##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




---

FORM 10-Q

|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                             
|x          |  | QUARTERLY REPORT PURSUANT TO SECTION 13
    OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|           |  | For the quarterly period ended June 30,
    2004                                            
|           |  | or                                                                                          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13
    OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|           |  | For the transition period
    from             to                                           

Commission File Number: 1-13625

EOP OPERATING LIMITED PARTNERSHIP

(Exact name of registrant as specified in its
charter)


|                                                                   |  |                                         
|------------------------------------------------------------------ |  | ----------------------------------------
|Delaware                                                           |  | 36-4156801                              
|(State or other jurisdiction of
    incorporation or organization) |  | (I.R.S. Employer
    Identification No.)
|                                                                  
|Two North Riverside Plaza,
    Suite 2100, Chicago, Illinois       |  | 60606(Zip code)                         
|(Address of principal executive
    offices)                       |  |                                         

(312) 466-3300

(Registrants telephone number, including
area code)


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

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

On July 30, 2004, 450,696,671 Units were
outstanding.



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TABLE OF CONTENTS



|                                                                                                    |                                                                                                |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I -- FINANCIAL INFORMATION                                                                    
|                                                                                                    | Item 1. Financial Statements.                                                                 
|                                                                                                    | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
|                                                                                                    | Item 3. Quantitative and Qualitative Disclosures About Market Risk.                           
|                                                                                                    | Item 4. Controls and Procedures.                                                              
|PART II -- OTHER INFORMATION                                                                       
|                                                                                                    | Item 1. Legal Proceedings.                                                                    
|                                                                                                    | Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities.     
|                                                                                                    | Item 6. Exhibits and Reports on Form 8-K.                                                     
|FINANCIAL COVENANT CALCULATIONS AS OF JUNE 30, 2004 UNDER CERTAIN INDENTURE AGREEMENTS             
|EOP OPERATING LIMITED PARTNERSHIP UNSECURED NOTES FINANCIAL COVENANT COMPLIANCE AS OF JUNE 30, 2004
|SIGNATURES                                                                                         
|Exhibit 3.1                                                                                        
|Exhibit 4.5                                                                                        
|Certifications                                                                                     
|Section 1350 Certification                                                                         



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##### Table of Contents






PART I  FINANCIAL
INFORMATION






|        |                      
|------- | ---------------------
|Item 1. | Financial Statements.

EOP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED BALANCE SHEETS

|                                                                                                   |                                                                                                                                       |                                                                                                                                                     |                                                                                                                                               |                                                                                                         |              |            |            |            |            |            |            | 
|-------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------- | ------------ | ---------- | ---------- | ---------- | ---------- | ---------- | ---------- | 
|                                                                                                   |                                                                                                                                       | June 30,                                                                                                                                            |                                                                                                                                               |                                                                                                         | December 31, |           
|(Dollars in thousands, except per unit amounts)                                                    |                                                                                                                                       | 2004                                                                                                                                                |                                                                                                                                               |                                                                                                         | 2003         |           
|                                                                                                   |                                                                                                                                       |                                                                                                                                                     |                                                                                                                                               |                                                                                                         |              |           
|                                                                                                   |                                                                                                                                       | (Unaudited)                                                                                                                                         |                                                                                                                                               |                                                                                                         |             
|Assets:                                                                                            |                                                                                                                                       |                                                                                                                                                     |                                                                                                                                               |                                                                                                         |              |            |            |           
|                                                                                                   | Investments in real estate                                                                                                            |                                                                                                                                                     | $                                                                                                                                             | 25,033,044                                                                                              |              |            | $          | 23,985,839 |           
|                                                                                                   | Developments in process                                                                                                               |                                                                                                                                                     |                                                                                                                                               | 67,641                                                                                                  |              |            |            | 75,232     |           
|                                                                                                   | Land available for development                                                                                                        |                                                                                                                                                     |                                                                                                                                               | 245,611                                                                                                 |              |            |            | 251,151    |           
|                                                                                                   | Accumulated depreciation                                                                                                              |                                                                                                                                                     |                                                                                                                                               | (2,958,986                                                                                              | )            |            |            | (2,578,082 | )         
|                                                                                                   |                                                                                                                                       |                                                                                                                                                     |                                                                                                                                               |                                                                                                         |              |           
|                                                                                                   |                                                                                                                                       | Investments in real estate, net of accumulated
    depreciation                                                                                     |                                                                                                                                               |                                                                                                         | 22,387,310   |            |            |            | 21,734,140 |           
|                                                                                                   | Cash and cash equivalents                                                                                                             |                                                                                                                                                     |                                                                                                                                               | 73,313                                                                                                  |              |            |            | 69,398     |           
|                                                                                                   | Tenant and other receivables (net of allowance
    for doubtful accounts of $9,130 and $6,490, respectively)                          |                                                                                                                                                     |                                                                                                                                               | 74,448                                                                                                  |              |            |            | 79,880     |           
|                                                                                                   | Deferred rent receivable                                                                                                              |                                                                                                                                                     |                                                                                                                                               | 446,781                                                                                                 |              |            |            | 379,329    |           
|                                                                                                   | Escrow deposits and restricted cash                                                                                                   |                                                                                                                                                     |                                                                                                                                               | 75,753                                                                                                  |              |            |            | 75,186     |           
|                                                                                                   | Investments in unconsolidated joint ventures                                                                                          |                                                                                                                                                     |                                                                                                                                               | 967,973                                                                                                 |              |            |            | 1,127,232  |           
|                                                                                                   | Deferred financing costs (net of accumulated
    amortization of $57,550 and $48,176, respectively)                                   |                                                                                                                                                     |                                                                                                                                               | 67,263                                                                                                  |              |            |            | 64,337     |           
|                                                                                                   | Deferred leasing costs and other related
    intangibles (net of accumulated amortization of $187,299 and
    $157,445, respectively) |                                                                                                                                                     |                                                                                                                                               | 360,552                                                                                                 |              |            |            | 314,568    |           
|                                                                                                   | Prepaid expenses and other assets (net of
    discounts of $3,092 and $66,200, respectively)                                          |                                                                                                                                                     |                                                                                                                                               | 219,612                                                                                                 |              |            |            | 344,940    |           
|                                                                                                   |                                                                                                                                       |                                                                                                                                                     |                                                                                                                                               |                                                                                                         |              |           
|                                                                                                   |                                                                                                                                       |                                                                                                                                                     | Total Assets                                                                                                                                  |                                                                                                         | $            | 24,673,005 |            |            | $          | 24,189,010 |           
|                                                                                                   |                                                                                                                                       |                                                                                                                                                     |                                                                                                                                               |                                                                                                         |              |           
|Liabilities, Minority Interests, Mandatorily
    Redeemable Preferred Units and Partners Capital: |                                                                                                                                       |                                                                                                                                                     |                                                                                                                                               |                                                                                                        
|                                                                                                   | Liabilities:                                                                                                                          |                                                                                                                                                     |                                                                                                                                               |                                                                                                         |              |            |            |            |           
|                                                                                                   |                                                                                                                                       | Mortgage debt (including a net (discount) of
    $(13,957) and $(13,663), respectively)                                                             |                                                                                                                                               | $                                                                                                       | 2,838,382    |            |            | $          | 2,315,889  |           
|                                                                                                   |                                                                                                                                       | Unsecured notes (including a net (discount)/
    premium of $(72,843) and $12,412, respectively)                                                    |                                                                                                                                               |                                                                                                         | 8,942,999    |            |            |            | 8,828,912  |           
|                                                                                                   |                                                                                                                                       | Line of credit                                                                                                                                      |                                                                                                                                               |                                                                                                         | 376,300      |            |            |            | 334,000    |           
|                                                                                                   |                                                                                                                                       | Accounts payable and accrued expenses                                                                                                               |                                                                                                                                               |                                                                                                         | 479,813      |            |            |            | 573,069    |           
|                                                                                                   |                                                                                                                                       | Distribution payable                                                                                                                                |                                                                                                                                               |                                                                                                         | 229,595      |            |            |            | 3,899      |           
|                                                                                                   |                                                                                                                                       | Other liabilities (net of a (discount) of
    $(30,006) and $0, respectively)                                                                       |                                                                                                                                               |                                                                                                         | 490,987      |            |            |            | 398,273    |           
|                                                                                                   |                                                                                                                                       | Commitments and contingencies                                                                                                                       |                                                                                                                                               |                                                                                                         |             |            |            |            |           |           
|                                                                                                   |                                                                                                                                       |                                                                                                                                                     |                                                                                                                                               |                                                                                                         |              |           
|                                                                                                   |                                                                                                                                       |                                                                                                                                                     |                                                                                                                                               | Total Liabilities                                                                                       |              |            | 13,358,076 |            |            |            | 12,454,042 | 
|                                                                                                   |                                                                                                                                       |                                                                                                                                                     |                                                                                                                                               |                                                                                                         |              |           
|                                                                                                   | Minority interests  partially owned
    properties                                                                                   |                                                                                                                                                     |                                                                                                                                               | 181,046                                                                                                 |              |            |            | 183,863    |           
|                                                                                                   |                                                                                                                                       |                                                                                                                                                     |                                                                                                                                               |                                                                                                         |              |           
|                                                                                                   | Mandatorily Redeemable Preferred Units:                                                                                               |                                                                                                                                                     |                                                                                                                                               |                                                                                                         |              |            |            |            |           
|                                                                                                   |                                                                                                                                       | 5.25% Series B Convertible, Cumulative
    Redeemable Preferred Units, liquidation preference
    $50.00 per unit, 5,990,000 issued and outstanding |                                                                                                                                               |                                                                                                         | 299,500      |            |            |            | 299,500    |           
|                                                                                                   |                                                                                                                                       |                                                                                                                                                     |                                                                                                                                               |                                                                                                         |              |           
|                                                                                                   | Partners Capital:                                                                                                                    |                                                                                                                                                     |                                                                                                                                               |                                                                                                         |              |            |            |            |           
|                                                                                                   |                                                                                                                                       | Preferred Units, 100,000,000 authorized:                                                                                                            |                                                                                                                                               |                                                                                                         |              |            |            |            |            |           
|                                                                                                   |                                                                                                                                       |                                                                                                                                                     | 8.625% Series C Cumulative Redeemable
    Preferred Units, liquidation preference $25.00 per unit, 0
    and 4,562,900 issued and outstanding |                                                                                                         |              |           |            |            |            | 114,073    |           
|                                                                                                   |                                                                                                                                       |                                                                                                                                                     | 7.75% Series G Cumulative Redeemable
    Preferred Units, liquidation preference $25.00 per unit,
    8,500,000 issued and outstanding        |                                                                                                         |              | 212,500    |            |            |            | 212,500    |           
|                                                                                                   |                                                                                                                                       | Other Partners Capital:                                                                                                                            |                                                                                                                                               |                                                                                                         |              |            |            |            |            |           
|                                                                                                   |                                                                                                                                       |                                                                                                                                                     | General Partners Capital                                                                                                                      |                                                                                                         |              | 82,717     |            |            |            | 85,086     |           
|                                                                                                   |                                                                                                                                       |                                                                                                                                                     | Limited Partners Capital                                                                                                                      |                                                                                                         |              | 10,609,228 |            |            |            | 10,855,488 |           
|                                                                                                   |                                                                                                                                       |                                                                                                                                                     | Deferred compensation                                                                                                                         |                                                                                                         |              | (3,715     | )          |            |            | (5,889     | )         
|                                                                                                   |                                                                                                                                       |                                                                                                                                                     | Accumulated other comprehensive loss (net of
    accumulated amortization of $1,726 and $(73), respectively)                                  |                                                                                                         |              | (66,347    | )          |            |            | (9,653     | )         
|                                                                                                   |                                                                                                                                       |                                                                                                                                                     |                                                                                                                                               |                                                                                                         |              |           
|                                                                                                   |                                                                                                                                       |                                                                                                                                                     |                                                                                                                                               | Total Partners Capital                                                                                 |              |            | 10,834,383 |            |            |            | 11,251,605 | 
|                                                                                                   |                                                                                                                                       |                                                                                                                                                     |                                                                                                                                               |                                                                                                         |              |           
|                                                                                                   |                                                                                                                                       |                                                                                                                                                     |                                                                                                                                               | Total Liabilities, Minority Interests,
    Mandatorily Redeemable Preferred Units and Partners Capital |              | $          | 24,673,005 |            |            | $          | 24,189,010 | 
|                                                                                                   |                                                                                                                                       |                                                                                                                                                     |                                                                                                                                               |                                                                                                         |              |           

See accompanying notes.

2



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##### Table of Contents



EOP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF
OPERATIONS

(Unaudited)


|                                                                                                                                   |                                                                                  |                                                                      |                                |             |                          |          |         |             |          |          |         |             |           |          |         |             |           |          |  
|---------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------- | -------------------------------------------------------------------- | ------------------------------ | ----------- | ------------------------ | -------- | ------- | ----------- | -------- | -------- | ------- | ----------- | --------- | -------- | ------- | ----------- | --------- | -------- | -
|                                                                                                                                   |                                                                                  |                                                                      |                                |            
|                                                                                                                                   |                                                                                  | For the three months ended                                           |                                |             | For the six months ended |         
|                                                                                                                                   |                                                                                  | June 30,                                                             |                                |             | June 30,                 |         
|                                                                                                                                   |                                                                                  |                                                                      |                                |             |                          |         
|(Dollars in thousands, except per unit amounts)                                                                                    |                                                                                  | 2004                                                                 |                                |             | 2003                     |          |         | 2004        |          |          | 2003    |            
|                                                                                                                                   |                                                                                  |                                                                      |                                |             |                          |          |         |             |          |          |         |            
|Revenues:                                                                                                                          |                                                                                  |                                                                      |                                |             |                          |          |         |             |          |          |         |             |           |          |         |            
|                                                                                                                                   | Rental                                                                           |                                                                      | $                              | 639,023     |                          |          | $       | 627,276     |          |          | $       | 1,269,519   |           |          | $       | 1,256,467   |          
|                                                                                                                                   | Tenant reimbursements                                                            |                                                                      |                                | 109,683     |                          |          |         | 107,741     |          |          |         | 211,800     |           |          |         | 209,500     |          
|                                                                                                                                   | Parking                                                                          |                                                                      |                                | 29,229      |                          |          |         | 27,968      |          |          |         | 58,135      |           |          |         | 54,527      |          
|                                                                                                                                   | Other                                                                            |                                                                      |                                | 13,749      |                          |          |         | 14,119      |          |          |         | 39,648      |           |          |         | 33,658      |          
|                                                                                                                                   | Fee income                                                                       |                                                                      |                                | 3,849       |                          |          |         | 3,526       |          |          |         | 6,909       |           |          |         | 8,462       |          
|                                                                                                                                   |                                                                                  |                                                                      |                                |             |                          |          |         |             |          |          |         |            
|                                                                                                                                   |                                                                                  | Total revenues                                                       |                                |             | 795,533                  |          |         |             | 780,630  |          |         |             | 1,586,011 |          |         |             | 1,562,614 |         
|                                                                                                                                   |                                                                                  |                                                                      |                                |             |                          |          |         |             |          |          |         |            
|Expenses:                                                                                                                          |                                                                                  |                                                                      |                                |             |                          |          |         |             |          |          |         |             |           |          |         |            
|                                                                                                                                   | Depreciation                                                                     |                                                                      |                                | 170,824     |                          |          |         | 155,878     |          |          |         | 339,387     |           |          |         | 309,268     |          
|                                                                                                                                   | Amortization                                                                     |                                                                      |                                | 18,681      |                          |          |         | 14,813      |          |          |         | 36,303      |           |          |         | 29,013      |          
|                                                                                                                                   | Real estate taxes                                                                |                                                                      |                                | 100,869     |                          |          |         | 89,726      |          |          |         | 184,660     |           |          |         | 178,511     |          
|                                                                                                                                   | Insurance                                                                        |                                                                      |                                | 9,037       |                          |          |         | 6,380       |          |          |         | 19,048      |           |          |         | 12,385      |          
|                                                                                                                                   | Repairs and maintenance                                                          |                                                                      |                                | 83,464      |                          |          |         | 78,727      |          |          |         | 162,787     |           |          |         | 156,568     |          
|                                                                                                                                   | Property operating                                                               |                                                                      |                                | 102,023     |                          |          |         | 101,185     |          |          |         | 208,312     |           |          |         | 197,675     |          
|                                                                                                                                   | Ground rent                                                                      |                                                                      |                                | 5,050       |                          |          |         | 4,870       |          |          |         | 10,396      |           |          |         | 9,466       |          
|                                                                                                                                   | Corporate general and administrative                                             |                                                                      |                                | 13,709      |                          |          |         | 17,655      |          |          |         | 25,018      |           |          |         | 31,157      |          
|                                                                                                                                   |                                                                                  |                                                                      |                                |             |                          |          |         |             |          |          |         |            
|                                                                                                                                   |                                                                                  | Total expenses                                                       |                                |             | 503,657                  |          |         |             | 469,234  |          |         |             | 985,911   |          |         |             | 924,043   |         
|                                                                                                                                   |                                                                                  |                                                                      |                                |             |                          |          |         |             |          |          |         |            
|                                                                                                                                   |                                                                                  | Operating income                                                     |                                |             | 291,876                  |          |         |             | 311,396  |          |         |             | 600,100   |          |         |             | 638,571   |         
|                                                                                                                                   |                                                                                  |                                                                      |                                |             |                          |          |         |             |          |          |         |            
|Other income / (expense):                                                                                                          |                                                                                  |                                                                      |                                |             |                          |          |         |             |          |          |         |             |           |          |         |            
|                                                                                                                                   | Interest/ dividend income                                                        |                                                                      |                                | 2,410       |                          |          |         | 3,666       |          |          |         | 3,730       |           |          |         | 6,893       |          
|                                                                                                                                   | Realized gain on settlement of derivatives and
    sale of marketable securities |                                                                      |                                | 24,016      |                          |          |         |            |          |          |         | 24,016      |           |          |         | 8,143       |          
|                                                                                                                                   | Interest:                                                                        |                                                                      |                                |             |                          |          |         |             |          |          |         |             |           |          |         |             |          
|                                                                                                                                   |                                                                                  | Expense incurred                                                     |                                |             | (208,970                 | )        |         |             | (206,492 | )        |         |             | (414,401  | )        |         |             | (411,703  | )       
|                                                                                                                                   |                                                                                  | Amortization of deferred financing costs and
    prepayment expenses |                                |             | (2,177                   | )        |         |             | (2,091   | )        |         |             | (4,348    | )        |         |             | (3,783    | )       
|                                                                                                                                   |                                                                                  |                                                                      |                                |             |                          |          |         |             |          |          |         |            
|                                                                                                                                   |                                                                                  |                                                                      | Total other income / (expense) |             |                          | (184,721 | )       |             |          | (204,917 | )       |             |           | (391,003 | )       |             |           | (400,450 | )
|                                                                                                                                   |                                                                                  |                                                                      |                                |             |                          |          |         |             |          |          |         |            
|Income before income taxes, allocation to
    minority interests, and income from investments in
    unconsolidated joint ventures |                                                                                  |                                                                      | 107,155                        |             |                          |          | 106,479 |             |          |          | 209,097 |             |           |          | 238,121 |            
|Income taxes                                                                                                                       |                                                                                  |                                                                      | (1,355                         | )           |                          |          | (1,574  | )           |          |          | (1,092  | )           |           |          | (2,570  | )          
|Minority interests  partially owned
    properties                                                                                |                                                                                  |                                                                      | (2,341                         | )           |                          |          | (1,841  | )           |          |          | (4,907  | )           |           |          | (4,347  | )          
|Income from investments in unconsolidated joint
    ventures                                                                       |                                                                                  |                                                                      | 14,739                         |             |                          |          | 20,946  |             |          |          | 30,457  |             |           |          | 41,710  |            
|                                                                                                                                   |                                                                                  |                                                                      |                                |             |                          |          |         |             |          |          |         |            
|Income from continuing operations                                                                                                  |                                                                                  |                                                                      | 118,198                        |             |                          |          | 124,010 |             |          |          | 233,555 |             |           |          | 272,914 |            
|Discontinued operations (including net gain on
    sales of real estate of $1,927, $44,448, $4,122, and $51,725,
    respectively) |                                                                                  |                                                                      | 3,420                          |             |                          |          | 59,773  |             |          |          | 7,748   |             |           |          | 85,361  |            
|                                                                                                                                   |                                                                                  |                                                                      |                                |             |                          |          |         |             |          |          |         |            
|Income before cumulative effect of a change in
    accounting principle                                                            |                                                                                  |                                                                      | 121,618                        |             |                          |          | 183,783 |             |          |          | 241,303 |             |           |          | 358,275 |            
|Cumulative effect of a change in accounting
    principle                                                                          |                                                                                  |                                                                      |                               |             |                          |          |        |             |          |          | (33,697 | )           |           |          |        |            
|                                                                                                                                   |                                                                                  |                                                                      |                                |             |                          |          |         |             |          |          |         |            
|Net income                                                                                                                         |                                                                                  |                                                                      | 121,618                        |             |                          |          | 183,783 |             |          |          | 207,606 |             |           |          | 358,275 |            
|Preferred distributions                                                                                                            |                                                                                  |                                                                      | (8,944                         | )           |                          |          | (15,395 | )           |          |          | (21,692 | )           |           |          | (30,856 | )          
|                                                                                                                                   |                                                                                  |                                                                      |                                |             |                          |          |         |             |          |          |         |            
|Net income available to unitholders                                                                                                |                                                                                  | $                                                                    | 112,674                        |             |                          | $        | 168,388 |             |          | $        | 185,914 |             |           | $        | 327,419 |            
|                                                                                                                                   |                                                                                  |                                                                      |                                |             |                          |          |         |             |          |          |         |            
|Earnings per unit  basic:                                                                                                         |                                                                                  |                                                                      |                                |             |                          |          |         |             |          |          |         |             |           |          |         |            
|                                                                                                                                   | Income from continuing operations per unit                                       |                                                                      | $                              | 0.24        |                          |          | $       | 0.24        |          |          | $       | 0.47        |           |          | $       | 0.53        |          
|                                                                                                                                   |                                                                                  |                                                                      |                                |             |                          |          |         |             |          |          |         |            
|                                                                                                                                   | Net income available to unitholders per unit                                     |                                                                      | $                              | 0.25        |                          |          | $       | 0.37        |          |          | $       | 0.41        |           |          | $       | 0.72        |          
|                                                                                                                                   |                                                                                  |                                                                      |                                |             |                          |          |         |             |          |          |         |            
|                                                                                                                                   | Weighted average Units outstanding                                               |                                                                      |                                | 449,245,505 |                          |          |         | 450,216,263 |          |          |         | 448,902,096 |           |          |         | 454,254,440 |          
|                                                                                                                                   |                                                                                  |                                                                      |                                |             |                          |          |         |             |          |          |         |            
|Earnings per unit 
    diluted:                                                                                                   |                                                                                  |                                                                      |                                |             |                          |          |         |             |          |          |         |             |           |          |         |            
|                                                                                                                                   | Income from continuing operations per unit                                       |                                                                      | $                              | 0.24        |                          |          | $       | 0.24        |          |          | $       | 0.47        |           |          | $       | 0.53        |          
|                                                                                                                                   |                                                                                  |                                                                      |                                |             |                          |          |         |             |          |          |         |            
|                                                                                                                                   | Net income available to unitholders per unit                                     |                                                                      | $                              | 0.25        |                          |          | $       | 0.37        |          |          | $       | 0.41        |           |          | $       | 0.72        |          
|                                                                                                                                   |                                                                                  |                                                                      |                                |             |                          |          |         |             |          |          |         |            
|                                                                                                                                   | Weighted average Units outstanding and dilutive
    potential units              |                                                                      |                                | 450,533,841 |                          |          |         | 452,010,570 |          |          |         | 450,840,364 |           |          |         | 455,646,938 |          
|                                                                                                                                   |                                                                                  |                                                                      |                                |             |                          |          |         |             |          |          |         |            
|Distributions declared per Unit
    outstanding                                                                                    |                                                                                  | $                                                                    | 0.50                           |             |                          | $        | 0.50    |             |          | $        | 1.00    |             |           | $        | 1.00    |            
|                                                                                                                                   |                                                                                  |                                                                      |                                |             |                          |          |         |             |          |          |         |            

See accompanying notes.

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##### Table of Contents



EOP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF NET COMPREHENSIVE
INCOME

(Unaudited)


|                                   |                                                                                                 |                      |         |        |                    |   |         |         |   |   |         |         |   |   |         |         |  
|---------------------------------- | ----------------------------------------------------------------------------------------------- | -------------------- | ------- | ------ | ------------------ | - | ------- | ------- | - | - | ------- | ------- | - | - | ------- | ------- | -
|                                   |                                                                                                 |                      |         |       
|                                   |                                                                                                 | For the three months |         |        | For the six months |  
|                                   |                                                                                                 | ended June 30,       |         |        | ended June 30,     |  
|                                   |                                                                                                 |                      |         |        |                    |  
|(Dollars in thousands)             |                                                                                                 | 2004                 |         |        | 2003               |   |         | 2004    |   |   | 2003    |        
|                                   |                                                                                                 |                      |         |        |                    |   |         |         |   |   |         |        
|Net income                         |                                                                                                 | $                    | 121,618 |        |                    | $ | 183,783 |         |   | $ | 207,606 |         |   | $ | 358,275 |        
|Other comprehensive income (loss): |                                                                                                 |                      |         |        |                    |   |         |         |   |   |         |         |   |   |         |        
|                                   | Unrealized holding losses on forward starting
    interest rate swaps                           |                      |         |       |                    |   |         | (47,899 | ) |   |         | (22,569 | ) |   |         | (55,903 | )
|                                   | Reversal of unrealized holding loss on settlement
    of forward starting interest rate swaps   |                      |         | 11,515 |                    |   |         |        |   |   |         | 33,017  |   |   |         | 5,942   |  
|                                   | (Payments) proceeds from settlement of forward
    starting interest rate swaps                 |                      |         |       |                    |   |         |        |   |   |         | (68,918 | ) |   |         | 768     |  
|                                   | Amortization of payments/(proceeds) from
    settlement of forward starting interest rate swaps |                      |         | 1,703  |                    |   |         | (19     | ) |   |         | 1,799   |   |   |         | (35     | )
|                                   | Unrealized holding (losses) gains from
    investments arising during the period                |                      |         | (160   | )                  |   |         | 302     |   |   |         | (24     | ) |   |         | 212     |  
|                                   |                                                                                                 |                      |         |        |                    |   |         |         |   |   |         |        
|Net comprehensive income           |                                                                                                 | $                    | 134,676 |        |                    | $ | 136,167 |         |   | $ | 150,911 |         |   | $ | 309,259 |        
|                                   |                                                                                                 |                      |         |        |                    |   |         |         |   |   |         |        

See accompanying notes.

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##### Table of Contents



EOP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH
FLOWS

(Unaudited)


|                       |                                                                                       |                                                                                                                                               |                                                                  |         |                          |         |   |         |         |         |      |         |         |         |   |         |         |         |  
|---------------------- | ------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------- | ------- | ------------------------ | ------- | - | ------- | ------- | ------- | ---- | ------- | ------- | ------- | - | ------- | ------- | ------- | -
|                       |                                                                                       |                                                                                                                                               |                                                                  |        
|                       |                                                                                       | For the three months ended                                                                                                                    |                                                                  |         | For the six months ended |        
|                       |                                                                                       | June 30,                                                                                                                                      |                                                                  |         | June 30,                 |        
|                       |                                                                                       |                                                                                                                                               |                                                                  |         |                          |        
|(Dollars in thousands) |                                                                                       | 2004                                                                                                                                          |                                                                  |         | 2003                     |         |   | 2004    |         |         | 2003 |        
|                       |                                                                                       |                                                                                                                                               |                                                                  |         |                          |         |   |         |         |         |      |        
|Operating Activities:  |                                                                                       |                                                                                                                                               |                                                                  |         |                          |         |   |         |         |         |      |         |         |         |   |        
|                       | Net income                                                                            |                                                                                                                                               | $                                                                | 121,618 |                          |         | $ | 183,783 |         |         | $    | 207,606 |         |         | $ | 358,275 |        
|                       | Adjustments to reconcile net income to net cash
    provided by operating activities: |                                                                                                                                               |                                                                  |         |                          |         |   |         |         |         |      |         |         |         |   |         |        
|                       |                                                                                       | Revenue recognized related to acquired lease
    obligations, net                                                                             |                                                                  |         | 387                      |         |   |         |        |         |      |         | 757     |         |   |         |        |        
|                       |                                                                                       | Amortization of discounts included in interest/
    dividend income                                                                           |                                                                  |         | (89                      | )       |   |         | (90     | )       |      |         | (178    | )       |   |         | (179    | )      
|                       |                                                                                       | Depreciation and amortization (including
    discontinued operations)                                                                         |                                                                  |         | 193,076                  |         |   |         | 178,286 |         |      |         | 383,057 |         |   |         | 354,497 |        
|                       |                                                                                       | Ineffective portion of swap settlement payment
    included in interest expense                                                               |                                                                  |         |                         |         |   |         |        |         |      |         | 212     |         |   |         |        |        
|                       |                                                                                       | Amortization of (premiums)/ discounts on
    unsecured notes and settled interest rate protection agreements
    included in interest expense |                                                                  |         | (731                     | )       |   |         | (5,000  | )       |      |         | (3,436  | )       |   |         | (10,298 | )      
|                       |                                                                                       | Compensation expense related to restricted shares
    and stock options issued to employees by Equity Office                                  |                                                                  |         | 4,812                    |         |   |         | 6,306   |         |      |         | 10,245  |         |   |         | 9,436   |        
|                       |                                                                                       | Income from investments in unconsolidated joint
    ventures                                                                                  |                                                                  |         | (14,739                  | )       |   |         | (20,946 | )       |      |         | (30,457 | )       |   |         | (41,710 | )      
|                       |                                                                                       | Net distributions from unconsolidated joint
    ventures                                                                                      |                                                                  |         | 19,131                   |         |   |         | 24,599  |         |      |         | 29,006  |         |   |         | 39,625  |        
|                       |                                                                                       | Net gain on sales of real estate (including
    discontinued operations)                                                                      |                                                                  |         | (1,927                   | )       |   |         | (44,448 | )       |      |         | (4,122  | )       |   |         | (51,725 | )      
|                       |                                                                                       | Cumulative effect of a change in accounting
    principle                                                                                     |                                                                  |         |                         |         |   |         |        |         |      |         | 33,697  |         |   |         |        |        
|                       |                                                                                       | Provision for doubtful accounts                                                                                                               |                                                                  |         | 1,543                    |         |   |         | 3,910   |         |      |         | 739     |         |   |         | 11,438  |        
|                       |                                                                                       | Income allocated to minority interests                                                                                                        |                                                                  |         | 2,553                    |         |   |         | 1,851   |         |      |         | 5,127   |         |   |         | 4,367   |        
|                       |                                                                                       | Changes in assets and liabilities:                                                                                                            |                                                                  |         |                          |         |   |         |         |         |      |         |         |         |   |         |         |        
|                       |                                                                                       |                                                                                                                                               | Decrease (increase) in rents receivables                         |         |                          | 10,214  |   |         |         | (3,800  | )    |         |         | 11,080  |   |         |         | (8,339  | )
|                       |                                                                                       |                                                                                                                                               | Increase in deferred rent receivables                            |         |                          | (23,185 | ) |         |         | (13,811 | )    |         |         | (50,906 | ) |         |         | (29,612 | )
|                       |                                                                                       |                                                                                                                                               | (Decrease) increase in prepaid expenses and other
    assets     |         |                          | (6,652  | ) |         |         | (14,623 | )    |         |         | 49,913  |   |         |         | 7,681   |  
|                       |                                                                                       |                                                                                                                                               | Increase (decrease) in accounts payable and
    accrued expenses |         |                          | 58,295  |   |         |         | 59,066  |      |         |         | (57,915 | ) |         |         | (6,770  | )
|                       |                                                                                       |                                                                                                                                               | Decrease in other liabilities                                    |         |                          | (21,611 | ) |         |         | (24,778 | )    |         |         | (20,014 | ) |         |         | (16,208 | )
|                       |                                                                                       |                                                                                                                                               |                                                                  |         |                          |         |   |         |         |         |      |        
|                       |                                                                                       |                                                                                                                                               | Net cash provided by operating activities                        |         |                          | 342,695 |   |         |         | 330,305 |      |         |         | 564,411 |   |         |         | 620,478 |  
|                       |                                                                                       |                                                                                                                                               |                                                                  |         |                          |         |   |         |         |         |      |        



See accompanying notes.


