<PAGE>   1

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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                      ------------------------------------

                                   FORM 10-Q

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
     ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999 OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                        COMMISSION FILE NUMBER: 1-13625

                       EOP OPERATING LIMITED PARTNERSHIP
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                             <C>
                  DELAWARE                                       36-4156801
      (State or other jurisdiction of               (I.R.S. Employer Identification No.)
        incorporation or organization)
         TWO NORTH RIVERSIDE PLAZA                                 60606
       SUITE 2200, CHICAGO, ILLINOIS                             (Zip Code)
  (Address of principal executive offices)
</TABLE>

                                 (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 [ ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS

On July 30, 1999, 288,618,617 of the registrant's Units were outstanding.

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<PAGE>   2

                        PART I -- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                       EOP OPERATING LIMITED PARTNERSHIP
                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                              JUNE 30, 1999   DECEMBER 31, 1998
(Dollars in thousands, except per unit data) ---------------  -------------   -----------------
                                                               (Unaudited)
<S>                                                           <C>             <C>
ASSETS:
    Investment in real estate...............................  $  13,704,626      $13,349,627
    Developments in process.................................        105,558          268,373
    Land available for development..........................        118,064           65,819
    Accumulated depreciation................................       (515,835)        (352,259)
                                                              -------------      -----------
      Investment in real estate, net of accumulated
         depreciation.......................................     13,412,413       13,331,560
    Cash and cash equivalents...............................         35,917           67,080
    Tenant and other receivables (net of allowance for
      doubtful accounts of $883 and $1,013, respectively)...         40,395           36,193
    Deferred rent receivable................................        118,100           87,115
    Escrow deposits and restricted cash.....................        130,260          159,576
    Investment in unconsolidated joint ventures.............        396,163          378,534
    Deferred financing costs (net of accumulated
      amortization of $10,517 and $6,242, respectively).....         60,002           53,181
    Deferred leasing costs (net of accumulated amortization
      of $15,537 and $9,714, respectively)..................         77,149           65,090
    Prepaid expenses and other assets.......................         69,493           82,962
                                                              -------------      -----------
         Total Assets.......................................  $  14,339,892      $14,261,291
                                                              =============      ===========
LIABILITIES AND PARTNERS' CAPITAL:
    Mortgage debt (including a net premium of $10,674 and
      $13,517, respectively)................................  $   1,842,749      $ 2,350,088
    Unsecured notes (including a net (discount)/premium of
      $(47) and $4,317, respectively).......................      3,654,953        2,459,317
    Lines of credit.........................................        548,000        1,216,000
    Accounts payable and accrued expenses...................        320,791          347,970
    Due to affiliates.......................................          1,328            1,136
    Dividend/distribution payable...........................        110,038            5,080
    Other liabilities.......................................         97,695           93,022
                                                              -------------      -----------
         Total Liabilities..................................      6,575,554        6,472,613
                                                              -------------      -----------
    Commitments and contingencies...........................
    Minority Interests -- partially owned properties........         28,935           28,360
                                                              -------------      -----------
    Preferred Units, 100,000,000 authorized:
      8.98% Series A Cumulative Redeemable Preferred Units,
         liquidation preference $25.00 per unit, 8,000,000
         issued and outstanding.............................        200,000          200,000
      5.25% Series B Convertible, Cumulative Redeemable
         Preferred Units, liquidation preference $50.00 per
         unit, 6,000,000 issued and outstanding.............        300,000          300,000
      8.625% Series C Cumulative Redeemable Preferred Units,
         liquidation preference $25.00 per unit, 4,600,000
         issued and outstanding.............................        115,000          115,000
    General Partners Capital................................        117,773          118,309
    Limited Partners Capital................................      7,002,630        7,027,009
                                                              -------------      -----------
         Total Partners' Capital............................      7,735,403        7,760,318
                                                              -------------      -----------
         Total Liabilities and Partners' Capital............  $  14,339,892      $14,261,291
                                                              =============      ===========
</TABLE>

                            See accompanying notes.

