consolidated financial
statements, we have also 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.



In our opinion, the 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, 2005 and 2004, and the results of their operations and their cash flows for each of the years in the three-year period
ended December 31, 2005, in conformity with U.S. generally accepted accounting principles. 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.



We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Pan Pacific Retail Properties, Inc.s internal control over financial reporting as of
December 31, 2005, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 21, 2006 expressed an
unqualified opinion on managements assessment of, and the effective operation of, internal control over financial reporting.



KPMG LLP



San Diego, California

February 21, 2006



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##### Table of Contents

Report of Independent Registered Public Accounting Firm



The Board of Directors

Pan Pacific Retail Properties, Inc.:



We have
audited managements assessment, included in the accompanying Managements Report on Internal Control Over Financial Reporting, that Pan Pacific Retail Properties, Inc. maintained effective internal control over financial reporting as of
December 31, 2005, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Pan Pacific Retail Properties, Inc.s management is
responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on managements assessment and
an opinion on the effectiveness of the Companys internal control over financial reporting based on our audit.



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



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



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



In our opinion, managements assessment that Pan Pacific Retail Properties, Inc. maintained effective internal control over financial reporting as of
December 31, 2005, is fairly stated, in all material respects, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our
opinion, Pan Pacific Retail Properties, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal ControlIntegrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).



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##### Table of Contents

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the consolidated balance sheets of Pan Pacific Retail Properties, Inc. and subsidiaries as of December 31, 2005 and 2004, 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, 2005, and our report dated February 21, 2006 expressed an unqualified opinion on those consolidated financial statements.



KPMG LLP



San Diego, California

February 21, 2006



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##### Table of Contents

PAN PACIFIC RETAIL PROPERTIES, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)



|                                                                                                                                                                                                             |  |                  |           |   |                   |   |           |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---------------- | --------- | - | ----------------- | - | --------- | -
|                                                                                                                                                                                                             |  | December 31,2005 |           |   | December 31, 2004 |  
|ASSETS:                                                                                                                                                                                                      |  |                  |           |   |                   |   |           |  
|                                                                                                                                                                                                             |  |                 
|Properties, at cost:                                                                                                                                                                                         |  |                  |           |   |                   |   |           |  
|Land                                                                                                                                                                                                         |  | $                | 574,048   |   |                   | $ | 549,722   |  
|Buildings and improvements                                                                                                                                                                                   |  |                  | 1,581,489 |   |                   |   | 1,482,118 |  
|Tenant improvements                                                                                                                                                                                          |  |                  | 66,702    |   |                   |   | 60,472    |  
|                                                                                                                                                                                                             |  |                  |           |   |                   |   |           |  
|                                                                                                                                                                                                             |  |                  | 2,222,239 |   |                   |   | 2,092,312 |  
|Less accumulated depreciation and amortization                                                                                                                                                               |  |                  | (240,086  | ) |                   |   | (200,181  | )
|                                                                                                                                                                                                             |  |                  |           |   |                   |   |           |  
|                                                                                                                                                                                                             |  |                  | 1,982,153 |   |                   |   | 1,892,131 |  
|                                                                                                                                                                                                             |  |                 
|Investment in unconsolidated entities                                                                                                                                                                        |  |                  | 1,379     |   |                   |   | 1,387     |  
|Cash and cash equivalents                                                                                                                                                                                    |  |                  | 5,859     |   |                   |   | 2,411     |  
|Accounts receivable (net of allowance for doubtful accounts of $2,121 and $3,892, respectively)                                                                                                              |  |                  | 10,813    |   |                   |   | 11,853    |  
|Accrued rent receivable (net of allowance for doubtful accounts of $3,283 and $3,306, respectively)                                                                                                          |  |                  | 28,699    |   |                   |   | 25,936    |  
|Notes receivable                                                                                                                                                                                             |  |                  | 3,046     |   |                   |   | 7,511     |  
|Deferred lease commissions (net of accumulated amortization of $9,769 and $7,808, respectively)                                                                                                              |  |                  | 15,526    |   |                   |   | 14,188    |  
|Prepaid expenses                                                                                                                                                                                             |  |                  | 21,585    |   |                   |   | 19,835    |  
|Other assets                                                                                                                                                                                                 |  |                  | 29,704    |   |                   |   | 20,192    |  
|                                                                                                                                                                                                             |  |                  |           |   |                   |   |           |  
|                                                                                                                                                                                                             |  | $                | 2,098,764 |   |                   | $ | 1,995,444 |  
|                                                                                                                                                                                                             |  |                  |           |   |                   |   |           |  
|LIABILITIES AND STOCKHOLDERS EQUITY:                                                                                                                                                                        |  |                  |           |   |                   |   |           |  
|                                                                                                                                                                                                             |  |                 
|Notes payable                                                                                                                                                                                                |  | $                | 390,132   |   |                   | $ | 343,736   |  
|Line of credit payable                                                                                                                                                                                       |  |                  | 44,500    |   |                   |   | 113,000   |  
|Senior notes                                                                                                                                                                                                 |  |                  | 653,908   |   |                   |   | 554,290   |  
|Accounts payable, accrued expenses and other liabilities                                                                                                                                                     |  |                  | 43,387    |   |                   |   | 39,205    |  
|                                                                                                                                                                                                             |  |                  |           |   |                   |   |           |  
|                                                                                                                                                                                                             |  |                  | 1,131,927 |   |                   |   | 1,050,231 |  
|Minority interests                                                                                                                                                                                           |  |                  | 28,794    |   |                   |   | 30,079    |  
|                                                                                                                                                                                                             |  |                  |           |   |                   |   |           |  
|Commitments and contingencies                                                                                                                                                                                |  |                  |           |   |                   |   |           |  
|                                                                                                                                                                                                             |  |                 
|Stockholders equity:                                                                                                                                                                                        |  |                  |           |   |                   |   |           |  
|Preferred stock par value $.01 per share, 30,000,000 authorized shares, no shares issued and outstanding at December 31, 2005 and 2004,
respectively                                                         |  |                  |          |   |                   |   |          |  
|Common stock par value $.01 per share, 100,000,000 authorized shares, 40,701,053 and 40,530,415 shares issued and outstanding, net of
1,190,999 treasury shares, at December 31, 2005 and 2004, respectively |  |                  | 407       |   |                   |   | 405       |  
|Additional paid in capital                                                                                                                                                                                   |  |                  | 967,139   |   |                   |   | 959,925   |  
|Deferred compensation                                                                                                                                                                                        |  |                  | (6,695    | ) |                   |   | (7,093    | )
|Accumulated deficit                                                                                                                                                                                          |  |                  | (22,808   | ) |                   |   | (38,103   | )
|                                                                                                                                                                                                             |  |                  |           |   |                   |   |           |  
|                                                                                                                                                                                                             |  |                  | 938,043   |   |                   |   | 915,134   |  
|                                                                                                                                                                                                             |  |                  |           |   |                   |   |           |  
|                                                                                                                                                                                                             |  | $                | 2,098,764 |   |                   | $ | 1,995,444 |  
|                                                                                                                                                                                                             |  |                  |           |   |                   |   |           |  



See accompanying notes
to consolidated financial statements.



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##### Table of Contents

PAN PACIFIC RETAIL PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except share data)



|                                                                                        |  |                                  |         |   |      |   |         |      |  |   |         |  
|--------------------------------------------------------------------------------------- |  | -------------------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                        |  | For the Years Ended December 31, |        
|                                                                                        |  | 2005                             |         |   | 2004 |   |         | 2003 | 
|REVENUE:                                                                                |  |                                  |         |   |      |   |         |      |  |   |         |  
|Base rent                                                                               |  | $                                | 237,554 |   |      | $ | 217,726 |      |  | $ | 199,321 |  
|Percentage rent                                                                         |  |                                  | 2,856   |   |      |   | 2,800   |      |  |   | 2,669   |  
|Recoveries from tenants                                                                 |  |                                  | 62,619  |   |      |   | 57,237  |      |  |   | 50,833  |  
|Income from unconsolidated entities                                                     |  |                                  | 418     |   |      |   | 438     |      |  |   | 802     |  
|Other                                                                                   |  |                                  | 4,992   |   |      |   | 8,449   |      |  |   | 5,325   |  
|                                                                                        |  |                                  |         |   |      |   |         |      |  |   |         |  
|                                                                                        |  |                                  | 308,439 |   |      |   | 286,650 |      |  |   | 258,950 |  
|                                                                                        |  |                                  |         |   |      |   |         |      |  |   |         |  
|EXPENSES:                                                                               |  |                                  |         |   |      |   |         |      |  |   |         |  
|Property operating                                                                      |  |                                  | 42,331  |   |      |   | 41,430  |      |  |   | 37,961  |  
|Property taxes                                                                          |  |                                  | 25,481  |   |      |   | 24,011  |      |  |   | 21,162  |  
|Depreciation and amortization                                                           |  |                                  | 56,103  |   |      |   | 48,011  |      |  |   | 39,266  |  
|Interest                                                                                |  |                                  | 69,352  |   |      |   | 62,619  |      |  |   | 58,473  |  
|General and administrative                                                              |  |                                  | 14,999  |   |      |   | 13,027  |      |  |   | 12,600  |  
|Impairment loss                                                                         |  |                                  |        |   |      |   | 642     |      |  |   |        |  
|Other                                                                                   |  |                                  | 931     |   |      |   | 2,991   |      |  |   | 686     |  
|                                                                                        |  |                                  |         |   |      |   |         |      |  |   |         |  
|                                                                                        |  |                                  | 209,197 |   |      |   | 192,731 |      |  |   | 170,148 |  
|                                                                                        |  |                                  |         |   |      |   |         |      |  |   |         |  
|INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY INTERESTS AND DISCONTINUED OPERATIONS |  |                                  | 99,242  |   |      |   | 93,919  |      |  |   | 88,802  |  
|Minority interests                                                                      |  |                                  | (2,404  | ) |      |   | (2,339  | )    |  |   | (2,454  | )
|                                                                                        |  |                                  |         |   |      |   |         |      |  |   |         |  
|INCOME FROM CONTINUING OPERATIONS BEFORE DISCONTINUED OPERATIONS                        |  |                                  | 96,838  |   |      |   | 91,580  |      |  |   | 86,348  |  
|Discontinued operations                                                                 |  |                                  | 14,467  |   |      |   | 10,409  |      |  |   | 18,088  |  
|                                                                                        |  |                                  |         |   |      |   |         |      |  |   |         |  
|NET INCOME                                                                              |  | $                                | 111,305 |   |      | $ | 101,989 |      |  | $ | 104,436 |  
|                                                                                        |  |                                  |         |   |      |   |         |      |  |   |         |  
|Basic earnings per share:                                                               |  |                                  |         |   |      |   |         |      |  |   |         |  
|Income from continuing operations                                                       |  | $                                | 2.40    |   |      | $ | 2.28    |      |  | $ | 2.19    |  
|Discontinued operations                                                                 |  | $                                | 0.35    |   |      | $ | 0.26    |      |  | $ | 0.46    |  
|Net income                                                                              |  | $                                | 2.75    |   |      | $ | 2.54    |      |  | $ | 2.65    |  
|                                                                                        |  |                                  |        
|Diluted earnings per share:                                                             |  |                                  |         |   |      |   |         |      |  |   |         |  
|Income from continuing operations                                                       |  | $                                | 2.38    |   |      | $ | 2.26    |      |  | $ | 2.16    |  
|Discontinued operations                                                                 |  | $                                | 0.35    |   |      | $ | 0.26    |      |  | $ | 0.45    |  
|Net income                                                                              |  | $                                | 2.73    |   |      | $ | 2.52    |      |  | $ | 2.61    |  



See accompanying notes
to consolidated financial statements.



F-5



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##### Table of Contents

PAN PACIFIC RETAIL PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

(In thousands, except share data)



|                                                                  |  |              |   |                          |        |     |                       |   |         |                     |  |   |        |   |  |   |         |   |  |   |         |  
|----------------------------------------------------------------- |  | ------------ | - | ------------------------ | ------ | --- | --------------------- | - | ------- | ------------------- |  | - | ------ | - |  | - | ------- | - |  | - | ------- | -
|                                                                  |  | Common stock |   | Additionalpaid incapital |        |     | Deferred compensation |   |         | Accumulated deficit |  |   | Total  |  
|                                                                  |  | Shares       |   |                          | Amount |     |                       |   |        
|Balance at December 31, 2002                                      |  | 33,584,186   |   |                          | $      | 336 |                       | $ | 731,069 |                     |  | $ | (4,345 | ) |  | $ | (78,425 | ) |  | $ | 648,635 |  
|Repurchase of common stock                                        |  | (3,000       | ) |                          |        |    |                       |   | (112    | )                   |  |   |       |   |  |   |        |   |  |   | (112    | )
|Redemption of operating subsidiary units                          |  |             |   |                          |        |    |                       |   | (3,091  | )                   |  |   |       |   |  |   |        |   |  |   | (3,091  | )
|Conversion of operating subsidiary units to common stock          |  | 100,000      |   |                          |        | 1   |                       |   | 1,924   |                     |  |   |       |   |  |   |        |   |  |   | 1,925   |  
|Issuance and vesting of restricted stock                          |  | 163,000      |   |                          |        | 2   |                       |   | 6,641   |                     |  |   | (4,436 | ) |  |   |        |   |  |   | 2,207   |  
|Stock issued in acquisition of Center Trust                       |  | 6,084,499    |   |                          |        | 61  |                       |   | 208,282 |                     |  |   |       |   |  |   |        |   |  |   | 208,343 |  
|Stock issued on exercise of options                               |  | 364,697      |   |                          |        | 3   |                       |   | 8,260   |                     |  |   |       |   |  |   |        |   |  |   | 8,263   |  
|Net income                                                        |  |             |   |                          |        |    |                       |   |        |                     |  |   |       |   |  |   | 104,436 |   |  |   | 104,436 |  
|Cash distributions ($2.03 per share)                              |  |             |   |                          |        |    |                       |   |        |                     |  |   |       |   |  |   | (78,321 | ) |  |   | (78,321 | )
|                                                                  |  |              |   |                          |        |     |                       |   |         |                     |  |   |        |   |  |   |         |   |  |   |         |  
|Balance at December 31, 2003                                      |  | 40,293,382   |   |                          |        | 403 |                       |   | 952,973 |                     |  |   | (8,781 | ) |  |   | (52,310 | ) |  |   | 892,285 |  
|Issuance and vesting of restricted stock, net of forfeited shares |  | 42,272       |   |                          |        |    |                       |   | 2,139   |                     |  |   | 1,688  |   |  |   |        |   |  |   | 3,827   |  
|Stock issued on exercise of options                               |  | 194,761      |   |                          |        | 2   |                       |   | 4,813   |                     |  |   |       |   |  |   |        |   |  |   | 4,815   |  
|Net income                                                        |  |             |   |                          |        |    |                       |   |        |                     |  |   |       |   |  |   | 101,989 |   |  |   | 101,989 |  
|Cash distributions ($2.17 per share)                              |  |             |   |                          |        |    |                       |   |        |                     |  |   |       |   |  |   | (87,782 | ) |  |   | (87,782 | )
|                                                                  |  |              |   |                          |        |     |                       |   |         |                     |  |   |        |   |  |   |         |   |  |   |         |  
|Balance at December 31, 2004                                      |  | 40,530,415   |   |                          |        | 405 |                       |   | 959,925 |                     |  |   | (7,093 | ) |  |   | (38,103 | ) |  |   | 915,134 |  
|Issuance and vesting of restricted stock, net of forfeited shares |  | 72,786       |   |                          |        |    |                       |   | 4,427   |                     |  |   | 398    |   |  |   |        |   |  |   | 4,825   |  
|Stock issued on exercise of options                               |  | 97,852       |   |                          |        | 2   |                       |   | 2,787   |                     |  |   |       |   |  |   |        |   |  |   | 2,789   |  
|Net income                                                        |  |             |   |                          |        |    |                       |   |        |                     |  |   |       |   |  |   | 111,305 |   |  |   | 111,305 |  
|Cash distributions ($2.36 per share)                              |  |             |   |                          |        |    |                       |   |        |                     |  |   |       |   |  |   | (96,010 | ) |  |   | (96,010 | )
|                                                                  |  |              |   |                          |        |     |                       |   |         |                     |  |   |        |   |  |   |         |   |  |   |         |  
|Balance at December 31, 2005                                      |  | 40,701,053   |   |                          | $      | 407 |                       | $ | 967,139 |                     |  | $ | (6,695 | ) |  | $ | (22,808 | ) |  | $ | 938,043 |  
|                                                                  |  |              |   |                          |        |     |                       |   |         |                     |  |   |        |   |  |   |         |   |  |   |         |  



See accompanying notes
to consolidated financial statements.