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##### Table of Contents



EOP OPERATING LIMITED PARTNERSHIP


CONSOLIDATED STATEMENTS OF CASH
FLOWS  (Continued)

(Unaudited)


|                       |                                                                                   |                                                          |  |            |                          |   |  |            |          |   |      |            |          |   |  |            |          |  
|---------------------- | --------------------------------------------------------------------------------- | -------------------------------------------------------- |  | ---------- | ------------------------ | - |  | ---------- | -------- | - | ---- | ---------- | -------- | - |  | ---------- | -------- | -
|                       |                                                                                   |                                                          |  |           
|                       |                                                                                   | For the three months ended                               |  |            | For the six months ended |  
|                       |                                                                                   | June 30,                                                 |  |            | June 30,                 |  
|                       |                                                                                   |                                                          |  |            |                          |  
|(Dollars in thousands) |                                                                                   | 2004                                                     |  |            | 2003                     |   |  | 2004       |          |   | 2003 |           
|                       |                                                                                   |                                                          |  |            |                          |   |  |            |          |   |      |           
|Investing Activities:  |                                                                                   |                                                          |  |            |                          |   |  |            |          |   |      |            |          |   |  |           
|                       | Property acquisitions                                                             |                                                          |  | (56,704    | )                        |   |  |           |          |   |      | (119,481   | )        |   |  |           |         
|                       | Property dispositions                                                             |                                                          |  | 215,280    |                          |   |  | 222,817    |          |   |      | 233,469    |          |   |  | 265,597    |         
|                       | Capital and tenant improvements                                                   |                                                          |  | (122,145   | )                        |   |  | (95,972    | )        |   |      | (243,353   | )        |   |  | (174,920   | )       
|                       | Lease commissions and other costs                                                 |                                                          |  | (29,051    | )                        |   |  | (34,829    | )        |   |      | (60,875    | )        |   |  | (74,049    | )       
|                       | Decrease in escrow deposits and restricted cash                                   |                                                          |  | 15,144     |                          |   |  | 28,381     |          |   |      | 47,211     |          |   |  | 14,832     |         
|                       | Investments in unconsolidated joint ventures                                      |                                                          |  |           |                          |   |  | (25,162    | )        |   |      |           |          |   |  | (32,018    | )       
|                       | Investments in notes receivable                                                   |                                                          |  |           |                          |   |  |           |          |   |      |           |          |   |  | (96        | )       
|                       | Repayments of notes receivable                                                    |                                                          |  |           |                          |   |  | 661        |          |   |      |           |          |   |  | 1,395      |         
|                       |                                                                                   |                                                          |  |            |                          |   |  |            |          |   |      |           
|                       |                                                                                   | Net cash provided by (used for) investing
    activities |  |            | 22,524                   |   |  |            | 95,896   |   |      |            | (143,029 | ) |  |            | 741      |  
|                       |                                                                                   |                                                          |  |            |                          |   |  |            |          |   |      |           
|Financing Activities:  |                                                                                   |                                                          |  |            |                          |   |  |            |          |   |      |            |          |   |  |           
|                       | Principal payments on mortgage debt                                               |                                                          |  | (36,950    | )                        |   |  | (10,507    | )        |   |      | (209,239   | )        |   |  | (20,945    | )       
|                       | Proceeds from unsecured notes                                                     |                                                          |  | 49,035     |                          |   |  |           |          |   |      | 1,040,275  |          |   |  | 494,810    |         
|                       | Repayment of unsecured notes                                                      |                                                          |  | (450,000   | )                        |   |  |           |          |   |      | (850,000   | )        |   |  | (300,000   | )       
|                       | Proceeds from lines of credit                                                     |                                                          |  | 1,437,400  |                          |   |  | 1,346,600  |          |   |      | 2,886,000  |          |   |  | 1,716,400  |         
|                       | Principal payments on lines of credit                                             |                                                          |  | (1,066,900 | )                        |   |  | (1,063,700 | )        |   |      | (2,843,700 | )        |   |  | (1,639,200 | )       
|                       | Payments of loan costs                                                            |                                                          |  | (201       | )                        |   |  | (8,332     | )        |   |      | (1,506     | )        |   |  | (8,548     | )       
|                       | Settlement of interest rate swap agreements                                       |                                                          |  |           |                          |   |  |           |          |   |      | (69,130    | )        |   |  | 768        |         
|                       | Distributions to minority interests in partially
    owned properties             |                                                          |  | (13,663    | )                        |   |  | (2,977     | )        |   |      | (15,491    | )        |   |  | (5,683     | )       
|                       | Payment of offering costs                                                         |                                                          |  | (22        | )                        |   |  | (151       | )        |   |      | (42        | )        |   |  | (163       | )       
|                       | Proceeds from exercise of stock options                                           |                                                          |  | 747        |                          |   |  | 6,263      |          |   |      | 39,803     |          |   |  | 7,627      |         
|                       | Distributions to unitholders                                                      |                                                          |  | (224,408   | )                        |   |  | (228,060   | )        |   |      | (225,244   | )        |   |  | (228,683   | )       
|                       | Cancellation of Units through Equity
    Offices common share repurchase program |                                                          |  | (32,808    | )                        |   |  | (201,570   | )        |   |      | (36,583    | )        |   |  | (353,444   | )       
|                       | Redemption of Units                                                               |                                                          |  | (1,071     | )                        |   |  | (2,131     | )        |   |      | (1,866     | )        |   |  | (2,209     | )       
|                       | Redemption of preferred units                                                     |                                                          |  |           |                          |   |  | (250,000   | )        |   |      | (114,073   | )        |   |  | (250,000   | )       
|                       | Payment of preferred distributions                                                |                                                          |  | (8,049     | )                        |   |  | (17,364    | )        |   |      | (16,671    | )        |   |  | (32,825    | )       
|                       |                                                                                   |                                                          |  |            |                          |   |  |            |          |   |      |           
|                       |                                                                                   | Net cash used for financing activities                   |  |            | (346,890                 | ) |  |            | (431,929 | ) |      |            | (417,467 | ) |  |            | (622,095 | )
|                       |                                                                                   |                                                          |  |            |                          |   |  |            |          |   |      |           



See accompanying notes.


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##### Table of Contents



EOP OPERATING LIMITED PARTNERSHIP


CONSOLIDATED STATEMENTS OF CASH
FLOWS  (Continued)

(Unaudited)


|                                                 |                                                                                                                                                                   |                                                                                                                                               |                                                             |         |                          |   |   |         |   |   |      |         |         |          |   |         |         |   | 
|------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------- | ------- | ------------------------ | - | - | ------- | - | - | ---- | ------- | ------- | -------- | - | ------- | ------- | - | 
|                                                 |                                                                                                                                                                   |                                                                                                                                               |                                                             |        
|                                                 |                                                                                                                                                                   | For the three months ended                                                                                                                    |                                                             |         | For the six months ended |  
|                                                 |                                                                                                                                                                   | June 30,                                                                                                                                      |                                                             |         | June 30,                 |  
|                                                 |                                                                                                                                                                   |                                                                                                                                               |                                                             |         |                          |  
|(Dollars in thousands)                           |                                                                                                                                                                   | 2004                                                                                                                                          |                                                             |         | 2003                     |   |   | 2004    |   |   | 2003 |        
|                                                 |                                                                                                                                                                   |                                                                                                                                               |                                                             |         |                          |   |   |         |   |   |      |        
|                                                 | Net increase (decrease) in cash and cash
    equivalents                                                                                                          |                                                                                                                                               |                                                             | 18,329  |                          |   |   | (5,728  | ) |   |      | 3,915   |         |          |   | (876    | )      
|                                                 | Cash and cash equivalents at the beginning of the
    period                                                                                                      |                                                                                                                                               |                                                             | 54,984  |                          |   |   | 63,323  |   |   |      | 69,398  |         |          |   | 58,471  |        
|                                                 |                                                                                                                                                                   |                                                                                                                                               |                                                             |         |                          |   |   |         |   |   |      |        
|                                                 | Cash and cash equivalents at the end of the period                                                                                                                |                                                                                                                                               | $                                                           | 73,313  |                          |   | $ | 57,595  |   |   | $    | 73,313  |         |          | $ | 57,595  |        
|                                                 |                                                                                                                                                                   |                                                                                                                                               |                                                             |         |                          |   |   |         |   |   |      |        
|Supplemental Information:                        |                                                                                                                                                                   |                                                                                                                                               |                                                             |         |                          |   |   |         |   |   |      |         |         |          |   |        
|                                                 | Interest paid during the period, including a
    reduction of interest expense for capitalized interest of $1,633
    and $1,201, $3,663 and $4,799, respectively |                                                                                                                                               | $                                                           | 166,486 |                          |   | $ | 172,397 |   |   | $    | 414,971 |         |          | $ | 420,737 |        
|                                                 |                                                                                                                                                                   |                                                                                                                                               |                                                             |         |                          |   |   |         |   |   |      |        
|Non-Cash Investing and Financing
    Activities: |                                                                                                                                                                   |                                                                                                                                               |                                                             |         |                          |   |   |         |   |   |      |         |         |          |   |        
|                                                 | Investing Activities:                                                                                                                                             |                                                                                                                                               |                                                             |         |                          |   |   |         |   |   |      |         |         |          |   |         |        
|                                                 |                                                                                                                                                                   | Escrow deposits related to property dispositions                                                                                              |                                                             | $       | (30,616                  | ) |   | $       |  |   |      | $       | (30,616 | )        |   | $       | (19,339 | )
|                                                 |                                                                                                                                                                   |                                                                                                                                               |                                                             |         |                          |   |   |         |   |   |      |        
|                                                 |                                                                                                                                                                   | Mortgage loan repayment as a result of a property
    disposition (including prepayment expense of $375 in 2004)                              |                                                             | $       | (5,830                   | ) |   | $       |  |   |      | $       | (5,830  | )        |   | $       | (16,279 | )
|                                                 |                                                                                                                                                                   |                                                                                                                                               |                                                             |         |                          |   |   |         |   |   |      |        
|                                                 |                                                                                                                                                                   | Mortgage loan assumed upon acquisition of property                                                                                            |                                                             | $       |                         |   |   | $       |  |   |      | $       | 82,970  |          |   | $       |        |  
|                                                 |                                                                                                                                                                   |                                                                                                                                               |                                                             |         |                          |   |   |         |   |   |      |        
|                                                 |                                                                                                                                                                   | Units issued in connection with property
    acquisition                                                                                      |                                                             | $       | 50                       |   |   | $       |  |   |      | $       | 50      |          |   | $       |        |  
|                                                 |                                                                                                                                                                   |                                                                                                                                               |                                                             |         |                          |   |   |         |   |   |      |        
|                                                 |                                                                                                                                                                   | Changes in accounts due to consolidation of
    existing interest in a property as a result of acquiring the
    remaining economic interest: |                                                             |         |                          |   |   |         |   |   |      |         |         |          |   |         |         |  
|                                                 |                                                                                                                                                                   |                                                                                                                                               | Decrease in investment in unconsolidated joint
    ventures |         | $                        |  |   |         | $ |  |      |         | $       | (157,659 | ) |         | $       |  | 
|                                                 |                                                                                                                                                                   |                                                                                                                                               |                                                             |         |                          |   |   |         |   |   |      |        
|                                                 |                                                                                                                                                                   |                                                                                                                                               | Increase in investment in real estate                       |         | $                        |  |   |         | $ |  |      |         | $       | 612,411  |   |         | $       |  | 
|                                                 |                                                                                                                                                                   |                                                                                                                                               |                                                             |         |                          |   |   |         |   |   |      |        
|                                                 |                                                                                                                                                                   |                                                                                                                                               | Increase in accumulated depreciation                        |         | $                        |  |   |         | $ |  |      |         | $       | (44,440  | ) |         | $       |  | 
|                                                 |                                                                                                                                                                   |                                                                                                                                               |                                                             |         |                          |   |   |         |   |   |      |        
|                                                 |                                                                                                                                                                   |                                                                                                                                               | Increase in mortgage debt                                   |         | $                        |  |   |         | $ |  |      |         | $       | (451,285 | ) |         | $       |  | 
|                                                 |                                                                                                                                                                   |                                                                                                                                               |                                                             |         |                          |   |   |         |   |   |      |        
|                                                 |                                                                                                                                                                   |                                                                                                                                               | Increase in other assets and liabilities                    |         | $                        |  |   |         | $ |  |      |         | $       | 40,973   |   |         | $       |  | 
|                                                 |                                                                                                                                                                   |                                                                                                                                               |                                                             |         |                          |   |   |         |   |   |      |        
|                                                 | Financing Activities:                                                                                                                                             |                                                                                                                                               |                                                             |         |                          |   |   |         |   |   |      |         |         |          |   |         |        
|                                                 |                                                                                                                                                                   | Mortgage loan repayment as a result of a property
    disposition (including prepayment expense of $375 in 2004)                              |                                                             | $       | 5,830                    |   |   | $       |  |   |      | $       | 5,830   |          |   | $       | 16,279  |  
|                                                 |                                                                                                                                                                   |                                                                                                                                               |                                                             |         |                          |   |   |         |   |   |      |        



See accompanying notes.


7



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##### Table of Contents



EOP OPERATING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Unaudited)


Our consolidated financial statements have been
prepared pursuant to the Securities and Exchange
Commissions (SEC) rules and regulations. The
following notes, which present interim disclosures as required
by the SEC, highlight significant changes to the notes to our
December 31, 2003 audited consolidated financial statements
and should be read together with the financial statements and
notes thereto included in our Form 10-K.



|         |                                              
|-------- | ---------------------------------------------
|NOTE 1  | BUSINESS AND FORMATION OF EOP
    PARTNERSHIP

EOP Operating Limited Partnership (EOP
Partnership) is a Delaware limited partnership. Our
general partner is Equity Office Properties Trust (Equity
Office), a Maryland real estate investment trust
(REIT). The use of the word we,
us, or our refers to EOP Partnership and
its subsidiaries, except where the context otherwise requires.
We were organized in 1996 to continue and expand the national
office property business organized by Mr. Samuel Zell, the
Chairman of the Board of Trustees of Equity Office, and to
complete the consolidation of our predecessors. Equity Office
completed its initial public offering (the IPO) on
July 11, 1997, having sold its common shares of beneficial
interest, $0.01 par value per share (Common
Shares). The net proceeds from the IPO were contributed to
us in exchange for units of partnership interest
(Units). Equity Office has elected to be taxed as a
REIT for federal income tax purposes and generally will not be
subject to federal income tax if it distributes 100% of its
taxable income and complies with a number of organizational
requirements.

We are a fully integrated, self-administered and
self-managed real estate company principally engaged, through
our subsidiaries, in owning, managing, leasing, acquiring and
developing office properties. At June 30, 2004, we owned or
had an interest in 683 office properties comprising
approximately 122.9 million rentable square feet of office
space in 18 states and the District of Columbia and were
located in 27 markets and 123 submarkets (the Office
Properties). On a weighted average basis, the Office
Properties were 86.3% occupied at June 30, 2004.
Approximately 42.1% of the rentable square feet is located in
central business districts and approximately 57.9% of the
rentable square feet is located in suburban markets. At
June 30, 2004, we also owned 37 industrial properties
comprising approximately 3.5 million square feet of
industrial space (the Industrial Properties and
together with the Office Properties, the Properties)
and approximately 0.3 million rentable square feet of
office properties under development. On a weighted average
basis, the Industrial Properties were 88.1% occupied at
June 30, 2004.



|         |                                               
|-------- | ----------------------------------------------
|NOTE 2  | SUMMARY OF SIGNIFICANT ACCOUNTING
    POLICIES



| |                      
| | ---------------------
| | Basis of Presentation

The consolidated financial statements represent
our financial condition and results of operations and those of
our subsidiaries. All intercompany transactions and balances
have been eliminated in consolidation. Property holding entities
and other subsidiaries of which we own 100% of the equity are
consolidated. For those joint ventures of which we own less than
100% of the equity interest, we consolidate the property if we
have the direct or indirect ability to make major decisions
about the entities activities based on the terms of the
respective joint venture agreements which specify the sharing of
participating and protective rights such as decisions regarding
major leases, encumbering the entities with debt and whether to
dispose of entities. We would also consolidate certain property
holding entities and other subsidiaries if we own less than a
100% equity interest if we are deemed to be the primary
beneficiary in a variable interest entity (as defined in FASB
Interpretation 46 Consolidation of Variable Interest
Entities, an Interpretation of ARB No. 51, as revised
(FIN 46(R))).

In May 2003, the Financial Accounting Standards
Board (FASB) issued Statement No. 150
Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity(Statement 150). Statement 150
establishes standards for classifying and measuring as
liabilities certain financial

8



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##### Table of Contents



EOP OPERATING LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

(Unaudited)


instruments that embody obligations of the issuer
and have characteristics of both liabilities and equity.
Statement 150 is effective for all financial instruments
created or modified after May 31, 2003, and otherwise is
effective at the beginning of the first interim period beginning
after June 15, 2003 (July 1, 2003 for calendar quarter
companies). We consolidate certain properties that are also
owned by unaffiliated parties that have noncontrolling
interests. In certain cases, the applicable joint venture
agreement provides for a contractual termination date of the
agreement based on certain specified events or dates.
Statement 150 requires the disclosure of the estimated
settlement value of these noncontrolling interests. As of
June 30, 2004 the estimated settlement value of these
noncontrolling interests approximated the book value of
approximately $166.8 million.



| |                 
| | ----------------
| | Use of Estimates

The preparation of the consolidated financial
statements in conformity with U.S. generally accepted accounting
principles (GAAP) requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
periods. Actual results could differ from those estimates.



| |                             
| | ----------------------------
| | Unaudited Interim Statements

The consolidated financial statements as of and
for the three and six months ended June 30, 2004 and 2003
and related footnote disclosures are unaudited. In the opinion
of management, such financial statements reflect all adjustments
necessary for a fair presentation of the results of the interim
periods. All such adjustments are of a normal and recurring
nature.



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

Certain reclassifications have been made to the
previously reported 2003 statements in order to provide
comparability with the 2004 statements reported herein.
These reclassifications have not changed the 2003 results of
operations or partners capital.



| |                                            
| | -------------------------------------------
| | Share Based Employee Compensation
    Plans

Prior to January 1, 2003, we used the
accounting provisions provided by Accounting Principles Board
Opinion No. 25 (APB 25) to account for the
issuance of share options and other equity awards. Effective
January 1, 2003, we adopted Statement of Financial
Accounting Standards No. 123
(Statement 123) Accounting for Stock Based
Compensation,which requires a fair value based accounting
method for determining compensation expense associated with the
issuance of share options and other equity awards. We adopted
the accounting provisions of Statement 123 to reflect the
cost of issuing share options and other equity awards. Statement
of Financial Accounting Standards No. 148
(Statement 148) Accounting for Stock-Based
Compensation  Transition and Disclosure 
an Amendment of FASB Statement No. 123, issued December
2002 and effective for interim periods beginning after
December 15, 2002, provided various methods of applying
Statement 123. In accordance with Statement 148, we
employed the prospective method for adopting Statement 123,
which requires the recognition of compensation expense based on
the fair value method for share options and other equity awards
granted on or after January 1, 2003 and for certain
modifications made subsequent to December 31, 2002 to share
options and other equity awards that were outstanding as of
December 31, 2002. Compensation expense is recognized
ratably over the respective vesting period of the award.

9



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##### Table of Contents



EOP OPERATING LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

(Unaudited)


The following table illustrates the unaudited
effect on net income available to unitholders and earnings per
unit for the three and six months ended June 30, 2004 and
2003 if the fair value based method had been applied to all
share options that have been issued. Compensation expense
related to restricted share awards is not presented in the table
below because the expense amount is the same under APB 25
and Statement 123 and therefore, is already reflected in
net income.

|                                                                                                               |                                                           |                      |         |      |                    |   |         |      |  |   |         |      |  |   |         |      | 
|-------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------- | -------------------- | ------- | ---- | ------------------ | - | ------- | ---- |  | - | ------- | ---- |  | - | ------- | ---- | 
|                                                                                                               |                                                           |                      |         |     
|                                                                                                               |                                                           | For the three months |         |      | For the six months |  
|                                                                                                               |                                                           | ended June 30,       |         |      | ended June 30,     |  
|                                                                                                               |                                                           |                      |         |      |                    |  
|(Dollars in thousands, except per share data)                                                                  |                                                           | 2004                 |         |      | 2003               |   |         | 2004 |  |   | 2003    |     
|                                                                                                               |                                                           |                      |         |      |                    |   |         |      |  |   |         |     
|Historical net income available to unitholders                                                                 |                                                           | $                    | 112,674 |      |                    | $ | 168,388 |      |  | $ | 185,914 |      |  | $ | 327,419 |     
|Add back compensation expense for share options
    included in historical net income available to unitholders |                                                           |                      | 1,257   |      |                    |   | 1,163   |      |  |   | 2,862   |      |  |   | 1,375   |     
|Deduct compensation expense for share options
    determined under fair value based method                     |                                                           |                      | (2,284  | )    |                    |   | (3,155  | )    |  |   | (5,177  | )    |  |   | (5,446  | )   
|                                                                                                               |                                                           |                      |         |      |                    |   |         |      |  |   |         |     
|Pro forma net income available to unitholders                                                                  |                                                           | $                    | 111,647 |      |                    | $ | 166,396 |      |  | $ | 183,599 |      |  | $ | 323,348 |     
|                                                                                                               |                                                           |                      |         |      |                    |   |         |      |  |   |         |     
|Earnings per unit  basic:                                                                                     |                                                           |                      |         |      |                    |   |         |      |  |   |         |      |  |   |         |     
|                                                                                                               | Historical net income available to unitholders            |                      | $       | 0.25 |                    |   | $       | 0.37 |  |   | $       | 0.41 |  |   | $       | 0.72 | 
|                                                                                                               |                                                           |                      |         |      |                    |   |         |      |  |   |         |     
|                                                                                                               | Pro forma net income available to unitholders             |                      | $       | 0.25 |                    |   | $       | 0.37 |  |   | $       | 0.41 |  |   | $       | 0.71 | 
|                                                                                                               |                                                           |                      |         |      |                    |   |         |      |  |   |         |     
|Earnings per unit  diluted:                                                                                   |                                                           |                      |         |      |                    |   |         |      |  |   |         |      |  |   |         |     
|                                                                                                               | Historical net income available to unitholders            |                      | $       | 0.25 |                    |   | $       | 0.37 |  |   | $       | 0.41 |  |   | $       | 0.72 | 
|                                                                                                               |                                                           |                      |         |      |                    |   |         |      |  |   |         |     
|                                                                                                               | Pro forma net income available to common
    shareholders |                      | $       | 0.25 |                    |   | $       | 0.37 |  |   | $       | 0.41 |  |   | $       | 0.71 | 
|                                                                                                               |                                                           |                      |         |      |                    |   |         |      |  |   |         |     



|         |             
|-------- | ------------
|NOTE 3  | ACQUISITIONS

In May 2004, we acquired a partners
interest in the 500 Orange property by issuing 1,930 Units
which were valued at approximately $50,000.

In May 2004, we acquired the American Center,
which consists of two office buildings, for approximately
$60.5 million. The office property is located in Tysons
Corner, Virginia and consists of approximately
328,741 square feet.

In February 2004, we acquired one of our joint
venture partners 15.53% economic interest in the 1301
Avenue of the Americas office building for approximately
$60.7 million and we assumed our partners share of
the mortgage notes of approximately $83.0 million. Our
economic interest in the joint venture is now 100%, and we
control all major decisions. Accordingly, we have consolidated
the property. The consolidated mortgage debt encumbering this
property upon consolidation was approximately
$534.3 million. In addition, we acquired another joint
venture partners interest for approximately
$7.5 million.



|         |                        
|-------- | -----------------------
|NOTE 4  | DISCONTINUED OPERATIONS

During the second quarter 2004, we sold four
office properties, 38 industrial properties and a vacant land
parcel in various transactions to unaffiliated parties for
approximately $255.5 million. The total gain on the sale of
these properties was approximately $1.9 million and is
included in discontinued operations. The sold office properties
consisted of approximately 449,593 square feet, and the
industrial properties consisted of approximately
2,275,550 square feet. In connection with the sale of one
of the office properties, we repaid approximately
$5.8 million of mortgage debt which encumbered the property.

10



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##### Table of Contents



EOP OPERATING LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

(Unaudited)


During the first quarter 2004 we sold one office
property consisting of approximately 118,172 square feet to
an unaffiliated party for approximately $18.5 million. The
total gain on the sale of this property was approximately
$2.2 million and is included in discontinued operations.

The net income for properties sold is reflected
in the consolidated statements of operations as discontinued
operations for the periods presented. The office properties that
were partially sold in December 2003 are not required to be
reflected as discontinued operations in accordance with
Statement 144. Below is a summary of the results of
operations for the properties sold through their respective sale
dates, which are classified as discontinued operations:

|                                                                    |                                                                                           |                               |                  |       |                    |       |        |       |        |        |        |       |       |       |        |        |        |        | 
|------------------------------------------------------------------- | ----------------------------------------------------------------------------------------- | ----------------------------- | ---------------- | ----- | ------------------ | ----- | ------ | ----- | ------ | ------ | ------ | ----- | ----- | ----- | ------ | ------ | ------ | ------ | 
|                                                                    |                                                                                           |                               |                  |      
|                                                                    |                                                                                           | For the three months          |                  |       | For the six months |      
|                                                                    |                                                                                           | ended June 30,                |                  |       | ended June 30,     |      
|                                                                    |                                                                                           |                               |                  |       |                    |      
|(Dollars in thousands)                                              |                                                                                           | 2004                          |                  |       | 2003               |       |        | 2004  |        |        | 2003   |      
|                                                                    |                                                                                           |                               |                  |       |                    |       |        |       |        |        |        |      
|Total revenues                                                      |                                                                                           | $                             | 4,999            |       |                    | $     | 30,007 |       |        | $      | 11,027 |       |       | $     | 67,556 |       
|                                                                    |                                                                                           |                               |                  |       |                    |       |        |       |        |        |        |      
|Expenses:                                                           |                                                                                           |                               |                  |       |                    |       |        |       |        |        |        |       |       |       |        |       
|                                                                    | Depreciation and amortization                                                             |                               |                  | 1,394 |                    |       |        | 5,717 |        |        |        | 3,021 |       |       |        | 12,659 |       
|                                                                    | Property operating                                                                        |                               |                  | 1,409 |                    |       |        | 9,083 |        |        |        | 3,570 |       |       |        | 21,054 |       
|                                                                    | Ground rent                                                                               |                               |                  |      |                    |       |        |      |        |        |        |      |       |       |        | 18     |       
|                                                                    |                                                                                           |                               |                  |       |                    |       |        |       |        |        |        |      
|                                                                    |                                                                                           | Total expenses                |                  |       | 2,803              |       |        |       | 14,800 |        |        |       | 6,591 |       |        |        | 33,731 |       
|                                                                    |                                                                                           |                               |                  |       |                    |       |        |       |        |        |        |      
|                                                                    |                                                                                           |                               | Operating income |       |                    | 2,196 |        |       |        | 15,207 |        |       |       | 4,436 |        |        |        | 33,825 | 
|                                                                    |                                                                                           |                               |                  |       |                    |       |        |       |        |        |        |      
|Other income/ (expense):                                            |                                                                                           |                               |                  |       |                    |       |        |       |        |        |        |       |       |       |        |       
|                                                                    | Interest/ dividend income                                                                 |                               |                  | (1    | )                  |       |        | 30    |        |        |        | 1     |       |       |        | 68     |       
|                                                                    | Interest expense and amortization of deferred
    financing costs and prepayment expenses |                               |                  | (479  | )                  |       |        | 101   |        |        |        | (586  | )     |       |        | (234   | )     
|                                                                    |                                                                                           |                               |                  |       |                    |       |        |       |        |        |        |      
|                                                                    |                                                                                           | Total other income/ (expense) |                  |       | (480               | )     |        |       | 131    |        |        |       | (585  | )     |        |        | (166   | )     
|                                                                    |                                                                                           |                               |                  |       |                    |       |        |       |        |        |        |      
|Income before income taxes and net gain on sales
    of real estate |                                                                                           |                               | 1,716            |       |                    |       | 15,338 |       |        |        | 3,851  |       |       |       | 33,659 |       
|Income taxes                                                        |                                                                                           |                               | (11              | )     |                    |       | (3     | )     |        |        | (5     | )     |       |       | (3     | )     
|Minority interests  partially owned
    properties                 |                                                                                           |                               | (212             | )     |                    |       | (10    | )     |        |        | (220   | )     |       |       | (20    | )     
|Net gain on sales of real estate                                    |                                                                                           |                               | 1,927            |       |                    |       | 44,448 |       |        |        | 4,122  |       |       |       | 51,725 |       
|                                                                    |                                                                                           |                               |                  |       |                    |       |        |       |        |        |        |      
|Net income                                                          |                                                                                           | $                             | 3,420            |       |                    | $     | 59,773 |       |        | $      | 7,748  |       |       | $     | 85,361 |       
|                                                                    |                                                                                           |                               |                  |       |                    |       |        |       |        |        |        |      
|Property net operating income from discontinued
    operations      |                                                                                           | $                             | 3,590            |       |                    | $     | 20,924 |       |        | $      | 7,457  |       |       | $     | 46,502 |       
|                                                                    |                                                                                           |                               |                  |       |                    |       |        |       |        |        |        |      



| |                  
| | -----------------
| | Segment Reporting

For segment reporting purposes the office
properties and the land parcel that were sold are included in
the Office Properties segment and the industrial
properties that were sold are included in the Corporate
and Other segment.

11



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##### Table of Contents



EOP OPERATING LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

(Unaudited)


NOTE 5  INVESTMENTS IN
UNCONSOLIDATED JOINT VENTURES

Several Office Properties are owned by us and
other unaffiliated parties in joint ventures which we account
for using the equity method. Combined summarized financial
information for these unconsolidated joint ventures is as
follows:

|                                                                                                                                                                 |                                              |                                                              |           |           |              |   |           |           |           | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------- | ------------------------------------------------------------ | --------- | --------- | ------------ | - | --------- | --------- | --------- | 
|                                                                                                                                                                 |                                              | June 30,                                                     |           |           | December 31, |  
|(Dollars in thousands)                                                                                                                                           |                                              | 2004                                                         |           |           | 2003         |  
|                                                                                                                                                                 |                                              |                                                              |           |           |              |  
|Balance Sheets:                                                                                                                                                  |                                              |                                                              |           |           |              |   |           |          
|                                                                                                                                                                 | Real estate, net of accumulated depreciation |                                                              | $         | 2,558,405 |              |   | $         | 3,258,009 |          
|                                                                                                                                                                 | Other assets                                 |                                                              |           | 278,979   |              |   |           | 339,835   |          
|                                                                                                                                                                 |                                              |                                                              |           |           |              |  
|                                                                                                                                                                 |                                              | Total Assets                                                 |           | $         | 2,837,384    |   |           | $         | 3,597,844 | 
|                                                                                                                                                                 |                                              |                                                              |           |           |              |  
|                                                                                                                                                                 | Mortgage debt                                |                                                              | $         | 771,717   |              |   | $         | 1,308,782 |          
|                                                                                                                                                                 | Other liabilities                            |                                                              |           | 109,971   |              |   |           | 140,259   |          
|                                                                                                                                                                 | Partners and shareholders equity           |                                                              |           | 1,955,696 |              |   |           | 2,148,803 |          
|                                                                                                                                                                 |                                              |                                                              |           |           |              |  
|                                                                                                                                                                 |                                              | Total Liabilities and Partners and
    Shareholders Equity |           | $         | 2,837,384    |   |           | $         | 3,597,844 | 
|                                                                                                                                                                 |                                              |                                                              |           |           |              |  
|Our share of equity                                                                                                                                              |                                              | $                                                            | 881,630   |           |              | $ | 1,040,373 |          
|Net excess of cost of investments over the net
    book value of underlying net assets, net of accumulated
    depreciation of $24,209 and $24,456, respectively |                                              |                                                              | 86,343    |           |              |   | 86,859    |          
|                                                                                                                                                                 |                                              |                                                              |           |           |              |  
|Carrying value of investments in unconsolidated
    joint ventures                                                                                               |                                              | $                                                            | 967,973   |           |              | $ | 1,127,232 |          
|                                                                                                                                                                 |                                              |                                                              |           |           |              |  
|Our share including the excess of the cost of the
    investment over the historical net book value of:                                                          |                                              |                                                              |           |           |              |   |           |          
|Total assets                                                                                                                                                     |                                              | $                                                            | 1,342,580 |           |              | $ | 1,968,983 |          
|                                                                                                                                                                 |                                              |                                                              |           |           |              |  
|Unconsolidated non-recourse mortgage debt                                                                                                                        |                                              | $                                                            | 344,384   |           |              | $ | 797,268   |          
|                                                                                                                                                                 |                                              |                                                              |           |           |              |  

|                          |                                                         |                                             |   |         |                          |  |   |         |         |  |      |         |         |  |   |         |         | 
|------------------------- | ------------------------------------------------------- | ------------------------------------------- | - | ------- | ------------------------ |  | - | ------- | ------- |  | ---- | ------- | ------- |  | - | ------- | ------- | 
|                          |                                                         |                                             |   |        
|                          |                                                         | For the three months                        |   |         | For the six months ended | 
|                          |                                                         | ended June 30,                              |   |         | June 30,                 | 
|                          |                                                         |                                             |   |         |                          | 
|(Dollars in thousands)    |                                                         | 2004                                        |   |         | 2003                     |  |   | 2004    |         |  | 2003 |        
|                          |                                                         |                                             |   |         |                          |  |   |         |         |  |      |        
|Statements of Operations: |                                                         |                                             |   |         |                          |  |   |         |         |  |      |         |         |  |   |        
|                          | Revenues                                                |                                             | $ | 109,416 |                          |  | $ | 126,420 |         |  | $    | 232,151 |         |  | $ | 242,035 |        
|                          |                                                         |                                             |   |         |                          |  |   |         |         |  |      |        
|                          | Expenses:                                               |                                             |   |         |                          |  |   |         |         |  |      |         |         |  |   |         |        
|                          |                                                         | Interest expense and loan cost amortization |   |         | 8,842                    |  |   |         | 17,615  |  |      |         | 22,189  |  |   |         | 34,970  | 
|                          |                                                         | Depreciation and amortization               |   |         | 24,956                   |  |   |         | 26,911  |  |      |         | 53,844  |  |   |         | 48,709  | 
|                          |                                                         | Operating expenses                          |   |         | 44,845                   |  |   |         | 58,826  |  |      |         | 93,498  |  |   |         | 102,008 | 
|                          |                                                         |                                             |   |         |                          |  |   |         |         |  |      |        
|                          |                                                         | Total expenses                              |   |         | 78,643                   |  |   |         | 103,352 |  |      |         | 169,531 |  |   |         | 185,687 | 
|                          |                                                         |                                             |   |         |                          |  |   |         |         |  |      |        
|                          | Net income                                              |                                             | $ | 30,773  |                          |  | $ | 23,068  |         |  | $    | 62,620  |         |  | $ | 56,348  |        
|                          |                                                         |                                             |   |         |                          |  |   |         |         |  |      |        
|Our share of:             |                                                         |                                             |   |         |                          |  |   |         |         |  |      |         |         |  |   |        
|                          | Net income                                              |                                             | $ | 14,739  |                          |  | $ | 20,946  |         |  | $    | 30,457  |         |  | $ | 41,710  |        
|                          |                                                         |                                             |   |         |                          |  |   |         |         |  |      |        
|                          | Interest expense and loan cost amortization             |                                             | $ | 4,192   |                          |  | $ | 12,377  |         |  | $    | 12,294  |         |  | $ | 24,626  |        
|                          |                                                         |                                             |   |         |                          |  |   |         |         |  |      |        
|                          | Depreciation and amortization (real estate
    related) |                                             | $ | 9,455   |                          |  | $ | 14,331  |         |  | $    | 21,482  |         |  | $ | 26,934  |        
|                          |                                                         |                                             |   |         |                          |  |   |         |         |  |      |        

12



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##### Table of Contents



EOP OPERATING LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

(Unaudited)




| |                                              
| | ---------------------------------------------
| | Investment in 1301 Avenue of the
    Americas

In February 2004, we acquired the remaining
economic interest in the 1301 Avenue of the Americas office
building, which was previously unconsolidated. See
Note 3  Acquisitions for more information.



|         |              
|-------- | -------------
|NOTE 6  | MORTGAGE DEBT

During the six months ended June 30, 2004,
the following transactions occurred:

|                                 |                                                                                                                                     |   |           |          |  
|-------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------- | - | --------- | -------- | -
|(Dollars in thousands)           |                                                                                                                                     |  
|                                 |                                                                                                                                     |  
|Balance at December 31, 2003 (a) |                                                                                                                                     | $ | 2,329,552 |         
|                                 | Repayments and scheduled principal amortization
    (b)                                                                             |   |           | (172,289 | )
|                                 | Assumed through acquisition and consolidation of
    1301 Avenue of the Americas (See Note 3 
    Acquisitions)                    |   |           | 534,255  |  
|                                 | Assumed through consolidation of SunAmerica
    Center
    (See Note 9  Cumulative Effect of a Change in
    Accounting Principle) |   |           | 203,225  |  
|                                 |                                                                                                                                     |   |          
|Balance at March 31, 2004 (a)    |                                                                                                                                     |   | 2,894,743 |         
|                                 | Repayments and scheduled principal amortization
    (c)                                                                             |   |           | (42,404  | )
|                                 |                                                                                                                                     |   |          
|Balance at June 30, 2004 (a)     |                                                                                                                                     | $ | 2,852,339 |         
|                                 |                                                                                                                                     |   |          



---



|    |  |                                                                                                                                                                                         
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Excludes net discount on mortgage debt of
    approximately $14.0 million, $13.6 million and
    $13.7 million at June 30, 2004, March 31, 2004
    and December 31, 2003, respectively.
|   
|(b) |  | Includes the repayment of mortgage debt
    encumbering the following properties: 580 California, BP Tower
    and 110 Atrium Place.                                                    
|   
|(c) |  | Includes the repayment of mortgage debt
    encumbering the following properties: Fremont Bayside,
    Industrial Drive Warehouse, John Marshall and 125 Perimeter
    Center.          



|         |                                                         
|-------- | --------------------------------------------------------
|NOTE 7  | UNSECURED NOTES AND DERIVATIVE FINANCIAL
    INSTRUMENTS



| |                         
| | ------------------------
| | Unsecured Notes  Repaid

During the six months ended June 30, 2004 we
repaid the following unsecured notes upon maturity:

|             |  |               |         |  |                |  |      |  
|------------ |  | ------------- | ------- |  | -------------- |  | ---- | -
|Month Repaid |  | Amount        |         |  | Effective Rate | 
|             |  |               |         |  |                | 
|             |  | (Dollars      |         |  |               
|             |  | in thousands) |         |  |               
|June         |  | $             | 250,000 |  |                |  | 6.50 | %
|May          |  |               | 200,000 |  |                |  | 6.80 | %
|January      |  |               | 300,000 |  |                |  | 6.50 | %
|January      |  |               | 100,000 |  |                |  | 6.90 | %
|             |  |               |         |  |                | 
|             |  | $             | 850,000 |  |                |  |      |  
|             |  |               |         |  |                | 



| |                         
| | ------------------------
| | Unsecured Notes  Issued

In June 2004 we launched a new program allowing
for the issuance of up to $500 million of unsecured
medium-term notes for sale to retail investors through licensed
brokers (EOP InterNotes). Equity Office is the
guarantor of the notes. As of June 30, 2004, we had issued
approximately $4.3 million of fixed interest rate EOP
InterNotes with coupon rates ranging from 4.75% to 5.25%. The
maturity dates range from four to six

13



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EOP OPERATING LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

(Unaudited)


years. Including all offering expenses, the
all-in effective rate of the InterNotes issued range from 4.95%
to 5.44%.