                                        2
<PAGE>   3

                       EOP OPERATING LIMITED PARTNERSHIP
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                               FOR THE THREE MONTHS ENDED
                                                                        JUNE 30,
                                                               ---------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)                       1999           1998
------------------------------------------------------------   ------------   ------------
<S>                                                            <C>            <C>
REVENUES:
     Rental.................................................   $   372,171    $   308,688
     Tenant reimbursements..................................        69,468         55,754
     Parking................................................        28,663         23,393
     Other..................................................         6,886          7,463
     Fee income.............................................         2,045          1,507
     Interest/dividends.....................................         2,046          3,139
                                                               -----------    -----------
          Total revenues....................................       481,279        399,944
                                                               -----------    -----------
EXPENSES:
     Interest:
          Expense incurred..................................       102,920         76,070
          Amortization of deferred financing costs..........         1,426          1,931
     Depreciation...........................................        83,626         68,890
     Amortization...........................................         3,117          1,640
     Real estate taxes......................................        62,237         47,538
     Insurance..............................................         2,359          1,628
     Repairs and maintenance................................        50,463         44,700
     Property operating.....................................        48,333         43,242
     Ground rent............................................         1,548          1,934
     General and administrative.............................        20,714         14,492
                                                               -----------    -----------
          Total expenses....................................       376,743        302,065
                                                               -----------    -----------
Income before allocation to minority interests, income from
  investment in unconsolidated joint ventures, net gain on
  sales of real estate and extraordinary items..............       104,536         97,879
Minority Interests -- partially owned properties............          (353)          (498)
Income from investment in unconsolidated joint ventures.....         3,215          1,392
Net gain on sales of real estate............................         8,085             --
                                                               -----------    -----------
Income before extraordinary items...........................       115,483         98,773
Extraordinary items.........................................        (7,135)          (547)
                                                               -----------    -----------
Net income..................................................       108,348         98,226
Preferred distributions.....................................       (10,907)        (8,432)
                                                               -----------    -----------
Net income available for Units..............................   $    97,441    $    89,794
                                                               ===========    ===========
Net income available per weighted average Unit
  outstanding -- Basic......................................   $       .34    $       .32
                                                               ===========    ===========
Weighted average Units outstanding -- Basic.................   288,598,492    280,183,422
                                                               ===========    ===========
Net income available per weighted average Unit
  outstanding -- Diluted....................................   $       .33    $       .32
                                                               ===========    ===========
Weighted average Units outstanding -- Diluted...............   290,946,853    281,200,962
                                                               ===========    ===========
</TABLE>

                            See accompanying notes.

                                        3
<PAGE>   4
                       EOP OPERATING LIMITED PARTNERSHIP
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                 FOR THE SIX MONTHS ENDED
                                                                         JUNE 30,
                                                                --------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)                       1999           1998
------------------------------------------------------------    -----------    -----------
<S>                                                             <C>            <C>
REVENUES:
     Rental.................................................    $   741,310    $   597,901
     Tenant reimbursements..................................        137,627        108,743
     Parking................................................         56,122         44,607
     Other..................................................         12,360         13,640
     Fee income.............................................          3,907          2,664
     Interest/dividends.....................................          5,087          6,209
                                                                -----------    -----------
          Total revenues....................................        956,413        773,764
                                                                -----------    -----------
EXPENSES:
     Interest:
          Expense incurred..................................        207,400        145,954
          Amortization of deferred financing costs..........          2,172          4,076
     Depreciation...........................................        166,538        133,430
     Amortization...........................................          6,018          2,747
     Real estate taxes......................................        124,038         97,572
     Insurance..............................................          4,681          3,871
     Repairs and maintenance................................        101,847         86,677
     Property operating.....................................         96,541         85,215
     Ground rent............................................          3,394          3,572
     General and administrative.............................         38,964         28,440
                                                                -----------    -----------
          Total expenses....................................        751,593        591,554
                                                                -----------    -----------
Income before allocation to minority interests, income from
  investment in unconsolidated joint ventures, net gain on
  sales of real estate and extraordinary items..............        204,820        182,210
Minority Interests -- partially owned properties............           (898)        (1,036)
Income from investment in unconsolidated joint ventures.....          5,050          5,026
Net gain on sales of real estate............................          8,085             --
                                                                -----------    -----------
Income before extraordinary items...........................        217,057        186,200
Extraordinary items.........................................        (10,318)        (7,506)
                                                                -----------    -----------
Net income..................................................        206,739        178,694
Preferred distributions.....................................        (21,788)       (14,703)
                                                                -----------    -----------
Net income available for Units..............................    $   184,951    $   163,991
                                                                ===========    ===========
Net income available per weighted average Unit
  outstanding -- Basic......................................    $       .64    $       .59
                                                                ===========    ===========
Weighted average Units outstanding -- Basic.................    288,576,797    279,494,438
                                                                ===========    ===========
Net income available per weighted average Unit
  outstanding -- Diluted....................................    $       .64    $       .58
                                                                ===========    ===========
Weighted average Units outstanding -- Diluted...............    291,190,435    280,613,985
                                                                ===========    ===========
</TABLE>