F-6



---

##### Table of Contents

PAN PACIFIC RETAIL PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)



|                                                                                                  |  |                                  |          |   |      |   |          |      |  |   |          |  
|------------------------------------------------------------------------------------------------- |  | -------------------------------- | -------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                                                                                  |  | For the Years Ended December 31, |         
|                                                                                                  |  | 2005                             |          |   | 2004 |   |          | 2003 | 
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                             |  |                                  |          |   |      |   |          |      |  |   |          |  
|Net income                                                                                        |  | $                                | 111,305  |   |      | $ | 101,989  |      |  | $ | 104,436  |  
|Adjustments to reconcile net income to net cash provided by operating activities:                 |  |                                  |          |   |      |   |          |      |  |   |          |  
|Depreciation and amortization                                                                     |  |                                  | 56,103   |   |      |   | 48,011   |      |  |   | 39,266   |  
|Bad debt expense                                                                                  |  |                                  | 1,383    |   |      |   | 4,070    |      |  |   | 4,061    |  
|Amortization of prepaid financing costs, premiums and discounts                                   |  |                                  | 1,661    |   |      |   | 1,342    |      |  |   | 1,336    |  
|Income from unconsolidated entities                                                               |  |                                  | (418     | ) |      |   | (438     | )    |  |   | (802     | )
|Discontinued operations                                                                           |  |                                  | (14,467  | ) |      |   | (10,409  | )    |  |   | (18,088  | )
|Minority interests                                                                                |  |                                  | 2,404    |   |      |   | 2,339    |      |  |   | 2,454    |  
|Vesting of restricted stock                                                                       |  |                                  | 4,825    |   |      |   | 3,827    |      |  |   | 2,207    |  
|Increase due to accrued interest added to notes receivable                                        |  |                                  | (464     | ) |      |   | (782     | )    |  |   | (1,188   | )
|Changes in assets and liabilities, net of the effects of the acquisition of Center Trust in 2003: |  |                                  |          |   |      |   |          |      |  |   |          |  
|Decrease (increase) in accounts receivable                                                        |  |                                  | 7        |   |      |   | (1,853   | )    |  |   | (4,137   | )
|Increase in accrued rent receivable                                                               |  |                                  | (3,113   | ) |      |   | (3,976   | )    |  |   | (3,979   | )
|Increase in deferred lease commissions                                                            |  |                                  | (5,164   | ) |      |   | (6,085   | )    |  |   | (5,687   | )
|(Increase) decrease in prepaid expenses                                                           |  |                                  | (2,569   | ) |      |   | (2,288   | )    |  |   | 2,350    |  
|Decrease (increase) in other assets                                                               |  |                                  | 94       |   |      |   | (458     | )    |  |   | (767     | )
|Decrease in accounts payable, accrued expenses and other liabilities                              |  |                                  | (162     | ) |      |   | (3,166   | )    |  |   | 3,675    |  
|                                                                                                  |  |                                  |          |   |      |   |          |      |  |   |          |  
|Net cash provided by continuing operating activities                                              |  |                                  | 151,425  |   |      |   | 132,123  |      |  |   | 125,137  |  
|                                                                                                  |  |                                  |         
|Operating cash from discontinued operations                                                       |  |                                  | 2,120    |   |      |   | 2,621    |      |  |   | 8,559    |  
|                                                                                                  |  |                                  |          |   |      |   |          |      |  |   |          |  
|Net cash provided by operating activities                                                         |  |                                  | 153,545  |   |      |   | 134,744  |      |  |   | 133,696  |  
|                                                                                                  |  |                                  |          |   |      |   |          |      |  |   |          |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                             |  |                                  |          |   |      |   |          |      |  |   |          |  
|Acquisitions of and additions to properties (revisedSee note 2)                                  |  |                                  | (88,130  | ) |      |   | (158,412 | )    |  |   | (91,093  | )
|Funds held in escrow pending property acquisitions                                                |  |                                  | (164     | ) |      |   |         |      |  |   |         |  
|Proceeds from sale of real estate (revisedSee note 2)                                            |  |                                  |         |   |      |   | 2,104    |      |  |   |         |  
|Intangibles in connection with acquisitions of properties                                         |  |                                  | (15,497  | ) |      |   | (20,173  | )    |  |   |         |  
|Distributions and equity repayments from unconsolidated entities                                  |  |                                  | 426      |   |      |   | 2,274    |      |  |   | 6,629    |  
|Acquisition of Center Trust                                                                       |  |                                  |         |   |      |   |         |      |  |   | (8,999   | )
|Redemption of operating subsidiary units                                                          |  |                                  | (482     | ) |      |   | (2,406   | )    |  |   | (6,786   | )
|Acquisition of minority interests                                                                 |  |                                  |         |   |      |   |         |      |  |   | (526     | )
|Collections of notes receivable                                                                   |  |                                  | 5,407    |   |      |   | 1,115    |      |  |   | 26,622   |  
|Addition to notes receivable                                                                      |  |                                  | (478     | ) |      |   |         |      |  |   |         |  
|                                                                                                  |  |                                  |          |   |      |   |          |      |  |   |          |  
|Net cash used in continuing investing activities (revisedSee note 2)                             |  |                                  | (98,918  | ) |      |   | (175,498 | )    |  |   | (74,153  | )
|Investing cash from discontinued operations (revisedSee note 2)                                  |  |                                  | 28,015   |   |      |   | 25,064   |      |  |   | 189,576  |  
|                                                                                                  |  |                                  |          |   |      |   |          |      |  |   |          |  
|Net cash (used in) provided by investing activities                                               |  |                                  | (70,903  | ) |      |   | (150,434 | )    |  |   | 115,423  |  
|                                                                                                  |  |                                  |          |   |      |   |          |      |  |   |          |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                             |  |                                  |          |   |      |   |          |      |  |   |          |  
|Notes payable proceeds                                                                            |  |                                  |         |   |      |   |         |      |  |   | 7,171    |  
|Notes payable payments                                                                            |  |                                  | (13,665  | ) |      |   | (18,364  | )    |  |   | (235,823 | )
|Line of credit proceeds                                                                           |  |                                  | 209,000  |   |      |   | 426,200  |      |  |   | 321,975  |  
|Line of credit payments                                                                           |  |                                  | (277,500 | ) |      |   | (361,450 | )    |  |   | (339,725 | )
|Repayment of senior notes                                                                         |  |                                  |         |   |      |   | (50,000  | )    |  |   |         |  
|Issuance of senior notes                                                                          |  |                                  | 99,429   |   |      |   | 100,384  |      |  |   | 74,816   |  
|Payment of prepaid financing costs                                                                |  |                                  | (1,012   | ) |      |   |         |      |  |   |         |  
|Repurchase of common stock                                                                        |  |                                  |         |   |      |   |         |      |  |   | (112     | )
|Stock issued on exercise of options                                                               |  |                                  | 2,789    |   |      |   | 4,815    |      |  |   | 8,263    |  
|Distributions paid                                                                                |  |                                  | (98,235  | ) |      |   | (89,937  | )    |  |   | (80,515  | )
|                                                                                                  |  |                                  |          |   |      |   |          |      |  |   |          |  
|Net cash (used in) provided by financing activities                                               |  |                                  | (79,194  | ) |      |   | 11,648   |      |  |   | (243,950 | )
|                                                                                                  |  |                                  |          |   |      |   |          |      |  |   |          |  
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                              |  |                                  | 3,448    |   |      |   | (4,042   | )    |  |   | 5,169    |  
|                                                                                                  |  |                                  |         
|CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                                    |  |                                  | 2,411    |   |      |   | 6,453    |      |  |   | 1,284    |  
|                                                                                                  |  |                                  |          |   |      |   |          |      |  |   |          |  
|CASH AND CASH EQUIVALENTS AT END OF YEAR                                                          |  | $                                | 5,859    |   |      | $ | 2,411    |      |  | $ | 6,453    |  
|                                                                                                  |  |                                  |          |   |      |   |          |      |  |   |          |  

(continued)



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##### Table of Contents

PAN PACIFIC RETAIL PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(In thousands)



|                                                                                           |  |                                  |        |      |   |        |  |   |        
|------------------------------------------------------------------------------------------ |  | -------------------------------- | ------ | ---- | - | ------ |  | - | -------
|                                                                                           |  | For the Years Ended December 31,
|                                                                                           |  | 2005                             |        | 2004 |   | 2003  
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                                          |  |                                  |        |      |   |        |  |   |        
|Cash paid for interest (net of amounts capitalized of $747, $566 and $4,506, respectively) |  | $                                | 68,477 |      | $ | 64,006 |  | $ | 59,874 
|                                                                                           |  |                                  |       
|SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:                    |  |                                  |        |      |   |        |  |   |        
|Transfer of other assets to properties                                                     |  | $                                |       |      | $ | 3,403  |  | $ | 40,230 
|Notes receivable issued upon sales of properties                                           |  | $                                |       |      | $ |       |  | $ | 25,125 
|Redemption of operating subsidiary units for common stock                                  |  | $                                |       |      | $ |       |  | $ | 1,925  
|Stock issued in acquisition of Center Trust                                                |  | $                                |       |      | $ |       |  | $ | 208,343
|Assumption of notes payable, bonds and line of credit in acquisition of Center Trust       |  | $                                |       |      | $ |       |  | $ | 362,257
|Notes payable assumed upon acquisitions of properties                                      |  | $                                | 60,420 |      | $ | 17,260 |  | $ | 16,919 
|Notes receivable from acquisition of Center Trust                                          |  | $                                |       |      | $ |       |  | $ | 7,498  
|Minority interest from acquisition of Center Trust                                         |  | $                                |       |      | $ |       |  | $ | 22,362 
|Assignment of debt on sales of properties                                                  |  | $                                |       |      | $ |       |  | $ | 44,765 
|Excess of cash paid over book value of operating subsidiary units redeemed                 |  | $                                |       |      | $ |       |  | $ | 3,091  
|Non-cash restricted stock issuance, net of forfeitures                                     |  | $                                | 4,427  |      | $ | 2,136  |  | $ | 6,629  
|Non-cash redemption of operating subsidiary units                                          |  | $                                | 3,424  |      | $ |       |  | $ |       



See accompanying notes
to consolidated financial statements.



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##### Table of Contents

PAN PACIFIC RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2005, 2004 and 2003

(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, 2005, the Company owned a portfolio comprised of 138 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, 2004 and 2003 to separately reflect the results of discontinued operations for
properties that were sold and held for sale during the years ended December 31, 2005 and 2004. 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, 2004 or 2003. 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. In 2003, 100,000 units were redeemed for common stock and 131,590 units were redeemed for cash of $5,540,000. In 2004, 125,000 units were redeemed for cash of $5,971,000. In 2005, 76,027 units were redeemed for cash of $4,896,000. The
following table summarizes the activity for these operating subsidiaries as of December 31, 2005:



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



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##### Table of Contents

PAN PACIFIC RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended
December 31, 2005, 2004 and 2003

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



1. Organization and basis of presentation (continued)



In connection with the 2000 acquisition of Western Properties Trust
(Western), the Company has an investment in an operating partnership. Pan Pacific (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 this operating subsidiary as of December 31, 2005:



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



In connection with the
2003 acquisition of Center Trust, the Company has a 96% general partner investment in an operating partnership. CT Operating Partnership, L.P. issued units convertible into shares of Company common stock or cash, at the Companys option.
Distributions are being 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 is allocated to the limited partners in an amount equal to the cumulative distributions earned
by such partners. All remaining net income and all loss is allocated to the Company as general partner. In 2003, 33,964 units were redeemed for cash of $1,246,000. The following table summarizes the activity for this operating subsidiary as of
December 31, 2005:



|                               |  |                         |  |                |  |                  
|------------------------------ |  | ----------------------- |  | -------------- |  | -----------------
|Operating subsidiary           |  | Units originally issued |  | Units redeemed |  | Units outstanding
|CT Operating Partnership, L.P. |  | 284,263                 |  | 33,964         |  | 250,299          



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##### Table of Contents

PAN PACIFIC RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended
December 31, 2005, 2004 and 2003

(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,
its wholly-owned subsidiaries, and partnerships and limited liability companies it controls. All material intercompany transactions and balances have been eliminated. The Company consolidates entities, including variable interest entities, that the
Company controls and records a minority interest for the portions not owned by the Company. Control is determined, where applicable, by the sufficiency of equity invested and the rights of the equity holders, and by the ownership of a majority of
the voting interests, with consideration given to the existence of approval or veto rights granted to the minority shareholder. If the minority shareholder holds substantive participation rights, it overcomes the presumption of control by the
majority voting interest holder. In contrast, if the minority shareholder simply holds protective rights (such as consent rights over certain actions), it does not overcome the presumption of control by the majority voting interest holder. With
respect to the partnerships and limited liability companies, the Company determines control through a consideration of each parties financial interests in profits and losses and the ability to participate in major decisions such as the
acquisition, sale or refinancing of principal assets.



(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 $229,000 and $414,000 at December 31, 2005 and 2004, respectively.