In May 2004, we issued $45.0 million of
senior unsecured notes due May 2014. The notes bear interest at
LIBOR plus 77.5 basis points. Equity Office is the
guarantor of the notes. The net cash proceeds from the issuance
were approximately $44.5 million and were used to repay a
portion of the $1.0 billion revolving credit facility.

In March 2004, we issued $1.0 billion of
4.75% senior unsecured notes due March 2014. Equity Office
is the guarantor of the notes. The net cash proceeds from the
issuance were approximately $991.2 million and were used to
repay the outstanding balance on our $1.0 billion revolving
credit facility. We also paid $69.1 million to settle
$800 million of forward-starting interest rate swaps that
were previously entered into to hedge the interest rate of the
$1.0 billion notes. Approximately $0.2 million of the
settlement amount was recognized in interest expense and the
remaining $68.9 million was recorded to other comprehensive
income. The amount recorded to other comprehensive income will
be amortized to interest expense over the 10-year term of the
notes. Including all offering expenses and the settlement of
$800 million of forward-starting swap agreements, the
all-in effective rate of the unsecured notes is 5.54%.



| |                                 
| | --------------------------------
| | Derivative Financial Instruments

In May 2004 we settled $500 million of
forward-starting interest rate swaps and recognized an
approximate $24.0 million gain. The swaps were entered into
in 2003 to hedge an anticipated unsecured note offering expected
to take place in June 2004, which did not occur.

In conjunction with the $1.0 billion debt
offering in March 2004, we entered into $1.0 billion of
fixed-to-floating interest rate swap agreements that effectively
convert the interest rate of the $1.0 billion of unsecured
notes issued in March 2004 to a floating rate of LIBOR plus
43 basis points and plus 79 basis points of loan
costs. Because these swaps are considered perfect hedges of the
$1.0 billion unsecured notes, they are marked-to-market
each quarter with a corresponding mark-to-market adjustment on
the $1.0 billion notes. Any market adjustment on the swap
agreements will be reflected in other assets or other
liabilities, and the corresponding market adjustment on the
unsecured notes will be reflected as either a discount or
premium on the unsecured notes. Because the swap agreements are
considered a perfectly effective fair value hedge, there will be
no effect on net income from the mark-to-market adjustment as
long as they are outstanding.

14



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##### Table of Contents



EOP OPERATING LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

(Unaudited)




|         |                                                                 
|-------- | ----------------------------------------------------------------
|NOTE 8  | PARTNERS CAPITAL AND MANDATORILY
    REDEEMABLE PREFERRED UNITS

Units

The following table presents the changes in the
issued and outstanding Units since December 31, 2003:

|                                 |                                                                                                        |  |             |            |  
|-------------------------------- | ------------------------------------------------------------------------------------------------------ |  | ----------- | ---------- | -
|Outstanding at December 31, 2003 |                                                                                                        |  | 449,492,618 |           
|                                 | Issued to Equity Office related to common shares
    issued for share options exercised                |  |             | 1,647,244  |  
|                                 | Repurchased/ retired(a)                                                                                |  |             | (38,664    | )
|                                 | Units redeemed for cash                                                                                |  |             | (31,550    | )
|                                 | Issued to Equity Office related to restricted
    shares and share awards issued, net of cancellations |  |             | 1,040,923  |  
|                                 |                                                                                                        |  |            
|Outstanding at March 31, 2004    |                                                                                                        |  | 452,110,571 |           
|                                 | Issued to Equity Office related to common shares
    issued for share options exercised                |  |             | 35,165     |  
|                                 | Repurchased/retired(b)                                                                                 |  |             | (1,359,219 | )
|                                 | Units redeemed for cash                                                                                |  |             | (38,030    | )
|                                 | Issued to Equity Office related to restricted
    shares and share awards issued, net of cancellations |  |             | (70,265    | )
|                                 | Units issued in connection with property
    acquisition (see Note 3)                                  |  |             | 1,930      |  
|                                 |                                                                                                        |  |            
|Outstanding at June 30, 2004     |                                                                                                        |  | 450,680,152 |           
|                                 |                                                                                                        |  |            



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                            
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | During the first quarter 2004, 38,664 Equity
    Office Common Shares were repurchased and retired at an average
    price of $29.71 per share for approximately
    $1.1 million in the aggregate. In connection with the
    repurchases, we retired a corresponding number of Units for an
    aggregate purchase price equal to the aggregate purchase price
    for all Common Share repurchases.     
|   
|(b) |  | During the second quarter 2004, 1,359,219 Equity
    Office Common Shares were repurchased and retired at an average
    price of $26.07 per share for approximately
    $35.4 million in the aggregate. In connection with the
    repurchases, we retired a corresponding number of Units for an
    aggregate purchase price equal to the aggregate purchase price
    for all Common Share repurchases.



| |              
| | -------------
| | Distributions

|               |  |              |         |  |           |  |               |                        |  |  |               | 
|-------------- |  | ------------ | ------- |  | --------- |  | ------------- | ---------------------- |  |  | ------------- | 
|               |  | Quarterly    |         |  |           |  |              
|               |  | Distribution |         |  |           |  |              
|               |  | Amount       |         |  |           |  |              
|               |  | Per Share    |         |  | Date Paid |  |               | Unitholder Record Date | 
|               |  |              |         |  |           |  |               |                        | 
|Units          |  | $            | .50     |  |           |  | July 15, 2004 |                        |  |  | June 30, 2004 | 
|Series B Units |  | $            | .65625  |  |           |  | May 17, 2004  |                        |  |  | May 3, 2004   | 
|Series G Units |  | $            | .484375 |  |           |  | June 15, 2004 |                        |  |  | June 1, 2004  | 



| |                
| | ---------------
| | Preferred Units

In January 2004, Equity Office redeemed all of
its 4,562,900 outstanding 8 5/8% Series C Cumulative
Redeemable Preferred Shares of Beneficial Interest. The
Series C Preferred Shares were redeemed at a redemption
price of $25.00 per share for an aggregate redemption price
of approximately $114.1 million. The deferred issuance cost
of approximately $4.1 million was reflected as a preferred
distribution. In connection with such redemption, we redeemed
all of the Series C Preferred Units from Equity Office.

15



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##### Table of Contents



EOP OPERATING LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

(Unaudited)




|         |                                                          
|-------- | ---------------------------------------------------------
|NOTE 9  | CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING
    PRINCIPLE

Under the provisions of FIN 46(R), which we
adopted on January 1, 2004, we consolidated the assets,
liabilities and results of operations of SunAmerica Center, an
office property located in Century City, California, which
consists of approximately 780,000 square feet, as we
determined we were the primary beneficiary of this variable
interest entity. We own an approximate 67% share of a
$202.2 million mezzanine-level debt position for which we
paid approximately $73.9 million in 1999. As of
December 31, 2003, this investment was recorded as a note
receivable and was included in other assets. The note matures in
August 2014 and prior to then interest is payable based on
available cash flow. Our maximum exposure to loss as a result of
the investment is equivalent to the $73.9 million we
invested in 1999. However, we may be required to contribute
additional funds to support the operations of the property. Any
additional funding will be in the form of a shortfall note,
which is repayable from available cash flow. The shortfall notes
may not exceed $2.5 million in the aggregate. Our payment
recourse is limited to the mezzanine borrower entitys 100%
interest in the property-owning entity.

As a result of the consolidation of SunAmerica
Center, we recorded a cumulative effect of a change in
accounting principle loss of approximately $33.7 million in
the first quarter 2004. The effect on our assets and liabilities
as a result of the consolidation of SunAmerica Center as of
January 1, 2004 was:

|                                                                          |  |   |          |     
|------------------------------------------------------------------------- |  | - | -------- | ----
|(Dollars in thousands)                                                    |  |  
|                                                                          |  |  
|Investment in real estate                                                 |  | $ | 330,787  |     
|Accumulated depreciation                                                  |  | $ | (31,219  | )   
|Mortgage debt                                                             |  | $ | (203,225 | )   
|Net other assets and liabilities, including a net
    discount of $31,476 |  | $ | (130,040 | )(a)



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | As of January 1, 2004, our joint venture
    partners share of the mezzanine-level debt of
    approximately $49.7 million is recorded in other
    liabilities, which is net of a discount of approximately
    $31.5 million. Interest expense on the approximate
    $66 million face amount of the joint venture partners
    debt is accrued at 7.25% per annum and the discount is
    amortized to interest expense through the maturity of the
    mezzanine-level loan in 2014. The remaining debt of
    approximately $15 million does not accrue interest.

16



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##### Table of Contents



EOP OPERATING LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

(Unaudited)


NOTE 10  EARNINGS PER
UNIT

The following table sets forth the computation of
basic and diluted earnings per unit:

|                                                                                      |                                                                                                                                  |                      |           |             |                    |  |           |             |   |  |           |             |   |  |           |             |  
|------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------- | -------------------- | --------- | ----------- | ------------------ |  | --------- | ----------- | - |  | --------- | ----------- | - |  | --------- | ----------- | -
|                                                                                      |                                                                                                                                  |                      |           |            
|                                                                                      |                                                                                                                                  | For the three months |           |             | For the six months | 
|                                                                                      |                                                                                                                                  | ended June 30,       |           |             | ended June 30,     | 
|                                                                                      |                                                                                                                                  |                      |           |             |                    | 
|(Dollars in thousands, except per unit data)                                          |                                                                                                                                  | 2004                 |           |             | 2003               |  |           | 2004        |   |  | 2003      |            
|                                                                                      |                                                                                                                                  |                      |           |             |                    |  |           |             |   |  |           |            
|Numerator:                                                                            |                                                                                                                                  |                      |           |             |                    |  |           |             |   |  |           |             |   |  |           |            
|                                                                                      | Income from continuing operations                                                                                                |                      | $         | 118,198     |                    |  | $         | 124,010     |   |  | $         | 233,555     |   |  | $         | 272,914     |  
|                                                                                      | Preferred distributions                                                                                                          |                      |           | (8,944      | )                  |  |           | (15,395     | ) |  |           | (21,692     | ) |  |           | (30,856     | )
|                                                                                      |                                                                                                                                  |                      |           |             |                    |  |           |             |   |  |           |            
|                                                                                      | Income from continuing operations available to
    unitholders                                                                   |                      |           | 109,254     |                    |  |           | 108,615     |   |  |           | 211,863     |   |  |           | 242,058     |  
|                                                                                      | Discontinued operations (including net gain on
    sales of real estate of $1,927, $44,448, $4,122 and $51,725
    respectively) |                      |           | 3,420       |                    |  |           | 59,773      |   |  |           | 7,748       |   |  |           | 85,361      |  
|                                                                                      | Cumulative effect of a change in accounting
    principle                                                                        |                      |           |            |                    |  |           |            |   |  |           | (33,697     | ) |  |           |            |  
|                                                                                      |                                                                                                                                  |                      |           |             |                    |  |           |             |   |  |           |            
|                                                                                      | Numerator for basic and diluted earnings per
    unit  net income available to unitholders                                      |                      | $         | 112,674     |                    |  | $         | 168,388     |   |  | $         | 185,914     |   |  | $         | 327,419     |  
|                                                                                      |                                                                                                                                  |                      |           |             |                    |  |           |             |   |  |           |            
|Denominator:                                                                          |                                                                                                                                  |                      |           |             |                    |  |           |             |   |  |           |             |   |  |           |            
|                                                                                      | Denominator for basic earnings per
    unit  weighted average Units outstanding                                                 |                      |           | 449,245,505 |                    |  |           | 450,216,263 |   |  |           | 448,902,096 |   |  |           | 454,254,440 |  
|                                                                                      | Effect of dilutive potential units:                                                                                              |                      |           |             |                    |  |           |             |   |  |           |             |   |  |           |             |  
|Units issuable upon exercise of Equity Office
    share options and restricted shares |                                                                                                                                  |                      | 1,288,336 |             |                    |  | 1,794,307 |             |   |  | 1,938,268 |             |   |  | 1,392,498 |            
|                                                                                      |                                                                                                                                  |                      |           |             |                    |  |           |             |   |  |           |            
|                                                                                      | Denominator for diluted earnings per
    unit  weighted average Units outstanding and dilutive
    potential units              |                      |           | 450,533,841 |                    |  |           | 452,010,570 |   |  |           | 450,840,364 |   |  |           | 455,646,938 |  
|                                                                                      |                                                                                                                                  |                      |           |             |                    |  |           |             |   |  |           |            
|Earnings per unit  basic:                                                            |                                                                                                                                  |                      |           |             |                    |  |           |             |   |  |           |             |   |  |           |            
|                                                                                      | Income from continuing operations available to
    unitholders                                                                   |                      | $         | 0.24        |                    |  | $         | 0.24        |   |  | $         | 0.47        |   |  | $         | 0.53        |  
|                                                                                      | Discontinued operations                                                                                                          |                      |           | 0.01        |                    |  |           | 0.13        |   |  |           | 0.02        |   |  |           | 0.19        |  
|                                                                                      | Cumulative effect of a change in accounting
    principle                                                                        |                      |           |            |                    |  |           |            |   |  |           | (0.08       | ) |  |           |            |  
|                                                                                      |                                                                                                                                  |                      |           |             |                    |  |           |             |   |  |           |            
|                                                                                      | Net income available to unitholders(a)                                                                                           |                      | $         | 0.25        |                    |  | $         | 0.37        |   |  | $         | 0.41        |   |  | $         | 0.72        |  
|                                                                                      |                                                                                                                                  |                      |           |             |                    |  |           |             |   |  |           |            
|Earnings per unit 
    diluted:                                                      |                                                                                                                                  |                      |           |             |                    |  |           |             |   |  |           |             |   |  |           |            
|                                                                                      | Income from continuing operations available to
    unitholders                                                                   |                      | $         | 0.24        |                    |  | $         | 0.24        |   |  | $         | 0.47        |   |  | $         | 0.53        |  
|                                                                                      | Discontinued operations                                                                                                          |                      |           | 0.01        |                    |  |           | 0.13        |   |  |           | 0.02        |   |  |           | 0.19        |  
|                                                                                      | Cumulative effect of a change in accounting
    principle                                                                        |                      |           |            |                    |  |           |            |   |  |           | (0.07       | ) |  |           |            |  
|                                                                                      |                                                                                                                                  |                      |           |             |                    |  |           |             |   |  |           |            
|                                                                                      | Net income available to unitholders(a)                                                                                           |                      | $         | 0.25        |                    |  | $         | 0.37        |   |  | $         | 0.41        |   |  | $         | 0.72        |  
|                                                                                      |                                                                                                                                  |                      |           |             |                    |  |           |             |   |  |           |            






|    |  |                                                                                                                    
|--- |  | -------------------------------------------------------------------------------------------------------------------
|(a) |  | Net income available to unitholders per unit may
    not total the sum of the per share components due to rounding.

17



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##### Table of Contents



EOP OPERATING LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

(Unaudited)


The following securities were not included in the
diluted earnings per unit computation because they would have
had an antidilutive effect:

|                         |       |                  |       |                            |      |  |                          |            |  |  |            |            |  |      |            |            |  |  |            |            | 
|------------------------ | ----- | ---------------- | ----- | -------------------------- | ---- |  | ------------------------ | ---------- |  |  | ---------- | ---------- |  | ---- | ---------- | ---------- |  |  | ---------- | ---------- | 
|                         |       |                  |       |                            |      | 
|                         |       |                  |       | For the three months ended |      |  | For the six months ended |           
|                         |       |                  |       | June 30,                   |      |  | June 30,                 |           
|                         |       | Weighted Average |       |                            |      |  |                          |            | 
|Antidilutive Securities  |       | Exercise Price   |       |                            | 2004 |  |                          | 2003       |  |  | 2004       |            |  | 2003 |           
|                         |       |                  |       |                            |      |  |                          |            |  |  |            |            |  |      |           
|Share options            |       | $                | 29.09 |                            |      |  | 16,203,300               |            |  |  |           |            |  |      |           |            |  |  |           |           
|Share options            |       | $                | 29.21 |                            |      |  |                         |            |  |  | 13,487,257 |            |  |      |           |            |  |  |           |           
|Share options            |       | $                | 29.12 |                            |      |  |                         |            |  |  |           |            |  |      | 14,896,855 |            |  |  |           |           
|Share options            |       | $                | 29.17 |                            |      |  |                         |            |  |  |           |            |  |      |           |            |  |  | 13,760,992 |           
|Series B Preferred Units |       | $                | 35.70 |                            |      |  | 8,389,354                |            |  |  | 8,389,354  |            |  |      | 8,389,354  |            |  |  | 8,389,354  |           
|                         |       |                  |       |                            |      |  |                          |            |  |  |            |            |  |      |           
|                         | Total |                  |       |                            |      |  |                          | 24,592,654 |  |  |            | 21,876,611 |  |      |            | 23,286,209 |  |  |            | 22,150,346 | 
|                         |       |                  |       |                            |      |  |                          |            |  |  |            |            |  |      |           

NOTE 11  SEGMENT
INFORMATION

As discussed in Note 1, our primary business
is the ownership and operation of Office Properties. We account
for each Office Property as an individual operating segment and
have aggregated the related operating accounts into a single
operating segment for financial reporting purposes due to the
fact that the individual operating segments have similar
economic characteristics. The net property operating income from
continuing operations generated at the Corporate and
Other segment consist primarily of the Industrial
Properties. The Other revenues generated at the
Corporate and Other segment consist primarily of fee
income from the management of office properties owned by third
parties, interest and dividend income from various investments
and realized gains on settlement of derivatives and sale of
marketable securities.

18



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##### Table of Contents



EOP OPERATING LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

(Unaudited)


|                                                                                                                                  |                                                                              |                                     |            |          |                            |   |          |              |          |        |            |          |           |           |          |          |              |   |          |          |          |   |          |          |          |  
|--------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------- | ----------------------------------- | ---------- | -------- | -------------------------- | - | -------- | ------------ | -------- | ------ | ---------- | -------- | --------- | --------- | -------- | -------- | ------------ | - | -------- | -------- | -------- | - | -------- | -------- | -------- | -
|                                                                                                                                  |                                                                              |                                     |            |         
|                                                                                                                                  |                                                                              | For the three months ended          |            |          | For the three months ended |  
|                                                                                                                                  |                                                                              | June 30, 2004                       |            |          | June 30, 2003              |  
|                                                                                                                                  |                                                                              |                                     |            |          |                            |  
|                                                                                                                                  |                                                                              | Office                              |            |          | Corporate                  |   |          |              |          | Office |            |          | Corporate |           |          |         
|(Dollars in thousands)                                                                                                            |                                                                              | Properties                          |            |          | and Other                  |   |          | Consolidated |          |        | Properties |          |           | and Other |          |          | Consolidated |  
|                                                                                                                                  |                                                                              |                                     |            |          |                            |   |          |              |          |        |            |          |           |           |          |          |              |  
|Property operating revenues(1)                                                                                                    |                                                                              | $                                   | 785,664    |          |                            | $ | 6,020    |              |          | $      | 791,684    |          |           | $         | 770,622  |          |              | $ | 6,482    |          |          | $ | 777,104  |         
|Property operating expenses(2)                                                                                                    |                                                                              |                                     | (293,843   | )        |                            |   | (1,550   | )            |          |        | (295,393   | )        |           |           | (274,573 | )        |              |   | (1,445   | )        |          |   | (276,018 | )       
|                                                                                                                                  |                                                                              |                                     |            |          |                            |   |          |              |          |        |            |          |           |           |          |          |              |  
|                                                                                                                                  | Property net operating income from continuing
    operations                 |                                     |            | 491,821  |                            |   |          | 4,470        |          |        |            | 496,291  |           |           |          | 496,049  |              |   |          | 5,037    |          |   |          | 501,086  |         
|                                                                                                                                  |                                                                              |                                     |            |          |                            |   |          |              |          |        |            |          |           |           |          |          |              |  
|Adjustments to arrive at net income:                                                                                              |                                                                              |                                     |            |          |                            |   |          |              |          |        |            |          |           |           |          |          |              |   |          |          |          |   |          |         
|                                                                                                                                  | Other revenues                                                               |                                     |            | 664      |                            |   |          | 5,595        |          |        |            | 6,259    |           |           |          | 247      |              |   |          | 6,945    |          |   |          | 7,192    |         
|                                                                                                                                  | Realized gain on settlement of derivatives                                   |                                     |            |         |                            |   |          | 24,016       |          |        |            | 24,016   |           |           |          |         |              |   |          |         |          |   |          |         |         
|                                                                                                                                  | Interest expense(3)                                                          |                                     |            | (55,138  | )                          |   |          | (156,009     | )        |        |            | (211,147 | )         |           |          | (45,921  | )            |   |          | (162,662 | )        |   |          | (208,583 | )       
|                                                                                                                                  | Depreciation and amortization                                                |                                     |            | (183,229 | )                          |   |          | (6,276       | )        |        |            | (189,505 | )         |           |          | (165,990 | )            |   |          | (4,701   | )        |   |          | (170,691 | )       
|                                                                                                                                  | Ground rent                                                                  |                                     |            | (5,050   | )                          |   |          |             |          |        |            | (5,050   | )         |           |          | (4,870   | )            |   |          |         |          |   |          | (4,870   | )       
|                                                                                                                                  | General and administrative                                                   |                                     |            |         |                            |   |          | (13,709      | )        |        |            | (13,709  | )         |           |          | (1       | )            |   |          | (17,654  | )        |   |          | (17,655  | )       
|                                                                                                                                  |                                                                              |                                     |            |          |                            |   |          |              |          |        |            |          |           |           |          |          |              |  
|                                                                                                                                  |                                                                              | Total                               |            |          | (242,753                   | ) |          |              | (146,383 | )      |            |          | (389,136  | )         |          |          | (216,535     | ) |          |          | (178,072 | ) |          |          | (394,607 | )
|                                                                                                                                  |                                                                              |                                     |            |          |                            |   |          |              |          |        |            |          |           |           |          |          |              |  
|Income before income taxes, allocation to
    minority interests and income from investments in unconsolidated
    joint ventures |                                                                              |                                     | 249,068    |          |                            |   | (141,913 | )            |          |        | 107,155    |          |           |           | 279,514  |          |              |   | (173,035 | )        |          |   | 106,479  |         
|Income taxes                                                                                                                      |                                                                              |                                     | (460       | )        |                            |   | (895     | )            |          |        | (1,355     | )        |           |           | (206     | )        |              |   | (1,368   | )        |          |   | (1,574   | )       
|Minority interests                                                                                                                |                                                                              |                                     | (2,341     | )        |                            |   |         |              |          |        | (2,341     | )        |           |           | (1,841   | )        |              |   |         |          |          |   | (1,841   | )       
|Income from investments in unconsolidated joint
    ventures                                                                      |                                                                              |                                     | 14,316     |          |                            |   | 423      |              |          |        | 14,739     |          |           |           | 19,478   |          |              |   | 1,468    |          |          |   | 20,946   |         
|                                                                                                                                  |                                                                              |                                     |            |          |                            |   |          |              |          |        |            |          |           |           |          |          |              |  
|Income from continuing operations                                                                                                 |                                                                              |                                     | 260,583    |          |                            |   | (142,385 | )            |          |        | 118,198    |          |           |           | 296,945  |          |              |   | (172,935 | )        |          |   | 124,010  |         
|Discontinued operations (including net gain on
    sales of real estate of $1,927 and $44,448, respectively)                      |                                                                              |                                     | 8,727      |          |                            |   | (5,307   | )            |          |        | 3,420      |          |           |           | 56,785   |          |              |   | 2,988    |          |          |   | 59,773   |         
|                                                                                                                                  |                                                                              |                                     |            |          |                            |   |          |              |          |        |            |          |           |           |          |          |              |  
|Net income                                                                                                                        |                                                                              | $                                   | 269,310    |          |                            | $ | (147,692 | )            |          | $      | 121,618    |          |           | $         | 353,730  |          |              | $ | (169,947 | )        |          | $ | 183,783  |         
|                                                                                                                                  |                                                                              |                                     |            |          |                            |   |          |              |          |        |            |          |           |           |          |          |              |  
|Property net operating income:                                                                                                    |                                                                              |                                     |            |          |                            |   |          |              |          |        |            |          |           |           |          |          |              |   |          |          |          |   |          |         
|                                                                                                                                  | Continuing operations                                                        |                                     | $          | 491,821  |                            |   | $        | 4,470        |          |        | $          | 496,291  |           |           | $        | 496,049  |              |   | $        | 5,037    |          |   | $        | 501,086  |         
|                                                                                                                                  | Discontinued operations                                                      |                                     |            | 87       |                            |   |          | 3,503        |          |        |            | 3,590    |           |           |          | 16,537   |              |   |          | 4,387    |          |   |          | 20,924   |         
|                                                                                                                                  |                                                                              |                                     |            |          |                            |   |          |              |          |        |            |          |           |           |          |          |              |  
|                                                                                                                                  |                                                                              | Total property net operating income |            | $        | 491,908                    |   |          | $            | 7,973    |        |            | $        | 499,881   |           |          | $        | 512,586      |   |          | $        | 9,424    |   |          | $        | 522,010  |  
|                                                                                                                                  |                                                                              |                                     |            |          |                            |   |          |              |          |        |            |          |           |           |          |          |              |  
|                                                                                                                                  | Property operating margin from continuing and
    discontinued operations(4) |                                     |            |          |                            |   |          |              |          |        |            | 62.7%    |           |           |          |          |              |   |          |          |          |   |          | 64.7     | %       
|                                                                                                                                  |                                                                              |                                     |            |          |                            |   |          |              |          |        |            |          |           |           |          |          |              |  
|                                                                                                                                  | Property operating margin from continuing
    operations(4)                  |                                     |            |          |                            |   |          |              |          |        |            | 62.7%    |           |           |          |          |              |   |          |          |          |   |          | 64.5     | %       
|                                                                                                                                  |                                                                              |                                     |            |          |                            |   |          |              |          |        |            |          |           |           |          |          |              |  
|Total assets                                                                                                                      |                                                                              | $                                   | 24,251,741 |          |                            | $ | 421,264  |              |          | $      | 24,673,005 |          |           |           |          |          |              |   |          |          |          |   |          |         
|                                                                                                                                  |                                                                              |                                     |            |          |                            |   |          |              |          |        |            |          |           |           |          |          |              |  