                            See accompanying notes.

                                        4
<PAGE>   5

                       EOP OPERATING LIMITED PARTNERSHIP
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                               FOR THE SIX MONTHS ENDED
                                                                       JUNE 30,
                                                               -------------------------
(DOLLARS IN THOUSANDS)                                            1999          1998
------------------------------------------------------------   -----------   -----------
<S>                                                            <C>           <C>
OPERATING ACTIVITIES:
     Net income before preferred distributions..............   $  206,739    $  178,694
     Adjustments to reconcile net income before preferred
      distributions to net cash provided by operating
      activities:
       Depreciation and amortization........................      174,728       140,253
       Amortization of premiums/discounts on unsecured notes
        and terminated interest rate protection
        agreements..........................................        1,825         1,271
       Compensation related to restricted shares issued to
        employees by the Trust..............................        2,452         1,506
       Income from unconsolidated joint ventures............       (5,050)       (5,026)
       Gain on sales of real estate.........................       (8,085)           --
       Extraordinary items..................................       10,318         7,506
       Provision for doubtful accounts......................          565            10
       Allocation to minority interests.....................          898         1,036
       Changes in assets and liabilities:
          (Increase) decrease in rents receivable...........       (4,767)        1,215
          (Increase) in deferred rent receivables...........      (30,985)      (32,902)
          Decrease in prepaid expenses and other assets.....       13,422         9,876
          (Decrease) in accounts payable and accrued
            expenses........................................      (26,398)       (8,069)
          Increase in due to affiliates.....................          192           192
          Increase in other liabilities.....................        4,869        50,129
                                                               ----------    ----------
          Net cash provided by operating activities.........      340,723       345,691
                                                               ----------    ----------
INVESTING ACTIVITIES:
     Property acquisitions..................................     (119,655)   (1,198,961)
     Payments for capital and tenant improvements...........      (93,787)      (73,782)
     Payments of disposition costs for sales of real
      estate................................................       (1,349)           --
     Distributions from unconsolidated joint ventures.......        7,707        33,737
     Investments in unconsolidated joint ventures...........      (20,286)       (7,363)
     Payments of lease acquisition costs....................      (17,882)      (23,675)
     Decrease (increase) in escrow deposits and restricted
      cash..................................................        4,474        (5,941)
                                                               ----------    ----------
          Net cash (used for) investing activities..........     (240,778)   (1,275,985)
                                                               ----------    ----------
</TABLE>