(c) Accounts receivable and revenue recognition



Rental revenue on the Companys leases with its tenants is recognized
on a straight-line basis over the terms of the leases. In determining what constitutes the leased asset, the Company evaluates whether or not the lessee is the owner, for accounting purposes, of the tenant improvements. The determination of who is
the owner, for accounting purposes, of the tenant improvements dictates the nature of the leased asset and when revenue recognition under a lease begins. If the Company is the owner of the tenant improvements, revenue recognition begins when the
lessee takes possession of the finished space. If the Company is not the owner of the tenant improvements, revenue recognition begins when the lessee takes possession of the unimproved space to construct its own improvements.



The rental revenue is recognized 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. 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 recognized at the time the related expenses are incurred. The value of acquired above and below market leases is amortized to rental revenue over the life of the related acquired lease. The Company accounts for all property sales in accordance
with SFAS No. 66, Accounting for Sales of Real Estate.



Bad debt expense, included in property operating expenses in the Companys financial statements, was $1,383,000, $4,070,000 and $4,061,000 for the years ended December 31, 2005, 2004 and 2003, respectively.



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##### Table of Contents

PAN PACIFIC RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended
December 31, 2005, 2004 and 2003

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



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



(d) Capitalization of acquisition and development costs



The Company capitalizes certain acquisition and development related costs to
the carrying costs of the property acquired or developed. The Company uses estimates and assumptions of items such as market rents, time required to lease vacant spaces, lease terms for incoming tenants, estimated tenant improvement costs and credit
worthiness of tenants in determining the as-if-vacant value, in-place lease value and above and below market rents value in allocating purchase price to tangible and identified intangible assets upon acquisition of a shopping center asset. These
costs are depreciated over the estimated useful lives of the properties commencing at the time the property is ready for its intended use or is acquired. 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, including leases in place at the time of an acquisition, are
amortized on a straight-line basis over the shorter of the life of the respective lease or the expected economic life of the asset.



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, and are included as a component of interest expense.



In accordance with SFAS No. 141, the Company has identified and recorded
the value of intangibles at the property acquisition date. Such intangibles include the value of in-place leases, above-market leases and below-market leases. Acquired lease intangible assets (in-place lease value and above-market leases) are
recorded in other assets. Acquired lease intangible liabilities (below-market leases) are recorded in accounts payable, accrued expenses and other liabilities. These acquired intangibles are amortized using the straight-line method over the
remaining terms of the related leases. The amortization of above-market and below-market leases is recorded as an adjustment to rental revenue. The amortization of in-place lease value is recorded to depreciation and amortization expense.



(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.



The Company recorded an impairment loss of $642,000 related to a non-strategic parcel of land for the year ended December 31, 2004. There were no
impairment losses recorded for the years ended December 31, 2005 and 2003.



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##### Table of Contents

PAN PACIFIC RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended
December 31, 2005, 2004 and 2003

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



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



(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, 2005 and 2004, management believes 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 including operating subsidiary units, net of shares assumed to
be repurchased using the treasury stock method.



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##### Table of Contents

PAN PACIFIC RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended
December 31, 2005, 2004 and 2003

(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,
|                                                                   |  | 2005                             |            | 2004 |   | 2003      
|Income available to common stockholders:                           |  |                                  |            |      |   |            |  |   |           
|Basic                                                              |  | $                                | 111,305    |      | $ | 101,989    |  | $ | 104,436   
|Add-back income allocated to dilutive operating subsidiary units   |  |                                  | 1,510      |      |   | 1,513      |  |   | 1,703     
|                                                                   |  |                                  |            |      |   |            |  |   |           
|Diluted                                                            |  | $                                | 112,815    |      | $ | 103,502    |  | $ | 106,139   
|                                                                   |  |                                  |            |      |   |            |  |   |           
|Weighted average shares:                                           |  |                                  |            |      |   |            |  |   |           
|Basic                                                              |  |                                  | 40,417,835 |      |   | 40,167,029 |  |   | 39,466,034
|Incremental shares from assumed:                                   |  |                                  |            |      |   |            |  |   |           
|Exercise of dilutive stock options and vesting of restricted stock |  |                                  | 166,922    |      |   | 233,506    |  |   | 311,228   
|Conversion of dilutive operating subsidiary units                  |  |                                  | 675,708    |      |   | 734,238    |  |   | 929,782   
|                                                                   |  |                                  |            |      |   |            |  |   |           
|Diluted                                                            |  |                                  | 41,260,465 |      |   | 41,134,773 |  |   | 40,707,044
|                                                                   |  |                                  |            |      |   |            |  |   |           



At December 31,
2005, 2004 and 2003, all stock options, both vested and unvested, and operating subsidiary units were dilutive and included in the calculation of diluted weighted-average shares.



(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) for its stock option grants.



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##### Table of Contents

PAN PACIFIC RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended
December 31, 2005, 2004 and 2003

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



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



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:



|                                                                         |  |      |         |   |      |   |         |      |  |   |         |  
|------------------------------------------------------------------------ |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                         |  | 2005 |         |   | 2004 |   |         | 2003 | 
|Net income as reported                                                   |  | $    | 111,305 |   |      | $ | 101,989 |      |  | $ | 104,436 |  
|Add: Stock-based compensation expense included in reported net income    |  |      | 4,825   |   |      |   | 3,827   |      |  |   | 2,207   |  
|Deduct: Total fair value stock based compensation expense for all awards |  |      | (4,879  | ) |      |   | (4,110  | )    |  |   | (2,737  | )
|                                                                         |  |      |         |   |      |   |         |      |  |   |         |  
|Pro forma net income                                                     |  | $    | 111,251 |   |      | $ | 101,706 |      |  | $ | 103,906 |  
|                                                                         |  |      |         |   |      |   |         |      |  |   |         |  
|Basic earnings per share as reported                                     |  | $    | 2.75    |   |      | $ | 2.54    |      |  | $ | 2.65    |  
|Pro forma basic earnings per share                                       |  | $    | 2.75    |   |      | $ | 2.53    |      |  | $ | 2.63    |  
|Diluted earnings per share as reported                                   |  | $    | 2.73    |   |      | $ | 2.52    |      |  | $ | 2.61    |  
|Pro forma diluted earnings per share                                     |  | $    | 2.73    |   |      | $ | 2.51    |      |  | $ | 2.59    |  



Pro forma net income
reflects options granted since adoption of the 1997 Plan and the 2000 Plan. The last grant of stock options occurred in 2002. All options were fully vested as of March 31, 2005, as such future years will not reflect any option-related
compensation expense under the SFAS 148 pro forma disclosure requirements unless additional stock options are granted. SFAS No. 123R is effective for the fiscal periods beginning after January 1, 2006. We believe that the adoption of this
Statement will not have a material effect on the financial position or results reported by the Company.



(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 U.S. generally accepted accounting principles. 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.



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##### Table of Contents

PAN PACIFIC RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended
December 31, 2005, 2004 and 2003

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



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



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 used by the Company. These estimates and
assumptions include items such as market rents, time required to lease vacant spaces, lease terms for incoming tenants and credit worthiness of tenants in determining the as-if-vacant value, in-place lease value and above and below market rents
value in allocating purchase price to tangible and identified intangible assets upon acquisition of a shopping center asset. Management also applies certain assumptions about incremental leasing costs in determining the appropriate amount of
internal leasing costs to capitalize. These accounting policies also 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 2004 and 2003 amounts have been made in order
to conform to 2005 presentation.



(m) Revisions to Consolidated Statements
of Cash Flows



In 2005, the Company has separately
disclosed the investing portions of the cash flows attributable to its discontinued operations, which in prior periods, were reported on a combined basis as a single amount.



3. Discontinued operations



The Company reports each individual property as a component for determining discontinued operations. The operations of one property sold during the year
ended December 31, 2005 and one property held for sale at December 31, 2005 were reported as income from discontinued operations in 2005, and their respective 2004 and 2003 operations were reclassified to income from discontinued
operations. The operations of three properties sold during the year ended December 31, 2004 were reported as income from discontinued operations in 2004, and their respective 2003 operations were reclassified to income from discontinued
operations. The operations of eight properties sold during the year ended December 31, 2003 were reported as income from discontinued operations in 2003. The following is a summary of our income from discontinued operations for the years ended
December 31, 2005, 2004 and 2003:



|                                       |  |                                  |        |   |      |   |        |      |  |   |        |  
|-------------------------------------- |  | -------------------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                       |  | For the years ended December 31, |       
|                                       |  | 2005                             |        |   | 2004 |   |        | 2003 | 
|Revenue                                |  | $                                | 3,284  |   |      | $ | 4,763  |      |  | $ | 14,950 |  
|Gain on sale of real estate            |  |                                  | 13,087 |   |      |   | 8,245  |      |  |   | 10,571 |  
|Property operating expenses            |  |                                  | (1,170 | ) |      |   | (1,954 | )    |  |   | (6,336 | )
|Depreciation and amortization expenses |  |                                  | (734   | ) |      |   | (645   | )    |  |   | (1,097 | )
|                                       |  |                                  |        |   |      |   |        |      |  |   |        |  
|Discontinued operations                |  | $                                | 14,467 |   |      | $ | 10,409 |      |  | $ | 18,088 |  
|                                       |  |                                  |        |   |      |   |        |      |  |   |        |  



F-16



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##### Table of Contents

PAN PACIFIC RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended
December 31, 2005, 2004 and 2003

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



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, 2005 and 2004, the Company owned a 50% general partner interest in North Coast Health Center. At December 31, 2003, the Company owned a 12% non-managing
member interest in Plaza Escuela and a 50% general partner interest in North Coast Health Center. These investments are reported using the equity method. Neither entity has been deemed to be a variable interest entity.



Summarized financial information for the entities is presented below:



|                                      |  |                  |        |                   |   |       
|------------------------------------- |  | ---------------- | ------ | ----------------- | - | ------
|                                      |  | December 31,2005 |        | December 31, 2004
|Properties                            |  | $                | 19,824 |                   | $ | 19,864
|Other assets                          |  |                  | 845    |                   |   | 574   
|                                      |  |                  |        |                   |   |       
|Total assets                          |  | $                | 20,669 |                   | $ | 20,438
|                                      |  |                  |        |                   |   |       
|Notes payable                         |  | $                | 17,846 |                   | $ | 17,560
|Other liabilities                     |  |                  | 65     |                   |   | 104   
|Partner capital:                      |  |                  |        |                   |   |       
|The Companys share                   |  |                  | 1,379  |                   |   | 1,387 
|Other partner                         |  |                  | 1,379  |                   |   | 1,387 
|                                      |  |                  |        |                   |   |       
|Total liabilities and partner capital |  | $                | 20,669 |                   | $ | 20,438
|                                      |  |                  |        |                   |   |       



|                                   |  |                                 |       |      |   |       |  |   |      
|---------------------------------- |  | ------------------------------- | ----- | ---- | - | ----- |  | - | -----
|                                   |  | For the years endedDecember 31,
|                                   |  | 2005                            |       | 2004 |   | 2003 
|Revenue                            |  | $                               | 3,312 |      | $ | 3,153 |  | $ | 4,108
|Expenses                           |  |                                 | 2,476 |      |   | 2,403 |  |   | 2,416
|                                   |  |                                 |       |      |   |       |  |   |      
|Net income                         |  | $                               | 836   |      | $ | 750   |  | $ | 1,692
|                                   |  |                                 |       |      |   |       |  |   |      
|The Companys equity in net income |  | $                               | 418   |      | $ | 438   |  | $ | 802  



F-17



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##### Table of Contents

PAN PACIFIC RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended
December 31, 2005, 2004 and 2003

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



5. Indebtedness



(a) Notes payable and other



|                                                                                                                                                                                         |  |              |        |      |   |            |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------ | ---- | - | ---------- | -
|                                                                                                                                                                                         |  | December 31, |       
|                                                                                                                                                                                         |  | 2005         |        | 2004 |  
|Notes payable secured by properties consist of the following:                                                                                                                            |  |              |        |      |   |            |  
|                                                                                                                                                                                         |  |             
|Bank notes payable, cross-collateralized by secured deeds of trust, bearing interest at 7.10% with monthly principal and interest payments of
$391, due in August 2009                   |  | $            | 50,773 |      | $ | 51,819     |  
|Bank notes payable, cross-collateralized by a secured mortgage and deeds of trust, bearing interest at 8.17% with monthly principal and
interest payments of $404, due in January 2007   |  |              | 49,457 |      |   | 50,178     |  
|Bank notes payable, cross-collateralized by secured deeds of trust, bearing interest at 7.75% with monthly principal and interest payments of
$373, due in June 2009                     |  |              | 48,791 |      |   | 49,400     |  
|Bank notes payable, cross-collateralized by secured deeds of trust, bearing interest at 7.13%, 6.76% and 7.10% with monthly principal and
interest payments of $278, due in January 2012 |  |              | 40,461 |      |   | 40,945     |  
|Bank notes payable, cross-collateralized by secured deeds of trust, bearing interest at 7.21% with monthly principal and interest payments of
$252, due in July 2006                     |  |              | 30,924 |      |   | 31,689     |  
|Bank note payable, secured by a deed of trust, bearing interest at 5.34% with monthly principal and interest payments of approximately $134,
due in January 2015                         |  |              | 29,250 |      |   |           |  
|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                                       |  |              | 24,856 |      |   | 25,198     |  
|Bank note payable, secured by a deed of trust, bearing interest at 7.38% with monthly principal and interest payments of $132, due in June
2009                                          |  |              | 15,913 |      |   | 16,302     |  
|Bank note payable, cross-collateralized by secured deeds of trust, bearing interest at 8.73% with monthly principal and interest payments of
$144, due in February 2007                  |  |              | 15,172 |      |   | 15,535     |  
|Bank note payable, secured by a deed of trust, bearing interest at 6.15% with monthly principal and interest payments of $91, due in November
2009                                       |  |              | 13,009 |      |   |           |  
|Bank note payable, secured by a deed of trust, bearing interest at 4.92% with monthly principal and interest payments of $70, due in April
2009                                          |  |              | 12,755 |      |   |           |  
|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                                         |  |              | 11,558 |      |   | 11,747     |  
|Bank note payable, secured by a deed of trust, bearing interest at 7.20% with monthly principal and interest payments of $86, due in September
2011                                      |  |              | 11,456 |      |   | 11,639     |  
|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                                        |  |              | 6,903  |      |   | 7,022      |  
|Bank note payable, secured by a deed of trust, bearing interest at 7.68% with monthly principal and interest payments of $51, due in August
2011                                         |  |              | 6,876  |      |   | 6,948      |  
|Bank note payable, secured by a deed of trust, bearing interest at 7.30% with monthly principal and interest payments of $37, due in June
2012                                           |  |              | 5,230  |      |   |           |  
|Bank note payable, secured by a deed of trust, bearing interest at 8.30% with monthly principal and interest payments of $39, due in October
2009                                        |  |              | 4,932  |      |   | 4,985      |  
|Bank note payable, secured by a deed of trust, bearing interest at 7.20% with monthly principal and interest payments of $34, due in September
2011                                      |  |              | 4,524  |      |   | 4,597      |  
|                                                                                                                                                                                         |  |              |        |      |   | (continued | )



F-18



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##### Table of Contents

PAN PACIFIC RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended
December 31, 2005, 2004 and 2003

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



5. Indebtedness (continued)



|                                                                                                                                                                |  |              |         |   |      |   |        
|--------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------- | - | ---- | - | -------
|                                                                                                                                                                |  | December 31,
|                                                                                                                                                                |  | 2005         |         |   | 2004
|Notes payable secured by properties consist of the following (continued):                                                                                       |  |              |         |   |      |   |        
|                                                                                                                                                                |  |             
|Bank note payable, secured by a deed of trust, bearing interest at 7.80% with monthly principal and interest payments of $107, repaid in
2005                   |  | $            |        |   |      | $ | 8,020  
|                                                                                                                                                                |  |             
|Floating rate tax-exempt certificates of participation  interest only at effective rate of 3.41% and 1.99%, respectively; maturing
November 2015; non-recourse |  |              | 6,000   |   |      |   | 6,000  
|                                                                                                                                                                |  |              |         |   |      |   |        
|                                                                                                                                                                |  |              | 388,840 |   |      |   | 342,024
|Unamortized note payable premiums                                                                                                                               |  |              | 1,683   |   |      |   | 1,712  
|Unamortized note payable discount                                                                                                                               |  |              | (391    | ) |      |   |       
|                                                                                                                                                                |  |              |         |   |      |   |        
|                                                                                                                                                                |  | $            | 390,132 |   |      | $ | 343,736
|                                                                                                                                                                |  |              |         |   |      |   |        



The net carrying value
of properties secured by these notes payable is $557,865,000 and $492,736,000 at December 31, 2005 and 2004, respectively.