19



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##### Table of Contents



EOP OPERATING LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

(Unaudited)


|                                                                                                                                  |                                                                                  |                                     |            |          |                          |   |          |              |          |        |            |           |           |           |           |          |              |   |          |          |          |   |           |           |           |  
|--------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------- | ----------------------------------- | ---------- | -------- | ------------------------ | - | -------- | ------------ | -------- | ------ | ---------- | --------- | --------- | --------- | --------- | -------- | ------------ | - | -------- | -------- | -------- | - | --------- | --------- | --------- | -
|                                                                                                                                  |                                                                                  |                                     |            |         
|                                                                                                                                  |                                                                                  | For the six months ended            |            |          | For the six months ended |  
|                                                                                                                                  |                                                                                  | June 30, 2004                       |            |          | June 30, 2003            |  
|                                                                                                                                  |                                                                                  |                                     |            |          |                          |  
|                                                                                                                                  |                                                                                  | Office                              |            |          | Corporate                |   |          |              |          | Office |            |           | Corporate |           |           |         
|(Dollars in thousands)                                                                                                            |                                                                                  | Properties                          |            |          | and Other                |   |          | Consolidated |          |        | Properties |           |           | and Other |           |          | Consolidated |  
|                                                                                                                                  |                                                                                  |                                     |            |          |                          |   |          |              |          |        |            |           |           |           |           |          |              |  
|Property operating revenues(1)                                                                                                    |                                                                                  | $                                   | 1,567,142  |          |                          | $ | 11,960   |              |          | $      | 1,579,102  |           |           | $         | 1,541,203 |          |              | $ | 12,949   |          |          | $ | 1,554,152 |          
|Property operating expenses(2)                                                                                                    |                                                                                  |                                     | (571,790   | )        |                          |   | (3,017   | )            |          |        | (574,807   | )         |           |           | (542,216  | )        |              |   | (2,923   | )        |          |   | (545,139  | )        
|                                                                                                                                  |                                                                                  |                                     |            |          |                          |   |          |              |          |        |            |           |           |           |           |          |              |  
|                                                                                                                                  | Property net operating income from continuing
    operations                     |                                     |            | 995,352  |                          |   |          | 8,943        |          |        |            | 1,004,295 |           |           |           | 998,987  |              |   |          | 10,026   |          |   |           | 1,009,013 |          
|                                                                                                                                  |                                                                                  |                                     |            |          |                          |   |          |              |          |        |            |           |           |           |           |          |              |  
|Adjustments to arrive at net income:                                                                                              |                                                                                  |                                     |            |          |                          |   |          |              |          |        |            |           |           |           |           |          |              |   |          |          |          |   |           |          
|                                                                                                                                  | Other revenues                                                                   |                                     |            | 2,353    |                          |   |          | 8,286        |          |        |            | 10,639    |           |           |           | 1,135    |              |   |          | 14,220   |          |   |           | 15,355    |          
|                                                                                                                                  | Realized gain on settlement of derivatives and
    sale of marketable securities |                                     |            |         |                          |   |          | 24,016       |          |        |            | 24,016    |           |           |           |         |              |   |          | 8,143    |          |   |           | 8,143     |          
|                                                                                                                                  | Interest expense(3)                                                              |                                     |            | (108,147 | )                        |   |          | (310,602     | )        |        |            | (418,749  | )         |           |           | (89,534  | )            |   |          | (325,952 | )        |   |           | (415,486  | )        
|                                                                                                                                  | Depreciation and amortization                                                    |                                     |            | (363,419 | )                        |   |          | (12,271      | )        |        |            | (375,690  | )         |           |           | (329,293 | )            |   |          | (8,988   | )        |   |           | (338,281  | )        
|                                                                                                                                  | Ground rent                                                                      |                                     |            | (10,396  | )                        |   |          |             |          |        |            | (10,396   | )         |           |           | (9,466   | )            |   |          |         |          |   |           | (9,466    | )        
|                                                                                                                                  | General and administrative                                                       |                                     |            |         |                          |   |          | (25,018      | )        |        |            | (25,018   | )         |           |           |         |              |   |          | (31,157  | )        |   |           | (31,157   | )        
|                                                                                                                                  |                                                                                  |                                     |            |          |                          |   |          |              |          |        |            |           |           |           |           |          |              |  
|                                                                                                                                  |                                                                                  | Total                               |            |          | (479,609                 | ) |          |              | (315,589 | )      |            |           | (795,198  | )         |           |          | (427,158     | ) |          |          | (343,734 | ) |           |           | (770,892  | )
|                                                                                                                                  |                                                                                  |                                     |            |          |                          |   |          |              |          |        |            |           |           |           |           |          |              |  
|Income before income taxes, allocation to
    minority interests and income from investments in unconsolidated
    joint ventures |                                                                                  |                                     | 515,743    |          |                          |   | (306,646 | )            |          |        | 209,097    |           |           |           | 571,829   |          |              |   | (333,708 | )        |          |   | 238,121   |          
|Income taxes                                                                                                                      |                                                                                  |                                     | (418       | )        |                          |   | (674     | )            |          |        | (1,092     | )         |           |           | (384      | )        |              |   | (2,186   | )        |          |   | (2,570    | )        
|Minority interests                                                                                                                |                                                                                  |                                     | (4,907     | )        |                          |   |         |              |          |        | (4,907     | )         |           |           | (4,347    | )        |              |   |         |          |          |   | (4,347    | )        
|Income from investments in unconsolidated joint
    ventures                                                                      |                                                                                  |                                     | 28,296     |          |                          |   | 2,161    |              |          |        | 30,457     |           |           |           | 40,491    |          |              |   | 1,219    |          |          |   | 41,710    |          
|                                                                                                                                  |                                                                                  |                                     |            |          |                          |   |          |              |          |        |            |           |           |           |           |          |              |  
|Income from continuing operations                                                                                                 |                                                                                  |                                     | 538,714    |          |                          |   | (305,159 | )            |          |        | 233,555    |           |           |           | 607,589   |          |              |   | (334,675 | )        |          |   | 272,914   |          
|Discontinued operations (including net gain on
    sales of real estate of $4,122 and $51,725, respectively)                      |                                                                                  |                                     | 10,809     |          |                          |   | (3,061   | )            |          |        | 7,748      |           |           |           | 79,279    |          |              |   | 6,082    |          |          |   | 85,361    |          
|                                                                                                                                  |                                                                                  |                                     |            |          |                          |   |          |              |          |        |            |           |           |           |           |          |              |  
|Income before cumulative effect of a change in
    accounting principle                                                           |                                                                                  |                                     | 549,523    |          |                          |   | (308,220 | )            |          |        | 241,303    |           |           |           | 686,868   |          |              |   | (328,593 | )        |          |   | 358,275   |          
|Cumulative effect of a change in accounting
    principle                                                                         |                                                                                  |                                     | (33,697    | )        |                          |   |         |              |          |        | (33,697    | )         |           |           |          |          |              |   |         |          |          |   |          |          
|                                                                                                                                  |                                                                                  |                                     |            |          |                          |   |          |              |          |        |            |           |           |           |           |          |              |  
|Net income                                                                                                                        |                                                                                  |                                     | 515,826    |          |                          |   | (308,220 | )            |          |        | 207,606    |           |           |           | 686,868   |          |              |   | (328,593 | )        |          |   | 358,275   |          
|                                                                                                                                  |                                                                                  |                                     |            |          |                          |   |          |              |          |        |            |           |           |           |           |          |              |  
|Property net operating income:                                                                                                    |                                                                                  |                                     |            |          |                          |   |          |              |          |        |            |           |           |           |           |          |              |   |          |          |          |   |           |          
|                                                                                                                                  | Continuing operations                                                            |                                     | $          | 995,352  |                          |   | $        | 8,943        |          |        | $          | 1,004,295 |           |           | $         | 998,987  |              |   | $        | 10,026   |          |   | $         | 1,009,013 |          
|                                                                                                                                  | Discontinued operations                                                          |                                     |            | 228      |                          |   |          | 7,229        |          |        |            | 7,457     |           |           |           | 37,458   |              |   |          | 9,044    |          |   |           | 46,502    |          
|                                                                                                                                  |                                                                                  |                                     |            |          |                          |   |          |              |          |        |            |           |           |           |           |          |              |  
|                                                                                                                                  |                                                                                  | Total property net operating income |            | $        | 995,580                  |   |          | $            | 16,172   |        |            | $         | 1,011,752 |           |           | $        | 1,036,445    |   |          | $        | 19,070   |   |           | $         | 1,055,515 |  
|                                                                                                                                  |                                                                                  |                                     |            |          |                          |   |          |              |          |        |            |           |           |           |           |          |              |  
|                                                                                                                                  | Property operating margin from continuing and
    discontinued operations(4)     |                                     |            |          |                          |   |          |              |          |        |            | 63.6%     |           |           |           |          |              |   |          |          |          |   |           | 65.1      | %        
|                                                                                                                                  |                                                                                  |                                     |            |          |                          |   |          |              |          |        |            |           |           |           |           |          |              |  
|                                                                                                                                  | Property operating margin from continuing
    operations(4)                      |                                     |            |          |                          |   |          |              |          |        |            | 63.6%     |           |           |           |          |              |   |          |          |          |   |           | 64.9      | %        
|                                                                                                                                  |                                                                                  |                                     |            |          |                          |   |          |              |          |        |            |           |           |           |           |          |              |  
|Total assets                                                                                                                      |                                                                                  | $                                   | 24,251,741 |          |                          | $ | 421,264  |              |          | $      | 24,673,005 |           |           |           |           |          |              |   |          |          |          |   |           |          
|                                                                                                                                  |                                                                                  |                                     |            |          |                          |   |          |              |          |        |            |           |           |           |           |          |              |  




|    |                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Included in property operating revenues are
    rental revenues, tenant reimbursements, parking income and other
    income.                                                                            
|   
|(2) | Included in property operating expenses are real
    estate taxes, insurance, repairs and maintenance and property
    operating expenses.                                                              
|   
|(3) | Interest expense for the Office Properties
    represents interest expense on property secured mortgage debt
    and does not include interest expense on the unsecured notes or
    the line of credit.
|   
|(4) | Property operating margin is calculated by
    dividing property net operating income by property operating
    revenues.                                                                               

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##### Table of Contents



EOP OPERATING LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

(Unaudited)




|          |                              
|--------- | -----------------------------
|NOTE 12  | COMMITMENTS AND CONTINGENCIES



| |                             
| | ----------------------------
| | Concentration of Credit Risk

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



| |              
| | -------------
| | Environmental

As an owner of real estate, we are subject to
various environmental laws of federal and local governments. Our
compliance with existing laws has not had a material adverse
effect on our financial condition and results of operations, and
we do not believe it will have a material adverse effect in the
future. However, we cannot predict the impact of unforeseen
environmental contingencies or new or changed laws or
regulations on our current Properties or on properties that we
may acquire.



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

Except as described below, we are not presently
subject to material litigation nor, to our knowledge, is any
material litigation threatened against us, other than routine
actions for negligence and other claims and administrative
proceedings arising in the ordinary course of business, some of
which are expected to be covered by liability insurance and all
of which collectively are not expected to have a material
adverse effect on our financial condition, results of
operations, or liquidity.

On May 8, 2003, Broadband Office, Inc. and
the official committee of unsecured creditors of Broadband
Office Inc. (collectively, the Plaintiffs), filed a
complaint (the Complaint) in the United States
Bankruptcy Court for the District of Delaware against one
private and seven public real estate companies, various
affiliated entities (collectively the Corporate
Defendants) and certain individuals, including Equity
Office, David Helfand (a former executive vice president of
Equity Office), Spieker Properties, Inc. and Spieker Properties,
L.P. (which we acquired in 2001) and Craig Vought (formerly
co-chief executive officer of Spieker Properties, Inc. and a
former Equity Office trustee). On August 25, 2003,
Plaintiffs filed a First Amended Complaint. Under the terms of
our indemnification agreements with Messrs. Helfand and
Vought, we may be responsible to reimburse them for the effect
of any judgment rendered against them personally as well as the
costs of their defense. To date, no separate defense costs have
been incurred with respect to these individuals. We were an
equity investor in, landlord to and customer of Broadband
Office, and Messrs. Helfand and Vought were members of the
board of directors of Broadband Office until their resignations
on May 1, 2001 and May 2, 2001, respectively.
Mr. Vought also served as a member of Broadband
Offices executive committee. Broadband Office filed for
bankruptcy protection on May 9, 2001. The First Amended
Complaint alleges, among other things, breaches of fiduciary
duty and seeks recovery of what it characterizes as preferential
payments and fraudulent transfers. It further seeks to hold us
liable for the outstanding debts of the corporation, jointly and
severally with all of the Corporate Defendants, as an alleged
general partner of Broadband Office. The Plaintiffs
allege that the amount of these claims exceeds $300 million
in the aggregate. As of July 28, 2004, we believe that all
parties have agreed to settle the case. All Corporate Defendants
have agreed to contribute pro rata to the settlement, which does
not involve payment of material sums by us. After we receive
payment on certain claims against Broadband Offices
bankruptcy estate, the net amount of our payment will be less
than $50,000. Although we believe that this settlement will be
finalized, there are still a number of steps that must take
place before it is complete. Among other things, the bankruptcy
court overseeing Broadband Offices bankruptcy proceeding
must approve of the settlement. If this or any other condition
to the settlement does not occur, then the lawsuit may go
forward. Given such contingencies, and given further the
inherent uncertainties of the judicial process and the early
stage of this action, we are unable to predict the outcome of
this matter with certainty. We intend to vigorously defend this

21



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EOP OPERATING LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

(Unaudited)


matter and believe we have meritorious defenses.
As a result, we have not accrued for any potential liability in
connection with this litigation. As in any litigation, there can
be no assurance that we will prevail. Should the court not
resolve this matter in our favor it could have a material
adverse effect on our financial condition, results of operations
and liquidity.



| |                                     
| | ------------------------------------
| | Forward-Starting Interest Rate Swaps

As of December 31, 2003, we had
$1.3 billion of forward-starting interest rate swaps
outstanding, which were all settled during the six months ended
June 30, 2004 (see Note 7  Unsecured Notes
and Derivative Financial Instruments). The market value of the
swaps at December 31, 2003 represented a net liability to
us of approximately $10.4 million (approximately
$11.1 million is recorded in other assets and
$21.5 million is recorded in other liabilities). The
corresponding net market value of the swaps was included in
accumulated other comprehensive income as December 31, 2003.



| |                                          
| | -----------------------------------------
| | Fixed-to-Floating Interest Rate
    Swaps

In March 2004, we entered into fixed-to-floating
interest rate swap agreements in the notional amount of
$1.0 billion to hedge the $1.0 billion of unsecured
notes also issued in March 2004. We are the variable interest
rate payer and the counterparty is the fixed rate payer. The
variable interest rate is based on LIBOR plus 43 basis
points plus 79 basis points of loan costs. The swaps are
perfect fair value hedges because the periodic settlement dates
and other key terms correspond to the dates and other key terms
of the hedged unsecured notes.

The fixed-to-floating interest rate swaps and the
hedged unsecured notes are reflected on the consolidated balance
sheet at market value. Any market adjustment on the swap
agreements will be reflected in other assets or other
liabilities, and the corresponding market adjustment on the
unsecured notes will be reflected as either a premium or
discount on the unsecured notes. The market value of the swaps
at June 30, 2004 represented a liability to us of
approximately $73.4 million.



| |              
| | -------------
| | Contingencies

Certain joint venture agreements contain buy/
sell options in which each party has the option to acquire the
interest of the other party. Except for certain agreements in
which our partners in two of our Office Properties can require
us to buy their interests, such agreements do not generally
require that we buy our partners interest. The exceptions
allow our unaffiliated partners, at their election, to require
that we buy their interests during specified future time
periods, commencing in 2009 and at amounts that represent the
fair market value of their interest at that time or at amounts
based on formulas contained in the respective agreements. In
addition, we have granted options to each of two tenants to
purchase the Office Property it occupies.

In accordance with Statement of Accounting
Standards No. 5 Accounting for Contingencies, we
have not recorded a liability or the related asset that would
result from the acquisition in connection with the above
potential obligations because the probability of our
unaffiliated partners requiring us to buy their interest is not
currently determinable and we are unable to estimate the amount
of the payment required for that purpose.

Approximately 239 of our properties, consisting
of 31.9 million square feet, are subject to restrictions on
taxable dispositions under tax protection agreements entered
into with some of the contributors of the properties. The
carrying value of these properties was approximately
$6.7 billion at June 30, 2004. The restrictions on
taxable dispositions are effective for periods expiring at
different times through 2021. The terms of these tax protection
agreements generally prevent us from selling specific properties
in taxable transactions unless we indemnify the contributing
partners for their income tax liability on the portion of the
gain on sale

22



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##### Table of Contents



EOP OPERATING LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

(Unaudited)


allocated to them as a result of the
propertys value at the time of its contribution to us or,
in some cases, to our predecessor. We do not believe that the
tax protection agreements materially affect the conduct of our
business or our decisions whether to dispose of restricted
properties during the restriction period because we generally
hold these and our other properties for investment purposes,
rather than for sale. Historically, however, where we have
deemed it to be in our unitholders best interests to
dispose of restricted properties, we have done so through
transactions structured as tax-deferred transactions under
section 1031 of the Internal Revenue Code. We anticipate
structuring most future dispositions of restricted properties as
transactions intended to qualify for tax-deferred treatment. We
therefore view the likelihood of incurring any such material
indemnification obligations to be remote. Were we to dispose of
a restricted property in a taxable transaction, we generally
would be required to pay to a partner that is a beneficiary of
one of the tax protection agreements an amount based on the
amount of income tax the partner would be required to pay on the
incremental gain allocated to such partner as a result of the
built-in gain that existed with respect to such property at the
time of its contribution to us, or in some cases, to our
predecessor. In some cases there is a further requirement to
reimburse any additional tax liability arising from the
indemnification payment itself. The exact amount that would be
payable with respect to any particular taxable sale of a
restricted property would depend on a number of factors, many of
which can only be calculated at the time of any future sale,
including the sale price of the property at the time of the
sale, the partnerships basis in the property at the time
of the sale, the partners basis in the assets at the time
of the contribution, the partners applicable rate of
federal, state and local taxation at the time of the sale, and
the timing of the sale itself.



| |          
| | ---------
| | Insurance

Property Damage, Business Interruption,
Earthquake and Terrorism:The
insurance coverage provided through third-party insurance
carriers is subject to coverage limitations. For each type of
insurance coverage described below, should an uninsured or
underinsured loss occur, we could lose all or a portion of our
investment in, and anticipated cash flows from, one or more of
the Properties. In addition, there can be no assurance that
third-party insurance carriers will be able to maintain
reinsurance sufficient to cover any losses that may be incurred.

|                                             |  |                                                                                                                                                                                         |  |                                          
|-------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------
|Type of Insurance                            |  | Equity Office                                                                                                                                                                           |  | Third-Party Coverage                     
|Coverage                                     |  | Loss Exposure/ Deductible                                                                                                                                                               |  | Limitation                               
|                                             |  |                                                                                                                                                                                         |  |                                          
|Property damage and business interruption(a) |  | $75 million annual aggregate exposure (which
    includes amounts paid for earthquake loss), plus $1 million
    per occurrence deductible                                              |  | $1.0 billion per occurrence(c)           
|Earthquake(a)(b)                             |  | $75 million annual aggregate exposure (which
    includes amounts paid for property damage and business
    interruption loss), plus $1 million per occurrence
    deductible           |  | $325 million in the aggregate per year(c)
|Acts of terrorism(d)                         |  | $2.8 million per occurrence deductible (plus
    10% of each and every loss with a maximum per occurrence
    exposure of $35.3 million which includes the
    $2.8 million deductible) |  | $825 million per occurrence(e)           






|    |  |                                                                                                                                                                                                                                                                             
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | We retain up to $75 million of such loss
    throughout the portfolio. In the event of a loss in excess of
    this retention limit, the third-party insurance carriers would
    be obligated to cover the losses up to the stated coverage
    amounts in the above table.

23



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##### Table of Contents



EOP OPERATING LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

(Unaudited)




|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) |  | The amount of the third-party insurance relating
    to earthquakes is based on maximum probable loss studies
    performed by independent third parties. The maximum annual
    aggregate payment amount for earthquake loss is
    $325 million, inclusive of our loss exposure of
    $75 million plus $1 million per occurrence deductible.
    There can be no assurance that the maximum probable loss studies
    have accurately estimated losses that may occur.                                 
|   
|(c) |  | These amounts include our loss
    exposure/deductible amount.                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|(d) |  | The coverage includes nuclear, chemical and
    biological events. The coverage does not apply to non-TRIA
    (Terrorism Insurance Act of 2002) events (which are terrorism
    events that are not committed by a foreigner or a foreign
    country). We maintain separate insurance with a
    $325 million annual aggregate limit subject to a deductible
    of $1 million for non-TRIA events. This separate coverage
    for non-TRIA events excludes nuclear, biological and chemical
    events.
|   
|(e) |  | This amount is in excess of our deductible
    amounts.                                                                                                                                                                                                                                                                                                                                                                                                                                                   

Pollution:We have
pollution and remediation insurance coverage for both sudden and
gradual events. Limits for this exposure are $2 million per
loss and $10 million aggregate per year subject to a
deductible of $100,000.

Workers Compensation, Automobile
Liability and General Liability:We
have per occurrence deductible amounts for workers compensation
of $500,000, auto liability of $250,000 and general liability of
$1,000,000.



|          |                  
|--------- | -----------------
|NOTE 13  | SUBSEQUENT EVENTS

The following transactions occurred subsequent to
June 30, 2004, through July 30, 2004:

1. We repaid approximately
$209.1 million of mortgage debt on the Worldwide Plaza
office property. The property is now an unencumbered asset.

2. We received approximately
$32.1 million in connection with the sale of our investment
in the preferred shares of CT Convertible Trust I.

3. We obtained a $500 million bridge
revolving credit facility that matures in July 2005. The credit
facility bears interest at LIBOR plus 65 basis points and
has an annual facility fee of 15 basis points.

4. With a pre-existing joint venture
partner, we acquired Colorado Center, a six building office
complex consisting of approximately 1.1 million square feet
in Santa Monica, California, for a purchase price of
approximately $443.6 million. We own 50% of the joint
venture asset. Our net share of the purchase price was
approximately $221.8 million.

5. We issued approximately
$17.6 million of fixed interest rate EOP InterNotes with
coupon rates ranging from 3.70% to 5.15%. The maturity dates
range from three to six and a half years.

24



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##### Table of Contents






Item 2. Managements Discussion
and Analysis of Financial Condition and Results of
Operations.

Forward-Looking Statements

Certain of the statements contained in this
Form 10-Q which are not historical fact may be
forward-looking statements. Such statements (none of which is
intended as a guarantee of performance) are subject to certain
risks and uncertainties, which could cause actual results to
differ materially from those projected or anticipated. A number
of important factors could cause actual results to differ
materially from those indicated by the forward-looking
statements, including, but not limited to, the risks described
in our current report on Form 8-K filed with the Securities
and Exchange Commission (the SEC) on March 22,
2004, as the same may be supplemented from time to time. Readers
are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date this
Form 10-Q is filed with the SEC. Among the factors about
which we have made assumptions are the following:



| |   |                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | changes in general economic conditions;                                                                                                                                                                 
|
| |  | the extent, duration and strength of any economic
    recovery;                                                                                                                                         
|
| |  | the extent of any tenant bankruptcies and
    insolvencies;                                                                                                                                             
|
| |  | our ability to maintain occupancy;                                                                                                                                                                      
|
| |  | our ability to timely lease or re-lease space at
    anticipated net effective rents, calculated after giving effect
    to any required tenant improvements and leasing costs as well as
    free rent;
|
| |  | the amount of lease termination fees, if any;                                                                                                                                                           
|
| |  | the cost and availability of debt and equity
    financing;                                                                                                                                             
|
| |  | our ability to dispose of certain assets from
    time to time on acceptable terms;                                                                                                                     
|
| |  | the effect of any impairment charges associated
    with asset dispositions or changes in market conditions;                                                                                            
|
| |  | our ability to realize anticipated cost savings
    and to otherwise create and realize economic benefits of scale;                                                                                     
|
| |  | our ability to obtain, at a reasonable cost,
    adequate insurance coverage for catastrophic events, such as
    earthquakes and terrorist acts; and                                                   
|
| |  | other risks and uncertainties detailed from time
    to time in our filings with the SEC.                                                                                                               

Overview

The following discussion and analysis is based
primarily on the consolidated financial statements of EOP
Partnership for the periods presented and should be read
together with the notes thereto contained in this
Form 10-Q. Terms employed herein as defined terms, but
without definition, have the meanings set forth in the notes to
the financial statements (See Item 1. Financial Statements).

Executive Summary

Equity Office is the largest office REIT and
publicly held owner of office properties in the nation based on
market capitalization and square footage. We receive our revenue
primarily from rental revenues generated by leases for our
office space. The key factors that affect the office business
and our operating results are the following:



| |   |                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------
| |  | the prevailing economic environment, including
    its effect on white-collar job growth in markets in which we
    have a presence;
|
| |  | occupancy rates;                                                                                                                    
|
| |  | rental rates on new leases;                                                                                                         
|
| |  | tenant improvements and leasing costs incurred to
    retain and obtain tenants;                                                    

25



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##### Table of Contents





| |   |                                                                               
| | - | ------------------------------------------------------------------------------
| |  | the extent of any early lease terminations and
    any lease termination fees;
|
| |  | operating expenses; and                                                       
|
| |  | the extent of any dispositions and acquisitions.                              

Current Economic Environment

Over the past few years, we have faced an
economic slowdown marked by slow employment growth and the
highest office vacancy in the United States in over
10 years. The poor economic environment and weak office
markets adversely impacted our financial results. Although the
economy seems to be recovering, its recovery has not yet
significantly impacted our financial results. Our overall office
occupancy declined from 88.6% at December 31, 2002 to 86.3%
at June 30, 2004. This was due to early lease terminations,
which totaled approximately 7.4 million square feet and
equated to approximately 6.0% of occupancy lost in our office
portfolio during this 18-month period. Over the last four
quarters, however, our occupancy has been stable at
approximately 86% and we expect our occupancy to increase to
approximately 88% by December 31, 2004.

Market rental rates have declined over the last
couple years and have significantly declined from their peak
levels, which has adversely impacted our financial results.
Although market rental rates seem to have begun to stabilize in
many of our markets, the roll down of rents on our expiring
leases to current market levels will continue to adversely
impact our rental revenues, net income and funds from operations
for the foreseeable future, assuming market rental rates do not
materially increase from their existing levels. In addition,
tenant improvements and leasing costs have increased
significantly over the last 12 months due to the
competitive market conditions for new and renewal leases. In
2004, we expect the cost to obtain and keep tenants, such as
tenant improvements, leasing commissions, free rent and other
concessions to approximate 2003 levels.

On a macroeconomic level, we believe office
markets are beginning to recover and there will only be a
minimal supply of new office space in most of our core markets.
In 2003, net absorption was approximately 12.8 million
square feet in our top 20 markets. In 2004, we expect net
absorption of approximately 30 to 35 million square feet in
the same markets. We anticipate annual growth in the gross
domestic product in the range of 3.5% to 4% and office job
growth in our top 20 markets of approximately 2.5%. Although we
believe this will lead to an increase in our occupancy level,
any changes in these assumptions could impact our financial
results.

Capital Transactions

During 2003 through June 30, 2004, we took
advantage of favorable market conditions for property sales by
disposing of approximately $1.2 billion in assets. In
addition, we entered into joint ventures and sold a 75% to 80%
interest in 13 Office Properties for approximately
$596.5 million. We used the proceeds from these asset sales
to repay debt, redeem preferred units, acquire strategic assets
in core markets, fund distributions to unitholders and
repurchase Units. As part of our capital allocation strategy, we
are concentrating our new investments in our core markets and
will continue to sell non-core assets and exit non-core markets
provided that market conditions for real estate assets remain
favorable. We may incur gains or losses on property sales and
may also incur potential impairment charges as a result of
either sales or changes in market conditions, some of which
could be material.

The remaining portion of our Managements
Discussion and Analysis of Financial Condition and Results of
Operations will help you understand:



| |   |                                                                                         
| | - | ----------------------------------------------------------------------------------------
| |  | the key transactions that we completed during the
    six months ended June 30, 2004;   
|
| |  | our critical accounting policies and estimates;                                         
|
| |  | our results of operations for the three and six
    months ended June 30, 2004 and 2003;

26



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##### Table of Contents





| |   |                                         
| | - | ----------------------------------------
| |  | our liquidity and capital resources; and
|
| |  | our funds from operations.              

Key Transactions in 2004

During the six months ended June 30, 2004,
we completed the following key transactions:



| |                     
| | --------------------
| | Investing Activities



| |   |                                                                                                                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | disposed of five office properties, 38 industrial
    properties and one vacant land parcel in various transactions to
    unaffiliated parties for approximately $274.0 million. The
    sold office properties consisted of approximately
    567,765 square feet and the industrial properties consisted
    of approximately 2,275,550 square feet;
|
| |  | acquired the American Center office property for
    approximately $60.5 million consisting of two buildings and
    approximately 328,741 square feet;                                                                                                                                                                                                
|
| |  | acquired one of our joint venture partners
    15.53% economic interest in the 1301 Avenue of the Americas
    office building for approximately $60.7 million and assumed
    our partners share of the mortgage notes of approximately
    $83.0 million and acquired another joint venture
    partners interest for approximately $7.5 million; 



| |                     
| | --------------------
| | Financing Activities



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | redeemed the 8 5/8% Series C Cumulative
    Redeemable Preferred Units of Beneficial Interest for
    approximately $114.1 million;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | repaid $300 million of 6.50% unsecured notes
    and $100 million of 6.90% unsecured notes that matured in
    January 2004, $200 million of 6.80% unsecured notes that
    matured in May 2004 and $250 million of 6.5% unsecured
    notes that matured in June 2004;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | issued $1.0 billion of unsecured notes due
    March 2014 with a coupon interest rate of 4.75%. In connection
    with this issuance, we settled $800 million of
    forward-starting interest rate swaps for a payment of
    approximately $69.1 million. Approximately
    $0.2 million of this payment was considered an ineffective
    hedge and was expensed during the first quarter. The remaining
    $68.9 million was considered an effective hedge and will be
    amortized to interest expense over the 10-year term of the
    $1.0 billion notes. The effective rate on these notes
    including issuance costs and the settlement of the
    forward-starting interest rate swaps is approximately 5.54%. We
    then entered into several fixed-to-floating interest rate swap
    agreements that effectively converted the interest rate on the
    newly issued unsecured notes from a fixed effective rate of
    5.54% to a floating rate of LIBOR plus 43 basis points plus
    79 basis points of loan costs;
|
| |  | issued $45 million of unsecured notes due
    May 2014 at a variable rate of LIBOR plus 77.5 basis points;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | settled $500 million of forward-starting
    interest rate swaps and recognized an approximate
    $24.0 million gain. The swaps were entered into in 2003 to
    hedge an anticipated unsecured note offering expected to take
    place in June 2004, which did not occur;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | launched a new program allowing for the issuance
    of up to $500 million of unsecured medium-term EOP
    InterNotes for sale to retail investors through licensed
    brokers. As of June 30, 2004, we had issued approximately
    $4.3 million of fixed interest rate EOP InterNotes with
    coupon rates ranging from 4.75% to 5.25%. The maturity dates
    range from four to six years. Including all offering expenses,
    the all-in effective rate of the InterNotes issued range from
    4.95% to 5.44%;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | repaid approximately $189.7 million of
    mortgage debt;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | cancelled a $1.0 billion standby 364-day
    line of credit; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

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| |      
| | -----
| | Other



| |   |                                                                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | consolidated the assets, liabilities and results
    of operations of the SunAmerica Center office property as of
    January 1, 2004 in accordance with FIN 46(R) and
    recognized a cumulative effect of a change in accounting
    principle loss of approximately $33.7 million.

Critical Accounting Policies and
Estimates

Refer to our 2003 Annual Report on Form 10-K
for a discussion of our critical accounting policies which
include allowance for doubtful accounts, impairment of
long-lived assets, depreciation and the fair value of financial
instruments. There have been no material changes to these
policies in 2004.

Results of Operations



| |                                                                                                        
| | -------------------------------------------------------------------------------------------------------
| | Trends in Occupancy, Rental Rates, Lease
    Terminations and Tenant Improvements and Leasing
    Costs

Below is a summary of leasing activity for
tenants taking occupancy for the periods presented in our Office
Properties. Our 10 largest markets in terms of property net
operating income from continuing operations in order from
greatest to least are Boston, San Francisco, San Jose,
New York, Los Angeles, Seattle, Chicago, Washington D.C.,
Atlanta and Orange County. These markets accounted for
approximately 78.7% of our property net operating income from
continuing operations in the second quarter of 2004.

|                      |                                                                                                            |                      |  |           |                    |  |  |              |       |  |      |           |       |      |  |           |       |  |  |            |       | 
|--------------------- | ---------------------------------------------------------------------------------------------------------- | -------------------- |  | --------- | ------------------ |  |  | ------------ | ----- |  | ---- | --------- | ----- | ---- |  | --------- | ----- |  |  | ---------- | ----- | 
|                      |                                                                                                            |                      |  |           |                    | 
|                      |                                                                                                            | For the three months |  |           | For the six months |  |  | For the year |      
|                      |                                                                                                            | ended June 30,       |  |           | ended June 30,     |  |  | ended        |      
|                      |                                                                                                            |                      |  |           |                    |  |  | December 31, |      
|                      |                                                                                                            | 2004                 |  |           | 2003               |  |  | 2004         |       |  | 2003 |           |       | 2003 | 
|Office Property Data: |                                                                                                            |                      |  |           |                    |  |  |              |       |  |      |           |       |      | 
|10 Largest Markets:   |                                                                                                            |                      |  |           |                    |  |  |              |       |  |      |           |       |      |  |           |       |  |  |           
|                      | Portion of total office portfolio based on square
    feet at end of period                                |                      |  | 69.8      | %                  |  |  | 68.8         | %     |  |      | 69.8      | %     |      |  | 68.8      | %     |  |  | 69.4       | %    
|                      | Occupancy at end of period                                                                                 |                      |  | 86.1      | %                  |  |  | 87.0         | %     |  |      | 86.1      | %     |      |  | 87.0      | %     |  |  | 86.1       | %    
|                      | Gross square footage for tenants whose lease term
    commenced during the period                          |                      |  | 3,659,585 |                    |  |  | 3,185,048    |       |  |      | 7,320,405 |       |      |  | 7,082,091 |       |  |  | 15,218,840 |      
|                      | Weighted average annual rent per square foot for
    tenants whose lease term commenced during the period: |                      |  |           |                    |  |  |              |       |  |      |           |       |      |  |           |       |  |  |            |      
|                      |                                                                                                            | GAAP basis(a)(b)     |  | $         | 26.79              |  |  | $            | 29.07 |  |      | $         | 26.76 |      |  | $         | 29.69 |  |  | $          | 27.93 | 
|                      |                                                                                                            | Cash basis(b)(c)     |  | $         | 25.70              |  |  | $            | 28.41 |  |      | $         | 25.87 |      |  | $         | 28.87 |  |  | $          | 26.99 | 
|                      | Gross square footage for expiring and terminated
    leases during the period                              |                      |  | 3,729,685 |                    |  |  | 3,409,363    |       |  |      | 7,466,587 |       |      |  | 8,295,338 |       |  |  | 15,932,288 |      
|                      | Weighted average annual rent per square foot for
    expiring and terminated leases during the period:     |                      |  |           |                    |  |  |              |       |  |      |           |       |      |  |           |       |  |  |            |      
|                      |                                                                                                            | GAAP basis(a)        |  | $         | 31.05              |  |  | $            | 30.93 |  |      | $         | 30.37 |      |  | $         | 31.78 |  |  | $          | 31.12 | 
|                      |                                                                                                            | Cash basis(c)        |  | $         | 32.31              |  |  | $            | 31.41 |  |      | $         | 31.45 |      |  | $         | 32.08 |  |  | $          | 31.50 | 

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|                        |                                                                                                            |                      |  |           |                    |  |  |              |       |  |      |            |       |      |  |            |       |  |  |            |       | 
|----------------------- | ---------------------------------------------------------------------------------------------------------- | -------------------- |  | --------- | ------------------ |  |  | ------------ | ----- |  | ---- | ---------- | ----- | ---- |  | ---------- | ----- |  |  | ---------- | ----- | 
|                        |                                                                                                            |                      |  |           |                    | 
|                        |                                                                                                            | For the three months |  |           | For the six months |  |  | For the year |      
|                        |                                                                                                            | ended June 30,       |  |           | ended June 30,     |  |  | ended        |      
|                        |                                                                                                            |                      |  |           |                    |  |  | December 31, |      
|                        |                                                                                                            | 2004                 |  |           | 2003               |  |  | 2004         |       |  | 2003 |            |       | 2003 | 
|Office Property Data:   |                                                                                                            |                      |  |           |                    |  |  |              |       |  |      |            |       |      | 
|Total Office Portfolio: |                                                                                                            |                      |  |           |                    |  |  |              |       |  |      |            |       |      |  |            |       |  |  |           
|                        | Occupancy at end of period                                                                                 |                      |  | 86.3      | %                  |  |  | 87.1         | %     |  |      | 86.3       | %     |      |  | 87.1       | %     |  |  | 86.3       | %    
|                        | Gross square footage for tenants whose lease term
    commenced during the period                          |                      |  | 6,242,599 |                    |  |  | 4,632,148    |       |  |      | 11,657,011 |       |      |  | 10,518,434 |       |  |  | 22,684,488 |      
|                        | Weighted average annual rent per square foot for
    tenants whose lease term commenced during the period: |                      |  |           |                    |  |  |              |       |  |      |            |       |      |  |            |       |  |  |            |      
|                        |                                                                                                            | GAAP basis(a)(b)     |  | $         | 23.25              |  |  | $            | 26.61 |  |      | $          | 23.84 |      |  | $          | 26.95 |  |  | $          | 25.68 | 
|                        |                                                                                                            | Cash basis(b)(c)     |  | $         | 22.57              |  |  | $            | 26.04 |  |      | $          | 23.16 |      |  | $          | 26.28 |  |  | $          | 24.86 | 
|                        | Gross square footage for expiring and terminated
    leases during the period                              |                      |  | 6,153,544 |                    |  |  | 4,755,613    |       |  |      | 11,758,555 |       |      |  | 11,844,621 |       |  |  | 23,976,592 |      
|                        | Weighted average annual rent per square foot for
    expiring and terminated leases during the period:     |                      |  |           |                    |  |  |              |       |  |      |            |       |      |  |            |       |  |  |            |      
|                        |                                                                                                            | GAAP basis(a)        |  | $         | 27.15              |  |  | $            | 28.23 |  |      | $          | 26.96 |      |  | $          | 28.89 |  |  | $          | 28.14 | 
|                        |                                                                                                            | Cash basis(c)        |  | $         | 28.03              |  |  | $            | 28.73 |  |      | $          | 27.82 |      |  | $          | 29.27 |  |  | $          | 28.55 | 



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | These weighted average GAAP rental rates are
    based on the average annual base rent per square foot over the
    term of each of the leases and the current estimated tenant
    reimbursements, if any.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(b) |  | Weighted average annual rent per square foot for
    new office leases for tenants whose lease term commenced during
    the period may lag behind market because leasing decisions
    typically are made anywhere from one month to 12 or more months
    prior to taking occupancy.                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|(c) |  | These weighted average annual cash rental rates
    are based on the monthly contractual rent as of the reporting
    date, or if the current rent payable is $0 then the first
    monthly rent payment due, under the existing leases as of
    June 30, 2004 multiplied by 12 months
    (Annualized Cash Rent). This amount reflects total
    base rent and estimated expense reimbursements from tenants as
    of June 30, 2004 without regard to any free rent and
    contractual increases or decreases in rent subsequent to
    June 30, 2004. We believe Annualized Cash Rent is a useful
    measure because this information can be used for comparison to
    current market rents as published by various third party sources.