                                        5
<PAGE>   6
                       EOP OPERATING LIMITED PARTNERSHIP
              CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                               FOR THE SIX MONTHS ENDED
                                                                       JUNE 30,
                                                               -------------------------
(DOLLARS IN THOUSANDS)                                            1999          1998
------------------------------------------------------------   -----------   -----------
<S>                                                            <C>           <C>
FINANCING ACTIVITIES:
     Proceeds from Trust related to sale of Common Shares,
      net of offering costs.................................           --        44,009
     Proceeds from exercise of options......................        1,796        14,534
     Conversion of Units....................................           --           (33)
     Distributions to unitholders...........................     (108,379)      (89,790)
     Payment of preferred distributions.....................      (22,007)      (12,697)
     Proceeds from sale of preferred units, net of offering
      costs.................................................           --       289,589
     Payment of offering costs..............................         (558)         (117)
     Distributions to minority interest in partially owned
      properties............................................         (144)         (953)
     Proceeds from mortgage debt............................        3,374         7,214
     Proceeds from unsecured notes..........................    1,195,587     2,279,572
     Proceeds from lines of credit..........................      482,700     1,530,000
     Principal payments on mortgage debt....................     (507,870)       (6,847)
     Principal payments on lines of credit..................   (1,150,700)   (3,241,300)
     Payments of loan costs.................................      (11,341)      (20,712)
     Termination of interest rate protection agreements.....           --       (38,277)
     Prepayment penalties on early extinguishment of debt...      (13,566)           --
                                                               ----------    ----------
       Net cash (used for) provided by financing
        activities..........................................     (131,108)      754,192
                                                               ----------    ----------
     Net (decrease) in cash and cash equivalents............      (31,163)     (176,102)
     Cash and cash equivalents at the beginning of the
      period................................................       67,080       228,853
                                                               ----------    ----------
     Cash and cash equivalents at the end of the period.....   $   35,917    $   52,751
                                                               ==========    ==========
SUPPLEMENTAL INFORMATION:
     Interest paid during the period, including capitalized
      interest of $7,415 and $6,465, respectively...........   $  187,859    $  111,949
                                                               ==========    ==========
NON-CASH INVESTING AND FINANCING ACTIVITIES:
     Escrow deposits used for property acquisitions.........   $ (120,798)   $       --
                                                               ==========    ==========
     Escrow deposits provided by property dispositions......   $   95,956    $       --
                                                               ==========    ==========
     Units issued through property acquisition..............   $       --    $      100
                                                               ==========    ==========
     Mortgage loans assumed/promissory notes issued through
      property acquisition..................................   $       --    $   86,053
                                                               ==========    ==========
</TABLE>

                            See accompanying notes.

                                        6
<PAGE>   7

                       EOP OPERATING LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

     DEFINITION OF TERMS.  Capitalized terms used but not defined herein are as
defined in the Company's Annual Report on Form 10-K for the year ended December
31, 1998 (the "Form 10-K").

     The consolidated financial statements of the Company have been prepared
pursuant to the Securities and Exchange Commission ("SEC") rules and
regulations. The following notes highlight significant changes to the notes to
the December 31, 1998 audited consolidated and combined financial statements of
EOP Operating Limited Partnership and Equity Office Predecessors and should be
read in conjunction with the financial statements and notes thereto included in
the Form 10-K and present interim disclosures as required by the SEC.

NOTE 1 -- BUSINESS AND FORMATION OF THE COMPANY

     As used herein, "Company" means EOP Operating Limited Partnership, a
Delaware limited partnership, and Equity Office Predecessors. The Company is a
subsidiary of the Trust which was formed on October 9, 1996 to continue and
expand the national office property business organized by Mr. Samuel Zell,
Chairman of the Board of Trustees of the Trust, and to complete the
Consolidation of the Equity Office Predecessors and the Trust's IPO. The Company
is a fully integrated and self-managed real estate company engaged in acquiring,
owning, managing, leasing and renovating office properties and parking
facilities. The Trust's assets, which include investments in joint ventures, are
owned by, and substantially all of its operations are conducted through the
Company. The Trust is the managing general partner of the Company. The Trust
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 and operational
requirements.

     As of June 30, 1999, the Company owned or had an interest in 284 office
properties (the "Office Properties") containing approximately 75.8 million
rentable square feet of office space and 20 stand-alone parking facilities (the
"Parking Facilities" and, together with the Office Properties, the "Properties")
containing approximately 20,506 parking spaces. The weighted average occupancy
of the Office Properties at June 30, 1999 was approximately 94.3%. The Office
Properties are located in 79 submarkets in 35 markets in 24 states and the
District of Columbia. The Office Properties, by rentable square feet, are
located approximately 52% in CBDs and 48% in suburban markets.

NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

     The consolidated financial statements represent the financial condition and
results of the Company and its subsidiaries.