(b) Line of credit payable



In September 2004, the Company entered into an amended and restated unsecured $300,000,000 revolving credit facility which bears interest, at the
Companys option, at either LIBOR plus 0.65% or a reference rate and expires in March 2007. At December 31, 2005 and 2004 the amount drawn on this line of credit was $44,500,000 and $113,000,000, respectively, and the interest rate was
5.10% and 3.18%, respectively. The credit facility requires a quarterly fee of 0.20% per annum on the total aggregate commitment. The Company at its sole option may increase the amount of the commitment up to $400,000,000 and extend the
maturity date to March 2008, assuming satisfaction of certain conditions. The Company believes it is in compliance with all covenants contained in the revolving credit facility agreement at December 31, 2005.



(c) Senior notes



|                                                                   |  |              |         |   |      |   |         |  
|------------------------------------------------------------------ |  | ------------ | ------- | - | ---- | - | ------- | -
|                                                                   |  | December 31, |        
|                                                                   |  | 2005         |         |   | 2004 |  
|Senior note obligations consist of the following:                  |  |              |         |   |      |   |         |  
|                                                                   |  |             
|7.95% senior notes, issued in 2001 and due in 2011                 |  | $            | 150,000 |   |      | $ | 150,000 |  
|5.25% senior notes, issued in 2005 and due in 2015                 |  |              | 100,000 |   |      |   |        |  
|6.13% senior notes, issued in 2002 and due in 2013                 |  |              | 100,000 |   |      |   | 100,000 |  
|4.70% senior notes, issued in 2003 and due in 2013                 |  |              | 75,000  |   |      |   | 75,000  |  
|5.75% senior notes, issued in 2002 and due in 2007                 |  |              | 55,000  |   |      |   | 55,000  |  
|5.95% senior notes, issued in 2004 and due in 2014                 |  |              | 50,000  |   |      |   | 50,000  |  
|5.95% senior notes, issued in 2004 and due in 2014                 |  |              | 50,000  |   |      |   | 50,000  |  
|7.10% senior notes, assumed in Western acquisition and due in 2006 |  |              | 25,000  |   |      |   | 25,000  |  
|7.20% senior notes, assumed in Western acquisition and due in 2008 |  |              | 25,000  |   |      |   | 25,000  |  
|7.30% senior notes, assumed in Western acquisition and due in 2010 |  |              | 25,000  |   |      |   | 25,000  |  
|                                                                   |  |              |         |   |      |   |         |  
|                                                                   |  |              | 655,000 |   |      |   | 555,000 |  
|Unamortized senior note premium                                    |  |              | 676     |   |      |   | 756     |  
|Unamortized senior note discounts                                  |  |              | (1,768  | ) |      |   | (1,466  | )
|                                                                   |  |              |         |   |      |   |         |  
|                                                                   |  | $            | 653,908 |   |      | $ | 554,290 |  
|                                                                   |  |              |         |   |      |   |         |  



F-19



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##### Table of Contents

PAN PACIFIC RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended
December 31, 2005, 2004 and 2003

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



5. Indebtedness (continued)



(d) Long-term debt maturities



Principal payments due on the notes payable and other, revolving credit
facility and senior notes are as follows:



|                    |  |   |          
|------------------- |  | - | ---------
|2006                |  | $ | 61,379   
|2007                |  |   | 179,033  
|2008                |  |   | 30,071   
|2009                |  |   | 139,865  
|2010                |  |   | 50,053   
|2011 and subsequent |  |   | 627,939  
|                    |  |   |          
|                    |  | $ | 1,088,340
|                    |  |   |          



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 and accounts payable, accrued expenses and other liabilities



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



(b) Notes receivable



The carrying amounts of notes receivable with balances of $50,000 and $4,679,000 at December 31, 2005 and 2004,
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 $214,000 and $339,000 at December 31, 2005 and 2004, respectively, due to the uncertainty of the timing of repayment.



The fair value of notes receivable with balances of $2,782,000
and $2,493,000 at December 31, 2005 and 2004, 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 fixed-rate notes payable and senior notes payable of
$1,042,441,000 and $894,688,000 at December 31, 2005 and 2004, respectively, approximates the carrying amount based on the current rates offered for loans with similar risks and maturities.



The fair value of our variable-rate line of credit approximates the carrying
amount based on the current rates offered for loans with similar risks and maturities.



F-20



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##### Table of Contents

PAN PACIFIC RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended
December 31, 2005, 2004 and 2003

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



7. Sale of real estate



The Company recorded a gain on sale of real estate of $13,087,000 during the year ended December 31, 2005. The gain is
included in discontinued operations and relates to the sale of one shopping center. The total sales proceeds for this sale of $30,390,000 were received in cash.



The Company recorded a gain on sale of real estate of $8,245,000 during the year ended December 31, 2004. The gain is included in discontinued
operations and relates to the sale of three shopping centers. The total sales proceeds for these sales of $25,925,000 were received in cash and one short-term note, which was paid off prior to December 31, 2004. The Company also sold a parcel
of land during the year ended December 31, 2004 and recorded an impairment loss of $642,000 related to this sale. The total sales proceeds of $2,104,000 for this land sale were received in cash.



The Company recorded a gain on sale of real estate of $10,571,000 during the
year ended December 31, 2003. The gain is included in discontinued operations and related to the sale of three shopping centers and an office building parcel. The total sales proceeds for these sales of $34,021,000 were received in cash and one
short-term note receivable which was paid off prior to December 31, 2003. The Company also sold another five shopping centers during the year ended December 31, 2003 and recorded no gain or loss on these sales. The total sales proceeds of
$210,681,000 were received in cash and two notes receivable, one which was paid off prior to December 31, 2003.



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 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 up to 489,971
shares of authorized but unissued common stock and was approved by the Companys stockholders. 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. During 2003 the number of shares available for grant pursuant to the 2000 Plan was increased by 668,832 shares to 2,455,527 shares upon approval by the Companys stockholders. At December 31, 2005, there were
1,189,850 additional shares available for grant under the 1997 Plan and the 2000 Plan.



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##### Table of Contents

PAN PACIFIC RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended
December 31, 2005, 2004 and 2003

(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 33 1/3% per year over three years from the date of grant, except for the options granted to the independent directors which vest 33 1/3% immediately, with the remainder vesting ratably over two years. No
stock options were granted during 2005, 2004 and 2003. 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.



Stock option activity during the periods presented
is as follows:



|                             |  |                   |   |  |                                 |        
|---------------------------- |  | ----------------- | - |  | ------------------------------- | -------
|                             |  | Number of Options |   |  | Weighted Average Exercise Price
|Balance at December 31, 2002 |  | 676,279           |   |  | $                               | 24.1264
|Exercised                    |  | (364,697          | ) |  | $                               | 22.7159
|                             |  |                   |   |  |                                 |        
|Balance at December 31, 2003 |  | 311,582           |   |  | $                               | 25.7773
|Expired                      |  | (68               | ) |  | $                               | 19.5000
|Exercised                    |  | (194,761          | ) |  | $                               | 24.6088
|                             |  |                   |   |  |                                 |        
|Balance at December 31, 2004 |  | 116,753           |   |  | $                               | 27.7303
|Forfeited                    |  | (2,666            | ) |  | $                               | 21.5500
|Exercised                    |  | (97,852           | ) |  | $                               | 28.5009
|                             |  |                   |   |  |                                 |        
|Balance at December 31, 2005 |  | 16,235            |   |  | $                               | 24.1004
|                             |  |                   |   |  |                                 |        



At December 31,
2005, two stock option grants had remaining fully vested shares:



|                                    |  |            |        |            |   |      
|----------------------------------- |  | ---------- | ------ | ---------- | - | -----
|                                    |  | 2001 Grant |        | 2002 Grant
|Granted options outstanding         |  |            | 11,567 |            |   | 4,668
|Exercise price                      |  | $          | 21.55  |            | $ | 30.42
|Remaining contractual life in years |  |            | 2.3    |            |   | 3.3  
|Options exercisable                 |  |            | 11,567 |            |   | 4,668



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##### Table of Contents

PAN PACIFIC RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended
December 31, 2005, 2004 and 2003

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



8. Stock plans (continued)



(b) Restricted stock and stock grants



During 2005, the Company granted 75,000 shares of restricted stock to
certain officers pursuant to the 2000 Plan. The restricted shares are accounted for in accordance with APB 25 and related Interpretations. The shares shall become vested over three years in one-third installments so long as the Company attains
certain performance goals for a particular vesting date. If these criteria are not met, such restricted shares will vest ten years from the date of grant. During 2005, the Company granted 8,000 shares of restricted stock to four independent
directors of the Board pursuant to the 2000 Plan. The restricted shares vest over three years from the date of grant. During 2005, the Company granted 2,000 shares of restricted stock to one independent director of the Board pursuant to the 2000
Plan. The restricted shares vest over two years from the date of grant. Compensation expense for the portion of restricted stock grants that vested during 2005 of $4,825,000 has been recognized in general and administrative expenses. During 2005,
12,214 shares of restricted stock granted in prior years were forfeited. Accordingly, deferred compensation was reduced by $447,000. Compensation expense related to the shares granted in 2005 and the grants from 2004, 2003, 2002 and 2001 to be
recognized in future periods is $6,695,000 at December 31, 2005.



During 2004, the Company granted 36,250 shares of restricted stock to certain officers and key employees pursuant to the 2000 Plan. The restricted shares vest over three years from the date of grant. During 2004, the Company granted 8,000
shares of restricted stock to four independent directors of the Board pursuant to the 2000 Plan. The restricted shares vest over three years from the date of grant. During 2004, the Company granted 1,000 shares of stock and 2,000 shares of
restricted stock to one independent director pursuant to the 2000 Plan. The restricted shares vest over two years from the date of grant. Compensation expense for the stock grant and the portion of restricted stock grants that vested during 2004 of
$3,827,000 has been recognized in general and administrative expenses. During 2004, 4,978 shares of restricted stock granted in 2004 and prior years were forfeited. Accordingly, deferred compensation was reduced by $205,000.



During 2003, the Company granted 153,000 shares of restricted stock to
certain officers and key employees pursuant to the 2000 Plan. The restricted shares vest over five years from the date of grant. During 2003, the Company granted 8,000 shares of restricted stock to four independent directors of the Board pursuant to
the 2000 Plan. The restricted shares vest over three years from the date of grant. During 2003, the Company granted 2,000 shares of restricted stock to one independent director pursuant to the 2000 Plan. The restricted shares vest over two years
from the date of grant. Compensation expense for the portion of restricted stock grants that vested during 2003 of $2,207,000 has been recognized in general and administrative expenses.



F-23



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##### Table of Contents

PAN PACIFIC RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended
December 31, 2005, 2004 and 2003

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



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, 2005, 2004 and 2003, 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 in the ten-year period following conversion. Such net
unrealized gains were approximately $80,000,000 at December 31, 2005. Management believes that the Company will not be required to make payments of income taxes on $55,000,000 of built-in gains during the ten-year period ending
December 31, 2007, or on $25,000,000 of built-in gains during the ten-year period ending December 31, 2012. It is the intent of the Company, and the Company has the ability to defer asset dispositions to periods when related gains will not
be subject to the built-in gains income taxes or otherwise to defer the 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.