The general decline in occupancy for our Office
Properties since the beginning of 2003 was a result of early
lease terminations. Although lease termination fees increase
current period income, future rental income will most likely be
reduced. Given the decline in market rents, it is unlikely we
will lease the space to new tenants at the same rate which had
been payable under the terminated leases. We will also often
incur downtime and additional costs to relet the space. Although
there is no way of predicting future lease terminations, we
currently anticipate that lease termination fees and the
affected square feet will be lower in 2004 than 2003. The amount
of lease termination fees are not necessarily proportionate to
the square footage of leases being terminated.

We estimate the average annual total rent of
approximately $30.26 per square foot as of June 30,
2004 for all of our Office Properties, calculated on a cash
basis, is approximately $3.50 to $4.00 per square foot
above current market rent. However, the rent roll down in 2005
will be in the $5.00 to $6.00 range due to leases expiring five
years after the rent peaked in most markets, which was in 2000.
This roll down in rents adversely affects our rental revenues
and until market rental rates increase substantially from their
current levels, we

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expect it to adversely affect our rental revenues
in subsequent periods as we enter into new leases. The square
footage of leases scheduled to expire and the Annualized Cash
Rent per occupied square foot for these leases is presented
below.


|                    |  |                 |             |               |             |   |       | 
|------------------- |  | --------------- | ----------- | ------------- | ----------- | - | ----- | 
|                    |  |                 |             | Annualized    |            
|                    |  |                 |             | Cash Rent per |            
|                    |  | Square Feet of  |             |               | Occupied    |  
|Year(a)             |  | Expiring Leases |             |               | Square Foot |  
|                    |  |                 |             |               |             |  
|2004 (remainder)    |  |                 | 5,516,620   |               |             | $ | 27.10 | 
|2005                |  |                 | 13,350,972  |               |             |   | 29.86 | 
|2006                |  |                 | 13,568,087  |               |             |   | 29.93 | 
|2007                |  |                 | 12,971,856  |               |             |   | 28.81 | 
|2008                |  |                 | 13,811,640  |               |             |   | 28.10 | 
|2009 and Thereafter |  |                 | 46,836,296  |               |             |   | 31.89 | 
|                    |  |                 |             |               |             |  
|Total/ Average      |  |                 | 106,055,471 |               |             | $ | 30.26 | 
|                    |  |                 |             |               |             |  



---



|    |  |                                                                                                                                     
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Based on the contractual termination date of the
    lease without regard to any early lease termination and/or
    renewal options.

During 2003 and continuing in 2004, we
experienced increases in tenant improvements and leasing costs
as compared to historical levels as a result of competitive
market conditions for new and renewal leases. The weighted
average tenant improvements and leasing cost per square foot
incurred for office leases which commenced during the three and
six months ended June 30, 2004 was approximately $16.52 and
$16.80, respectively, an increase compared to the cost of $15.51
and $14.92 per square foot incurred in the same respective
periods in 2003. These increases in tenant improvements and
leasing costs resulted in a decrease in net effective rents
(contract rents reduced by tenant improvements costs, leasing
commissions and any free rent periods) for lease renewals and
retenanted properties. We expect tenant improvements and leasing
costs to average approximately $18 to $20 per square foot
in 2004.

30



---



##### Table of Contents



Period-to-Period Comparisons



| |                                         
| | ----------------------------------------
| | Acquisition and Disposition
    Activity

Below is a summary of our acquisition and
disposition activity since January 1, 2003. The buildings
and total square feet shown include properties we own in joint
ventures with other partners that we either consolidate or
account for under the equity method. The total square feet of
these unconsolidated properties is included in the table.
Excluding the joint venture partners share of the square
feet of the office properties, we effectively owned
114,281,026 square feet of office space as of June 30,
2004.

|                        |                                    |                   |     |     |                       |  |             |            |   |  |             |     |   |  |           |            |  
|----------------------- | ---------------------------------- | ----------------- | --- | --- | --------------------- |  | ----------- | ---------- | - |  | ----------- | --- | - |  | --------- | ---------- | -
|                        |                                    |                   |     |    
|                        |                                    | Office Properties |     |     | Industrial Properties | 
|                        |                                    |                   |     |     |                       | 
|                        |                                    | Buildings         |     |     | Square Feet           |  |             | Buildings  |   |  | Square Feet |    
|                        |                                    |                   |     |     |                       |  |             |            |   |  |             |    
|Properties owned as of: |                                    |                   |     |     |                       |  |             |            |   |  |             |     |   |  |           |           
|December 31, 2002       |                                    |                   | 734 |     |                       |  | 125,725,399 |            |   |  | 77          |     |   |  | 5,967,759 |           
|                        | Acquisitions                       |                   |     | 2   |                       |  |             | 829,293    |   |  |             |    |   |  |           |           |  
|                        | Developments placed in service     |                   |     | 5   |                       |  |             | 1,218,215  |   |  |             |    |   |  |           |           |  
|                        | Dispositions(a)                    |                   |     | (53 | )                     |  |             | (5,182,707 | ) |  |             | (2  | ) |  |           | (216,900   | )
|                        | Properties taken out of service(b) |                   |     | (4  | )                     |  |             | (450,548   | ) |  |             |    |   |  |           |           |  
|                        | Building remeasurements            |                   |     |    |                       |  |             | 115,273    |   |  |             |    |   |  |           |           |  
|                        |                                    |                   |     |     |                       |  |             |            |   |  |             |    
|December 31, 2003       |                                    |                   | 684 |     |                       |  | 122,254,925 |            |   |  | 75          |     |   |  | 5,750,859 |           
|                        | Consolidation of SunAmerica Center |                   |     | 1   |                       |  |             | 780,063    |   |  |             |    |   |  |           |           |  
|                        | Developments placed in service(c)  |                   |     | 1   |                       |  |             | 114,955    |   |  |             |    |   |  |           |           |  
|                        | Dispositions                       |                   |     | (1  | )                     |  |             | (118,172   | ) |  |             |    |   |  |           |           |  
|                        | Building remeasurements            |                   |     |    |                       |  |             | 1,501      |   |  |             |    |   |  |           | 1,875      |  
|                        |                                    |                   |     |     |                       |  |             |            |   |  |             |    
|March 31, 2004          |                                    |                   | 685 |     |                       |  | 123,033,272 |            |   |  | 75          |     |   |  | 5,752,734 |           
|                        | Acquisitions                       |                   |     | 2   |                       |  |             | 328,741    |   |  |             |    |   |  |           |           |  
|                        | Dispositions                       |                   |     | (4  | )                     |  |             | (449,593   | ) |  |             | (38 | ) |  |           | (2,275,550 | )
|                        | Building remeasurements            |                   |     |    |                       |  |             | 23,979     |   |  |             |    |   |  |           |           |  
|                        |                                    |                   |     |     |                       |  |             |            |   |  |             |    
|June 30, 2004           |                                    |                   | 683 |     |                       |  | 122,936,399 |            |   |  | 37          |     |   |  | 3,477,184 |           
|                        |                                    |                   |     |     |                       |  |             |            |   |  |             |    



---



|    |  |                                                                                                                                                                                
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Excludes partial sales of real estate, which are
    accounted for under the equity method because the properties are
    still included in our portfolio statistics.          
|   
|(b) |  | Cambridge Science Center (f/k/a Riverview I) is
    now considered a development and 175 Wyman has been taken out of
    service and is being held for potential redevelopment.
|   
|(c) |  | Douglas Corporate Center II, a development
    at December 31, 2003, is included in the office portfolio
    as an operational property effective in the first quarter 2004.   



| |                      
| | ---------------------
| | Results of Operations

The financial data presented in the consolidated
statements of operations show changes in revenues and expenses
from period-to-period. We do not believe our period-to-period
financial data are necessarily comparable because we acquire and
dispose of properties on an ongoing basis. The following tables
show results attributable to the Properties that were held
during both periods being compared (the Same Store
Portfolio) and the changes in our aggregate total
portfolio of Properties (the Total Portfolio). The
significant differences between our Same Store and Total
Portfolios are:



| |   |                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------
| |  | revenues recorded and expenses incurred at the
    corporate level;                                      
|
| |  | the consolidations of 1301 Avenue of the Americas
    and SunAmerica Center in the first quarter of 2004;

31



---



##### Table of Contents





| |   |                                                                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the consolidation of Key Center in the third
    quarter of 2003;                                                                                                                                
|
| |  | the acquisition of U.S. Bank Tower and 225
    West Santa Clara in 2003 and American Center in 2004;                                                                                             
|
| |  | certain developments placed in service; and                                                                                                                                                      
|
| |  | the properties sold in 2003 and 2004 including
    the partial sale of 13 properties in December 2003 which are now
    included in income from investments in unconsolidated joint
    ventures.

Included in property operating revenues are
rental revenue, tenant reimbursements, parking and other income.
Included in property operating expenses are insurance, repairs
and maintenance and property operating expenses.

32



---



##### Table of Contents





| |                                                                                                   
| | --------------------------------------------------------------------------------------------------
| | Comparison of the three months ended
    June 30, 2004 to the three months ended June 30,
    2003

The table below represents selected operating
information for the Total Portfolio and for the Same Store
Portfolio consisting of 635 consolidated Office Properties, 37
Industrial Properties and 23 unconsolidated joint venture
Properties acquired or placed in service on or prior to
April 1, 2003.

|                                                                                                                                  |                                            |                               |                  |          |                      |         |         |          |          |         |         |        |        |         |       |       |      |      |         |         |         |         |         |         |         |         |         |         |         |         |       |       |       |       |  
|--------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ----------------------------- | ---------------- | -------- | -------------------- | ------- | ------- | -------- | -------- | ------- | ------- | ------ | ------ | ------- | ----- | ----- | ---- | ---- | ------- | ------- | ------- | ------- | ------- | ------- | ------- | ------- | ------- | ------- | ------- | ------- | ----- | ----- | ----- | ----- | -
|                                                                                                                                  |                                            |                               |                  |         
|                                                                                                                                  |                                            | Total Portfolio               |                  |          | Same Store Portfolio |        
|                                                                                                                                  |                                            |                               |                  |          |                      |        
|                                                                                                                                  |                                            |                               |                  |          |                      |         |         |         
|                                                                                                                                  |                                            |                               |                  | Change   |                      |         |         |          | Change   |        
|                                                                                                                                  |                                            |                               |                  |          |                      |         |         |          |          |        
|(Dollars in thousands)                                                                                                            |                                            | 2004                          |                  |          | 2003                 |         |         | $        |          |         | %       |        |        | 2004    |       |       | 2003 |      |         | $       |         |         | %       |        
|                                                                                                                                  |                                            |                               |                  |          |                      |         |         |          |          |         |         |        |        |         |       |       |      |      |         |         |         |         |         |        
|Revenues:                                                                                                                         |                                            |                               |                  |          |                      |         |         |          |          |         |         |        |        |         |       |       |      |      |         |         |         |         |         |         |         |         |         |         |         |         |       |      
|                                                                                                                                  | Property operating revenues                |                               | $                | 791,684  |                      |         | $       | 777,104  |          |         | $       | 14,580 |        |         |       | 1.9   | %    |      | $       | 735,352 |         |         | $       | 749,222 |         |         | $       | (13,870 | )       |         |       | (1.9  | )%   
|                                                                                                                                  | Fee income                                 |                               |                  | 3,849    |                      |         |         | 3,526    |          |         |         | 323    |        |         |       | 9.2   |      |      |         |        |         |         |         |        |         |         |         |        |         |         |       |      |      
|                                                                                                                                  |                                            |                               |                  |          |                      |         |         |          |          |         |         |        |        |         |       |       |      |      |         |         |         |         |         |        
|                                                                                                                                  |                                            | Total revenues                |                  |          | 795,533              |         |         |          | 780,630  |         |         |        | 14,903 |         |       |       | 1.9  |      |         |         | 735,352 |         |         |         | 749,222 |         |         |         | (13,870 | )       |       |       | (1.9  | )    
|                                                                                                                                  |                                            |                               |                  |          |                      |         |         |          |          |         |         |        |        |         |       |       |      |      |         |         |         |         |         |        
|Expenses:                                                                                                                         |                                            |                               |                  |          |                      |         |         |          |          |         |         |        |        |         |       |       |      |      |         |         |         |         |         |         |         |         |         |         |         |         |       |      
|                                                                                                                                  | Depreciation and amortization              |                               |                  | 189,505  |                      |         |         | 170,691  |          |         |         | 18,814 |        |         |       | 11.0  |      |      |         | 172,460 |         |         |         | 161,536 |         |         |         | 10,924  |         |         |       | 6.8   |      
|                                                                                                                                  | Real estate taxes                          |                               |                  | 100,869  |                      |         |         | 89,726   |          |         |         | 11,143 |        |         |       | 12.4  |      |      |         | 92,498  |         |         |         | 84,866  |         |         |         | 7,632   |         |         |       | 9.0   |      
|                                                                                                                                  | Property operating expenses                |                               |                  | 194,524  |                      |         |         | 186,292  |          |         |         | 8,232  |        |         |       | 4.4   |      |      |         | 183,354 |         |         |         | 180,342 |         |         |         | 3,012   |         |         |       | 1.7   |      
|                                                                                                                                  | Ground rent                                |                               |                  | 5,050    |                      |         |         | 4,870    |          |         |         | 180    |        |         |       | 3.7   |      |      |         | 4,357   |         |         |         | 4,793   |         |         |         | (436    | )       |         |       | (9.1  | )    
|                                                                                                                                  | General and administrative(a)              |                               |                  | 13,709   |                      |         |         | 17,655   |          |         |         | (3,946 | )      |         |       | (22.4 | )    |      |         |        |         |         |         |        |         |         |         |        |         |         |       |      |      
|                                                                                                                                  |                                            |                               |                  |          |                      |         |         |          |          |         |         |        |        |         |       |       |      |      |         |         |         |         |         |        
|                                                                                                                                  |                                            | Total expenses                |                  |          | 503,657              |         |         |          | 469,234  |         |         |        | 34,423 |         |       |       | 7.3  |      |         |         | 452,669 |         |         |         | 431,537 |         |         |         | 21,132  |         |       |       | 4.9   |      
|                                                                                                                                  |                                            |                               |                  |          |                      |         |         |          |          |         |         |        |        |         |       |       |      |      |         |         |         |         |         |        
|                                                                                                                                  |                                            |                               | Operating income |          |                      | 291,876 |         |          |          | 311,396 |         |        |        | (19,520 | )     |       |      | (6.3 | )       |         |         | 282,683 |         |         |         | 317,685 |         |         |         | (35,002 | )     |       |       | (11.0 | )
|                                                                                                                                  |                                            |                               |                  |          |                      |         |         |          |          |         |         |        |        |         |       |       |      |      |         |         |         |         |         |        
|Other income/ (expense):                                                                                                          |                                            |                               |                  |          |                      |         |         |          |          |         |         |        |        |         |       |       |      |      |         |         |         |         |         |         |         |         |         |         |         |         |       |      
|                                                                                                                                  | Interest/ dividend income                  |                               |                  | 2,410    |                      |         |         | 3,666    |          |         |         | (1,256 | )      |         |       | (34.3 | )    |      |         | 737     |         |         |         | 988     |         |         |         | (251    | )       |         |       | (25.4 | )    
|                                                                                                                                  | Realized gain on settlement of derivatives |                               |                  | 24,016   |                      |         |         |         |          |         |         | 24,016 |        |         |       | 100.0 |      |      |         |        |         |         |         |        |         |         |         |        |         |         |       |      |      
|                                                                                                                                  | Interest expense(b)                        |                               |                  | (211,147 | )                    |         |         | (208,583 | )        |         |         | (2,564 | )      |         |       | 1.2   |      |      |         | (40,793 | )       |         |         | (47,169 | )       |         |         | 6,376   |         |         |       | (13.5 | )    
|                                                                                                                                  |                                            |                               |                  |          |                      |         |         |          |          |         |         |        |        |         |       |       |      |      |         |         |         |         |         |        
|                                                                                                                                  |                                            | Total other income/ (expense) |                  |          | (184,721             | )       |         |          | (204,917 | )       |         |        | 20,196 |         |       |       | (9.9 | )    |         |         | (40,056 | )       |         |         | (46,181 | )       |         |         | 6,125   |         |       |       | (13.3 | )    
|                                                                                                                                  |                                            |                               |                  |          |                      |         |         |          |          |         |         |        |        |         |       |       |      |      |         |         |         |         |         |        
|Income before income taxes, allocation to
    minority interests and income from investments in unconsolidated
    joint ventures |                                            |                               | 107,155          |          |                      |         | 106,479 |          |          |         | 676     |        |        |         | 0.6   |       |      |      | 242,627 |         |         |         | 271,504 |         |         |         | (28,877 | )       |         |         | (10.6 | )    
|Income taxes                                                                                                                      |                                            |                               | (1,355           | )        |                      |         | (1,574  | )        |          |         | 219     |        |        |         | (13.9 | )     |      |      | (441    | )       |         |         | (194    | )       |         |         | (247    | )       |         |         | 127.3 |      
|Minority interests                                                                                                                |                                            |                               | (2,341           | )        |                      |         | (1,841  | )        |          |         | (500    | )      |        |         | 27.2  |       |      |      | (2,647  | )       |         |         | (2,221  | )       |         |         | (426    | )       |         |         | 19.2  |      
|Income from investments in unconsolidated joint
    ventures                                                                      |                                            |                               | 14,739           |          |                      |         | 20,946  |          |          |         | (6,207  | )      |        |         | (29.6 | )     |      |      | 10,359  |         |         |         | 14,490  |         |         |         | (4,131  | )       |         |         | (28.5 | )    
|                                                                                                                                  |                                            |                               |                  |          |                      |         |         |          |          |         |         |        |        |         |       |       |      |      |         |         |         |         |         |        
|Income from continuing operations                                                                                                 |                                            |                               | 118,198          |          |                      |         | 124,010 |          |          |         | (5,812  | )      |        |         | (4.7  | )     |      |      | 249,898 |         |         |         | 283,579 |         |         |         | (33,681 | )       |         |         | (11.9 | )    
|Discontinued operations (including net gain on
    sales of real estate of $1,927 and $44,448, respectively)                      |                                            |                               | 3,420            |          |                      |         | 59,773  |          |          |         | (56,353 | )      |        |         | (94.3 | )     |      |      |        |         |         |         |        |         |         |         |        |         |         |         |      |      
|                                                                                                                                  |                                            |                               |                  |          |                      |         |         |          |          |         |         |        |        |         |       |       |      |      |         |         |         |         |         |        
|Net income                                                                                                                        |                                            | $                             | 121,618          |          |                      | $       | 183,783 |          |          | $       | (62,165 | )      |        |         | (33.8 | )%    |      | $    | 249,898 |         |         | $       | 283,579 |         |         | $       | (33,681 | )       |         |         | (11.9 | )%   
|                                                                                                                                  |                                            |                               |                  |          |                      |         |         |          |          |         |         |        |        |         |       |       |      |      |         |         |         |         |         |        
|Property net operating income from continuing
    operations(c)                                                                   |                                            | $                             | 496,291          |          |                      | $       | 501,086 |          |          | $       | (4,795  | )      |        |         | (1.0  | )%    |      | $    | 459,500 |         |         | $       | 484,014 |         |         | $       | (24,514 | )       |         |         | (5.1  | )%   
|                                                                                                                                  |                                            |                               |                  |          |                      |         |         |          |          |         |         |        |        |         |       |       |      |      |         |         |         |         |         |        
|Deferred rental revenue                                                                                                           |                                            | $                             | 22,959           |          |                      | $       | 18,952  |          |          | $       | 4,007   |        |        |         | 21.1  | %     |      | $    | 17,889  |         |         | $       | 18,425  |         |         | $       | (536    | )       |         |         | (2.9  | )%   
|                                                                                                                                  |                                            |                               |                  |          |                      |         |         |          |          |         |         |        |        |         |       |       |      |      |         |         |         |         |         |        
|Lease termination fees                                                                                                            |                                            | $                             | 8,383            |          |                      | $       | 7,833   |          |          | $       | 550     |        |        |         | 7.0   | %     |      | $    | 8,755   |         |         | $       | 7,833   |         |         | $       | 922     |         |         |         | 11.8  | %    
|                                                                                                                                  |                                            |                               |                  |          |                      |         |         |          |          |         |         |        |        |         |       |       |      |      |         |         |         |         |         |        



---



|    |  |                                                                                                                                                                                                                                                                                             
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Corporate general and administrative expense is
    not allocated to the Same Store Portfolio because these expenses
    are not directly incurred in connection with any specific
    Property.                                                                                            
|   
|(b) |  | Interest expense (including amortization of
    deferred financing costs and prepayment expenses) for the Same
    Store Portfolio represents interest expense on property secured
    mortgage debt and does not include interest expense on the
    unsecured notes or the line of credit.
|   
|(c) |  | Represents segment data. See Item 1.
    Financial Statements Note 11-Segment Information.                                                                                                                                                                                                  

33



---



##### Table of Contents





| |                            
| | ---------------------------
| | Property Operating Revenues

The decrease in property operating revenues in
the Same Store Portfolio was primarily attributable to reduced
occupancy in the Same Store Portfolio from 86.6% at
March 31, 2003 to 86.1% at June 30, 2004. The decrease
in occupancy was due to early lease terminations. In addition to
the decline in occupancy, rental revenues declined as a result
of lower average rental rates on new leases as compared to
average rental rates on expiring leases.



| |                              
| | -----------------------------
| | Depreciation and Amortization

Total Portfolio and Same Store Portfolio
depreciation and amortization expense increased from the prior
period primarily as a result of capital and tenant improvements
made since the beginning of the prior period and from an
increase in deferred leasing costs.



| |                  
| | -----------------
| | Real Estate Taxes

Real estate taxes increased for the Total
Portfolio and Same Store Portfolio primarily due to an increase
in estimated taxes at our properties located in California of
approximately $9.0 million offset, in part, by savings at
our properties located in Boston of approximately
$1.3 million.



| |                            
| | ---------------------------
| | Property Operating Expenses

Property operating expenses increased for the
Same Store Portfolio primarily as a result of increases in
repairs and maintenance expense of approximately
$2.1 million and insurance expense of approximately
$1.9 million, offset by a decrease in property operating
expenses of approximately $1.0 million.



| |                                    
| | -----------------------------------
| | General and Administrative Expenses

General and administrative expense decreased
primarily as a result of approximately $2.6 million of
consulting expenses and $4.2 million of corporate level
severance expense incurred in 2003, partially offset by
approximately $2.8 million of increased salaries and other
general and administrative expenses in 2004.



| |                                               
| | ----------------------------------------------
| | Realized Gain on Settlement of
    Derivatives

In the second quarter 2004 we settled
$500 million of forward-starting interest rate swaps and
recognized an approximate $24.0 million gain. The swaps
were entered into in 2003 to hedge an anticipated unsecured note
offering expected to take place in June 2004, which did not
occur.



| |                 
| | ----------------
| | Interest Expense

Interest expense for the Same Store Portfolio
decreased primarily as a result of mortgage debt repayments
since April 1, 2003 totaling approximately
$310.9 million, which encumbered 10 properties.



| |                                                             
| | ------------------------------------------------------------
| | Income from Investments in Unconsolidated
    Joint Ventures

Income from investments in unconsolidated joint
ventures for the Total and Same Store Portfolio decreased
primarily because property operating revenues including lease
termination fees declined. The decrease in property operating
revenues was primarily attributable to reduced occupancy and
lower average rental rates on new leases as compared to average
rental rates on expiring leases.



| |                        
| | -----------------------
| | Discontinued Operations

The decrease in discontinued operations was the
result of a lower net gain on the sale of properties during the
three months ended June 30, 2004 as compared to the prior
period, and by the loss of net income due to the sales.
Discontinued operations for the three months ended June 30,
2003 include the net income of properties sold in 2003 and 2004
whereas the discontinued operations in 2004 only include the net
income of properties sold during the three months ended
June 30, 2004.

34



---



##### Table of Contents





| |                                                                                               
| | ----------------------------------------------------------------------------------------------
| | Comparison of the six months ended
    June 30, 2004 to the six months ended June 30,
    2003

The table below represents selected operating
information for the Total Portfolio and for the Same Store
Portfolio consisting of 635 consolidated Office Properties, 37
Industrial Properties and 23 unconsolidated joint venture
Properties acquired or placed in service on or prior to
January 1, 2003.

|                                                                                                                                  |                                                                                  |                               |                  |           |                      |         |         |           |           |         |         |        |        |         |       |       |      |      |         |           |           |         |         |           |           |         |         |         |         |         |       |       |       |      |  
|--------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------- | ----------------------------- | ---------------- | --------- | -------------------- | ------- | ------- | --------- | --------- | ------- | ------- | ------ | ------ | ------- | ----- | ----- | ---- | ---- | ------- | --------- | --------- | ------- | ------- | --------- | --------- | ------- | ------- | ------- | ------- | ------- | ----- | ----- | ----- | ---- | -
|                                                                                                                                  |                                                                                  |                               |                  |          
|                                                                                                                                  |                                                                                  | Total Portfolio               |                  |           | Same Store Portfolio |        
|                                                                                                                                  |                                                                                  |                               |                  |           |                      |        
|                                                                                                                                  |                                                                                  |                               |                  |           |                      |         |         |          
|                                                                                                                                  |                                                                                  |                               |                  | Change    |                      |         |         |           | Change    |        
|                                                                                                                                  |                                                                                  |                               |                  |           |                      |         |         |           |           |        
|(Dollars in thousands)                                                                                                            |                                                                                  | 2004                          |                  |           | 2003                 |         |         | $         |           |         | %       |        |        | 2004    |       |       | 2003 |      |         | $         |           |         | %       |          
|                                                                                                                                  |                                                                                  |                               |                  |           |                      |         |         |           |           |         |         |        |        |         |       |       |      |      |         |           |           |         |         |          
|Revenues:                                                                                                                         |                                                                                  |                               |                  |           |                      |         |         |           |           |         |         |        |        |         |       |       |      |      |         |           |           |         |         |           |           |         |         |         |         |         |       |      
|                                                                                                                                  | Property operating revenues                                                      |                               | $                | 1,579,102 |                      |         | $       | 1,554,152 |           |         | $       | 24,950 |        |         |       | 1.6   | %    |      | $       | 1,474,649 |           |         | $       | 1,497,423 |           |         | $       | (22,774 | )       |         |       | (1.5  | )%   
|                                                                                                                                  | Fee income                                                                       |                               |                  | 6,909     |                      |         |         | 8,462     |           |         |         | (1,553 | )      |         |       | (18.4 | )    |      |         |          |           |         |         |          |           |         |         |        |         |         |       |      |      
|                                                                                                                                  |                                                                                  |                               |                  |           |                      |         |         |           |           |         |         |        |        |         |       |       |      |      |         |           |           |         |         |          
|                                                                                                                                  |                                                                                  | Total revenues                |                  |           | 1,586,011            |         |         |           | 1,562,614 |         |         |        | 23,397 |         |       |       | 1.5  |      |         |           | 1,474,649 |         |         |           | 1,497,423 |         |         |         | (22,774 | )       |       |       | (1.5  | )   
|                                                                                                                                  |                                                                                  |                               |                  |           |                      |         |         |           |           |         |         |        |        |         |       |       |      |      |         |           |           |         |         |          
|Expenses:                                                                                                                         |                                                                                  |                               |                  |           |                      |         |         |           |           |         |         |        |        |         |       |       |      |      |         |           |           |         |         |           |           |         |         |         |         |         |       |      
|                                                                                                                                  | Depreciation and amortization                                                    |                               |                  | 375,690   |                      |         |         | 338,281   |           |         |         | 37,409 |        |         |       | 11.1  |      |      |         | 345,002   |           |         |         | 321,175   |           |         |         | 23,827  |         |         |       | 7.4   |      
|                                                                                                                                  | Real estate taxes                                                                |                               |                  | 184,660   |                      |         |         | 178,511   |           |         |         | 6,149  |        |         |       | 3.4   |      |      |         | 171,165   |           |         |         | 169,259   |           |         |         | 1,906   |         |         |       | 1.1   |      
|                                                                                                                                  | Property operating expenses                                                      |                               |                  | 390,147   |                      |         |         | 366,628   |           |         |         | 23,519 |        |         |       | 6.4   |      |      |         | 368,673   |           |         |         | 355,726   |           |         |         | 12,947  |         |         |       | 3.6   |      
|                                                                                                                                  | Ground rent                                                                      |                               |                  | 10,396    |                      |         |         | 9,466     |           |         |         | 930    |        |         |       | 9.8   |      |      |         | 8,952     |           |         |         | 9,249     |           |         |         | (297    | )       |         |       | (3.2  | )    
|                                                                                                                                  | General and administrative(a)                                                    |                               |                  | 25,018    |                      |         |         | 31,157    |           |         |         | (6,139 | )      |         |       | (19.7 | )    |      |         |          |           |         |         |          |           |         |         |        |         |         |       |      |      
|                                                                                                                                  |                                                                                  |                               |                  |           |                      |         |         |           |           |         |         |        |        |         |       |       |      |      |         |           |           |         |         |          
|                                                                                                                                  |                                                                                  | Total expenses                |                  |           | 985,911              |         |         |           | 924,043   |         |         |        | 61,868 |         |       |       | 6.7  |      |         |           | 893,792   |         |         |           | 855,409   |         |         |         | 38,383  |         |       |       | 4.5   |     
|                                                                                                                                  |                                                                                  |                               |                  |           |                      |         |         |           |           |         |         |        |        |         |       |       |      |      |         |           |           |         |         |          
|                                                                                                                                  |                                                                                  |                               | Operating income |           |                      | 600,100 |         |           |           | 638,571 |         |        |        | (38,471 | )     |       |      | (6.0 | )       |           |           | 580,857 |         |           |           | 642,014 |         |         |         | (61,157 | )     |       |       | (9.5 | )
|                                                                                                                                  |                                                                                  |                               |                  |           |                      |         |         |           |           |         |         |        |        |         |       |       |      |      |         |           |           |         |         |          
|Other income/ (expense):                                                                                                          |                                                                                  |                               |                  |           |                      |         |         |           |           |         |         |        |        |         |       |       |      |      |         |           |           |         |         |           |           |         |         |         |         |         |       |      
|                                                                                                                                  | Interest/ dividend income                                                        |                               |                  | 3,730     |                      |         |         | 6,893     |           |         |         | (3,163 | )      |         |       | (45.9 | )    |      |         | 1,809     |           |         |         | 1,863     |           |         |         | (54     | )       |         |       | (2.9  | )    
|                                                                                                                                  | Realized gain on settlement of derivatives and
    sale of marketable securities |                               |                  | 24,016    |                      |         |         | 8,143     |           |         |         | 15,873 |        |         |       | 194.9 |      |      |         |          |           |         |         |          |           |         |         |        |         |         |       |      |      
|                                                                                                                                  | Interest expense(b)                                                              |                               |                  | (418,749  | )                    |         |         | (415,486  | )         |         |         | (3,263 | )      |         |       | 0.8   |      |      |         | (84,118   | )         |         |         | (94,427   | )         |         |         | 10,309  |         |         |       | (10.9 | )    
|                                                                                                                                  |                                                                                  |                               |                  |           |                      |         |         |           |           |         |         |        |        |         |       |       |      |      |         |           |           |         |         |          
|                                                                                                                                  |                                                                                  | Total other income/ (expense) |                  |           | (391,003             | )       |         |           | (400,450  | )       |         |        | 9,447  |         |       |       | (2.4 | )    |         |           | (82,309   | )       |         |           | (92,564   | )       |         |         | 10,255  |         |       |       | (11.1 | )   
|                                                                                                                                  |                                                                                  |                               |                  |           |                      |         |         |           |           |         |         |        |        |         |       |       |      |      |         |           |           |         |         |          
|Income before income taxes, allocation to
    minority interests and income from investments in unconsolidated
    joint ventures |                                                                                  |                               | 209,097          |           |                      |         | 238,121 |           |           |         | (29,024 | )      |        |         | (12.2 | )     |      |      | 498,548 |           |           |         | 549,450 |           |           |         | (50,902 | )       |         |         | (9.3  | )    
|Income taxes                                                                                                                      |                                                                                  |                               | (1,092           | )         |                      |         | (2,570  | )         |           |         | 1,478   |        |        |         | (57.5 | )     |      |      | (435    | )         |           |         | (371    | )         |           |         | (64     | )       |         |         | 17.3  |      
|Minority interests                                                                                                                |                                                                                  |                               | (4,907           | )         |                      |         | (4,347  | )         |           |         | (560    | )      |        |         | 12.9  |       |      |      | (5,536  | )         |           |         | (4,756  | )         |           |         | (780    | )       |         |         | 16.4  |      
|Income from investments in unconsolidated joint
    ventures                                                                      |                                                                                  |                               | 30,457           |           |                      |         | 41,710  |           |           |         | (11,253 | )      |        |         | (27.0 | )     |      |      | 20,422  |           |           |         | 30,328  |           |           |         | (9,906  | )       |         |         | (32.7 | )    
|                                                                                                                                  |                                                                                  |                               |                  |           |                      |         |         |           |           |         |         |        |        |         |       |       |      |      |         |           |           |         |         |          
|Income from continuing operations                                                                                                 |                                                                                  |                               | 233,555          |           |                      |         | 272,914 |           |           |         | (39,359 | )      |        |         | (14.4 | )     |      |      | 512,999 |           |           |         | 574,651 |           |           |         | (61,652 | )       |         |         | (10.7 | )    
|Discontinued operations (including net gain on
    sales of real estate of $4,122 and $51,725, respectively)                      |                                                                                  |                               | 7,748            |           |                      |         | 85,361  |           |           |         | (77,613 | )      |        |         | (90.9 | )     |      |      |        |           |           |         |        |           |           |         |        |         |         |         |      |      
|                                                                                                                                  |                                                                                  |                               |                  |           |                      |         |         |           |           |         |         |        |        |         |       |       |      |      |         |           |           |         |         |          