Use of Estimates

     The preparation of the consolidated financial statements of the Company in
conformity with generally accepted accounting principles 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 of the Company as of and for the
three and six months ended June 30, 1999 and 1998 and related footnote
disclosures are unaudited. In the opinion of management, such

                                        7
<PAGE>   8
                       EOP OPERATING LIMITED PARTNERSHIP

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

financial statements reflect all adjustments necessary for a fair presentation
of the results of the interim periods. All such adjustments are of a normal,
recurring nature.

Reclassifications

     Certain reclassifications have been made to the previously reported 1998
statements in order to provide comparability with the 1999 statements reported
herein. These reclassifications have not changed the 1998 results or partners'
capital.

NOTE 3 -- INVESTMENT IN REAL ESTATE

     During the six months ended June 30, 1999, the Company acquired the
Properties listed below. Each Property was purchased from an unaffiliated party
and was funded from working capital and credit facilities.

<TABLE>
<CAPTION>
                                                               RENTABLE
DATE ACQUIRED   PROPERTY                    LOCATION          SQUARE FEET    TOTAL ACQUISITION COST
-------------   --------                    --------          -----------   -------------------------
                                                                            (Dollars in thousands)(1)
<C>             <S>                         <C>               <C>           <C>
1/7/99....      Texas Commerce Tower        Irving, TX           369,134            $ 55,254
1/7/99....      Computer Associates Tower   Irving, TX           360,815              51,294
1/28/99...      City Center Bellevue        Bellevue, WA         472,587             115,915(2)
4/30/99...      517 Marquette Garage        Minneapolis, MN           --              19,159
                                                               ---------            --------
                                            Total              1,202,536            $241,622
                                                               =========            ========
</TABLE>

---------------

(1) Total acquisition cost includes the purchase price specified in the purchase
    contract, closing costs, acquisition costs and accounting adjustments
    recorded in accordance with GAAP.

(2) The total acquisition cost includes a vacant land parcel valued at $12.4
    million.

     In April 1999, the Company invested approximately $3.0 million in MacArthur
Airport Parking Facility, consisting of 2,575 parking spaces, located in Islip,
New York. The investment was accounted for as a mortgage note receivable and is
included in other assets.

NOTE 4 -- DISPOSITIONS

     During the three months ended June 30, 1999, the Company disposed of the
following office properties to unaffiliated parties.

<TABLE>
<CAPTION>
DISPOSAL                                            RENTABLE                                   GAIN/(LOSS)
  DATE    PROPERTY             LOCATION            SQUARE FEET        SALES PRICE                ON SALE
--------  --------             --------            -----------   ----------------------   ----------------------
                                                                 (Dollars in thousands)   (Dollars in thousands)
<S>       <C>                  <C>                 <C>           <C>                      <C>
5/21/99   Atrium Towers        Oklahoma City, OK     155,865            $ 8,600                   $  549
5/21/99   5100 Brookline       Oklahoma City, OK     105,459              4,400                     (738)
6/30/99   215 Fremont Street   San Francisco, CA     265,000             33,500                    6,214
6/30/99   One Columbus         Columbus, OH          407,472             51,500                    2,060
                                                     -------            -------                   ------
                               Total                 933,796            $98,000                   $8,085
                                                     =======            =======                   ======
</TABLE>

NOTE 5 -- INVESTMENT IN UNCONSOLIDATED JOINT VENTURES

     The Company has several investments in unconsolidated joint ventures
consisting of Office Properties, Parking Facilities and a management company.
Combined summarized financial information of the unconsolidated joint ventures
is as follows:

                                        8
<PAGE>   9
                       EOP OPERATING LIMITED PARTNERSHIP

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)                                   JUNE 30, 1999    DECEMBER 31, 1998
-------------------------------------------------------  -------------    -----------------
<S>                                                      <C>              <C>
Balance Sheets:
  Real estate, net.....................................    $531,919           $488,997
  Other assets.........................................      83,913             78,623
                                                           --------           --------
          Total Assets.................................    $615,832           $567,620
                                                           ========           ========
  Mortgage debt........................................    $272,869           $243,096
  Other liabilities....................................      18,568             16,059
  Partners' and shareholders' equity...................     324,395            308,465
                                                           --------           --------
          Total Liabilities and Partners' and
            Shareholders' Equity.......................    $615,832           $567,620
                                                           ========           ========
Company's share of equity..............................    $179,542           $159,092
Excess of cost of investments over the net book value
  of underlying net assets, net of accumulated
  depreciation of $8,676 and $5,854, respectively......     216,621            219,442
                                                           --------           --------
Carrying value of investments in unconsolidated
  joint ventures.......................................    $396,163           $378,534
                                                           ========           ========
Company's share of unconsolidated mortgage debt........    $148,654           $124,282
                                                           ========           ========
</TABLE>