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, |        
|                                                                           |  | 2005Estimate                     |         |   | 2004Actual |   |         | 2003Actual | 
|Book net income                                                            |  | $                                | 111,305 |   |            | $ | 101,989 |            |  | $ | 104,436 |  
|Less: Differences between book and tax net income for REIT subsidiaries    |  |                                  | (853    | ) |            |   | (2,084  | )          |  |   | (5,076  | )
|                                                                           |  |                                  |         |   |            |   |         |            |  |   |         |  
|                                                                           |  |                                  | 110,452 |   |            |   | 99,905  |            |  |   | 99,360  |  
|Add: Book depreciation and amortization (a)                                |  |                                  | 56,837  |   |            |   | 35,740  |            |  |   | 29,604  |  
|Less: Tax depreciation and amortization                                    |  |                                  | (42,121 | ) |            |   | (29,408 | )          |  |   | (28,227 | )
|Less: Straight-line rent adjustments                                       |  |                                  | (3,345  | ) |            |   | (2,072  | )          |  |   | (1,902  | )
|Book/tax difference on gains/losses from capital transactions              |  |                                  | (13,279 | ) |            |   | (7,671  | )          |  |   | (8,407  | )
|Stock option expense                                                       |  |                                  | (976    | ) |            |   | (2,131  | )          |  |   | (5,648  | )
|Other book/tax differences, net                                            |  |                                  | (5,485  | ) |            |   | 1,853   |            |  |   | (1,276  | )
|                                                                           |  |                                  |         |   |            |   |         |            |  |   |         |  
|Taxable ordinary income before adjustments                                 |  |                                  | 102,083 |   |            |   | 96,216  |            |  |   | 83,504  |  
|Less: Other adjustments (b)                                                |  |                                  |        |   |            |   | (3,567  | )          |  |   | (7,253  | )
|                                                                           |  |                                  |         |   |            |   |         |            |  |   |         |  
|REIT taxable income before net operating loss and dividends paid deduction |  | $                                | 102,083 |   |            | $ | 92,649  |            |  | $ | 76,251  |  
|                                                                           |  |                                  |         |   |            |   |         |            |  |   |         |  

---

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

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



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##### Table of Contents

PAN PACIFIC RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended
December 31, 2005, 2004 and 2003

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



9. Income taxes (continued)



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



|                          |  |                                  |      |  |      |   |  |      |      |  |        |   |  |   |      |  |        |  
|------------------------- |  | -------------------------------- | ---- |  | ---- | - |  | ---- | ---- |  | ------ | - |  | - | ---- |  | ------ | -
|                          |  | For the years ended December 31, |     
|                          |  | 2005                             |      |  | 2004 |   |  | 2003 |     
|Ordinary income           |  | $                                | 2.36 |  | 100  | % |  | $    | 2.15 |  | 99.24  | % |  | $ | 1.31 |  | 64.61  | %
|Return of capital         |  |                                  |     |  |     |   |  |      |     |  |       |   |  |   | 0.62 |  | 30.67  |  
|Capital gain distribution |  |                                  |     |  |     |   |  |      | 0.02 |  | 0.76   |   |  |   | 0.10 |  | 4.72   |  
|                          |  |                                  |      |  |      |   |  |      |      |  |        |   |  |   |      |  |        |  
|                          |  | $                                | 2.36 |  | 100  | % |  | $    | 2.17 |  | 100.00 | % |  | $ | 2.03 |  | 100.00 | %
|                          |  |                                  |      |  |      |   |  |      |      |  |        |   |  |   |      |  |        |  



10. Future lease revenue



Total future minimum lease receipts due under
noncancellable operating tenant leases in effect at December 31, 2005 are as follows:



|                    |  |   |          
|------------------- |  | - | ---------
|2006                |  | $ | 232,675  
|2007                |  |   | 206,795  
|2008                |  |   | 176,109  
|2009                |  |   | 146,514  
|2010                |  |   | 112,076  
|2011 and subsequent |  |   | 435,398  
|                    |  |   |          
|                    |  | $ | 1,309,567
|                    |  |   |          



11. 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 $14,000, $13,000 and $12,000 in 2005, 2004 and 2003, respectively. Employees over 50 years of age were able to add an additional $4,000, $3,000 and $2,000 in 2005, 2004 and 2003, respectively. The
amounts contributed by employees are immediately vested and non-forfeitable. The Company, at managements discretion, may match employee contributions. The Companys matching contributions for the years ended December 31, 2005, 2004
and 2003 were approximately $104,000, $98,000 and $92,000, respectively.



F-25



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##### Table of Contents

PAN PACIFIC RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended
December 31, 2005, 2004 and 2003

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



12. Commitments and contingencies



(a)The Company has entered into construction contracts and also leases certain real
estate and office equipment under operating leases expiring at various dates through 2084. Rental expense was $1,729,000, $2,038,000 and $1,782,000 for the years ended December 31, 2005, 2004 and 2003, respectively. Committed amounts under
construction contracts due in 2006 totaled approximately $3,322,000. Committed amounts under construction contracts and minimum rentals under noncancellable operating leases in effect at December 31, 2005 were as follows:



|                    |  |   |       
|------------------- |  | - | ------
|2006                |  | $ | 4,831 
|2007                |  |   | 1,506 
|2008                |  |   | 1,526 
|2009                |  |   | 1,387 
|2010                |  |   | 1,252 
|2011 and subsequent |  |   | 44,059
|                    |  |   |       
|                    |  | $ | 54,561
|                    |  |   |       



(b)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 Companys financial position or results of operations.



(c)The Company acquired a land parcel in Northern California in July of 2004 with the intent to build a retail shopping center. At December 31, 2005, the projected development costs for the project had
not yet been determined.



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##### Table of Contents

PAN PACIFIC RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended
December 31, 2005, 2004 and 2003

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



13. Financial instruments subject to mandatory redemption



The Company is the general partner in a consolidated limited partnership
which owns a shopping center. The limited partnership has a defined termination date of December 31, 2074. The limited partner is entitled to receive 25% of the liquidation proceeds after debts and creditor obligations of the partnership have
been satisfied. If termination of the partnership occurred on December 31, 2005 the amount payable to the limited partner is estimated to be $3,899,000.



The Company is a general partner in a general partnership and a limited partnership which collectively own a shopping center. The general partnership has
a defined termination date of April 1, 2070. The limited partnership has a defined termination date of December 31, 2069. The other general partner and the limited partner are entitled to receive 66% of the liquidation proceeds after debts
and creditor obligations of the partnerships have been satisfied. If termination of the partnership occurred on December 31, 2005, the amounts payable to the other general partner and the limited partner are estimated to be $12,411,000.



14. Segment reporting



The Company operates in one industry segment  real estate ownership,
management and development. As of December 31, 2005 and 2004, the Company owned 138 and 133 community shopping centers, respectively, primarily located in the Western United States. 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.



F-27



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##### Table of Contents

PAN PACIFIC RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended
December 31, 2005, 2004 and 2003

(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. Certain prior quarter amounts have been reclassified to give effect to the Companys discontinued operations, in accordance with SFAS No. 144.



|                                                                                        |  |                     |        |   |              |   |        |         |  |   |          |   |  |   |        |  
|--------------------------------------------------------------------------------------- |  | ------------------- | ------ | - | ------------ | - | ------ | ------- |  | - | -------- | - |  | - | ------ | -
|                                                                                        |  | Quarters ended 2005 |       
|                                                                                        |  | December 31         |        |   | September 30 |   |        | June 30 |  |   | March 31 |  
|Revenue                                                                                 |  | $                   | 80,304 |   |              | $ | 77,232 |         |  | $ | 75,566   |   |  | $ | 75,337 |  
|Expenses                                                                                |  |                     | 54,970 |   |              |   | 52,199 |         |  |   | 50,784   |   |  |   | 51,244 |  
|                                                                                        |  |                     |        |   |              |   |        |         |  |   |          |   |  |   |        |  
|Income from continuing operations before minority interests and discontinued operations |  |                     | 25,334 |   |              |   | 25,033 |         |  |   | 24,782   |   |  |   | 24,093 |  
|Minority interests                                                                      |  |                     | (601   | ) |              |   | (615   | )       |  |   | (570     | ) |  |   | (618   | )
|Discontinued operations                                                                 |  |                     | 13,360 |   |              |   | 380    |         |  |   | 208      |   |  |   | 519    |  
|                                                                                        |  |                     |        |   |              |   |        |         |  |   |          |   |  |   |        |  
|Net income                                                                              |  | $                   | 38,093 |   |              | $ | 24,798 |         |  | $ | 24,420   |   |  | $ | 23,994 |  
|                                                                                        |  |                     |        |   |              |   |        |         |  |   |          |   |  |   |        |  
|Basic earnings per share:                                                               |  |                     |        |   |              |   |        |         |  |   |          |   |  |   |        |  
|Income from continuing operations                                                       |  | $                   | 0.61   |   |              | $ | 0.60   |         |  | $ | 0.60     |   |  | $ | 0.58   |  
|Discontinued operations                                                                 |  | $                   | 0.33   |   |              | $ | 0.01   |         |  | $ |         |   |  | $ | 0.01   |  
|Net income                                                                              |  | $                   | 0.94   |   |              | $ | 0.61   |         |  | $ | 0.60     |   |  | $ | 0.59   |  
|Diluted earnings per share:                                                             |  |                     |        |   |              |   |        |         |  |   |          |   |  |   |        |  
|Income from continuing operations                                                       |  | $                   | 0.61   |   |              | $ | 0.60   |         |  | $ | 0.60     |   |  | $ | 0.58   |  
|Discontinued operations                                                                 |  | $                   | 0.32   |   |              | $ | 0.01   |         |  | $ |         |   |  | $ | 0.01   |  
|Net income                                                                              |  | $                   | 0.93   |   |              | $ | 0.61   |         |  | $ | 0.60     |   |  | $ | 0.59   |  
|                                                                                        | 
|                                                                                        |  | Quarters ended 2004 |       
|                                                                                        |  | December 31         |        |   | September 30 |   |        | June 30 |  |   | March 31 |  
|Revenue                                                                                 |  | $                   | 75,907 |   |              | $ | 72,805 |         |  | $ | 69,695   |   |  | $ | 68,243 |  
|Expenses                                                                                |  |                     | 51,614 |   |              |   | 49,852 |         |  |   | 46,558   |   |  |   | 44,707 |  
|                                                                                        |  |                     |        |   |              |   |        |         |  |   |          |   |  |   |        |  
|Income from continuing operations before minority interests and discontinued operations |  |                     | 24,293 |   |              |   | 22,953 |         |  |   | 23,137   |   |  |   | 23,536 |  
|Minority interests                                                                      |  |                     | (465   | ) |              |   | (592   | )       |  |   | (651     | ) |  |   | (631   | )
|Discontinued operations                                                                 |  |                     | 295    |   |              |   | 8,666  |         |  |   | 616      |   |  |   | 832    |  
|                                                                                        |  |                     |        |   |              |   |        |         |  |   |          |   |  |   |        |  
|Net income                                                                              |  | $                   | 24,123 |   |              | $ | 31,027 |         |  | $ | 23,102   |   |  | $ | 23,737 |  
|                                                                                        |  |                     |        |   |              |   |        |         |  |   |          |   |  |   |        |  
|Basic earnings per share:                                                               |  |                     |        |   |              |   |        |         |  |   |          |   |  |   |        |  
|Income from continuing operations                                                       |  | $                   | 0.59   |   |              | $ | 0.56   |         |  | $ | 0.56     |   |  | $ | 0.57   |  
|Discontinued operations                                                                 |  | $                   | 0.01   |   |              | $ | 0.21   |         |  | $ | 0.02     |   |  | $ | 0.02   |  
|Net income                                                                              |  | $                   | 0.60   |   |              | $ | 0.77   |         |  | $ | 0.58     |   |  | $ | 0.59   |  
|Diluted earnings per share:                                                             |  |                     |        |   |              |   |        |         |  |   |          |   |  |   |        |  
|Income from continuing operations                                                       |  | $                   | 0.59   |   |              | $ | 0.55   |         |  | $ | 0.56     |   |  | $ | 0.57   |  
|Discontinued operations                                                                 |  | $                   |       |   |              | $ | 0.21   |         |  | $ | 0.01     |   |  | $ | 0.02   |  
|Net income                                                                              |  | $                   | 0.59   |   |              | $ | 0.76   |         |  | $ | 0.57     |   |  | $ | 0.59   |  



F-28



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##### Table of Contents

PAN PACIFIC RETAIL PROPERTIES, INC.

SCHEDULE III

PROPERTIES AND ACCUMULATED DEPRECIATION

December 31, 2005

(In thousands)