35



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|                                                                        |  |                 |           |        |                      |   |           |   |        |   |          |   |  |      |        |    |      |   |         |   |  |   |         |  |  |   |         |   |  |  |       |   
|----------------------------------------------------------------------- |  | --------------- | --------- | ------ | -------------------- | - | --------- | - | ------ | - | -------- | - |  | ---- | ------ | -- | ---- | - | ------- | - |  | - | ------- |  |  | - | ------- | - |  |  | ----- | --
|                                                                        |  |                 |           |       
|                                                                        |  | Total Portfolio |           |        | Same Store Portfolio |  
|                                                                        |  |                 |           |        |                      |  
|                                                                        |  |                 |           |        |                      |   |           |  
|                                                                        |  |                 |           | Change |                      |   |           |   | Change |  
|                                                                        |  |                 |           |        |                      |   |           |   |        |  
|(Dollars in thousands)                                                  |  | 2004            |           |        | 2003                 |   |           | $ |        |   | %        |   |  | 2004 |        |    | 2003 |   |         | $ |  |   | %       | 
|                                                                        |  |                 |           |        |                      |   |           |   |        |   |          |   |  |      |        |    |      |   |         |   |  |   |         | 
|Income before cumulative effect of a change in
    accounting principle |  |                 | 241,303   |        |                      |   | 358,275   |   |        |   | (116,972 | ) |  |      | (32.6  | )  |      |   | 512,999 |   |  |   | 574,651 |  |  |   | (61,652 | ) |  |  | (10.7 | ) 
|Cumulative effect of a change in accounting
    principle               |  |                 | (33,697   | )      |                      |   |          |   |        |   | (33,697  | ) |  |      | (100.0 | )  |      |   |        |   |  |   |        |  |  |   |        |   |  |  |      |   
|                                                                        |  |                 |           |        |                      |   |           |   |        |   |          |   |  |      |        |    |      |   |         |   |  |   |         | 
|Net income                                                              |  | $               | 207,606   |        |                      | $ | 358,275   |   |        | $ | (150,669 | ) |  |      | (42.1  | )% |      | $ | 512,999 |   |  | $ | 574,651 |  |  | $ | (61,652 | ) |  |  | (10.7 | )%
|                                                                        |  |                 |           |        |                      |   |           |   |        |   |          |   |  |      |        |    |      |   |         |   |  |   |         | 
|Property net operating income from continuing
    operations(c)         |  | $               | 1,004,295 |        |                      | $ | 1,009,013 |   |        | $ | (4,718   | ) |  |      | (0.5   | )% |      | $ | 934,811 |   |  | $ | 972,438 |  |  | $ | (37,627 | ) |  |  | (3.9  | )%
|                                                                        |  |                 |           |        |                      |   |           |   |        |   |          |   |  |      |        |    |      |   |         |   |  |   |         | 
|Deferred rental revenue                                                 |  | $               | 44,567    |        |                      | $ | 30,354    |   |        | $ | 14,213   |   |  |      | 46.8   | %  |      | $ | 37,414  |   |  | $ | 29,193  |  |  | $ | 8,221   |   |  |  | 28.2  | % 
|                                                                        |  |                 |           |        |                      |   |           |   |        |   |          |   |  |      |        |    |      |   |         |   |  |   |         | 
|Lease termination fees                                                  |  | $               | 28,142    |        |                      | $ | 20,949    |   |        | $ | 7,193    |   |  |      | 34.3   | %  |      | $ | 22,838  |   |  | $ | 20,589  |  |  | $ | 2,249   |   |  |  | 10.9  | % 
|                                                                        |  |                 |           |        |                      |   |           |   |        |   |          |   |  |      |        |    |      |   |         |   |  |   |         | 



---



|    |  |                                                                                                                                                                                                                                                                                             
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Corporate general and administrative expense is
    not allocated to the Same Store Portfolio because these expenses
    are not directly incurred in connection with any specific
    Property.                                                                                            
|   
|(b) |  | Interest expense (including amortization of
    deferred financing costs and prepayment expenses) for the Same
    Store Portfolio represents interest expense on property secured
    mortgage debt and does not include interest expense on the
    unsecured notes or the line of credit.
|   
|(c) |  | Represents segment data. See Item 1.
    Financial Statements Note 11-Segment Information.                                                                                                                                                                                                  



| |                            
| | ---------------------------
| | Property Operating Revenues

The decrease in property operating revenues in
the Same Store Portfolio was primarily attributable to reduced
occupancy in the Same Store Portfolio from 88.2% at
December 31, 2002 to 86.1% at June 30, 2004. The
decrease in occupancy was due to early lease terminations. In
addition to the decline in occupancy, rental revenues declined
as a result of lower average rental rates on new leases as
compared to average rental rates on expiring leases.



| |                              
| | -----------------------------
| | Depreciation and Amortization

Total Portfolio and Same Store Portfolio
depreciation and amortization expense increased from the prior
period primarily as a result of capital and tenant improvements
made since the beginning of the prior period and from an
increase in deferred leasing costs.



| |                  
| | -----------------
| | Real Estate Taxes

Real estate taxes increased for the Total
Portfolio and Same Store Portfolio primarily due to an increase
in estimated taxes at our properties located in California of
approximately $6.0 million offset, in part, by savings at
our properties located in Boston of approximately
$4.9 million.



| |                            
| | ---------------------------
| | Property Operating Expenses

Property operating expenses for the Same Store
Portfolio increased primarily as a result of increases in
repairs and maintenance expense of approximately
$2.5 million, insurance expense of approximately
$5.8 million, and property operating general and
administrative expenses (which include legal, advertising,
leasing, payroll and severance) of approximately
$4.1 million.



| |                                    
| | -----------------------------------
| | General and Administrative Expenses

General and administrative expense decreased
primarily as a result of approximately $5.7 million of
consulting expenses and greater corporate level severance
expense of approximately $2.8 million in 2003,

36



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##### Table of Contents



partially offset by approximately
$2.3 million of increased salaries and other general and
administrative expenses in 2004.




| |                                                                                 
| | --------------------------------------------------------------------------------
| | Realized Gain on Settlement of Derivatives and
    Sale of Marketable Securities

In the second quarter 2004 we settled
$500 million of forward-starting interest rate swaps and
recognized an approximate $24.0 million gain. The swaps
were entered into in 2003 to hedge an anticipated unsecured note
offering expected to take place in June 2004, which did not
occur.

During 2002, we entered into an early lease
termination agreement with a tenant that was scheduled to occupy
an entire building. As part of the consideration for the lease
termination, we received five million shares of common stock.
These securities were sold during the first quarter of 2003 at a
gain of approximately $8.1 million.



| |                 
| | ----------------
| | Interest Expense

Interest expense for the Same Store Portfolio
decreased primarily as a result of mortgage debt repayments
since January 1, 2003 totaling approximately
$310.9 million, which encumbered 10 properties.



| |                                                             
| | ------------------------------------------------------------
| | Income from Investments in Unconsolidated
    Joint Ventures

We acquired the remaining economic interests in
1301 Avenue of the Americas and Key Center office buildings and
consolidated these properties. The consolidation caused a
decrease in income from investments in unconsolidated joint
ventures for the Total Portfolio. In the six months ended
June 30, 2003, the net income from these properties that
was included in income from investments in unconsolidated joint
ventures was approximately $8.7 million. This decrease was
partially offset by the 13 office properties that were partially
sold in the fourth quarter 2003 and are now accounted for under
the equity method. These properties contributed approximately
$7.0 million to income from investments in unconsolidated
joint ventures in the six months ended June 30, 2004.

Income from investments in unconsolidated joint
ventures for the Total and Same Store Portfolio decreased
because property operating revenues declined due to reduced
occupancy and lower average rental rates on new leases as
compared to average rental rates on expiring leases.



| |                        
| | -----------------------
| | Discontinued Operations

The decrease in discontinued operations was the
result of a lower net gain on the sale of properties during the
six months ended June 30, 2004 as compared to the prior
period, and by the loss of net income due to the sales.
Discontinued operations for the six months ended June 30,
2003 includes the net income of properties sold in 2003 and 2004
whereas the discontinued operations in 2004 only includes the
net income of properties sold during the six months ended
June 30, 2004.



| |                                                          
| | ---------------------------------------------------------
| | Cumulative Effect of a Change in Accounting
    Principle

Under the provisions of FIN 46(R), we
consolidated the assets, liabilities and results of operations
of SunAmerica Center effective January 1, 2004, and
recorded a cumulative effect of a change in accounting principle
resulting in a loss of approximately $33.7 million. See
Item 1. Financial Statements Note 8 
Cumulative Effect of a Change in Accounting Principle.

Discontinued Operations

See Item 1. Financial Statements
Note  4 Discontinued Operations for a summary of the
results of operations of properties sold.

37



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##### Table of Contents



Liquidity and Capital Resources



| |          
| | ---------
| | Liquidity

Our net cash provided by operating activities is
primarily dependent upon the occupancy level of our properties,
the rental rates on our leases, the collectibility of rent from
our tenants and the level of operating and other expenses. Our
net cash provided by operating activities, including our share
of net cash provided by operating activities from unconsolidated
joint ventures, has been our primary source of liquidity to fund
debt service, capital improvements, tenant improvements and
leasing costs for operating properties as well as distributions
to our unitholders. We expect that our line of credit, other
financing sources that may become available to us and future
property sales will adequately provide for any additional
amounts which may be needed to fund working capital and
unanticipated cash needs as well as acquisitions and development
costs.

A material adverse change in our net cash
provided by operating activities may affect our ability to fund
these items and may affect the financial performance covenants
under our line of credit and unsecured notes. If we fail to meet
our financial performance covenants and are unable to reach a
satisfactory resolution with our lenders, the maturity dates for
our unsecured notes could be accelerated, and our line of credit
could become unavailable to us or the interest charged on the
line of credit could increase. Any of these circumstances could
adversely affect our ability to fund working capital and
unanticipated cash needs, acquisitions and development costs.

Moodys, Standard & Poors and Fitch
provide credit ratings on our unsecured notes and preferred
stock. In July 2004, Moodys downgraded our credit ratings
from Baa1 to Baa2 with a stable outlook. Standard &
Poors and Fitch have retained our credit ratings at BBB+ with a
stable outlook. If Standard & Poors or Fitch downgrades
our credit ratings, the interest rate charged on our line of
credit will increase. In addition, the interest rate associated
with any future financings may be impacted if our credit ratings
adversely change. A security rating is not a recommendation to
buy, sell or hold securities and is subject to revision or
withdrawal at any time by the assigning rating organization.
Each rating should be evaluated independently of any other
rating.

In order to qualify as a REIT for federal income
tax purposes, Equity Office must distribute at least 90% of its
taxable income (excluding capital gains) to its shareholders.
Equity Office currently distributes capital gains to its
shareholders; however, these gains can be retained by Equity
Office and taxed at the corporate tax rate. Our partnership
agreement generally requires us to distribute substantially all
of the net cash from operations each quarter and to make
reasonable efforts to distribute to Equity Office enough cash
for it to meet the 90% distribution requirement. Accordingly, we
currently intend, although we are not legally obligated, to
continue to make regular quarterly distributions to holders of
Units and preferred units. The declaration of dividends on
capital shares is at the discretion of Equity Offices
Board of Trustees, which decision is made from time to time by
Equity Offices Board of Trustees based on then prevailing
circumstances.



| |                   
| | ------------------
| | Net Free Cash Flow

We define net free cash flow as (a) net cash
provided by operating activities determined in accordance with
GAAP plus funds from operations (FFO) from our joint
venture activities and minority interests (which we view as an
integral part of our business) plus changes in assets and
liabilities, less (b) expenditures for capital
improvements, tenant improvements and leasing costs and
distributions to our unitholders. Net free cash flow is a
non-GAAP financial measure and is reconciled to net cash
provided by operating activities, the most directly comparable
GAAP measure, for the periods presented below. Our calculation
of net free cash flow is not necessarily comparable to similar
measures that may be presented by other companies.

Lower occupancy levels, reduced rental rates, and
reduced revenues as a result of asset sales have had the effect
of reducing our net cash provided by operating activities. In
addition, our tenant improvements and leasing costs have
increased as compared to historical levels due to competitive
market conditions for new and renewal leases. During the three
months ended and six months ended June 30, 2004 and the
year ended December 31, 2003, our net free cash flow was
insufficient to pay capital improvements, tenant improvements

38



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##### Table of Contents



and leasing costs and distributions to our
unitholders by approximately $68.5 million,
$98.5 million and $179.1 million, respectively. We
funded this net free cash flow deficit primarily with a
combination of proceeds from property dispositions and
borrowings under our line of credit.


Below is a reconciliation of our net free cash
flow to net cash provided by operating activities, the most
directly comparable GAAP measure, for the three months and six
months ended June 30, 2004 and the year ended
December 31, 2003.

|                                                                                                                                                                                                                                              |  |               |          |   |              |   |          |              |  |   |           |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | -------- | - | ------------ | - | -------- | ------------ |  | - | --------- | -
|                                                                                                                                                                                                                                              |  | For the three |          |   | For the six  |   |          | For the year | 
|                                                                                                                                                                                                                                              |  | months ended  |          |   | months ended |   |          | ended        | 
|                                                                                                                                                                                                                                              |  | June 30,      |          |   | June 30,     |   |          | December 31, | 
|(Dollars in thousands)                                                                                                                                                                                                                        |  | 2004          |          |   | 2004         |   |          | 2003         | 
|                                                                                                                                                                                                                                              |  |               |          |   |              |   |          |              | 
|                                                                                                                                                                                                                                              |  |              
|                                                                                                                                                                                                                                              |  | (Unaudited)   |         
|Net cash provided by operating activities                                                                                                                                                                                                     |  | $             | 342,695  |   |              | $ | 564,411  |              |  | $ | 1,132,303 |  
|Plus: Net joint venture and minority interest FFO
    excluding non-cash items (deferred rent, loan amortization and
    non-real estate depreciation)                                                                                        |  |               | 19,488   |   |              |   | 42,640   |              |  |   | 112,800   |  
|Plus: Total changes in assets and liabilities in
    net cash provided by operating activities, net of provision for
    doubtful accounts, deferred rent and net distributions from
    unconsolidated joint ventures                        |  |               | (60,230  | ) |              |   | (5,498   | )            |  |   | 31,249    |  
|(Less) plus: Gain on settlement of derivatives,
    other timing differences and changes in non-cash items                                                                                                                                    |  |               | (22,078  | ) |              |   | (20,144  | )            |  |   | 11,665    |  
|Less: Paid or accrued distributions to unitholders                                                                                                                                                                                            |  |               | (225,552 | ) |              |   | (451,546 | )            |  |   | (901,259  | )
|Less: Capital improvements, tenant improvements
    and leasing costs (for leases which commenced during the period)
    and other costs including our share of joint venture capital
    improvements, tenant improvements and leasing costs |  |               | (115,216 | ) |              |   | (212,089 | )            |  |   | (512,036  | )
|Less: Preferred distributions (excluding deferred
    issuance costs of $1,305, $5,431 and $0, respectively)                                                                                                                                  |  |               | (7,641   | ) |              |   | (16,261  | )            |  |   | (53,841   | )
|                                                                                                                                                                                                                                              |  |               |          |   |              |   |          |              | 
|Net Free Cash Flow Deficit                                                                                                                                                                                                                    |  | $             | (68,534  | ) |              | $ | (98,487  | )            |  | $ | (179,119  | )
|                                                                                                                                                                                                                                              |  |               |          |   |              |   |          |              | 

If our net cash from operating activities and
tenant improvements and leasing costs continue at these levels,
and if Equity Offices Board of Trustees continues to
declare distributions on our units at current levels, we expect
that our net free cash flow deficit will continue in subsequent
periods and that we will fund this deficit in a similar manner.
We currently anticipate that the deficit for the remainder of
2004 will be comparable to the deficit incurred during the six
months ended June 30, 2004. This estimate is based on
various assumptions which are difficult to predict, including
the level of leasing activity at year-end and related leasing
costs. Any changes in our assumptions could impact our financial
results.

As of June 30, 2004, we had
$349.3 million (of which $209.1 million of mortgage
debt was repaid in July) of debt maturing through
December 31, 2004, which excludes scheduled principal
payments prior to maturity. Should Equity Offices Board of
Trustees continue to declare distributions at current levels we
will not be able to retain sufficient cash to repay all of our
debt as it comes due using only cash from operating activities
and we will be required to repay most of our maturing debt with
proceeds from asset sales and debt offerings. Although there can
be no assurance that such funding at acceptable terms will be
available to us, we believe that net cash provided by operating
activities, draws under our line of credit, proceeds from other
financing sources that we expect to be available to us and
proceeds from anticipated asset sales will together provide
sufficient liquidity to meet our cash needs during this period.

39



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##### Table of Contents





| |              
| | -------------
| | Distributions

In the second quarter 2004, Equity Offices
Board of Trustees declared distributions on preferred units as
reflected below:

|                         |  |                 |          |  |              |               |        |                        |  |   |       | 
|------------------------ |  | --------------- | -------- |  | ------------ | ------------- | ------ | ---------------------- |  | - | ----- | 
|                         |  |                 |          |  |              | Distributions |       
|                         |  | Distribution    |          |  | Annualized   |               |        | for the three months   | 
|                         |  | Declared for    |          |  | Distribution |               |        | ended June 30, 2004    | 
|Security                 |  | Current Quarter |          |  | Per Unit     |               |        | (Dollars in thousands) | 
|                         |  |                 |          |  |              |               |        |                        | 
|Series B Preferred Units |  | $               | 0.65625  |  |              | $             | 2.625  |                        |  | $ | 3,931 | 
|Series G Preferred Units |  | $               | 0.484375 |  |              | $             | 1.9375 |                        |  | $ | 4,117 | 

Equity Offices Board of Trustees also
declared distributions on the Units for the second quarter of
2004 at the rate of $.50 per unit.



| |                        
| | -----------------------
| | Contractual Obligations

As of June 30, 2004, we were subject to
certain material contractual payment obligations as described in
the table below. We were not subject to any material capital
lease obligations or unconditional purchase obligations as of
June 30, 2004.

|                                                            |                    |                                       |           |           |            |   |         |         |         |   |        |           |           |      |         |         |           |   |        |            |           |   |         |         |           |   |           |           |           |  
|----------------------------------------------------------- | ------------------ | ------------------------------------- | --------- | --------- | ---------- | - | ------- | ------- | ------- | - | ------ | --------- | --------- | ---- | ------- | ------- | --------- | - | ------ | ---------- | --------- | - | ------- | ------- | --------- | - | --------- | --------- | --------- | -
|                                                            |                    |                                      
|                                                            |                    | Payments Due by Period                |          
|                                                            |                    |                                       |          
|                                                            |                    |                                       |           | Remainder |            |   |        
|(Dollars in thousands)                                      |                    | Total                                 |           |           | of 2004    |   |         | 2005    |         |   | 2006   |           |           | 2007 |         |         | 2008      |   |        | Thereafter |          
|                                                            |                    |                                       |           |           |            |   |         |         |         |   |        |           |           |      |         |         |           |   |        |            |          
|Contractual Obligations:                                    |                    |                                       |           |           |            |   |         |         |         |   |        |           |           |      |         |         |           |   |        |            |           |   |         |         |           |   |           |          
|Long-term debt:                                             |                    |                                       |           |           |            |   |         |         |         |   |        |           |           |      |         |         |           |   |        |            |           |   |         |         |           |   |           |          
|                                                            | Mortgage debt(a)   |                                       | $         | 2,852,339 |            |   | $       | 228,977 |         |   | $      | 1,099,570 |           |      | $       | 286,794 |           |   | $      | 239,763    |           |   | $       | 134,984 |           |   | $         | 862,251   |          
|                                                            | Unsecured notes(b) |                                       |           | 9,015,842 |            |   |         | 30,000  |         |   |        | 675,000   |           |      |         | 650,000 |           |   |        | 976,500    |           |   |         | 778,190 |           |   |           | 5,906,152 |          
|Line of Credit                                              |                    |                                       | 376,300   |           |            |   |        |         |         |   |       |           |           |      | 376,300 |         |           |   |       |            |           |   |        |         |           |   |          |          
|Series B Preferred Units                                    |                    |                                       | 299,500   |           |            |   |        |         |         |   |       |           |           |      |        |         |           |   |       |            |           |   | 299,500 |         |           |   |          |          
|Share of mortgage debt of unconsolidated joint
    ventures |                    |                                       | 344,384   |           |            |   | 111,475 |         |         |   | 19,270 |           |           |      | 52,283  |         |           |   | 2,622  |            |           |   | 16,989  |         |           |   | 141,745   |          
|Operating leases                                            |                    |                                       | 1,252,270 |           |            |   | 8,292   |         |         |   | 16,649 |           |           |      | 16,748  |         |           |   | 16,646 |            |           |   | 16,660  |         |           |   | 1,177,275 |          
|Share of ground leases of unconsolidated joint
    ventures |                    |                                       | 127,958   |           |            |   | 608     |         |         |   | 1,216  |           |           |      | 1,258   |         |           |   | 1,294  |            |           |   | 1,294   |         |           |   | 122,288   |          
|Construction contracts on developments                      |                    |                                       | 2,722     |           |            |   | 2,722   |         |         |   |       |           |           |      |        |         |           |   |       |            |           |   |        |         |           |   |          |          
|                                                            |                    |                                       |           |           |            |   |         |         |         |   |        |           |           |      |         |         |           |   |        |            |          
|                                                            |                    | Total Contractual Obligations         |           | $         | 14,271,315 |   |         | $       | 382,074 |   |        | $         | 1,811,705 |      |         | $       | 1,383,383 |   |        | $          | 1,236,825 |   |         | $       | 1,247,617 |   |           | $         | 8,209,711 |  
|                                                            |                    |                                       |           |           |            |   |         |         |         |   |        |           |           |      |         |         |           |   |        |            |          
|Weighted Average Interest Rates on Maturing
    Debt:       |                    |                                       |           |           |            |   |         |         |         |   |        |           |           |      |         |         |           |   |        |            |           |   |         |         |           |   |           |          
|                                                            |                    |                                       |           |           |            |   |         |         |         |   |        |           |           |      |         |         |           |   |        |            |          
|Long-term debt:                                             |                    |                                       |           |           |            |   |         |         |         |   |        |           |           |      |         |         |           |   |        |            |           |   |         |         |           |   |           |          
|                                                            | Mortgage debt      |                                       |           | 7.60      | %          |   |         | 6.85    | %       |   |        | 7.58      | %         |      |         | 7.21    | %         |   |        | 7.87       | %         |   |         | 7.48    | %         |   |           | 7.86      | %        
|                                                            | Unsecured notes    |                                       |           | 6.65      | %          |   |         | 7.26    | %       |   |        | 5.67      | %         |      |         | 7.52    | %         |   |        | 7.52       | %         |   |         | 7.26    | %         |   |           | 6.44      | %        
|Line of credit                                              |                    |                                       | 1.90      | %         |            |   |        |         |         |   |       |           |           |      | 1.90    | %       |           |   |       |            |           |   |        |         |           |   |          |          
|Share of mortgage debt of unconsolidated joint
    ventures |                    |                                       | 4.68      | %         |            |   | 2.34    | %       |         |   | 1.91   | %         |           |      | 7.66    | %       |           |   |       |            |           |   | 6.92    | %       |           |   | 5.43      | %        
|                                                            |                    |                                       |           |           |            |   |         |         |         |   |        |           |           |      |         |         |           |   |        |            |          
|                                                            |                    | Total Weighted Average Interest Rates |           |           | 6.67       | % |         |         | 5.46    | % |        |           | 6.80      | %    |         |         | 5.90      | % |        |            | 7.59      | % |         |         | 7.28      | % |           |           | 6.61      | %
|                                                            |                    |                                       |           |           |            |   |         |         |         |   |        |           |           |      |         |         |           |   |        |            |          



---



|    |  |                                                                  
|--- |  | -----------------------------------------------------------------
|(a) |  | Balance excludes a net unamortized discount of
    $14.0 million.
|   
|(b) |  | Balance excludes a net unamortized discount of
    $72.8 million.

40



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| |                                          
| | -----------------------------------------
| | Fixed-to-Floating Interest Rate
    Swaps

See Item 1. Financial Statements
Note  12 Commitments and Contingencies for
information on our fixed-to-floating interest rate swaps.



| |                 
| | ----------------
| | Energy Contracts

In an ongoing effort to control energy costs,
from time to time we enter into contracts for the purchase of
gas or electricity for properties in states which have
deregulated their energy markets. Typically, these contracts
provide for a term of one to three years. Although all or a
portion of the commodity price under these contracts is
generally fixed, the amounts actually expended under these
contracts will vary in accordance with actual energy usage or
the timing of energy usage during the period. As a result, the
amounts to be expended under these contracts are difficult to
predict.



| |                               
| | ------------------------------
| | Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements
with any unconsolidated investments or joint ventures that we
believe have or are reasonably likely to have a material effect
on our financial condition, results of operations, liquidity or
capital resources.



| |               
| | --------------
| | Debt Financing



| |                  
| | -----------------
| | Consolidated Debt

The table below summarizes our consolidated
mortgage debt, unsecured notes and line of credit indebtedness
at June 30, 2004 and December 31, 2003.

|                                         |                  |                         |   |            |              |   |   |            |            |  
|---------------------------------------- | ---------------- | ----------------------- | - | ---------- | ------------ | - | - | ---------- | ---------- | -
|                                         |                  | June 30,                |   |            | December 31, |  
|(Dollars in thousands)                   |                  | 2004                    |   |            | 2003         |  
|                                         |                  |                         |   |            |              |  
|Balance                                  |                  |                         |   |            |              |   |   |           
|                                         | Fixed rate       |                         | $ | 10,593,667 |              |   | $ | 11,108,801 |           
|                                         | Variable rate(a) |                         |   | 1,564,014  |              |   |   | 370,000    |           
|                                         |                  |                         |   |            |              |  
|                                         |                  | Total                   |   | $          | 12,157,681   |   |   | $          | 11,478,801 |  
|                                         |                  |                         |   |            |              |  
|Percent of total debt                    |                  |                         |   |            |              |   |   |           
|                                         | Fixed rate       |                         |   | 87.1       | %            |   |   | 96.8       | %         
|                                         | Variable rate(a) |                         |   | 12.9       | %            |   |   | 3.2        | %         
|                                         |                  |                         |   |            |              |  
|                                         |                  | Total                   |   |            | 100.0        | % |   |            | 100.0      | %
|                                         |                  |                         |   |            |              |  
|Effective interest rate at end of period |                  |                         |   |            |              |   |   |           
|                                         | Fixed rate       |                         |   | 7.30       | %            |   |   | 7.11       | %         
|                                         | Variable rate(a) |                         |   | 2.85       | %            |   |   | 1.93       | %         
|                                         |                  |                         |   |            |              |  
|                                         |                  | Effective interest rate |   |            | 6.73         | % |   |            | 6.94       | %
|                                         |                  |                         |   |            |              |  



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                  
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | The variable rate debt as of June 30, 2004
    includes $1.0 billion of fixed rate unsecured notes that
    were converted to a variable rate based on LIBOR plus
    122 basis points through several interest rate swap
    agreements entered into on March 23, 2004. The interest
    rates for the remaining variable rate debt are based on various
    spreads over LIBOR.

41



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The increase in total consolidated debt of
approximately $678.9 million from December 31, 2003 to
June 30, 2004 was primarily due to the consolidations of
SunAmerica Center and 1301 Avenue of the Americas, which were
encumbered by approximately $737.5 million of mortgage
debt. Since December 31, 2003, the following transactions
affected our consolidated debt:

|                                                                        |  |   |           |  
|----------------------------------------------------------------------- |  | - | --------- | -
|(Dollars in thousands)                                                  |  |  
|                                                                        |  |  
|Consolidation of SunAmerica Center                                      |  | $ | 203,225   |  
|Consolidation of our share of 1301 Avenue of the
    Americas           |  |   | 451,285   |  
|Consolidation of our partners share of 1301
    Avenue of the Americas |  |   | 82,970    |  
|                                                                        |  |   |          
|Total consolidation of mortgage debt                                    |  |   | 737,480   |  
|Mortgage debt repayments                                                |  |   | (214,693  | )
|Issuance of unsecured notes                                             |  |   | 1,049,342 |  
|Repayment of unsecured notes                                            |  |   | (850,000  | )
|Net activity on the line of credit                                      |  |   | 42,300    |  
|Increase in net discount on mortgage debt and
    unsecured notes       |  |   | (85,549   | )
|                                                                        |  |   |          
|Total increase of consolidated debt                                     |  | $ | 678,880   |  
|                                                                        |  |   |          



| |                    
| | -------------------
| | Unconsolidated Debt

Our share of unconsolidated debt was
approximately $344.4 million and $797.3 million at
June 30, 2004 and December 31, 2003, respectively. The
decrease of approximately $452.9 million was primarily due
to the consolidation of 1301 Avenue of the Americas of which our
share of the mortgage debt was approximately $451.3 million.



| |              
| | -------------
| | Mortgage Debt

As of June 30, 2004, total mortgage debt
(excluding our share of the mortgage debt encumbering
unconsolidated properties of approximately $344.4 million)
consisted of approximately $2,695.7 million of fixed rate
debt with a weighted average interest rate of approximately
7.81% and $142.7 million of variable rate debt based on
various spreads over LIBOR (the average effective rate on
variable rate debt was 3.70% as of June 30, 2004 which
includes the spread over LIBOR). See Liquidity and Capital
Resources  Contractual Obligations for annual
payment obligations under our mortgage debt.

The instruments encumbering the properties
restrict title transfer of the respective properties subject to
the terms of the mortgage, prohibit additional liens, require
payment of real estate taxes on the properties, maintenance of
the properties in good condition, maintenance of insurance on
the properties and include a requirement to obtain lender
consent to enter into material tenant leases.



| |               
| | --------------
| | Line of Credit

We have a $1.0 billion revolving credit
facility that was obtained in May 2003 and matures in May 2006.
As of August 2, 2004 and June 30, 2004,
$880.0 million and $376.3 million was outstanding
under this facility, respectively. The line of credit bears
interest at LIBOR plus 60 basis points, but would increase
in the event of an adverse change in our credit ratings from
Standard & Poors or Fitch. The line of credit has an
annual facility fee of 20 basis points payable quarterly.
In addition, a competitive bid option, whereby the lenders
participating in the credit facility may bid on the interest to
be charged resulting in an interest rate lower than LIBOR plus
60 basis points, is available for up to $350 million
of the borrowings under the credit facility. The effective rate
on the line of credit at June 30, 2004 was approximately
1.90%.



| |                                 
| | --------------------------------
| | Bridge Revolving Credit Facility

In July 2004 we obtained a $500 million
bridge revolving credit facility that matures in July 2005. The
credit facility bears interest at LIBOR plus 65 basis
points and has an annual facility fee of 15 basis points.
As of August 2, 2004, $100.0 million was outstanding
under this facility. Amounts borrowed under the facility are

42



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##### Table of Contents



required to be repaid with certain cash proceeds
from property sales and any cash proceeds from debt and equity
offerings.


The $500 million available under this
facility will be reduced by the amount of such mandatory
prepayments as well as the amount by which such cash proceeds
from property sales and debt and equity offerings exceed amounts
otherwise due under the facility.



| |                
| | ---------------
| | Unsecured Notes

Unsecured notes increased to approximately
$8,943.0 million at June 30, 2004 compared to
approximately $8,828.9 million at December 31, 2003,
as a result of the issuance of $1,049.3 million of
unsecured notes, offset by the repayment of $850.0 million
of unsecured notes and the increase in the mark-to-market
adjustment of $85.2 million relating to fixed-to-floating
interest rate swaps.