<TABLE>
<CAPTION>
                                                      FOR THE THREE MONTHS    FOR THE SIX MONTHS
                                                         ENDED JUNE 30,         ENDED JUNE 30,
                                                      --------------------    ------------------
(DOLLARS IN THOUSANDS)                                  1999        1998       1999       1998
----------------------------------------------------  --------    --------    -------    -------
<S>                                                   <C>         <C>         <C>        <C>
Statements of Operations:
  Revenues..........................................  $26,593     $27,574     $51,976    $56,022
                                                      -------     -------     -------    -------
  Expenses:
     Interest expense...............................    4,456       4,403       8,903      8,178
     Depreciation and amortization..................    4,536       4,156       8,639      9,833
     Operating expenses.............................    9,817       9,774      20,424     18,924
                                                      -------     -------     -------    -------
          Total expenses............................   18,809      18,333      37,966     36,935
                                                      -------     -------     -------    -------
  Net income........................................  $ 7,784     $ 9,241     $14,010    $19,087
                                                      =======     =======     =======    =======
  Company's share of net income.....................  $ 3,215     $ 1,392     $ 5,050    $ 5,026
                                                      =======     =======     =======    =======
  Company's share of interest expense...............  $ 2,197     $ 2,219     $ 4,397    $ 4,126
                                                      =======     =======     =======    =======
  Company's share of depreciation and amortization
     (real estate related)..........................  $ 3,647     $ 3,275     $ 7,131    $ 7,216
                                                      =======     =======     =======    =======
</TABLE>

NOTE 6 -- MORTGAGE DEBT

     On April 1, 1999, the Company prepaid a $240.0 million mortgage note
encumbering ten Office Properties and incurred a prepayment penalty of
approximately $13.6 million and wrote-off approximately $6.5 million of
mark-to-market premium on the debt. The net amount of $7.1 million represents an
extraordinary loss for the three months ended June 30, 1999. The Company used
the proceeds from the $1.0 Billion Notes Offering to repay the mortgage note and
to pay the prepayment penalty.

NOTE 7 -- UNSECURED NOTES

     On April 19, 1999, the Company issued $200 million of unsecured notes due
April 19, 2029 (the "$200 Million Notes") in an offering to institutional
investors (the "$200 Million Notes Offering"). The net
                                        9
<PAGE>   10
                       EOP OPERATING LIMITED PARTNERSHIP

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

proceeds after discount and offering expenses were approximately $196.6 million
and were used to repay amounts outstanding on the $1.0 Billion Credit Facility.
The $200 Million Notes bear interest at a stated rate of 7.5% per annum and have
an effective annual rate of 7.6%.

NOTE 8 -- PARTNERS' CAPITAL

Units

     The following table presents the changes in the Company's issued and
outstanding Units since March 31, 1999:

<TABLE>
<S>                                                           <C>
OUTSTANDING AT MARCH 31, 1999...............................  288,562,565
Issued to the Trust related to Common Shares issued for
  share option exercises....................................       70,955
Retirement of restricted Units(1)...........................      (20,000)
                                                              -----------
OUTSTANDING AT JUNE 30, 1999................................  288,613,520
                                                              ===========
</TABLE>

---------------

(1) In June 1999, 20,000 restricted Common Shares were retired by the Trust,
    resulting in the Company's concurrent retirement of 20,000 restricted Units.

     On June 30, 1999, the Trust established a dividend reinvestment plan (the
"DRIP") and the direct share purchase plan (the "DSPP"). The DRIP allows the
Trust's shareholders to reinvest dividends received into additional Common
Shares. The DSPP allows the Trust's shareholders to make direct share purchases
from the Trust. The Trust registered 25,000,000 Common Shares with the SEC in
connection with the DRIP and DSPP and expects to issue Common Shares under each
plan. In the event the Trust issues Common Shares under each plan, the Trust
will contribute the proceeds to the Company in exchange for a corresponding
number of Units.