|                                              |  |              |        |               |   |                                             |  |             |        |  |                  |        |       |  |      |        |                            |   |                   |  |                                  |        |                                 |   |        |  |   |        |  |   |       |  |          |       
|--------------------------------------------- |  | ------------ | ------ | ------------- | - | ------------------------------------------- |  | ----------- | ------ |  | ---------------- | ------ | ----- |  | ---- | ------ | -------------------------- | - | ----------------- |  | -------------------------------- | ------ | ------------------------------- | - | ------ |  | - | ------ |  | - | ----- |  | -------- | ------
|                                              |  |              |        | Initial Costs |   | Costs Capitalized Subsequent to Acquisition |  | Total Costs |        |  |                  |        |      
|Description                                   |  | Encumbrances |        | Land          |   | Buildings and Improvements (2)              |  | Land Add.   |        |  | Improvements (2) |        | Other |  | Land |        | Buildings and Improvements |   | Total (1) (2) (3) |  | Accumulated Depreciation (2) (3) |        | Date of Acquis. (A) Constr. (C) |  
|PROPERTIES:                                   |  |              |        |               |   |                                             |  |             |        |  |                  |        |       |  |      |        |                            |   |                   |  |                                  |        |                                 |   |        |  |   |        |  |   |       |  |          |       
|Alamosa Plaza Las Vegas, NV                   |  | $            | 13,009 |               | $ | 5,240                                       |  | $           | 15,721 |  | $                |       |       |  | $    | 59     |                            | $ |                  |  | $                                | 5,240  |                                 | $ | 15,780 |  | $ | 21,020 |  | $ | 295   |  | 2005     | (A)   
|Albany Plaza Albany, OR                       |  |              |       |               |   | 1,525                                       |  |             | 4,606  |  |                  | 1      |       |  |      | 1,318  |                            |   |                  |  |                                  | 1,526  |                                 |   | 5,924  |  |   | 7,450  |  |   | 1,084 |  | 1999     | (A)   
|Anaheim Plaza Anaheim, CA                     |  |              |       |               |   | 12,390                                      |  |             | 37,170 |  |                  |       |       |  |      | 483    |                            |   |                  |  |                                  | 12,390 |                                 |   | 37,653 |  |   | 50,043 |  |   | 1,643 |  | 2004     | (A)   
|Angels Camp Town Center Angels Camp, CA       |  |              |       |               |   | 1,153                                       |  |             | 3,485  |  |                  |       |       |  |      | 82     |                            |   |                  |  |                                  | 1,153  |                                 |   | 3,567  |  |   | 4,720  |  |   | 460   |  | 2000     | (A)   
|Auburn North Auburn, WA                       |  |              |       |               |   | 2,275                                       |  |             | 6,876  |  |                  | 25     |       |  |      | 2,773  |                            |   |                  |  |                                  | 2,300  |                                 |   | 9,649  |  |   | 11,949 |  |   | 2,139 |  | 1999     | (A)   
|Bear Creek Plaza Medford, OR                  |  |              |       |               |   | 3,275                                       |  |             | 10,076 |  |                  |       |       |  |      | 1,354  |                            |   |                  |  |                                  | 3,275  |                                 |   | 11,430 |  |   | 14,705 |  |   | 2,803 |  | 1998     | (A)   
|Bel Air Village Shopping Center Elk Grove, CA |  |              | 12,088 |               |   | 4,606                                       |  |             | 13,835 |  |                  |       |       |  |      |       |                            |   |                  |  |                                  | 4,606  |                                 |   | 13,835 |  |   | 18,441 |  |   | 346   |  | 2004     | (A)   
|Bixby Hacienda Hacienda Heights, CA           |  |              |       |               |   | 6,859                                       |  |             | 16,012 |  |                  | 3      |       |  |      | 142    |                            |   |                  |  |                                  | 6,862  |                                 |   | 16,154 |  |   | 23,016 |  |   | 1,569 |  | 2002     | (A)   
|Blaine International Center Blaine, WA        |  |              |       |               |   | 1,951                                       |  |             | 5,255  |  |                  |       |       |  |      | 53     |                            |   |                  |  |                                  | 1,951  |                                 |   | 5,308  |  |   | 7,259  |  |   | 702   |  | 2000     | (A)   
|Blossom Valley Turlock, CA                    |  |              |       |               |   | 2,494                                       |  |             | 7,483  |  |                  |       |       |  |      | 163    |                            |   |                  |  |                                  | 2,494  |                                 |   | 7,646  |  |   | 10,140 |  |   | 1,006 |  | 2000     | (A)   
|Brookhurst Anaheim, CA                        |  |              |       |               |   | 6,152                                       |  |             | 14,359 |  |                  |       |       |  |      | 1,069  |                            |   |                  |  |                                  | 6,152  |                                 |   | 15,428 |  |   | 21,580 |  |   | 1,742 |  | 2001     | (A)   
|Brookvale Center Fremont, CA                  |  |              |       |               |   | 3,161                                       |  |             | 9,555  |  |                  | 22     |       |  |      | 850    |                            |   |                  |  |                                  | 3,183  |                                 |   | 10,405 |  |   | 13,588 |  |   | 2,284 |  | 1997     | (A)   
|Cable Park Orangevale, CA                     |  |              |       |               |   | 3,043                                       |  |             | 9,192  |  |                  |       |       |  |      | 108    |                            |   |                  |  |                                  | 3,043  |                                 |   | 9,300  |  |   | 12,343 |  |   | 1,398 |  | 1999     | (A)   
|Canal Farms Las Brunos, CA                    |  |              |       |               |   | 1,577                                       |  |             | 4,728  |  |                  |       |       |  |      | 54     |                            |   |                  |  |                                  | 1,577  |                                 |   | 4,782  |  |   | 6,359  |  |   | 652   |  | 2000     | (A)   
|Canby Square Canby, OR                        |  |              |       |               |   | 2,503                                       |  |             | 7,517  |  |                  | 33     |       |  |      | 1,711  |                            |   |                  |  |                                  | 2,536  |                                 |   | 9,228  |  |   | 11,764 |  |   | 939   |  | 2001     | (A)   
|Canyon Ridge Plaza Kent, WA                   |  |              |       |               |   | 2,905                                       |  |             |       |  |                  | (1     | )     |  |      | 8,067  |                            |   |                  |  |                                  | 2,904  |                                 |   | 8,067  |  |   | 10,971 |  |   | 2,111 |  | 19921995 | (A)(C)
|Canyon Square Plaza Santa Clarita, CA         |  |              |       |               |   | 2,725                                       |  |             | 8,327  |  |                  |       |       |  |      | 114    |                            |   |                  |  |                                  | 2,725  |                                 |   | 8,441  |  |   | 11,166 |  |   | 1,338 |  | 1999     | (A)   
|Caughlin Ranch Reno, NV                       |  |              |       |               |   | 2,284                                       |  |             | 6,853  |  |                  |       |       |  |      | 1,173  |                            |   |                  |  |                                  | 2,284  |                                 |   | 8,026  |  |   | 10,310 |  |   | 1,116 |  | 2000     | (A)   
|Century Center Modesto, CA                    |  |              |       |               |   | 4,780                                       |  |             | 14,337 |  |                  |       |       |  |      | 753    |                            |   |                  |  |                                  | 4,780  |                                 |   | 15,090 |  |   | 19,870 |  |   | 2,130 |  | 2000     | (A)   
|Cheyenne Commons Las Vegas, NV                |  |              |       |               |   | 8,540                                       |  |             | 27,937 |  |                  |       |       |  |      | 2,272  |                            |   |                  |  |                                  | 8,540  |                                 |   | 30,209 |  |   | 38,749 |  |   | 8,566 |  | 1995     | (A)   
|Chico Crossroads Chico, CA                    |  |              |       |               |   | 3,600                                       |  |             | 17,071 |  |                  |       |       |  |      | 6,949  |                            |   |                  |  |                                  | 3,600  |                                 |   | 24,020 |  |   | 27,620 |  |   | 4,726 |  | 1997     | (A)   
|Chino Town Square Chino, CA                   |  |              | 24,856 |               |   | 8,801                                       |  |             | 10,466 |  |                  | 12,290 |       |  |      | 16,317 |                            |   |                  |  |                                  | 21,091 |                                 |   | 26,783 |  |   | 47,874 |  |   | 8,201 |  | 1992     | (A)   
|Claremont Village Everett, WA                 |  |              |       |               |   | 2,320                                       |  |             | 7,035  |  |                  |       |       |  |      | 133    |                            |   |                  |  |                                  | 2,320  |                                 |   | 7,168  |  |   | 9,488  |  |   | 1,490 |  | 1997     | (A)   
|Cobblestone Redding, CA                       |  |              |       |               |   | 1,869                                       |  |             | 5,609  |  |                  |       |       |  |      | 217    |                            |   |                  |  |                                  | 1,869  |                                 |   | 5,826  |  |   | 7,695  |  |   | 802   |  | 2000     | (A)   
|Commonwealth Square Folsom, CA                |  |              |       |               |   | 4,425                                       |  |             | 13,274 |  |                  |       |       |  |      | 296    |                            |   |                  |  |                                  | 4,425  |                                 |   | 13,570 |  |   | 17,995 |  |   | 1,819 |  | 2000     | (A)   
|Country Club Center Rio Rancho, NM            |  |              | 3,011  |               |   | 566                                         |  |             | 1,518  |  |                  |       |       |  |      | 1,819  |                            |   |                  |  |                                  | 566    |                                 |   | 3,337  |  |   | 3,903  |  |   | 1,527 |  | 1992     | (A)   
|Country Fair Shopping Center Chino, CA        |  |              |       |               |   | 6,113                                       |  |             | 14,263 |  |                  | 1      |       |  |      | 321    |                            |   |                  |  |                                  | 6,114  |                                 |   | 14,584 |  |   | 20,698 |  |   | 1,192 |  | 2003     | (A)   
|Country Gables Granite Bay, CA                |  |              |       |               |   | 4,622                                       |  |             | 10,806 |  |                  |       |       |  |      | 236    |                            |   |                  |  |                                  | 4,622  |                                 |   | 11,042 |  |   | 15,664 |  |   | 1,501 |  | 2000     | (A)   



(continued)



F-29



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##### Table of Contents

PAN PACIFIC RETAIL PROPERTIES, INC.

SCHEDULE III

PROPERTIES AND ACCUMULATED DEPRECIATION (Continued)

December 31, 2005

(In thousands)



|                                                  |  |              |  |               |  |                                            |  |             |  |                  |  |       |  |        |  |                            |  |                   |  |                                  |  |                                 |    
|------------------------------------------------- |  | ------------ |  | ------------- |  | ------------------------------------------ |  | ----------- |  | ---------------- |  | ----- |  | ------ |  | -------------------------- |  | ----------------- |  | -------------------------------- |  | ------------------------------- | ---
|                                                  |  |              |  | Initial Costs |  | Costs Capitalized Subsequent toAcquisition |  | Total Costs |  |                  |  |       | 
|Description                                       |  | Encumbrances |  | Land          |  | Buildings and Improvements (2)             |  | Land Add.   |  | Improvements (2) |  | Other |  | Land   |  | Buildings and Improvements |  | Total (1) (2) (3) |  | Accumulated Depreciation (2) (3) |  | Date of Acquis. (A) Constr. (C) |    
|PROPERTIES:                                       |  |              |  |               |  |                                            |  |             |  |                  |  |       |  |        |  |                            |  |                   |  |                                  |  |                                 |    
|Creekside Center Hayward, CA                      |  |             |  | 1,500         |  | 4,545                                      |  | 2           |  | 660              |  |      |  | 1,502  |  | 5,205                      |  | 6,707             |  | 976                              |  | 1998                            | (A)
|Date Palm Cathedral City, CA                      |  |             |  | 1,750         |  | 5,241                                      |  |            |  | 51               |  |      |  | 1,750  |  | 5,292                      |  | 7,042             |  | 401                              |  | 2003                            | (A)
|Decatur Meadows Las Vegas, NV                     |  |             |  | 2,752         |  | 6,424                                      |  |            |  | 285              |  |      |  | 2,752  |  | 6,709                      |  | 9,461             |  | 828                              |  | 2002                            | (A)
|Del Norte Plaza Escondido, CA                     |  | 15,913       |  | 9,972         |  | 23,268                                     |  |            |  | 250              |  |      |  | 9,972  |  | 23,518                     |  | 33,490            |  | 1,683                            |  | 2003                            | (A)
|Dublin Retail Center Dublin, CA                   |  |             |  | 4,063         |  | 12,160                                     |  |            |  | 312              |  |      |  | 4,063  |  | 12,472                     |  | 16,535            |  | 1,354                            |  | 2000                            | (A)
|Eagle Station Carson City, NV                     |  |             |  | 2,455         |  | 7,363                                      |  |            |  | 184              |  |      |  | 2,455  |  | 7,547                      |  | 10,002            |  | 1,021                            |  | 2000                            | (A)
|East Burnside Portland, OR                        |  |             |  | 1,583         |  | 3,695                                      |  | 21          |  | 211              |  |      |  | 1,604  |  | 3,906                      |  | 5,510             |  | 562                              |  | 2000                            | (A)
|Eastridge Plaza Porterville, CA                   |  |             |  | 1,170         |  | 3,513                                      |  |            |  | 2,757            |  |      |  | 1,170  |  | 6,270                      |  | 7,440             |  | 501                              |  | 2000                            | (A)
|El Camino North Oceanside, CA                     |  |             |  | 15,722        |  | 36,623                                     |  |            |  | 12,837           |  |      |  | 15,722 |  | 49,460                     |  | 65,182            |  | 3,578                            |  | 2003                            | (A)
|Elko Junction Elko, NV                            |  |             |  | 3,274         |  | 9,822                                      |  |            |  | 45               |  |      |  | 3,274  |  | 9,867                      |  | 13,141            |  | 1,291                            |  | 2000                            | (A)
|Elverta Crossing Sacramento, CA                   |  |             |  | 3,080         |  | 9,236                                      |  |            |  | 258              |  |      |  | 3,080  |  | 9,494                      |  | 12,574            |  | 1,253                            |  | 2000                            | (A)
|Emerald Place Dublin, CA                          |  |             |  | 9,003         |  |                                           |  |            |  | 1,735            |  |      |  | 9,003  |  | 1,735                      |  | 10,738            |  |                                 |  | 2004                            | (A)
|Encinitas Marketplace Encinitas, CA               |  |             |  | 3,529         |  | 8,281                                      |  |            |  | 709              |  |      |  | 3,529  |  | 8,990                      |  | 12,519            |  | 1,692                            |  | 2000                            | (A)
|Fairmont Shopping Center Fairmont, CA             |  |             |  | 3,420         |  | 8,024                                      |  | 1           |  | 280              |  |      |  | 3,421  |  | 8,304                      |  | 11,725            |  | 1,939                            |  | 1997                            | (A)
|Fashion Faire San Leandro, CA                     |  |             |  | 2,863         |  | 8,695                                      |  |            |  | 865              |  |      |  | 2,863  |  | 9,560                      |  | 12,423            |  | 1,906                            |  | 1998                            | (A)
|Fire Mountain Oceanside, CA                       |  | 11,391       |  | 5,155         |  | 12,029                                     |  |            |  | 176              |  |      |  | 5,155  |  | 12,205                     |  | 17,360            |  | 918                              |  | 2003                            | (A)
|Foothill Marketplace Rancho Cucamonga, CA         |  |             |  | 9,962         |  | 29,885                                     |  | 1           |  | 24               |  |      |  | 9,963  |  | 29,909                     |  | 39,872            |  | 1,065                            |  | 2004                            | (A)
|Foothillls Park Place Phoenix, AZ                 |  |             |  | 1,590         |  | 3,710                                      |  |            |  | 2,375            |  |      |  | 1,590  |  | 6,085                      |  | 7,675             |  | 516                              |  | 2003                            | (A)
|Frontier Village Shopping Center Lake Stevens, WA |  |             |  | 6,258         |  | 14,573                                     |  |            |  | 3,325            |  |      |  | 6,258  |  | 17,898                     |  | 24,156            |  | 1,337                            |  | 2003                            | (A)
|Fullerton Town Center Fullerton, CA               |  |             |  | 10,192        |  | 23,617                                     |  |            |  | 731              |  |      |  | 10,192 |  | 24,348                     |  | 34,540            |  | 1,907                            |  | 2003                            | (A)
|Gardena Gateway Center Gardena, CA                |  | 6,474        |  | 2,778         |  | 6,471                                      |  |            |  | 48               |  |      |  | 2,778  |  | 6,519                      |  | 9,297             |  | 489                              |  | 2003                            | (A)
|Garrison Square Vancouver, WA                     |  |             |  | 1,462         |  | 4,391                                      |  | 52          |  | 1,303            |  |      |  | 1,514  |  | 5,694                      |  | 7,208             |  | 573                              |  | 2001                            | (A)
|Gateway Shopping Center Mill Creek, WA            |  |             |  | 3,938         |  | 12,032                                     |  |            |  | 97               |  |      |  | 3,938  |  | 12,129                     |  | 16,067            |  | 1,462                            |  | 2000                            | (A)
|Glen Cove Center Vallejo, CA                      |  |             |  | 1,925         |  | 5,807                                      |  |            |  | 21               |  |      |  | 1,925  |  | 5,828                      |  | 7,753             |  | 1,043                            |  | 1998                            | (A)
|Glenbrook Center Sacramento, CA                   |  |             |  | 1,538         |  | 3,588                                      |  |            |  | 1,520            |  |      |  | 1,538  |  | 5,108                      |  | 6,646             |  | 829                              |  | 2000                            | (A)
|Gordon Ranch Chino Hills, CA                      |  |             |  | 5,623         |  | 13,120                                     |  |            |  | 1,125            |  |      |  | 5,623  |  | 14,245                     |  | 19,868            |  | 1,151                            |  | 2002                            | (A)
|Granary Square Valencia, CA                       |  |             |  | 5,479         |  | 12,835                                     |  |            |  | 434              |  |      |  | 5,479  |  | 13,269                     |  | 18,748            |  | 1,915                            |  | 2000                            | (A)



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F-30



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##### Table of Contents

PAN PACIFIC RETAIL PROPERTIES, INC.