43



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The table below summarizes the unsecured notes
outstanding as of June 30, 2004:

|                        |                            |        |       |                        |           |  |      |           |   |   |           |           |  |  |                   |  | 
|----------------------- | -------------------------- | ------ | ----- | ---------------------- | --------- |  | ---- | --------- | - | - | --------- | --------- |  |  | ----------------- |  | 
|                        |                            | Coupon |       |                        | Effective |  |      | Principal |   |   | Maturity  |          
|Original Term           |                            | Rate   |       |                        | Rate(a)   |  |      | Balance   |   |   | Date      |          
|                        |                            |        |       |                        |           |  |      |           |   |   |           |          
|                        |                            |        |       |                        |           | 
|                        |                            |        |       | (Dollars in thousands) |           |  |     
|Fixed interest rate:    |                            |        |       |                        |           |  |      |           |   |   |           |           |  |  |                   | 
|7 Years                 |                            |        | 7.24% |                        |           |  | 7.26 | %         |   | $ | 30,000    |           |  |  | 09/01/04          | 
|8 Years                 |                            |        | 6.88% |                        |           |  | 6.40 | %         |   |   | 125,000   |           |  |  | 02/01/05          | 
|7 Years                 |                            |        | 6.63% |                        |           |  | 4.99 | %         |   |   | 400,000   |           |  |  | 02/15/05          | 
|7 Years                 |                            |        | 8.00% |                        |           |  | 6.49 | %         |   |   | 100,000   |           |  |  | 07/19/05          | 
|8 Years                 |                            |        | 7.36% |                        |           |  | 7.69 | %         |   |   | 50,000    |           |  |  | 09/01/05          | 
|6 Years                 |                            |        | 8.38% |                        |           |  | 7.65 | %         |   |   | 500,000   |           |  |  | 03/15/06          | 
|9 Years                 |                            |        | 7.44% |                        |           |  | 7.74 | %         |   |   | 50,000    |           |  |  | 09/01/06          | 
|10 Years                |                            |        | 7.13% |                        |           |  | 6.74 | %         |   |   | 100,000   |           |  |  | 12/01/06          | 
|9 Years                 |                            |        | 7.00% |                        |           |  | 6.80 | %         |   |   | 1,500     |           |  |  | 02/02/07          | 
|9 Years                 |                            |        | 6.88% |                        |           |  | 6.83 | %         |   |   | 25,000    |           |  |  | 04/30/07          | 
|9 Years                 |                            |        | 6.76% |                        |           |  | 6.76 | %         |   |   | 300,000   |           |  |  | 06/15/07          | 
|10 Years                |                            |        | 7.41% |                        |           |  | 7.70 | %         |   |   | 50,000    |           |  |  | 09/01/07          | 
|7 Years                 |                            |        | 7.75% |                        |           |  | 7.91 | %         |   |   | 600,000   |           |  |  | 11/15/07          | 
|10 Years                |                            |        | 6.75% |                        |           |  | 6.97 | %         |   |   | 150,000   |           |  |  | 01/15/08          | 
|10 Years                |                            |        | 6.75% |                        |           |  | 7.01 | %         |   |   | 300,000   |           |  |  | 02/15/08          | 
|8 Years(b)              |                            |        | 7.25% |                        |           |  | 7.64 | %         |   |   | 325,000   |           |  |  | 11/15/08          | 
|10 Years                |                            |        | 6.80% |                        |           |  | 6.94 | %         |   |   | 500,000   |           |  |  | 01/15/09          | 
|10 Years                |                            |        | 7.25% |                        |           |  | 7.14 | %         |   |   | 200,000   |           |  |  | 05/01/09          | 
|11 Years                |                            |        | 7.13% |                        |           |  | 6.97 | %         |   |   | 150,000   |           |  |  | 07/01/09          | 
|10 Years                |                            |        | 8.10% |                        |           |  | 8.22 | %         |   |   | 360,000   |           |  |  | 08/01/10          | 
|10 Years                |                            |        | 7.65% |                        |           |  | 7.20 | %         |   |   | 200,000   |           |  |  | 12/15/10          | 
|10 Years                |                            |        | 7.00% |                        |           |  | 6.83 | %         |   |   | 1,100,000 |           |  |  | 07/15/11          | 
|10 Years                |                            |        | 6.75% |                        |           |  | 7.02 | %         |   |   | 500,000   |           |  |  | 02/15/12          | 
|10 Years                |                            |        | 5.88% |                        |           |  | 5.98 | %         |   |   | 500,000   |           |  |  | 01/15/13          | 
|20 Years                |                            |        | 7.88% |                        |           |  | 8.08 | %         |   |   | 25,000    |           |  |  | 12/01/16          | 
|20 Years                |                            |        | 7.35% |                        |           |  | 8.08 | %         |   |   | 200,000   |           |  |  | 12/01/17          | 
|20 Years                |                            |        | 7.25% |                        |           |  | 7.54 | %         |   |   | 250,000   |           |  |  | 02/15/18          | 
|30 Years                |                            |        | 7.50% |                        |           |  | 8.24 | %         |   |   | 150,000   |           |  |  | 10/01/27          | 
|30 Years                |                            |        | 7.25% |                        |           |  | 7.31 | %         |   |   | 225,000   |           |  |  | 06/15/28          | 
|30 Years                |                            |        | 7.50% |                        |           |  | 7.55 | %         |   |   | 200,000   |           |  |  | 04/19/29          | 
|30 Years                |                            |        | 7.88% |                        |           |  | 7.94 | %         |   |   | 300,000   |           |  |  | 07/15/31          | 
|EOP InterNotes(c)       |                            |        | 4.88% |                        |           |  | 5.08 | %         |   |   | 4,342     |           |  |  | 06/15/08-06/15/10 | 
|                        |                            |        |       |                        |           |  |      |           |   |   |           |          
|                        | Weighted Average/ Subtotal |        |       | 7.19%                  |           |  |      | 7.12      | % |   |           | 7,970,842 |  |  |                   |  | 
|                        |                            |        |       |                        |           |  |      |           |   |   |           |          
|Variable-interest rate: |                            |        |       |                        |           |  |      |           |   |   |           |           |  |  |                   | 
|10 Years(d)             |                            |        | 4.75% |                        |           |  | 3.12 | %         |   |   | 1,000,000 |           |  |  | 3/15/14           | 
|10 Years(e)             |                            |        | 2.07% |                        |           |  | 2.17 | %         |   |   | 45,000    |           |  |  | 5/27/14           | 
|                        |                            |        |       |                        |           |  |      |           |   |   |           |          
|                        | Weighted Average/ Subtotal |        |       | 4.63%                  |           |  |      | 3.08      | % |   |           | 1,045,000 |  |  |                   |  | 
|                        |                            |        |       |                        |           |  |      |           |   |   |           |          
|Total Weighted Average  |                            |        | 6.89% |                        |           |  | 6.65 | %         |   |   | 9,015,842 |           |  |  |                   | 
|                        |                            |        |       |                        |           |  |      |           |   |   |           |          
|Net discount            |                            |        |       |                        |           |  |      |           |   |   | (72,843   | )         |  |  |                   | 
|                        |                            |        |       |                        |           |  |      |           |   |   |           |          
|                        | Total                      |        |       |                        |           |  |      |           |   |   | $         | 8,942,999 |  |  |                   |  | 
|                        |                            |        |       |                        |           |  |      |           |   |   |           |          



---



|    |  |                                                                                                                                                                                                                           
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Includes the effect of settled interest rate
    protection and interest rate swap agreements, offering and
    transaction costs and premiums and discounts on certain
    unsecured notes.                              
|   
|(b) |  | The notes are exchangeable into Equity Office
    Common Shares at an exchange rate of $34.00 per share. If
    the closing price of a Common Share at the time a holder
    exercises its exchange right is less than the

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|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  | exchange price of $34.00, the holder will
    receive, in lieu of Common Shares, cash in an amount equal to
    97% of the product of the number of Common Shares into which the
    principal amount of notes subject to such exercise would
    otherwise be exchangeable and the current market price per
    Common Share. Upon exchange of a $1,000 note for Common Shares
    of Equity Office, we would issue a corresponding number of Units
    to Equity Office on a one-for-one basis.
|   
|(c) |  | The rates shown are weighted average rates. The
    coupon rate on the EOP InterNotes range from 4.75% to 5.25%.
    Including all offering expenses, the all-in effective rates of
    the EOP InterNotes range from 4.95% to 5.44%.                                                                                                                                                                                                                                                            
|   
|(d) |  | As of March 23, 2004, $1.0 billion of
    fixed-rate unsecured notes were converted to a variable interest
    rate based on LIBOR plus 122 basis points through several
    interest rate swap agreements entered into on March 23,
    2004.                                                                                                                                                                                                                                                   
|   
|(e) |  | The notes have an interest rate of LIBOR plus
    77.5 basis points.                                                                                                                                                                                                                                                                                                                                                                                                                             

As of July 30, 2004, approximately
$3.1 billion was available for issuance under previously
filed $3.0 billion and $4.0 billion shelf registration
statements.



| |                                                            
| | -----------------------------------------------------------
| | Restrictions and Covenants under Unsecured
    Indebtedness

Agreements or instruments relating to our lines
of credit and unsecured notes contain certain financial
restrictions and requirements regarding total debt-to-assets
ratios, debt service coverage ratios, minimum ratio of
unencumbered assets to unsecured debt and other limitations. As
of June 30, 2004, we were in compliance with each of these
financial restrictions and requirements. If we fail to comply
with any of these restrictions and requirements, then the
indebtedness could become due and payable before its stated due
date.

Set forth below are the financial restrictions
and requirements to which we are subject under our unsecured
note indentures and our performance under each covenant as of
June 30, 2004:

|                                                                                                             |  |             |      | 
|------------------------------------------------------------------------------------------------------------ |  | ----------- | ---- | 
|Covenants(a) (in each case as defined in the respective                                                      |  | Actual      |     
|indenture)                                                                                                   |  | Performance |     
|                                                                                                             |  |             |     
|Debt to Adjusted Total Assets may not be greater
    than 60%                                                |  |             | 47%  | 
|Secured Debt to Adjusted Total Assets may not be
    greater than 40%                                        |  |             | 12%  | 
|Consolidated Income Available for Debt Service to
    Annual Debt Service charge may not be less than 1.50:1 |  |             | 2.45 | 
|Total Unencumbered Assets to Unsecured Debt may
    not be less than 150%(b)                                 |  |             | 216% | 



---



|    |  |                                                                                                                     
|--- |  | --------------------------------------------------------------------------------------------------------------------
|(a) |  | The calculations of our actual performance under
    each covenant are included as Appendix A to this
    Form 10-Q.
|(b) |  | The unsecured notes assumed in the merger with
    Spieker Partnership are subject to a minimum ratio of 165%.      

45



---



##### Table of Contents





| |                   
| | ------------------
| | Capital Securities

The following table presents the changes in
Equity Offices issued and outstanding Common Shares and
EOP Partnerships Units (exclusive of Units owned by Equity
Office) since December 31, 2003:

|                                 |                                                                     |               |             |            |       |  |            |          |   |  |             |            |  
|-------------------------------- | ------------------------------------------------------------------- | ------------- | ----------- | ---------- | ----- |  | ---------- | -------- | - |  | ----------- | ---------- | -
|                                 |                                                                     | Common Shares |             |            | Units |  |            | Total    |  
|                                 |                                                                     |               |             |            |       |  |            |          |  
|Outstanding at December 31, 2003 |                                                                     |               | 400,460,388 |            |       |  | 49,032,230 |          |   |  | 449,492,618 |           
|                                 | Share options exercised                                             |               |             | 1,647,244  |       |  |            |         |   |  |             | 1,647,244  |  
|                                 | Common Shares repurchased/ retired (a)                              |               |             | (38,664    | )     |  |            |         |   |  |             | (38,664    | )
|                                 | Units redeemed for Common Shares                                    |               |             | 236,553    |       |  |            | (236,553 | ) |  |             |           |  
|                                 | Units redeemed for cash                                             |               |             |           |       |  |            | (31,550  | ) |  |             | (31,550    | )
|                                 | Restricted shares and share awards issued, net of
    cancellations |               |             | 1,040,923  |       |  |            |         |   |  |             | 1,040,923  |  
|                                 |                                                                     |               |             |            |       |  |            |          |  
|Outstanding at March 31, 2004    |                                                                     |               | 403,346,444 |            |       |  | 48,764,127 |          |   |  | 452,110,571 |           
|                                 | Share options exercised                                             |               |             | 35,165     |       |  |            |         |   |  |             | 35,165     |  
|                                 | Common Shares repurchased/retired(b)                                |               |             | (1,359,219 | )     |  |            |         |   |  |             | (1,359,219 | )
|                                 | Units redeemed for Common Shares                                    |               |             | 459,436    |       |  |            | (459,436 | ) |  |             |           |  
|                                 | Units redeemed for cash                                             |               |             |           |       |  |            | (38,030  | ) |  |             | (38,030    | )
|                                 | Units issued(c)                                                     |               |             |           |       |  |            | 1,930    |   |  |             | 1,930      |  
|                                 | Restricted shares and share awards issued, net of
    cancellations |               |             | (70,265    | )     |  |            |         |   |  |             | (70,265    | )
|                                 |                                                                     |               |             |            |       |  |            |          |  
|Outstanding at June 30, 2004     |                                                                     |               | 402,411,561 |            |       |  | 48,268,591 |          |   |  | 450,680,152 |           
|                                 |                                                                     |               |             |            |       |  |            |          |  



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                         
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | During the first quarter 2004, Common Shares were
    repurchased by Equity Office at an average price of
    $29.71 per share for approximately $1.1 million in the
    aggregate. In connection with the repurchases, we retired a
    corresponding number of Units for an aggregate purchase price
    equal to the aggregate purchase price for all Common Share
    repurchases.  
|(b) |  | During the second quarter 2004, Common Shares
    were repurchased by Equity Office at an average price of
    $26.07 per share for approximately $35.4 million in
    the aggregate. In connection with the repurchases, we retired a
    corresponding number of Units for an aggregate purchase price
    equal to the aggregate purchase price for all Common Share
    repurchases.
|(c) |  | During the second quarter 2004, we issued Units
    in connection with the buyout of a partners interest in
    the 500 Orange property. The total value of the Units was
    approximately $50,000.                                                                                                                                                                                   



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

The following summary discussion of our cash
flows is based on the consolidated statements of cash flows in
Item 1.  Financial Statements and is not meant
to be an all-inclusive discussion of the changes in our cash
flows for the periods presented below.



| |                                            
| | -------------------------------------------
| | Six Months Ended June 30, 2004 and
    2003

Cash and cash equivalents increased by
approximately $3.9 million to $73.3 million at
June 30, 2004, compared to $69.4 million at
December 31, 2003. This increase was the net result of
approximately $564.4 million provided by operating
activities, approximately $143.0 million used for investing
activities (consisting primarily of $119.5 million used for
property acquisitions and approximately $304.2 million used
for capital and tenant improvements, lease commissions and other
costs offset by $233.5 million in property sales and
$47.2 million released from escrow) and approximately
$417.5 million used for financing activities.

46



---



##### Table of Contents



Additional Items for 2004



| |                        
| | -----------------------
| | Developments in Process

Developments in process decreased by
approximately $7.6 million to $67.6 million at
June 30, 2004 compared to $75.2 million at
December 31, 2003. This decrease was a result of one
development placed in service (Douglas Corporate Center II
of which total costs incurred at December 31, 2003 were
approximately $13.6 million), partially offset by
additional costs of approximately $6.0 million spent on
current developments.



| |                         
| | ------------------------
| | Deferred Rent Receivable

Deferred rent receivable increased by
approximately $67.5 million to $446.8 million at
June 30, 2004, compared to $379.3 million at
December 31, 2003. This increase was a result of a
$44.9 million increase in receivables recorded from tenants
for the current difference between the straight-line rent and
the rent that is contractually due from tenants, a
$5.4 million increase related to the consolidation of
SunAmerica Center and a $15.4 million increase related to
the consolidation of the 1301 Avenue of the Americas office
building after we acquired the remaining economic interest in
the joint venture.



| |                                                 
| | ------------------------------------------------
| | Investments in Unconsolidated Joint
    Ventures

Investments in unconsolidated joint ventures
decreased by approximately $159.3 million to
$968.0 million at June 30, 2004, compared to
$1,127.2 million at December 31, 2003. This decrease
was primarily a result of a $157.7 million investment at
December 31, 2003 in the 1301 Avenue of the Americas office
building, which was consolidated in February 2004 after we
acquired the remaining economic interest in the joint venture.



| |                                      
| | -------------------------------------
| | Prepaid Expenses and Other
    Assets

Prepaid expenses and other assets decreased by
approximately $125.3 million to $219.6 million at
June 30, 2004 compared to $344.9 million at
December 31, 2003. This decrease was primarily a result of
an $82.2 million note receivable related to the SunAmerica
Center whose assets, liabilities, and results of operations were
consolidated in 2004, a $14.5 million decrease in prepaid
expenses and an $11.1 million decrease in the market value
of the forward-starting interest rate swaps.



| |                     
| | --------------------
| | Distribution Payable

Distribution payable increased by approximately
$225.7 million to approximately $229.6 million at
June 30, 2004 compared to $3.9 million at
December 31, 2003. This increase was a result of the Unit
distribution declaration for the second quarter of 2004, which
was paid in July 2004. The fourth quarter 2003 distribution was
declared and paid in the fourth quarter of 2003.

Market Risk

Since December 31, 2003 there were no
material changes in the information regarding market risk that
was provided in the Form 10-K for the year ended
December 31, 2003, except as noted below:



| |                   
| | ------------------
| | Interest Rate Risk

As of June 30, 2004 and December 31,
2003, the fair value of our fixed-rate debt was approximately
$.9 billion and $1.3 billion higher than the book
value of approximately $10.6 billion and
$11.1 billion, respectively, due to the general decrease in
market interest rates on secured and unsecured debt.



| |                                     
| | ------------------------------------
| | Interest Rate Risk 
    Derivatives



| |                                                               
| | --------------------------------------------------------------
| | Forward-Starting and Fixed-to-Floating
    Interest Rate Swaps

As of December 31, 2003, we had
$1.3 billion of forward-starting interest rate swaps
outstanding, which were all settled during the six months ended
June 30, 2004. In the second quarter 2004 we settled
$500 million

47



---



##### Table of Contents



of the forward-starting interest rate swaps and
recognized an approximate $24.0 million gain. The swaps
were entered into in 2003 to hedge an anticipated unsecured note
offering expected to take place in June 2004, which did not
occur.


In March 2004, in conjunction with a
$1.0 billion debt offering, we settled $800 million of
forward-starting interest rate swaps that were outstanding as of
December 31, 2003. In March we entered into
$1.0 billion of fixed-to-floating interest rate swap
agreements to hedge the $1.0 billion of unsecured notes
also issued in March 2004.

See Item 1  Financial Statements
Note 12  Commitments and Contingencies for
information on our forward-starting and fixed-to-floating
interest rate swaps.

Capital Improvements, Tenant Improvements and
Leasing Costs



| |                     
| | --------------------
| | Capital Improvements

Significant renovations and improvements, which
improve or extend the useful life of our Properties are
capitalized. We categorize these capital expenditures as follows:



| |   |                                                                                                                                                                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Capital
    Improvements improvements
    that enhance the value of the property such as lobby
    renovations, roof replacement, significant renovations for
    Americans with Disabilities Act compliance, chiller replacement
    and elevator upgrades.                                                                                        
|
| |  | Development and Redevelopment
    Costs include costs
    associated with the development or redevelopment of a property
    including tenant improvements, leasing commissions, capitalized
    interest and operating costs incurred during completion of the
    property and incurred while the property is made ready for its
    intended use.

The table below details the costs incurred for
each type of improvement.

|                       |                      |                                     |   |                |             |  |   |              |                |  |             |        |        |  |   |       |       | 
|---------------------- | -------------------- | ----------------------------------- | - | -------------- | ----------- |  | - | ------------ | -------------- |  | ----------- | ------ | ------ |  | - | ----- | ----- | 
|                       |                      |                                    
|                       |                      | For the three months ended June 30, |  
|                       |                      |                                     |  
|                       |                      |                                     |   |               
|                       |                      | 2004                                |   |                | 2003        | 
|                       |                      |                                     |   |                |             | 
|                       |                      |                                     |   | Unconsolidated |             |  |   |              | Unconsolidated | 
|                       |                      | Consolidated                        |   |                | Properties  |  |   | Consolidated |                |  | Properties  |       
|(Dollars in thousands) |                      | Properties                          |   |                | (our share) |  |   | Properties   |                |  | (our share) |       
|                       |                      |                                     |   |                |             |  |   |              |                |  |             |       
|Capital Improvements:  |                      |                                     |   |                |             |  |   |              |                |  |             |        |        |  |   |      
|                       | Capital improvements |                                     | $ | 16,217         |             |  | $ | 1,188        |                |  | $           | 8,767  |        |  | $ | 1,401 |      
|                       | Development costs    |                                     |   | 22,583         |             |  |   | 13           |                |  |             | 22,170 |        |  |   | (215  | )    
|                       | Redevelopment costs  |                                     |   |               |             |  |   |             |                |  |             | 1,874  |        |  |   |      |      
|                       |                      |                                     |   |                |             |  |   |              |                |  |             |       
|                       |                      | Total capital improvements          |   | $              | 38,800      |  |   | $            | 1,201          |  |             | $      | 32,811 |  |   | $     | 1,186 | 
|                       |                      |                                     |   |                |             |  |   |              |                |  |             |       

|                       |                      |                                   |   |                |             |  |  |              |                |  |             |        |        |  |   |       |       | 
|---------------------- | -------------------- | --------------------------------- | - | -------------- | ----------- |  |  | ------------ | -------------- |  | ----------- | ------ | ------ |  | - | ----- | ----- | 
|                       |                      |                                  
|                       |                      | For the six months ended June 30, |  
|                       |                      |                                   |  
|                       |                      |                                   |   |               
|                       |                      | 2004                              |   |                | 2003        | 
|                       |                      |                                   |   |                |             | 
|                       |                      |                                   |   | Unconsolidated |             |  |  |              | Unconsolidated | 
|                       |                      | Consolidated                      |   |                | Properties  |  |  | Consolidated |                |  | Properties  |       
|(Dollars in thousands) |                      | Properties                        |   |                | (our share) |  |  | Properties   |                |  | (our share) |       
|                       |                      |                                   |   |                |             |  |  |              |                |  |             |       
|Capital Improvements:  |                      |                                   |   |                |             |  |  |              |                |  |             |        |        |  |   |      
|                       | Capital improvements |                                   | $ | 21,489         |             |  |  | 1,777        |                |  | $           | 13,807 |        |  | $ | 1,676 |      
|                       | Development costs    |                                   |   | 42,528         |             |  |  | 163          |                |  |             | 45,767 |        |  |   | 4,331 |      
|                       | Redevelopment costs  |                                   |   | 356            |             |  |  |             |                |  |             | 5,545  |        |  |   |      |      
|                       |                      |                                   |   |                |             |  |  |              |                |  |             |       
|                       |                      | Total capital improvements        |   | $              | 64,373      |  |  | $            | 1,940          |  |             | $      | 65,119 |  |   | $     | 6,007 | 
|                       |                      |                                   |   |                |             |  |  |              |                |  |             |       



| |                                          
| | -----------------------------------------
| | Tenant Improvements and Leasing
    Costs

Costs related to the renovation, alteration or
build-out of existing office space, as well as related leasing
costs, are capitalized and depreciated or amortized over the
lease term. These tenant improvements may include, but are not
limited to, floor coverings, ceilings, walls, HVAC, mechanical,
electrical, plumbing and fire protection systems.

48



---



##### Table of Contents



The amounts shown below represent the total
tenant improvements and leasing costs for leases which commenced
during the period, regardless of when such costs were actually
paid.

|                                                         |  |                                     |        |            |             |   |       |             |            |   |             |  |  |   |       | 
|-------------------------------------------------------- |  | ----------------------------------- | ------ | ---------- | ----------- | - | ----- | ----------- | ---------- | - | ----------- |  |  | - | ----- | 
|                                                         |  |                                    
|                                                         |  | For the three months ended June 30, |       
|                                                         |  |                                     |       
|                                                         |  |                                     |        |           
|                                                         |  | 2004                                |        |            | 2003        |  
|                                                         |  |                                     |        |            |             |  
|                                                         |  |                                     |        | Total Cost |             |   |       |             | Total Cost |  
|                                                         |  |                                     |        | per Square |             |   |       |             | per Square |  
|(Dollars in thousands, except per square foot amounts)   |  | Total Costs                         |        |            | Foot Leased |   |       | Total Costs |            |   | Foot Leased | 
|                                                         |  |                                     |        |            |             |   |       |             |            |   |             | 
|Consolidated Properties:                                 |  |                                     |        |            |             |   |       |             |            |   |             |  |  |   |       | 
|                                                         |  |                                     |        |            |             |   |       |             |            |   |             | 
|Office Properties:                                       |  |                                     |        |            |             |   |       |             |            |   |             |  |  |   |       | 
|Renewals                                                 |  | $                                   | 29,272 |            |             | $ | 10.09 |             |            | $ | 32,497      |  |  | $ | 12.47 | 
|Retenanted                                               |  |                                     | 63,128 |            |             |   | 23.14 |             |            |   | 35,340      |  |  |   | 20.08 | 
|                                                         |  |                                     |        |            |             |   |       |             |            |   |             | 
|Total/ Weighted Average                                  |  | $                                   | 92,400 |            |             | $ | 16.41 |             |            | $ | 67,837      |  |  | $ | 15.54 | 
|                                                         |  |                                     |        |            |             |   |       |             |            |   |             | 
|Industrial Properties:                                   |  |                                     |        |            |             |   |       |             |            |   |             |  |  |   |       | 
|Renewals                                                 |  | $                                   | 114    |            |             | $ | 2.90  |             |            | $ | 336         |  |  | $ | 15.28 | 
|Retenanted                                               |  |                                     | 635    |            |             |   | 5.74  |             |            |   | 361         |  |  |   | 5.95  | 
|                                                         |  |                                     |        |            |             |   |       |             |            |   |             | 
|Total/ Weighted Average                                  |  | $                                   | 749    |            |             | $ | 5.00  |             |            | $ | 697         |  |  | $ | 8.43  | 
|                                                         |  |                                     |        |            |             |   |       |             |            |   |             | 
|Unconsolidated Joint Ventures
    (a):                   |  |                                     |        |            |             |   |       |             |            |   |             |  |  |   |       | 
|                                                         |  |                                     |        |            |             |   |       |             |            |   |             | 
|Renewals                                                 |  | $                                   | 1,479  |            |             | $ | 11.95 |             |            | $ | 1,697       |  |  | $ | 17.01 | 
|Retenanted                                               |  |                                     | 2,910  |            |             |   | 27.33 |             |            |   | 673         |  |  |   | 11.19 | 
|                                                         |  |                                     |        |            |             |   |       |             |            |   |             | 
|Total/ Weighted Average                                  |  | $                                   | 4,389  |            |             | $ | 19.06 |             |            | $ | 2,370       |  |  | $ | 14.82 | 
|                                                         |  |                                     |        |            |             |   |       |             |            |   |             | 
|Total Properties (renewals and retenanted
    combined): |  |                                     |        |            |             |   |       |             |            |   |             |  |  |   |       | 
|                                                         |  |                                     |        |            |             |   |       |             |            |   |             | 
|Office (consolidated and unconsolidated)                 |  | $                                   | 96,789 |            |             | $ | 16.52 |             |            | $ | 70,207      |  |  | $ | 15.51 | 
|Industrial                                               |  |                                     | 749    |            |             |   | 5.00  |             |            |   | 697         |  |  |   | 8.43  | 
|                                                         |  |                                     |        |            |             |   |       |             |            |   |             | 
|Total/ Weighted Average                                  |  | $                                   | 97,538 |            |             | $ | 16.23 |             |            | $ | 70,904      |  |  | $ | 15.38 | 
|                                                         |  |                                     |        |            |             |   |       |             |            |   |             | 

|                                                         |  |                                   |         |            |             |   |       |             |            |   |             |  |  |   |       | 
|-------------------------------------------------------- |  | --------------------------------- | ------- | ---------- | ----------- | - | ----- | ----------- | ---------- | - | ----------- |  |  | - | ----- | 
|                                                         |  |                                  
|                                                         |  | For the six months ended June 30, |        
|                                                         |  |                                   |        
|                                                         |  |                                   |         |           
|                                                         |  | 2004                              |         |            | 2003        |  
|                                                         |  |                                   |         |            |             |  
|                                                         |  |                                   |         | Total Cost |             |   |       |             | Total Cost |  
|                                                         |  |                                   |         | per Square |             |   |       |             | per Square |  
|(Dollars in thousands, except per square foot amounts)   |  | Total Costs                       |         |            | Foot Leased |   |       | Total Costs |            |   | Foot Leased | 
|                                                         |  |                                   |         |            |             |   |       |             |            |   |             | 
|Consolidated Properties:                                 |  |                                   |         |            |             |   |       |             |            |   |             |  |  |   |       | 
|                                                         |  |                                   |         |            |             |   |       |             |            |   |             | 
|Office Properties:                                       |  |                                   |         |            |             |   |       |             |            |   |             |  |  |   |       | 
|Renewals                                                 |  | $                                 | 46,223  |            |             | $ | 9.64  |             |            | $ | 56,315      |  |  | $ | 10.56 | 
|Retenanted                                               |  |                                   | 118,906 |            |             |   | 22.51 |             |            |   | 78,598      |  |  |   | 19.16 | 
|                                                         |  |                                   |         |            |             |   |       |             |            |   |             | 
|Total/ Weighted Average                                  |  | $                                 | 165,129 |            |             | $ | 16.39 |             |            | $ | 134,913     |  |  | $ | 14.30 | 
|                                                         |  |                                   |         |            |             |   |       |             |            |   |             | 
|Industrial Properties:                                   |  |                                   |         |            |             |   |       |             |            |   |             |  |  |   |       | 
|Renewals                                                 |  | $                                 | 1,345   |            |             | $ | 2.29  |             |            | $ | 481         |  |  | $ | 2.89  | 
|Retenanted                                               |  |                                   | 1,593   |            |             |   | 5.08  |             |            |   | 593         |  |  |   | 3.45  | 
|                                                         |  |                                   |         |            |             |   |       |             |            |   |             | 
|Total/ Weighted Average                                  |  | $                                 | 2,938   |            |             | $ | 3.26  |             |            | $ | 1,074       |  |  | $ | 3.17  | 
|                                                         |  |                                   |         |            |             |   |       |             |            |   |             | 
|Unconsolidated Joint Ventures
    (a):                   |  |                                   |         |            |             |   |       |             |            |   |             |  |  |   |       | 
|                                                         |  |                                   |         |            |             |   |       |             |            |   |             | 
|Renewals                                                 |  | $                                 | 8,698   |            |             | $ | 20.59 |             |            | $ | 9,889       |  |  | $ | 31.06 | 
|Retenanted                                               |  |                                   | 6,506   |            |             |   | 27.58 |             |            |   | 2,830       |  |  |   | 20.51 | 
|                                                         |  |                                   |         |            |             |   |       |             |            |   |             | 
|Total/ Weighted Average                                  |  | $                                 | 15,204  |            |             | $ | 23.09 |             |            | $ | 12,719      |  |  | $ | 27.87 | 
|                                                         |  |                                   |         |            |             |   |       |             |            |   |             | 
|Total Properties (renewals and retenanted
    combined): |  |                                   |         |            |             |   |       |             |            |   |             |  |  |   |       | 
|                                                         |  |                                   |         |            |             |   |       |             |            |   |             | 
|Office (consolidated and unconsolidated)                 |  | $                                 | 180,333 |            |             | $ | 16.80 |             |            | $ | 147,632     |  |  | $ | 14.92 | 
|Industrial                                               |  |                                   | 2,938   |            |             |   | 3.26  |             |            |   | 1,074       |  |  |   | 3.17  | 
|                                                         |  |                                   |         |            |             |   |       |             |            |   |             | 
|Total/ Weighted Average                                  |  | $                                 | 183,271 |            |             | $ | 15.75 |             |            | $ | 148,706     |  |  | $ | 14.53 | 
|                                                         |  |                                   |         |            |             |   |       |             |            |   |             | 



---



|    |  |                                                                                                                          
|--- |  | -------------------------------------------------------------------------------------------------------------------------
|(a) |  | Represents our share of unconsolidated joint
    venture tenant improvements and leasing costs for office
    properties.

49



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We have seen evidence suggesting that rents may
have begun to stabilize. Tenant improvements and leasing costs,
however, have increased over the last 12 months as compared
to historical levels due to competitive market conditions for
new and renewal leases. These increases in tenant improvements
and leasing costs contributed to a decrease in net effective
rents (contract rents reduced by tenant improvements costs,
leasing commissions and any free rent periods) for lease
renewals and retenanted properties.