Distributions

     The following table summarizes the distributions paid or declared on Units
and preferred units during the three months ended June 30, 1999:

<TABLE>
<CAPTION>
                                                    DISTRIBUTION
                                                       AMOUNT       DATE PAID    RECORD DATE
                                                    ------------    ---------    -----------
<S>                                                 <C>             <C>          <C>
Units...........................................      $   0.37       7/12/99       6/30/99
Series A Preferred Units........................      $0.56125       6/15/99        6/1/99
Series B Preferred Units........................      $0.65625       5/17/99        5/3/99
Series C Preferred Units........................      $0.53906       6/15/99        6/1/99
</TABLE>

                                       10
<PAGE>   11
                       EOP OPERATING LIMITED PARTNERSHIP

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 9 -- EARNINGS PER UNIT

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

<TABLE>
<CAPTION>
                                              FOR THE THREE MONTHS ENDED     FOR THE SIX MONTHS ENDED
                                                       JUNE 30,                      JUNE 30,
                                              ---------------------------   ---------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)      1999           1998           1999           1998
--------------------------------------------  ------------   ------------   ------------   ------------
<S>                                           <C>            <C>            <C>            <C>
NUMERATOR:
  Net income available for Units before
     extraordinary items..................    $    104,576   $     90,341   $    195,269   $    171,497
  Extraordinary items.....................          (7,135)          (547)       (10,318)        (7,506)
                                              ------------   ------------   ------------   ------------
  Numerator for basic and diluted earnings
     per Unit - net income available for
     Units................................    $     97,441   $     89,794   $    184,951   $    163,991
                                              ============   ============   ============   ============
DENOMINATOR:
  Denominator for basic earnings per Unit -
     weighted average Units...............     288,598,492    280,183,422    288,576,797    279,494,438
  Effect of dilutive securities:
     Units issuable upon exercise of share
       options and put options............       2,348,361      1,017,540      2,613,638      1,119,547
                                              ------------   ------------   ------------   ------------
  Denominator for diluted earnings per Unit
     - adjusted weighted average Units and
     assumed conversions..................     290,946,853    281,200,962    291,190,435    280,613,985
                                              ============   ============   ============   ============
BASIC EARNINGS AVAILABLE FOR UNITS PER
  WEIGHTED AVERAGE UNIT:
  Net income before extraordinary items...    $        .37   $        .32   $        .68   $        .62
  Extraordinary items.....................            (.03)            --           (.04)          (.03)
                                              ------------   ------------   ------------   ------------
  Net income..............................    $        .34   $        .32   $        .64   $        .59
                                              ============   ============   ============   ============
DILUTED EARNINGS AVAILABLE FOR UNITS PER
  WEIGHTED AVERAGE UNIT:
  Net income before extraordinary items...    $        .36   $        .32   $        .67   $        .61
  Extraordinary items.....................            (.03)            --           (.03)          (.03)
                                              ------------   ------------   ------------   ------------
  Net income..............................    $        .33   $        .32   $        .64   $        .58
                                              ============   ============   ============   ============
</TABLE>

                                       11
<PAGE>   12
                       EOP OPERATING LIMITED PARTNERSHIP

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The following securities were not included in the computation of diluted
earnings per Unit since they would have an antidilutive effect:

<TABLE>
<CAPTION>
                                                       FOR THE THREE MONTHS ENDED    FOR THE SIX MONTHS ENDED
                                        WEIGHTED                JUNE 30,                     JUNE 30,
                                    AVERAGE EXERCISE   ---------------------------   -------------------------
ANTIDILUTIVE SECURITIES                  PRICE             1999           1998          1999          1998
-----------------------             ----------------   ------------   ------------   -----------   -----------
<S>                                 <C>                <C>            <C>            <C>           <C>
Share options.....................      $30.080          3,440,835             --            --            --
Share options.....................      $30.290                 --      2,988,350            --            --
Share options.....................      $30.050                 --             --     3,470,835            --
Share options.....................      $30.380                 --             --            --     2,866,850
Series B Preferred Units..........      $35.700          6,000,000      6,000,000     6,000,000     6,000,000
Warrants..........................      $39.375          5,000,000      5,000,000     5,000,000     5,000,000
                                                        ----------     ----------    ----------    ----------
                                    Total......         14,440,835     13,988,350    14,470,835    13,866,850
                                                        ==========     ==========    ==========    ==========
</TABLE>

     Upon exercise of the above antidilutive securities, the Company would issue
a corresponding number of Units to the Trust on a one-for-one basis.