SCHEDULE III

PROPERTIES AND ACCUMULATED DEPRECIATION (Continued)

December 31, 2005

(In thousands)



|                                          |  |              |  |               |  |                                             |  |             |   |  |                  |   |  |       |  |        |  |                            |  |                   |  |                                  |  |                                 |       
|----------------------------------------- |  | ------------ |  | ------------- |  | ------------------------------------------- |  | ----------- | - |  | ---------------- | - |  | ----- |  | ------ |  | -------------------------- |  | ----------------- |  | -------------------------------- |  | ------------------------------- | ------
|                                          |  |              |  | Initial Costs |  | Costs Capitalized Subsequent to Acquisition |  | Total Costs |   |  |                  |   | 
|Description                               |  | Encumbrances |  | Land          |  | Buildings and Improvements (2)              |  | Land Add.   |   |  | Improvements (2) |   |  | Other |  | Land   |  | Buildings and Improvements |  | Total (1) (2) (3) |  | Accumulated Depreciation (2) (3) |  | Date of Acquis. (A) Constr. (C) |       
|PROPERTIES:                               |  |              |  |               |  |                                             |  |             |   |  |                  |   |  |       |  |        |  |                            |  |                   |  |                                  |  |                                 |       
|Green Valley Town & Country Henderson, NV |  |             |  | 4,096         |  | 12,343                                      |  |            |   |  | 393              |   |  |      |  | 4,096  |  | 12,736                     |  | 16,832            |  | 2,726                            |  | 1997                            | (A)   
|Gresham Town Fair Gresham, OR             |  | 15,763       |  | 6,471         |  | 15,061                                      |  | (7          | ) |  | 292              |   |  |      |  | 6,464  |  | 15,353                     |  | 21,817            |  | 1,164                            |  | 2003                            | (A)   
|Heritage Park Suison City, CA             |  |             |  | 3,449         |  | 10,348                                      |  |            |   |  | 1,782            |   |  |      |  | 3,449  |  | 12,130                     |  | 15,579            |  | 1,566                            |  | 2000                            | (A)   
|Heritage Place Tulare, CA                 |  |             |  | 2,098         |  | 6,298                                       |  |            |   |  | 225              |   |  |      |  | 2,098  |  | 6,523                      |  | 8,621             |  | 826                              |  | 2000                            | (A)   
|Hermiston Plaza Hermiston, OR             |  |             |  | 1,930         |  | 6,145                                       |  |            |   |  | 1,307            |   |  |      |  | 1,930  |  | 7,452                      |  | 9,382             |  | 1,611                            |  | 1998                            | (A)   
|Hood River Center Hood River, OR          |  |             |  | 1,169         |  | 3,699                                       |  |            |   |  | 3,221            |   |  |      |  | 1,169  |  | 6,920                      |  | 8,089             |  | 1,532                            |  | 1998                            | (A)   
|Jefferson Square Seattle, WA              |  | 12,364       |  |              |  | 23,568                                      |  |            |   |  | 48               |   |  |      |  |       |  | 23,616                     |  | 23,616            |  | 190                              |  | 2005                            | (A)   
|Kenneth Hahn Plaza Los Angeles, CA        |  | 6,000        |  | 3,115         |  | 7,267                                       |  |            |   |  | 161              |   |  |      |  | 3,115  |  | 7,428                      |  | 10,543            |  | 572                              |  | 2003                            | (A)   
|Kmart Center Sacramento, CA               |  |             |  | 1,130         |  | 3,392                                       |  |            |   |  | 185              |   |  |      |  | 1,130  |  | 3,577                      |  | 4,707             |  | 578                              |  | 2000                            | (A)   
|La Verne Towne Center Trust La Verne, CA  |  |             |  | 3,477         |  | 7,980                                       |  |            |   |  | 192              |   |  |      |  | 3,477  |  | 8,172                      |  | 11,649            |  | 636                              |  | 2003                            | (A)   
|Laguna Park Village Elk Grove, CA         |  | 4,774        |  | 2,026         |  | 6,077                                       |  |            |   |  | 9                |   |  |      |  | 2,026  |  | 6,086                      |  | 8,112             |  | 152                              |  | 2004                            | (A)   
|Laguna Village Sacramento, CA             |  |             |  | 3,448         |  | 20                                          |  |            |   |  | 18,436           |   |  |      |  | 3,448  |  | 18,456                     |  | 21,904            |  | 5,458                            |  | 19921996/97                     | (A)(C)
|Lakewood Shopping Center Lakewood, CA     |  |             |  | 2,363         |  | 7,141                                       |  |            |   |  | 44               |   |  |      |  | 2,363  |  | 7,185                      |  | 9,548             |  | 1,548                            |  | 1997                            | (A)   
|Lakewood Plaza Bellflower, CA             |  |             |  | 2,538         |  | 5,921                                       |  |            |   |  | 20               |   |  |      |  | 2,538  |  | 5,941                      |  | 8,479             |  | 444                              |  | 2003                            | (A)   
|Lakewood Village Windsor, CA              |  |             |  | 5,347         |  | 12,476                                      |  |            |   |  | 109              |   |  |      |  | 5,347  |  | 12,585                     |  | 17,932            |  | 1,657                            |  | 2000                            | (A)   
|Larwin Square Tustin, CA                  |  |             |  | 8,617         |  | 20,104                                      |  | 70          |   |  | 678              |   |  |      |  | 8,687  |  | 20,782                     |  | 29,469            |  | 1,727                            |  | 2002                            | (A)   
|Loma Square San Diego, CA                 |  | 17,405       |  | 10,135        |  | 23,649                                      |  |            |   |  | 275              |   |  |      |  | 10,135 |  | 23,924                     |  | 34,059            |  | 1,758                            |  | 2003                            | (A)   
|Manteca Marketplace Manteca, CA           |  |             |  | 3,904         |  | 11,908                                      |  | 3           |   |  | 676              |   |  |      |  | 3,907  |  | 12,584                     |  | 16,491            |  | 2,573                            |  | 1998                            | (A)   
|Marina Village Huntington Beach, CA       |  |             |  | 3,531         |  | 10,660                                      |  | 15          |   |  | 639              |   |  |      |  | 3,546  |  | 11,299                     |  | 14,845            |  | 2,156                            |  | 1999                            | (A)   
|Maysville Marketsquare Maysville, KY      |  | 4,928        |  | 3,435         |  | 2,001                                       |  | (352        | ) |  | 3,971            |   |  |      |  | 3,083  |  | 5,972                      |  | 9,055             |  | 1,997                            |  | 19921993                        | (A)(C)
|Medford Center Medford, OR                |  |             |  | 8,369         |  | 19,527                                      |  | 1           |   |  | 3,321            |   |  |      |  | 8,370  |  | 22,848                     |  | 31,218            |  | 1,743                            |  | 2003                            | (A)   
|Melrose Village Vista, CA                 |  | 8,319        |  | 5,125         |  | 11,621                                      |  |            |   |  | 181              |   |  |      |  | 5,125  |  | 11,802                     |  | 16,927            |  | 3,518                            |  | 1999                            | (A)   
|Memphis Retail Center Memphis, TN         |  |             |  | 1,204         |  | 3,784                                       |  |            |   |  | (113             | ) |  |      |  | 1,204  |  | 3,671                      |  | 4,875             |  | 1,204                            |  | 1992                            | (A)   
|Menlo Park Portland, OR                   |  |             |  | 3,056         |  | 7,134                                       |  | 44          |   |  | 1,604            |   |  |      |  | 3,100  |  | 8,738                      |  | 11,838            |  | 1,174                            |  | 2000                            | (A)   
|Milwaukie Marketplace Milwaukie, OR       |  |             |  | 3,184         |  | 9,717                                       |  |            |   |  | 422              |   |  |      |  | 3,184  |  | 10,139                     |  | 13,323            |  | 2,156                            |  | 1998                            | (A)   
|Mineral King Plaza Visalia, CA            |  |             |  | 1,506         |  | 3,505                                       |  |            |   |  | 160              |   |  |      |  | 1,506  |  | 3,665                      |  | 5,171             |  | 292                              |  | 2003                            | (A)   
|Mira Loma Shopping Center Reno, NV        |  |             |  | 1,925         |  | 5,810                                       |  |            |   |  | 1,475            |   |  |      |  | 1,925  |  | 7,285                      |  | 9,210             |  | 1,299                            |  | 1998                            | (A)   



(continued)



F-31



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##### Table of Contents

PAN PACIFIC RETAIL PROPERTIES, INC.

SCHEDULE III

PROPERTIES AND ACCUMULATED DEPRECIATION (Continued)

December 31, 2005

(In thousands)



|                                             |  |              |  |               |  |                                             |  |             |   |  |                  |  |       |  |        |  |                            |  |                   |  |                                  |  |                                 |    
|-------------------------------------------- |  | ------------ |  | ------------- |  | ------------------------------------------- |  | ----------- | - |  | ---------------- |  | ----- |  | ------ |  | -------------------------- |  | ----------------- |  | -------------------------------- |  | ------------------------------- | ---
|                                             |  |              |  | Initial Costs |  | Costs Capitalized Subsequent to Acquisition |  | Total Costs |   |  |                  |  |      
|Description                                  |  | Encumbrances |  | Land          |  | Buildings and Improvements (2)              |  | Land Add.   |   |  | Improvements (2) |  | Other |  | Land   |  | Buildings and Improvements |  | Total (1) (2) (3) |  | Accumulated Depreciation (2) (3) |  | Date of Acquis. (A) Constr. (C) |    
|PROPERTIES:                                  |  |              |  |               |  |                                             |  |             |   |  |                  |  |       |  |        |  |                            |  |                   |  |                                  |  |                                 |    
|Mission Ridge Plaza Manteca, CA              |  |             |  | 2,880         |  | 8,640                                       |  |            |   |  | 109              |  |      |  | 2,880  |  | 8,749                      |  | 11,629            |  | 1,120                            |  | 2000                            | (A)
|Monterey Plaza San Jose, CA                  |  | 15,782       |  | 7,688         |  | 18,692                                      |  | 14          |   |  | 374              |  |      |  | 7,702  |  | 19,066                     |  | 26,768            |  | 4,226                            |  | 1997                            | (A)
|Mountain Square Upland, CA                   |  | 23,593       |  | 8,902         |  | 20,666                                      |  |            |   |  | 341              |  |      |  | 8,902  |  | 21,007                     |  | 29,909            |  | 1,563                            |  | 2003                            | (A)
|North County Plaza Carlsbad, CA              |  |             |  | 5,899         |  | 13,765                                      |  |            |   |  | 1,149            |  |      |  | 5,899  |  | 14,914                     |  | 20,813            |  | 1,099                            |  | 2003                            | (A)
|North Mountain Village Phoenix, AZ           |  | 6,876        |  | 2,058         |  | 6,173                                       |  |            |   |  | 80               |  |      |  | 2,058  |  | 6,253                      |  | 8,311             |  | 502                              |  | 2003                            | (A)
|North Reno Reno, NV                          |  | 5,581        |  | 2,447         |  | 7,341                                       |  | 4           |   |  |                 |  |      |  | 2,451  |  | 7,341                      |  | 9,792             |  | 107                              |  | 2005                            | (A)
|Northridge Plaza Fair Oaks, CA               |  |             |  | 1,658         |  | 4,977                                       |  |            |   |  | 208              |  |      |  | 1,658  |  | 5,185                      |  | 6,843             |  | 754                              |  | 2000                            | (A)
|Oceanside Crossing Oceanside, CA             |  |             |  | 1,667         |  | 3,890                                       |  |            |   |  | 590              |  |      |  | 1,667  |  | 4,480                      |  | 6,147             |  | 381                              |  | 2003                            | (A)
|Olympia Place Walnut Creek, CA               |  |             |  | 8,559         |  | 10,041                                      |  | (38         | ) |  | 26,963           |  |      |  | 8,521  |  | 37,004                     |  | 45,525            |  | 1,897                            |  | 2000                            | (A)
|Olympia Square Olympia, WA                   |  | 12,957       |  | 3,737         |  | 11,580                                      |  | 1           |   |  | 794              |  |      |  | 3,738  |  | 12,374                     |  | 16,112            |  | 4,952                            |  | 1992                            | (A)
|Olympia West Center Olympia, WA              |  |             |  | 2,736         |  | 8,278                                       |  |            |   |  | 52               |  |      |  | 2,736  |  | 8,330                      |  | 11,066            |  | 1,702                            |  | 1997                            | (A)
|Oregon City Shopping Center Oregon City, OR  |  | 8,641        |  | 4,426         |  | 13,424                                      |  |            |   |  | 3,525            |  |      |  | 4,426  |  | 16,949                     |  | 21,375            |  | 3,061                            |  | 1998                            | (A)
|Oregon Trail Gresham, OR                     |  |             |  | 3,593         |  | 11,501                                      |  |            |   |  | 2,955            |  |      |  | 3,593  |  | 14,456                     |  | 18,049            |  | 3,083                            |  | 1998                            | (A)
|Pacific Commons Shopping Center Spanaway, WA |  |             |  | 3,419         |  | 10,307                                      |  |            |   |  | 123              |  |      |  | 3,419  |  | 10,430                     |  | 13,849            |  | 2,005                            |  | 1998                            | (A)
|Palmdale Center Palmdale, CA                 |  |             |  | 1,150         |  | 3,509                                       |  |            |   |  | 87               |  |      |  | 1,150  |  | 3,596                      |  | 4,746             |  | 766                              |  | 1997                            | (A)
|Palomar Village Shopping Center Temecula, CA |  |             |  | 7,243         |  | 20,228                                      |  |            |   |  | 9                |  |      |  | 7,243  |  | 20,237                     |  | 27,480            |  | 549                              |  | 2004                            | (A)
|Panther Lake Shopping Center Kent, WA        |  |             |  | 1,950         |  | 5,901                                       |  | 1           |   |  | 224              |  |      |  | 1,951  |  | 6,125                      |  | 8,076             |  | 1,293                            |  | 1998                            | (A)
|Park Place Vallejo, CA                       |  |             |  | 4,020         |  | 9,381                                       |  |            |   |  | 110              |  |      |  | 4,020  |  | 9,491                      |  | 13,511            |  | 1,244                            |  | 2000                            | (A)
|Pavilions Place Westminster, CA              |  |             |  | 12,071        |  | 28,166                                      |  | 36          |   |  | 1,319            |  |      |  | 12,107 |  | 29,485                     |  | 41,592            |  | 1,891                            |  | 2003                            | (A)
|Pine Creek Shopping Center Grass Valley, CA  |  |             |  | 5,000         |  | 15,001                                      |  |            |   |  | 1,887            |  |      |  | 5,000  |  | 16,888                     |  | 21,888            |  | 2,119                            |  | 2000                            | (A)
|Pioneer Plaza Springfield, OR                |  |             |  | 1,864         |  | 5,707                                       |  |            |   |  | 80               |  |      |  | 1,864  |  | 5,787                      |  | 7,651             |  | 1,138                            |  | 1998                            | (A)
|Plaza 580 Livermore, CA                      |  |             |  | 4,010         |  | 12,031                                      |  |            |   |  | 309              |  |      |  | 4,010  |  | 12,340                     |  | 16,350            |  | 1,628                            |  | 2000                            | (A)
|Powell Valley Junction Gresham, OR           |  |             |  | 1,546         |  | 4,747                                       |  |            |   |  | 1,597            |  |      |  | 1,546  |  | 6,344                      |  | 7,890             |  | 1,180                            |  | 1998                            | (A)
|Rainbow Promenade Las Vegas, NV              |  | 17,671       |  | 9,381         |  | 21,933                                      |  | (15         | ) |  | 169              |  |      |  | 9,366  |  | 22,102                     |  | 31,468            |  | 4,633                            |  | 1997                            | (A)
|Rancho Las Palmas Rancho Mirage, CA          |  | 11,558       |  | 5,025         |  | 15,233                                      |  |            |   |  | 1,266            |  |      |  | 5,025  |  | 16,499                     |  | 21,524            |  | 2,816                            |  | 1999                            | (A)
|Renaissance West Las Vegas, NV               |  | 29,250       |  | 9,872         |  | 29,615                                      |  |            |   |  |                 |  |      |  | 9,872  |  | 29,615                     |  | 39,487            |  |                                 |  | 2005                            | (A)
|Rheem Valley Moraga, CA                      |  |             |  | 4,518         |  | 10,523                                      |  |            |   |  | 851              |  |      |  | 4,518  |  | 11,374                     |  | 15,892            |  | 948                              |  | 2003                            | (A)



(continued)



F-32



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##### Table of Contents

PAN PACIFIC RETAIL PROPERTIES, INC.