The above information includes capital
improvements, tenant improvements and leasing costs incurred for
leases which commenced during the period shown. The amounts
included in the consolidated statement of cash flows represent
the cash expenditures made during the period. The differences
between these amounts represent timing differences between the
lease commencement dates and the actual cash expenditures. In
addition, the figures below include expenditures for corporate
furniture, fixtures and equipment, software, leasehold
improvements and other. The reconciliation between the amounts
above for the consolidated properties and the amounts disclosed
in the consolidated statements of cash flows is as follows:

|                                                                                                                    |                       |                      |         |        |                    |   |         |        |  |   |         |         |  |   |         |         | 
|------------------------------------------------------------------------------------------------------------------- | --------------------- | -------------------- | ------- | ------ | ------------------ | - | ------- | ------ |  | - | ------- | ------- |  | - | ------- | ------- | 
|                                                                                                                    |                       |                      |         |       
|                                                                                                                    |                       | For the three months |         |        | For the six months |  
|                                                                                                                    |                       | ended June 30,       |         |        | ended June 30,     |  
|                                                                                                                    |                       |                      |         |        |                    |  
|(Dollars in thousands)                                                                                              |                       | 2004                 |         |        | 2003               |   |         | 2004   |  |   | 2003    |        
|                                                                                                                    |                       |                      |         |        |                    |   |         |        |  |   |         |        
|Total capital improvements                                                                                          |                       | $                    | 38,800  |        |                    | $ | 32,811  |        |  | $ | 64,373  |         |  | $ | 65,119  |        
|Tenant improvements and leasing
    costs:                                                                          |                       |                      |         |        |                    |   |         |        |  |   |         |         |  |   |         |        
|                                                                                                                    | Office Properties     |                      |         | 92,400 |                    |   |         | 67,837 |  |   |         | 165,129 |  |   |         | 134,913 | 
|                                                                                                                    | Industrial Properties |                      |         | 749    |                    |   |         | 697    |  |   |         | 2,938   |  |   |         | 1,074   | 
|Expenditures for corporate furniture, fixtures
    and equipment, software, leasehold improvements and other        |                       |                      | 273     |        |                    |   | 6,515   |        |  |   | 5,552   |         |  |   | 8,371   |        
|Timing differences                                                                                                  |                       |                      | 18,974  |        |                    |   | 22,941  |        |  |   | 66,236  |         |  |   | 39,492  |        
|                                                                                                                    |                       |                      |         |        |                    |   |         |        |  |   |         |        
|Total capital improvements, tenant improvements
    and leasing costs                                               |                       | $                    | 151,196 |        |                    | $ | 130,801 |        |  | $ | 304,228 |         |  | $ | 248,969 |        
|                                                                                                                    |                       |                      |         |        |                    |   |         |        |  |   |         |        
|Capital and tenant improvements from the
    consolidated statement of cash flows                                   |                       | $                    | 122,145 |        |                    | $ | 95,972  |        |  | $ | 243,353 |         |  | $ | 174,920 |        
|Lease commissions and other costs from the
    consolidated statement of cash flows                                 |                       |                      | 29,051  |        |                    |   | 34,829  |        |  |   | 60,875  |         |  |   | 74,049  |        
|                                                                                                                    |                       |                      |         |        |                    |   |         |        |  |   |         |        
|Total capital improvements, tenant improvements
    and leasing costs from the consolidated statement of cash flows |                       | $                    | 151,196 |        |                    | $ | 130,801 |        |  | $ | 304,228 |         |  | $ | 248,969 |        
|                                                                                                                    |                       |                      |         |        |                    |   |         |        |  |   |         |        

Developments

We own directly several properties in various
stages of development or pre-development. These developments are
funded by working capital and our lines of credit. Specifically
identifiable direct acquisition, development and construction
costs are capitalized, including, where applicable, salaries and
related costs, real estate taxes and interest incurred in
developing the property. The properties under development and
all figures stated below are as of June 30, 2004.

|                         |  |           |         |  |          |  |                 |           |  |        |       |  |          |         |         |           |          |   |            |        |  |   |        |  |  |  |    |  
|------------------------ |  | --------- | ------- |  | -------- |  | --------------- | --------- |  | ------ | ----- |  | -------- | ------- | ------- | --------- | -------- | - | ---------- | ------ |  | - | ------ |  |  |  | -- | -
|                         |  | Placed in |         |  |          |  |                 |           |  |        | Costs |  |          | Total   |         |           | Current  |  
|                         |  | Service   |         |  |          |  | Number of       |           |  | Square |       |  | Incurred |         |         | Estimated |          |   | Percentage |       
|(Dollars in thousands)   |  | Date(a)   |         |  | Location |  |                 | Buildings |  |        | Feet  |  |          | to Date |         |           | Costs(b) |   |            | Leased | 
|                         |  |           |         |  |          |  |                 |           |  |        |       |  |          |         |         |           |          |   |            |        | 
|Wholly-Owned             |  |           |         |  |          |  |                 |           |  |        |       |  |          |         |         |           |          |   |            |        |  |   |        |  |  |  |    |  
|Kruse Woods V            |  |           | 4Q/2003 |  |          |  | Lake Oswego, OR |           |  |        | 1     |  |          |         | 184,000 |           |          | $ | 30,136     |        |  | $ | 33,900 |  |  |  | 70 | %
|Cambridge Science Center |  |           | 2Q/2004 |  |          |  | Cambridge, MA   |           |  |        | 1     |  |          |         | 131,000 |           |          |   | 37,505     |        |  |   | 54,900 |  |  |  | 19 | %
|                         |  |           |         |  |          |  |                 |           |  |        |       |  |          |         |         |           |          |   |            |        | 
|                         |  |           |         |  |          |  |                 |           |  |        | 2     |  |          |         | 315,000 |           |          | $ | 67,641     |        |  | $ | 88,800 |  |  |  | 49 | %
|                         |  |           |         |  |          |  |                 |           |  |        |       |  |          |         |         |           |          |   |            |        | 



---



|    |  |                                                                                                                                                                                                                   
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | The Placed in Service Date represents the date
    the certificate of occupancy was obtained. Subsequent to
    obtaining the certificate of occupancy, the property is expected
    to undergo a lease-up period.

50



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|    |  |                                                                                                                                                                                                                                                                                                                         
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) |  | The Total Estimated Costs represent 100% of the
    developments estimated costs, including the acquisition
    cost of the land and building, if any. The Total Estimated Costs
    are subject to change upon, or prior to, the completion of the
    development and include amounts required to lease the property.

In addition to the developments described above,
we own or have under option various land parcels available for
development. These sites represent possible future development
of up to approximately 12 million square feet of office
space. These developments will be impacted by the timing and
likelihood of success of the entitlement processes, both of
which are uncertain. These various sites include, among others:
Russia Wharf, Boston, MA; Reston Town Center, Reston, VA;
Prominence in Buckhead, Atlanta, GA; Perimeter Center, Atlanta,
GA; Tabor Center, Denver, CO; Bridge Pointe Corporate Centre,
San Diego, CA; La Jolla Centre, San Diego, CA;
Orange Center, Orange, CA; Waters Edge, Los Angeles, CA;
Skyport Plaza, San Jose, CA; Foundry Square,
San Francisco, CA; San Rafael Corporate Center,
San Rafael, CA; Station Landing, Walnut Creek, CA;
Parkshore Plaza, Folsom, CA; City Center Bellevue, Bellevue, WA;
and 8th Street, Bellevue, WA.

There are no unconsolidated joint venture
properties under development as of June 30, 2004.

Subsequent Events

See Note 13  Subsequent Events
for transactions that occurred subsequent to June 30, 2004
through July 30, 2004.

Inflation

Substantially all of our office leases require
the tenant to pay, as additional rent, a portion of real estate
taxes and operating expenses. In addition, many of our office
leases provide for fixed increases in base rent or indexed
escalations (based on the Consumer Price Index or other
measures). We believe that the majority of inflationary
increases in expenses will be offset, in part, by the expense
reimbursements and contractual rent increases described above.

Funds From Operations
(FFO)

FFO is a non-GAAP financial measure. We believe
FFO, as defined by the Board of Governors of the National
Association of Real Estate Investment Trusts
(NAREIT), to be an appropriate measure of
performance for a real estate company, for the reasons, and
subject to the qualifications, specified below. The following
table reflects the reconciliation of FFO to net income, the most
directly comparable GAAP measure, for the periods presented:

51



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|                                                                                                                                                                                                                                  |  |                                     |         |          |                                   |   |       |         |          |   |         |   |  |          |       |   |         |   |          |         |  |   |         |   |  |   |         |   |  |   |       |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------- | ------- | -------- | --------------------------------- | - | ----- | ------- | -------- | - | ------- | - |  | -------- | ----- | - | ------- | - | -------- | ------- |  | - | ------- | - |  | - | ------- | - |  | - | ----- | -
|                                                                                                                                                                                                                                  |  |                                     |         |         
|                                                                                                                                                                                                                                  |  | For the three months ended June 30, |         |          | For the six months ended June 30, |  
|                                                                                                                                                                                                                                  |  |                                     |         |          |                                   |  
|                                                                                                                                                                                                                                  |  |                                     |         |          |                                   |   |       |        
|                                                                                                                                                                                                                                  |  | 2004                                |         |          | 2003                              |   |       | 2004    |          |   | 2003    |  
|                                                                                                                                                                                                                                  |  |                                     |         |          |                                   |   |       |         |          |   |         |  
|                                                                                                                                                                                                                                  |  |                                     |         | Per      |                                   |   |       |         | Per      |   |         |   |  | Per      |       |   |         |   | Per      |        
|                                                                                                                                                                                                                                  |  |                                     |         | Weighted |                                   |   |       |         | Weighted |   |         |   |  | Weighted |       |   |         |   | Weighted |        
|(Dollars in thousands,                                                                                                                                                                                                            |  |                                     |         | Average  |                                   |   |       |         | Average  |   |         |   |  | Average  |       |   |         |   | Average  |        
|except per unit amounts)                                                                                                                                                                                                          |  | Dollars                             |         |          | Unit(b)                           |   |       | Dollars |          |   | Unit(b) |   |  | Dollars  |       |   | Unit(b) |   |          | Dollars |  |   | Unit(b) |  
|                                                                                                                                                                                                                                  |  |                                     |         |          |                                   |   |       |         |          |   |         |   |  |          |       |   |         |   |          |         |  |   |         |  
|                                                                                                                                                                                                                                  |  |                                    
|Reconciliation of net income to
    FFO(a):                                                                                                                                                                                       |  |                                     |         |          |                                   |   |       |         |          |   |         |   |  |          |       |   |         |   |          |         |  |   |         |   |  |   |         |   |  |   |       |  
|Net income                                                                                                                                                                                                                        |  | $                                   | 121,618 |          |                                   | $ | 0.27  |         |          | $ | 183,783 |   |  | $        | 0.41  |   |         | $ | 207,606  |         |  | $ | 0.46    |   |  | $ | 358,275 |   |  | $ | 0.79  |  
|Real estate related depreciation and amortization
    and net gain on sales of real estate, including our share of
    unconsolidated joint ventures and adjusted for minority
    interests share in partially owned properties |  |                                     | 192,325 |          |                                   |   | 0.43  |         |          |   | 141,796 |   |  |          | 0.31  |   |         |   | 383,892  |         |  |   | 0.86    |   |  |   | 317,650 |   |  |   | 0.70  |  
|Cumulative effect of a change in accounting
    principle                                                                                                                                                                         |  |                                     |        |          |                                   |   |      |         |          |   |        |   |  |          |      |   |         |   | 33,697   |         |  |   | 0.08    |   |  |   |        |   |  |   |      |  
|                                                                                                                                                                                                                                  |  |                                     |         |          |                                   |   |       |         |          |   |         |   |  |          |       |   |         |   |          |         |  |   |         |  
|FFO                                                                                                                                                                                                                               |  |                                     | 313,943 |          |                                   |   | 0.70  |         |          |   | 325,579 |   |  |          | 0.72  |   |         |   | 625,195  |         |  |   | 1.39    |   |  |   | 675,925 |   |  |   | 1.49  |  
|Preferred distributions                                                                                                                                                                                                           |  |                                     | (8,944  | )        |                                   |   | (0.02 | )       |          |   | (15,395 | ) |  |          | (0.03 | ) |         |   | (21,692  | )       |  |   | (0.05   | ) |  |   | (30,856 | ) |  |   | (0.07 | )
|                                                                                                                                                                                                                                  |  |                                     |         |          |                                   |   |       |         |          |   |         |   |  |          |       |   |         |   |          |         |  |   |         |  
|FFO available to unitholders  basic                                                                                                                                                                                              |  | $                                   | 304,999 |          |                                   | $ | 0.68  |         |          | $ | 310,184 |   |  | $        | 0.69  |   |         | $ | 603,503  |         |  | $ | 1.34    |   |  | $ | 645,069 |   |  | $ | 1.42  |  
|                                                                                                                                                                                                                                  |  |                                     |         |          |                                   |   |       |         |          |   |         |   |  |          |       |   |         |   |          |         |  |   |         |  

|                                                                                                         |  |            |             |   |     |   |             |            |  |   |             |   |  |            |             |   |     |   |             |            |  |   |             |   |  |   |             |   |  |   |             |  
|-------------------------------------------------------------------------------------------------------- |  | ---------- | ----------- | - | --- | - | ----------- | ---------- |  | - | ----------- | - |  | ---------- | ----------- | - | --- | - | ----------- | ---------- |  | - | ----------- | - |  | - | ----------- | - |  | - | ----------- | -
|                                                                                                         |  | Net Income |             |   | FFO |   |             | Net Income |  |   | FFO         |   |  | Net Income |             |   | FFO |   |             | Net Income |  |   | FFO         |  
|                                                                                                         |  |            |             |   |     |   |             |            |  |   |             |   |  |            |             |   |     |   |             |            |  |   |             |  
|Adjustments to arrive at FFO available to
    unitholders plus assumed conversions:                      |  |            |             |   |     |   |             |            |  |   |             |   |  |            |             |   |     |   |             |            |  |   |             |   |  |   |             |   |  |   |             |  
|Net income and FFO                                                                                       |  | $          | 121,618     |   |     | $ | 313,943     |            |  | $ | 183,783     |   |  | $          | 325,579     |   |     | $ | 207,606     |            |  | $ | 625,195     |   |  | $ | 358,275     |   |  | $ | 675,925     |  
|Preferred distributions                                                                                  |  |            | (8,944      | ) |     |   | (8,944      | )          |  |   | (15,395     | ) |  |            | (15,395     | ) |     |   | (21,692     | )          |  |   | (21,692     | ) |  |   | (30,856     | ) |  |   | (30,856     | )
|                                                                                                         |  |            |             |   |     |   |             |            |  |   |             |   |  |            |             |   |     |   |             |            |  |   |             |  
|Net income and FFO available to unitholders                                                              |  |            | 112,674     |   |     |   | 304,999     |            |  |   | 168,388     |   |  |            | 310,184     |   |     |   | 185,914     |            |  |   | 603,503     |   |  |   | 327,419     |   |  |   | 645,069     |  
|Preferred distributions on Series B
    preferred shares, of which is assumed to be converted into Units |  |            |            |   |     |   | 5,236       |            |  |   |            |   |  |            | 3,931       |   |     |   |            |            |  |   | 9,167       |   |  |   |            |   |  |   | 7,862       |  
|                                                                                                         |  |            |             |   |     |   |             |            |  |   |             |   |  |            |             |   |     |   |             |            |  |   |             |  
|Net income and FFO available to unitholders plus
    assumed conversions                                 |  | $          | 112,674     |   |     | $ | 310,235     |            |  | $ | 168,388     |   |  | $          | 314,115     |   |     | $ | 185,914     |            |  | $ | 612,670     |   |  | $ | 327,419     |   |  | $ | 652,931     |  
|                                                                                                         |  |            |             |   |     |   |             |            |  |   |             |   |  |            |             |   |     |   |             |            |  |   |             |  
|Weighted average Units, dilutive potential common
    shares plus assumed conversions outstanding        |  |            | 450,533,841 |   |     |   | 458,923,195 |            |  |   | 452,010,570 |   |  |            | 460,399,924 |   |     |   | 450,840,364 |            |  |   | 459,229,718 |   |  |   | 455,646,938 |   |  |   | 464,036,292 |  
|                                                                                                         |  |            |             |   |     |   |             |            |  |   |             |   |  |            |             |   |     |   |             |            |  |   |             |  
|Net income and FFO available to unitholders plus
    assumed conversions per unit                        |  | $          | 0.25        |   |     | $ | 0.68        |            |  | $ | 0.37        |   |  | $          | 0.68        |   |     | $ | 0.41        |            |  | $ | 1.33        |   |  | $ | 0.72        |   |  | $ | 1.41        |  
|                                                                                                         |  |            |             |   |     |   |             |            |  |   |             |   |  |            |             |   |     |   |             |            |  |   |             |  

|                                                                                                                                                                    |  |  |  |                            |  |  |             |  |  |  |  |  |  |  |             |  |  |  |  |  |  |  |             |  |  |  |  |  |  |  |             | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | -------------------------- |  |  | ----------- |  |  |  |  |  |  |  | ----------- |  |  |  |  |  |  |  | ----------- |  |  |  |  |  |  |  | ----------- | 
|                                                                                                                                                                    |  |  |  |                           
|                                                                                                                                                                    |  |  |  | Units and unit equivalents | 
|                                                                                                                                                                    |  |  |  |                            | 
|Weighted average Units outstanding (used for both
    net income and FFO basic calculation)                                                                         |  |  |  |                            |  |  | 449,245,505 |  |  |  |  |  |  |  | 450,216,263 |  |  |  |  |  |  |  | 448,902,096 |  |  |  |  |  |  |  | 454,254,440 | 
|Impact of share options and restricted units
    which are dilutive to both net income and FFO                                                                      |  |  |  |                            |  |  | 1,288,336   |  |  |  |  |  |  |  | 1,794,307   |  |  |  |  |  |  |  | 1,938,268   |  |  |  |  |  |  |  | 1,392,498   | 
|                                                                                                                                                                    |  |  |  |                            |  |  |             |  |  |  |  |  |  |  |             |  |  |  |  |  |  |  |             | 
|Weighted average Units and dilutive potential
    units used for net income available to unitholders                                                                |  |  |  |                            |  |  | 450,533,841 |  |  |  |  |  |  |  | 452,010,570 |  |  |  |  |  |  |  | 450,840,364 |  |  |  |  |  |  |  | 455,646,938 | 
|Impact of conversion of Series B preferred
    units, which are dilutive to FFO, but not net income                                                                 |  |  |  |                            |  |  | 8,389,354   |  |  |  |  |  |  |  | 8,389,354   |  |  |  |  |  |  |  | 8,389,354   |  |  |  |  |  |  |  | 8,389,354   | 
|                                                                                                                                                                    |  |  |  |                            |  |  |             |  |  |  |  |  |  |  |             |  |  |  |  |  |  |  |             | 
|Weighted average Units, dilutive potential units
    plus assumed conversions used for the calculation of FFO
    available to unitholders plus assumed conversions |  |  |  |                            |  |  | 458,923,195 |  |  |  |  |  |  |  | 460,399,924 |  |  |  |  |  |  |  | 459,229,718 |  |  |  |  |  |  |  | 464,036,292 | 
|                                                                                                                                                                    |  |  |  |                            |  |  |             |  |  |  |  |  |  |  |             |  |  |  |  |  |  |  |             | 



---



|    |  |                                                                                                                                                       
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | FFO is a non-GAAP financial measure. The most
    directly comparable GAAP measure is net income, to which it is
    reconciled. See definition below.
|   
|(b) |  | FFO per unit may not total the sum of the per
    unit components in the reconciliation due to rounding.                                              

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FFO Definition:

FFO is defined as net income, computed in
accordance with accounting principles generally accepted in the
United States (GAAP), excluding gains or losses from
sales of properties, plus real estate related depreciation and
amortization, and after adjustments for unconsolidated
partnerships and joint ventures. Adjustments for unconsolidated
partnerships and joint ventures are calculated to reflect funds
from operations on the same basis. We believe that FFO is
helpful to investors as one of several measures of the
performance of an a real estate company. We further believe that
by excluding the effect of depreciation, amortization and gains
or losses from sales of real estate, all of which are based on
historical costs and which may be of limited relevance in
evaluating current performance, FFO can facilitate comparisons
of operating performance between periods and between other real
estate companies. Investors should review FFO, along with GAAP
net income when trying to understand a real estate
companys operating performance. We compute FFO in
accordance with standards established by NAREIT, which may not
be comparable to FFO reported by other real estate companies
that do not define the term in accordance with the current
NAREIT definition or that interpret the current NAREIT
definition differently than we do. FFO does not represent cash
generated from operating activities in accordance with GAAP, nor
does it represent cash available to pay distributions and should
not be considered as an alternative to net income, determined in
accordance with GAAP, as an indication of our financial
performance, or to cash flow from operating activities,
determined in accordance with GAAP, as a measure of our
liquidity, nor is it indicative of funds available to fund our
cash needs, including our ability to make cash distributions.






|        |                                                                
|------- | ---------------------------------------------------------------
|Item 3. | Quantitative and Qualitative Disclosures About
    Market Risk.

Quantitative and qualitative disclosures about
market risk are incorporated herein by reference from
Item 2.  Managements Discussion and
Analysis of Financial Condition and Results of
Operations  Market Risk.






|        |                         
|------- | ------------------------
|Item 4. | Controls and Procedures.

Evaluation of Disclosure Controls and
Procedures

Equity Offices principal executive officer,
Richard D. Kincaid, and principal financial officer, Marsha C.
Williams, evaluated as of June 30, 2004 the effectiveness
of the design and operation of our disclosure controls and other
procedures that are designed to ensure that information required
to be disclosed by us in the reports that we file or submit
under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods
specified in the SECs rules and forms. As a result of this
evaluation, these executive officers have concluded that, as of
such date, the design and operation of our disclosure controls
and procedures were effective.

Changes in Internal Control over Financial
Reporting

There were no changes in our internal control
over financial reporting identified in connection with the
evaluation referred to above that have materially affected, or
are reasonably likely to materially affect, our internal control
over financial reporting.

53



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##### Table of Contents






PART II  OTHER
INFORMATION






|        |                   
|------- | ------------------
|Item 1. | Legal Proceedings.

Legal proceedings are incorporated herein by
reference from Item 1.  Financial
Statements  Note 12  Commitments and
Contingencies.






|        |                                                                                      
|------- | -------------------------------------------------------------------------------------
|Item 2. | Changes in Securities, Use of Proceeds and
    Issuer Purchases of Equity Securities.



| |     |                                                                                                                                                                                                                                                                                                                                                                       
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (c) | In May 2004, we acquired a partners
    interest in the 500 Orange Property by issuing
    1,930 Units which were valued at approximately $50,000. The
    Units were issued in a private placement in reliance on an
    exemption from registration under the Securities Act of 1933, as
    amended, provided under Section 4(2) and Rule 506 of
    Regulation D.






|        |                                      
|------- | -------------------------------------
|Item 6. | Exhibits and Reports on
    Form 8-K.

(a) Exhibits:

The exhibits required by this item are set forth
on the Exhibit Index attached hereto.

(b) Reports on Form 8-K

The following reports on Form 8-K were filed
during the quarterly period ended June 30, 2004:

|              |  |                                              
|------------- |  | ---------------------------------------------
|Date of Event |  | Items Reported/Financial Statements Filed    
|              |  |                                              
|May 19, 2004  |  | Item 5. Other Events                         
|              |  | Item 7. Financial Statements and
    Exhibits
|May 21, 2004  |  | Item 5. Other Events                         
|              |  | Item 7. Financial Statements and
    Exhibits
|June 10, 2004 |  | Item 5. Other Events                         
|              |  | Item 7. Financial Statements and
    Exhibits

54



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APPENDIX A





FINANCIAL COVENANT CALCULATIONS AS OF
JUNE 30, 2004

UNDER CERTAIN INDENTURE AGREEMENTS





EOP OPERATING LIMITED PARTNERSHIP

UNSECURED NOTES FINANCIAL COVENANT
COMPLIANCE AS OF JUNE 30, 2004


(Dollars in thousands)


Compliance with these financial covenants
requires EOP Partnership to apply specialized terms, the
definitions of which are set forth in the related unsecured note
indentures, and to calculate ratios in the manner prescribed in
the indentures.

This section presents such ratios as of
June 30, 2004 to show that EOP Partnership was in
compliance with the applicable financial covenants contained in
the unsecured note indentures, copies of which have been filed
as exhibits to the EOP Partnerships periodic reports filed
with the SEC. Management is not presenting these ratios and the
related calculations for any other purpose or for any other
period, and is not intending for these measures to otherwise
provide information about EOP Partnerships financial
condition or results of operations. Investors should not rely on
these measures other than for the purpose of testing EOP
Partnerships compliance with the financial covenants
contained in the unsecured note indentures as of June 30,
2004.

Debt to Adjusted Total Assets

EOP Partnership may not, and may not permit a
subsidiary to, incur any Debt, other than intercompany Debt, if,
immediately after giving effect to the incurrence of such
additional Debt, the aggregate principal amount of all
outstanding Debt of EOP Partnership and its Subsidiaries on a
consolidated basis determined in accordance with GAAP is greater
than 60% of the sum of:



| |      |                                                                                                                                                                                                                                                                                                                                    
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)  | Total Assets as of the end of the fiscal quarter
    covered in EOP Partnerships Annual Report on
    Form 10-K or Quarterly Report on Form 10-Q, as the
    case may be, most recently filed with the SEC prior to the
    incurrence of such additional Debt and                                                                
|
| | (ii) | the increase or decrease in Total Assets from the
    end of such quarter including, without limitation, any increase
    in Total Assets resulting from the incurrence of such additional
    Debt (such increase or decrease together with EOP
    Partnerships Total Assets is referred to as the
    Adjusted Total Assets).

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##### Table of Contents



|                                                                         |                       |   |            |            | 
|------------------------------------------------------------------------ | --------------------- | - | ---------- | ---------- | 
|Mortgage debt (excluding a net discount of
    $(13,957))                |                       | $ | 2,852,339  |           
|Unsecured notes (excluding a net discount of
    $(72,843))              |                       |   | 9,015,842  |           
|Line of credit                                                           |                       |   | 376,300    |           
|EOP Partnerships share of unconsolidated
    non-recourse mortgage debt |                       |   | 344,384    |           
|                                                                         |                       |   |           
|                                                                         | Debt                  |   | $          | 12,588,865 | 
|                                                                         |                       |   |           
|Investments in real estate                                               |                       | $ | 25,033,044 |           
|Developments in process                                                  |                       |   | 67,641     |           
|Land available for development                                           |                       |   | 245,611    |           
|Cash and cash equivalents                                                |                       |   | 73,313     |           
|Escrow deposits and restricted cash                                      |                       |   | 75,753     |           
|Investments in unconsolidated joint ventures                             |                       |   | 967,973    |           
|Prepaid expenses and other assets (net of
    discount of $3,092)        |                       |   | 219,612    |           
|                                                                         |                       |   |           
|                                                                         | Adjusted Total Assets |   | $          | 26,682,947 | 
|                                                                         |                       |   |           
|Ratio                                                                    |                       |   | 47         | %         
|                                                                         |                       |   |           
|Maximum Ratio                                                            |                       |   | 60         | %         
|                                                                         |                       |   |           

Secured Debt to Adjusted Total
Assets

EOP Partnership may not, and may not permit any
Subsidiary to, incur any Secured Debt of EOP Partnership or any
Subsidiary if, immediately after giving effect to the incurrence
of such additional Secured Debt, the aggregate principal amount
of all outstanding Secured Debt of EOP Partnership and its
Subsidiaries on a consolidated basis is greater than 40% of
Adjusted Total Assets.

|                                                                         |                       |   |           |            | 
|------------------------------------------------------------------------ | --------------------- | - | --------- | ---------- | 
|Mortgage debt (excluding a net discount of
    $(13,957))                |                       | $ | 2,852,339 |           
|EOP Partnerships share of unconsolidated
    non-recourse mortgage debt |                       |   | 344,384   |           
|                                                                         |                       |   |          
|                                                                         | Secured Debt          |   | $         | 3,196,723  | 
|                                                                         |                       |   |          
|                                                                         | Adjusted Total Assets |   | $         | 26,682,947 | 
|                                                                         |                       |   |          
|Ratio                                                                    |                       |   | 12        | %         
|                                                                         |                       |   |          
|Maximum Ratio                                                            |                       |   | 40        | %         
|                                                                         |                       |   |          

Consolidated Income Available for Debt Service
to Annual Debt Service Charge

EOP Partnership may not, and may not permit any
Subsidiary to, incur any Debt, other than intercompany Debt
(provided that, in the case of Debt owed to Subsidiaries, such
Debt is subordinate in right of payment to the debt securities),
if the ratio of Consolidated Income Available for Debt Service
to Annual Debt Service Charge (in each case as defined below)
for the period consisting of the four consecutive fiscal
quarters most recently ended prior to the date on which the
additional Debt is to be incurred shall have been less than 1.5
to 1 on a pro forma basis after giving effect to the incurrence
of such Debt and to the application of the proceeds therefrom,
and calculated on the assumption that:



|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | such Debt and any other Debt incurred by EOP
    Partnership or a Subsidiary since the first day of such
    four-quarter period, which was outstanding at the end of such
    period, had been incurred at the beginning of such period and
    continued to be outstanding throughout such period, and the
    application of the proceeds of such Debt, including to refinance
    other Debt, had occurred at the beginning of such period;
| 
| | the repayment or retirement of any other Debt by
    EOP Partnership or a Subsidiary since the first day of such
    four-quarter period had been repaid or retired at the beginning
    of such period, except that, in determining the amount of Debt
    so repaid or retired, the amount of Debt under any revolving
    credit facility is computed based upon the average daily balance
    of such Debt during such period;             

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##### Table of Contents





|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | in the case of Acquired Indebtedness or Debt
    incurred in connection with any acquisition since the first day
    of the four-quarter period, the related acquisition had occurred
    as of the first day of the period with the appropriate
    adjustments with respect to the acquisition being included in
    the pro forma calculation; and                                                                                                                                                                                                                                                                                                                                
| 
| | in the case of any increase or decrease in Total
    Assets, or any other acquisition or disposition by EOP
    Partnership or any Subsidiary of any asset or group of assets,
    since the first day of such four-quarter period, including by
    merger, stock purchase or sale, or asset purchase or sale, such
    increase, decrease or other acquisition or disposition or any
    related repayment of Debt had occurred as of the first day of
    such period with the appropriate adjustments to revenues,
    expenses and Debt levels with respect to such increase, decrease
    or other acquisition or disposition being included in such pro
    forma calculation.

|                                                                            |                                                |   |         |           | 
|--------------------------------------------------------------------------- | ---------------------------------------------- | - | ------- | --------- | 
|Pro forma net income                                                        |                                                | $ | 407,496 |          
|Pro forma interest expense                                                  |                                                |   | 790,247 |          
|Pro forma amortization of mark to market
    discounts/ premiums            |                                                |   | (3,854  | )        
|Pro forma provision for taxes                                               |                                                |   | 3,781   |          
|Pro forma amortization and depreciation                                     |                                                |   | 755,410 |          
|Pro forma charge from a change in accounting
    principle                  |                                                |   | 33,697  |          
|Less pro forma income from investments in
    unconsolidated joint ventures |                                                |   | (62,279 | )        
|                                                                            |                                                |   |        
|                                                                            | Consolidated Income Available for Debt Service |   | $       | 1,924,498 | 
|                                                                            |                                                |   |        
|Pro forma interest expense                                                  |                                                | $ | 790,247 |          
|Pro forma amortization of mark to market
    discounts/ premiums            |                                                |   | (3,854  | )        
|                                                                            |                                                |   |        
|                                                                            | Annual Debt Service Charge                     |   | $       | 786,393   | 
|                                                                            |                                                |   |        
|Ratio                                                                       |                                                |   | 2.45    |          
|                                                                            |                                                |   |        
|Minimum Ratio                                                               |                                                |   | 1.50    |          
|                                                                            |                                                |   |        

Total Unencumbered Assets to Unsecured
Debt

EOP Partnership is required at all times to
maintain Total Unencumbered Assets of not less than 150% of the
aggregate outstanding principal amount of all outstanding
Unsecured Debt of EOP Partnership and its Subsidiaries on a
consolidated basis.

|                                                                        |                           |   |            |            | 
|----------------------------------------------------------------------- | ------------------------- | - | ---------- | ---------- | 
|Total undepreciated real estate assets                                  |                           | $ | 19,087,184 |           
|Cash and cash equivalents                                               |                           |   | 73,313     |           
|Escrow deposits and restricted cash                                     |                           |   | 75,753     |           
|Prepaid expenses and other assets (net of
    discount of $3,092)       |                           |   | 219,612    |           
|Unencumbered investments in unconsolidated joint
    venture properties |                           |   | 804,302    |           
|                                                                        |                           |   |           
|                                                                        | Total Unencumbered Assets |   | $          | 20,260,164 | 
|                                                                        |                           |   |           
|Unsecured notes (excluding a net discount of
    $(72,843))             |                           | $ | 9,015,842  |           
|Line of credit                                                          |                           |   | 376,300    |           
|                                                                        |                           |   |           
|                                                                        | Unsecured Debt            |   | $          | 9,392,142  | 
|                                                                        |                           |   |           
|Ratio                                                                   |                           |   | 216        | %         
|                                                                        |                           |   |           
|Minimum Ratio(a)                                                        |                           |   | 150        | %         
|                                                                        |                           |   |           






|    |  |                                                                                                               
|--- |  | --------------------------------------------------------------------------------------------------------------
|(a) |  | The unsecured notes assumed in the merger with
    Spieker Partnership are subject to a minimum ratio of 165%.

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##### Table of Contents






SIGNATURES

Pursuant to the requirements 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.



| |                                  
| | ---------------------------------
| | EOP OPERATING LIMITED PARTNERSHIP



| |     |                               
| | --- | ------------------------------
| | By: | EQUITY OFFICE PROPERTIES TRUST

| |                    
| | -------------------
| | its general partner

Date: August 9, 2004

| |     |                       
| | --- | ----------------------
| | By: | /s/ RICHARD D. KINCAID

| |                                          
| | -----------------------------------------
| |                                          
| | Richard D. Kincaid                       
| | President and Chief Executive
    Officer

Date: August 9, 2004

| |     |                       
| | --- | ----------------------
| | By: | /s/ MARSHA C. WILLIAMS

| |                            
| | ---------------------------
| |                            
| | Marsha C. Williams         
| | Executive Vice President   
| | and Chief Financial Officer



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##### Table of Contents



EXHIBIT INDEX

|        |  |                                                                                                                                                                                                                                    |  |                                                                                                                                                                  
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                    |  |                                                                                                                                                                  
|Number  |  | Description                                                                                                                                                                                                                        |  | Location                                                                                                                                                         
|        |  |                                                                                                                                                                                                                                    |  |                                                                                                                                                                  
|3.1     |  | Fourth Amendment to Third Amended and Restated
    Agreement of Limited Partnership of EOP Operating Limited
    Partnership                                                                                                       |  | Filed herewith                                                                                                                                                   
|4.1     |  | Indenture, dated August 29, 2000, by and
    between EOP Operating Limited Partnership and U.S. Bank
    National Association (formerly known as U.S. Bank Trust
    National Association)                                         |  | Incorporated by reference to Exhibit 4.1 to
    EOP Operating Limited Partnerships Registration Statement
    on Form S-3, as amended (SEC File No. 333-43530)  
|4.2     |  | First Supplemental Indenture, dated June 18,
    2001, among EOP Operating Limited Partnership, Equity Office
    Properties Trust and U.S. Bank National Association
    (formerly known as U.S. Bank Trust National Association) |  | Incorporated by reference to Exhibit 4.2 to
    Equity Office Properties Trusts Registration Statement on
    Form S-3, as amended (SEC File No. 333-58976)     
|4.3     |  | $45,000,000 Note due May 27, 2014 and
    related Guarantee                                                                                                                                                                        |  | Incorporated herein by reference to
    Exhibit 4.3 to EOP Operating Limited Partnerships
    Current Report on Form 8-K filed with the SEC on
    May 26, 2004 
|4.4     |  | Form of Medium-Term InterNote and related
    Guarantee (Fixed Rate)                                                                                                                                                               |  | Incorporated herein by reference to
    Exhibit 4.3 to EOP Operating Limited Partnerships
    Current Report on Form 8-K filed with the SEC on
    June 15, 2004
|4.5     |  | Schedule of Medium-Term InterNotes (Fixed Rate)
    issued                                                                                                                                                                         |  | Filed herewith                                                                                                                                                   
|31.1    |  | Rule 13a-14(a)/15d-14(a) Certifications                                                                                                                                                                                            |  | Filed herewith                                                                                                                                                   
|32.1    |  | Section 1350 Certification                                                                                                                                                                                                         |  | Filed herewith