SCHEDULE III

PROPERTIES AND ACCUMULATED DEPRECIATION (Continued)

December 31, 2005

(In thousands)



|                                                |  |              |  |               |  |                                             |  |             |   |  |                  |   |  |       |  |        |  |                            |  |                   |  |                                  |  |                                 |    
|----------------------------------------------- |  | ------------ |  | ------------- |  | ------------------------------------------- |  | ----------- | - |  | ---------------- | - |  | ----- |  | ------ |  | -------------------------- |  | ----------------- |  | -------------------------------- |  | ------------------------------- | ---
|                                                |  |              |  | Initial Costs |  | Costs Capitalized Subsequent to Acquisition |  | Total Costs |   |  |                  |   | 
|Description                                     |  | Encumbrances |  | Land          |  | Buildings and Improvements (2)              |  | Land Add.   |   |  | Improvements (2) |   |  | Other |  | Land   |  | Buildings and Improvements |  | Total (1) (2) (3) |  | Accumulated Depreciation (2) (3) |  | Date of Acquis. (A) Constr. (C) |    
|PROPERTIES:                                     |  |              |  |               |  |                                             |  |             |   |  |                  |   |  |       |  |        |  |                            |  |                   |  |                                  |  |                                 |    
|Rockwood Plaza Gresham, OR                      |  |             |  | 1,179         |  | 3,540                                       |  | 18          |   |  | 1,274            |   |  |      |  | 1,197  |  | 4,814                      |  | 6,011             |  | 1,018                            |  | 2000                            | (A)
|Sahara Pavilion North Las Vegas, NV             |  | 28,561       |  | 11,920        |  | 28,652                                      |  | 2           |   |  | 636              |   |  |      |  | 11,922 |  | 29,288                     |  | 41,210            |  | 11,060                           |  | 1992                            | (A)
|Sahara Pavilion South Las Vegas, NV             |  |             |  | 4,833         |  | 12,988                                      |  |            |   |  | 1,626            |   |  |      |  | 4,833  |  | 14,614                     |  | 19,447            |  | 5,549                            |  | 1992                            | (A)
|San Dimas Market Place San Dimas, CA            |  | 13,253       |  | 5,699         |  | 17,315                                      |  |            |   |  | 183              |   |  |      |  | 5,699  |  | 17,498                     |  | 23,197            |  | 3,513                            |  | 1998                            | (A)
|Sandy Marketplace Sandy, OR                     |  | 4,012        |  | 2,047         |  | 6,132                                       |  | 8           |   |  | 518              |   |  |      |  | 2,055  |  | 6,650                      |  | 8,705             |  | 1,365                            |  | 1998                            | (A)
|Shops at Bakersfield Bakersfield, CA            |  |             |  | 59            |  | 178                                         |  |            |   |  | 33               |   |  |      |  | 59     |  | 211                        |  | 270               |  | 16                               |  | 2003                            | (A)
|Shops at Lincoln School Modesto, CA             |  |             |  | 1,672         |  | 5,069                                       |  |            |   |  | 237              |   |  |      |  | 1,672  |  | 5,306                      |  | 6,978             |  | 823                              |  | 1999                            | (A)
|Silverdale Plaza Silverdale, WA                 |  |             |  | 7,546         |  | 22,320                                      |  |            |   |  | 18               |   |  |      |  | 7,546  |  | 22,338                     |  | 29,884            |  | 233                              |  | 2005                            | (A)
|Silverdale Shopping Center Silverdale, WA       |  | 5,478        |  | 2,048         |  | 4,652                                       |  |            |   |  | 128              |   |  |      |  | 2,048  |  | 4,780                      |  | 6,828             |  | 377                              |  | 2003                            | (A)
|Sky Park Plaza Chico, CA                        |  |             |  | 3,566         |  | 10,700                                      |  |            |   |  | 1,713            |   |  |      |  | 3,566  |  | 12,413                     |  | 15,979            |  | 1,457                            |  | 2000                            | (A)
|Southgate Center Milwaukie, OR                  |  | 2,777        |  | 1,423         |  | 4,319                                       |  |            |   |  | 531              |   |  |      |  | 1,423  |  | 4,850                      |  | 6,273             |  | 862                              |  | 1998                            | (A)
|Southpointe Plaza Sacramento, CA                |  | 9,148        |  | 2,194         |  | 5,100                                       |  |            |   |  | 677              |   |  |      |  | 2,194  |  | 5,777                      |  | 7,971             |  | 488                              |  | 2003                            | (A)
|Sunset Esplanade Hillsboro, OR                  |  |             |  | 8,610         |  | 20,090                                      |  |            |   |  | 136              |   |  |      |  | 8,610  |  | 20,226                     |  | 28,836            |  | 1,961                            |  | 2002                            | (A)
|Sunset Mall Portland, OR                        |  | 7,095        |  | 2,996         |  | 9,089                                       |  | (14         | ) |  | 188              |   |  |      |  | 2,982  |  | 9,277                      |  | 12,259            |  | 1,704                            |  | 1998                            | (A)
|Sunset Square Bellingham, WA                    |  |             |  | 6,100         |  | 18,647                                      |  | (5          | ) |  | 2,128            |   |  |      |  | 6,095  |  | 20,775                     |  | 26,870            |  | 8,068                            |  | 1992                            | (A)
|Sycamore Plaza Anaheim, CA                      |  |             |  | 1,856         |  | 5,589                                       |  |            |   |  | 208              |   |  |      |  | 1,856  |  | 5,797                      |  | 7,653             |  | 798                              |  | 2000                            | (A)
|Tacoma Central Tacoma, WA                       |  |             |  | 5,314         |  | 16,219                                      |  |            |   |  | 575              |   |  |      |  | 5,314  |  | 16,794                     |  | 22,108            |  | 3,577                            |  | 1997                            | (A)
|Tanasbourne Village Hillsboro, OR               |  | 16,999       |  | 5,573         |  | 13,861                                      |  |            |   |  | 1,048            |   |  |      |  | 5,573  |  | 14,909                     |  | 20,482            |  | 5,366                            |  | 1992                            | (A)
|Troutdale Troutdale, OR                         |  |             |  | 1,662         |  | 4,987                                       |  |            |   |  | 218              |   |  |      |  | 1,662  |  | 5,205                      |  | 6,867             |  | 73                               |  | 2005                            | (A)
|Tustin Heights Tustin, CA                       |  | 9,672        |  | 3,675         |  | 11,089                                      |  | (25         | ) |  | 1,073            |   |  |      |  | 3,650  |  | 12,162                     |  | 15,812            |  | 2,343                            |  | 1997                            | (A)
|Ukiah Crossroads Ukiah, CA                      |  |             |  | 1,869         |  | 5,609                                       |  |            |   |  | 31               |   |  |      |  | 1,869  |  | 5,640                      |  | 7,509             |  | 737                              |  | 2000                            | (A)
|Vermont Slauson Shopping Center Los Angeles, CA |  |             |  | 5,231         |  | 12,143                                      |  |            |   |  | 29               |   |  |      |  | 5,231  |  | 12,172                     |  | 17,403            |  | 866                              |  | 2003                            | (A)
|Victorian Walk Fresno, CA                       |  |             |  | 1,676         |  | 5,025                                       |  |            |   |  | 355              |   |  |      |  | 1,676  |  | 5,380                      |  | 7,056             |  | 871                              |  | 2000                            | (A)
|Vineyard Village Ontario, CA                    |  |             |  | 2,767         |  | 6,411                                       |  |            |   |  | (354             | ) |  |      |  | 2,767  |  | 6,057                      |  | 8,824             |  | 1,643                            |  | 1994/96                         | (A)
|Vineyard Village East Ontario, CA               |  |             |  | 648           |  | 2,720                                       |  | 1           |   |  | 349              |   |  |      |  | 649    |  | 3,069                      |  | 3,718             |  | 1,000                            |  | 1994                            | (A)
|Vineyards Marketplace Rancho Cucamonga, CA      |  | 4,933        |  | 2,072         |  | 4,835                                       |  |            |   |  | 62               |   |  |      |  | 2,072  |  | 4,897                      |  | 6,969             |  | 361                              |  | 2003                            | (A)
|West Town Winnemucca, NV                        |  |             |  | 1,085         |  | 3,258                                       |  |            |   |  | 28               |   |  |      |  | 1,085  |  | 3,286                      |  | 4,371             |  | 428                              |  | 2000                            | (A)



(continued)



F-33



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##### Table of Contents

PAN PACIFIC RETAIL PROPERTIES, INC.

SCHEDULE III

PROPERTIES AND ACCUMULATED DEPRECIATION (Continued)

December 31, 2005

(In thousands)



|                                                                       |  |              |         |               |   |                                             |  |             |           |                  |   |        |  |      |         |                            |   |                   |  |                                  |         |                                 |   |           |  |   |           |  |   |         |  |      |    
|---------------------------------------------------------------------- |  | ------------ | ------- | ------------- | - | ------------------------------------------- |  | ----------- | --------- | ---------------- | - | ------ |  | ---- | ------- | -------------------------- | - | ----------------- |  | -------------------------------- | ------- | ------------------------------- | - | --------- |  | - | --------- |  | - | ------- |  | ---- | ---
|                                                                       |  |              |         | Initial Costs |   | Costs Capitalized Subsequent to Acquisition |  | Total Costs |           |                  |   |        | 
|Description                                                            |  | Encumbrances |         | Land          |   | Buildings and Improvements (2)              |  | Land Add.   |           | Improvements (2) |   | Other  |  | Land |         | Buildings and Improvements |   | Total (1) (2) (3) |  | Accumulated Depreciation (2) (3) |         | Date of Acquis. (A) Constr. (C) |  
|PROPERTIES:                                                            |  |              |         |               |   |                                             |  |             |           |                  |   |        |  |      |         |                            |   |                   |  |                                  |         |                                 |   |           |  |   |           |  |   |         |  |      |    
|Winterwood Pavilion Las Vegas, NV                                      |  |              |        |               |   | 4,573                                       |  |             | 13,015    |                  |   |       |  |      | 1,319   |                            |   |                  |  |                                  | 4,573   |                                 |   | 14,334    |  |   | 18,907    |  |   | 5,770   |  | 1992 | (A)
|Yreka Junction Yreka, CA                                               |  |              |        |               |   | 2,436                                       |  |             | 7,304     |                  |   |       |  |      | 12      |                            |   |                  |  |                                  | 2,436   |                                 |   | 7,316     |  |   | 9,752     |  |   | 943     |  | 2000 | (A)
|Pan Pacific Retail Properties redemption of operating subsidiary units |  |              |        |               |   |                                            |  |             |          |                  |   |       |  |      |        |                            |   | 6,997             |  |                                  |        |                                 |   | 6,997     |  |   | 6,997     |  |   | 131     |  | 2004 | (A)
|                                                                       |  |              |         |               |   |                                             |  |             |           |                  |   |        |  |      |         |                            |   |                   |  |                                  |         |                                 |   |           |  |   |           |  |   |         |  |      |    
|                                                                       |  | $            | 390,132 |               | $ | 560,086                                     |  | $           | 1,461,576 |                  | $ | 12,213 |  | $    | 181,367 |                            | $ | 6,997             |  | $                                | 572,299 |                                 | $ | 1,649,940 |  | $ | 2,222,239 |  | $ | 240,086 |  |      |    
|                                                                       |  |              |         |               |   |                                             |  |             |           |                  |   |        |  |      |         |                            |   |                   |  |                                  |         |                                 |   |           |  |   |           |  |   |         |  |      |    



(continued)



F-34



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##### Table of Contents

PAN PACIFIC RETAIL PROPERTIES, INC.

SCHEDULE III

PROPERTIES AND ACCUMULATED DEPRECIATION (Continued)

December 31, 2005

(In thousands)



Notes:



|(1) | The aggregate gross cost of the properties owned by Pan Pacific Retail Properties, Inc. for federal income tax purposes, approximated $2,071,215 as of December 31, 2005.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(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, 2003 through
December 31, 2005:
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                                                             |  |                                  |           |   |      |   |           |      |  |   |           |  
|------------------------------------------------------------------------------------------------------------ |  | -------------------------------- | --------- | - | ---- | - | --------- | ---- |  | - | --------- | -
|                                                                                                             |  | For the years ended December 31, |          
|                                                                                                             |  | 2005                             |           |   | 2004 |   |           | 2003 | 
|Cost of properties                                                                                           |  |                                  |           |   |      |   |           |      |  |   |           |  
|Balance, beginning of year                                                                                   |  | $                                | 2,092,312 |   |      | $ | 1,934,343 |      |  | $ | 1,431,090 |  
|Additions (acquisition, improvements, etc.)                                                                  |  |                                  | 150,481   |   |      |   | 179,198   |      |  |   | 725,670   |  
|Interest capitalized                                                                                         |  |                                  | 747       |   |      |   | 567       |      |  |   | 4,507     |  
|Deductions (write-off of tenant improvements, cost of real estate sold and provision for loss on impairment) |  |                                  | (21,301   | ) |      |   | (21,796   | )    |  |   | (226,924  | )
|                                                                                                             |  |                                  |           |   |      |   |           |      |  |   |           |  
|Balance, end of year                                                                                         |  | $                                | 2,222,239 |   |      | $ | 2,092,312 |      |  | $ | 1,934,343 |  
|                                                                                                             |  |                                  |           |   |      |   |           |      |  |   |           |  
|                                                                                                             | 
|                                                                                                             |  | For the years ended December 31, |          
|                                                                                                             |  | 2005                             |           |   | 2004 |   |           | 2003 | 
|Accumulated depreciation and amortization                                                                    |  |                                  |           |   |      |   |           |      |  |   |           |  
|Balance, beginning of year                                                                                   |  | $                                | 200,181   |   |      | $ | 160,449   |      |  | $ | 125,057   |  
|Additions (depreciation and amortization expense)                                                            |  |                                  | 46,190    |   |      |   | 42,157    |      |  |   | 37,838    |  
|Deductions (write-off of accumulated depreciation of tenant improvements and cost of real estate sold)       |  |                                  | (6,285    | ) |      |   | (2,425    | )    |  |   | (2,446    | )
|                                                                                                             |  |                                  |           |   |      |   |           |      |  |   |           |  
|Balance, end of year                                                                                         |  | $                                | 240,086   |   |      | $ | 200,181   |      |  | $ | 160,449   |  
|                                                                                                             |  |                                  |           |   |      |   |           |      |  |   |           |  



See accompanying report
of independent registered public accounting firm.



F-35