NOTE 10 -- SEGMENT INFORMATION

     As discussed in Note 1, the Company's primary business is the ownership and
operation of Office Properties. The Company's long-term tenants are in a variety
of businesses and no single tenant, by itself, is material to the Company's
business. Information related to this segment for the three months ended June
30, 1999 and 1998 and the six months ended June 30, 1999 and 1998 is below:

                                       12
<PAGE>   13
                       EOP OPERATING LIMITED PARTNERSHIP

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
                                FOR THE THREE MONTHS ENDED JUNE 30, 1999    FOR THE THREE MONTHS ENDED JUNE 30, 1998
                                -----------------------------------------   -----------------------------------------
                                   OFFICE      CORPORATE                       OFFICE      CORPORATE
    (DOLLARS IN THOUSANDS)       PROPERTIES    AND OTHER    CONSOLIDATED     PROPERTIES    AND OTHER    CONSOLIDATED
------------------------------  ------------   ----------   -------------   ------------   ----------   -------------
<S>                             <C>            <C>          <C>             <C>            <C>          <C>
Property Operating Revenues...  $   468,216    $   8,972     $   477,188    $   388,053     $  7,245     $   395,298
Property Operating Expenses...     (161,337)      (2,055)       (163,392)      (135,078)      (2,030)       (137,108)
                                -----------    ---------     -----------    -----------     --------     -----------
  Net operating income........      306,879        6,917         313,796        252,975        5,215         258,190
                                -----------    ---------     -----------    -----------     --------     -----------
Adjustments to arrive at net
  income:
  Other revenues..............          461        3,630           4,091            341        4,305           4,646
  Interest expense(1).........      (31,251)     (71,669)       (102,920)       (35,182)     (40,888)        (76,070)
  Depreciation and
    amortization..............      (84,680)      (3,489)        (88,169)       (69,271)      (3,190)        (72,461)
  Ground rent.................       (1,536)         (12)         (1,548)        (1,921)         (13)         (1,934)
  General and
    administrative............         (289)     (20,425)        (20,714)          (215)     (14,277)        (14,492)
                                -----------    ---------     -----------    -----------     --------     -----------
  Total adjustments to arrive
    at net income.............     (117,295)     (91,965)       (209,260)      (106,248)     (54,063)       (160,311)
                                -----------    ---------     -----------    -----------     --------     -----------
Income before allocation to
  minority interests, income
  from investment in
  unconsolidated joint
  ventures, net gain on sales
  of real estate and
  extraordinary items.........      189,584      (85,048)        104,536        146,727      (48,848)         97,879
Minority interests............         (395)          42            (353)          (421)         (77)           (498)
Income from investment in
  unconsolidated joint
  ventures....................        2,667          548           3,215            594          798           1,392
Net gain on sales of real
  estate......................        8,085           --           8,085             --           --              --
Extraordinary items...........       (7,135)          --          (7,135)            --         (547)           (547)
                                -----------    ---------     -----------    -----------     --------     -----------
Net income....................  $   192,806    $ (84,458)    $   108,348    $   146,900     $(48,674)    $    98,226
                                ===========    =========     ===========    ===========     ========     ===========
Capital and tenant
  improvements................  $    46,267    $   2,378     $    48,645    $    43,995     $  1,739     $    45,734
                                ===========    =========     ===========    ===========     ========     ===========
Total Assets..................  $13,746,440    $ 593,452     $14,339,892    $12,447,149     $427,985     $12,875,134
                                ===========    =========     ===========    ===========     ========     ===========
</TABLE>

                                       13
<PAGE>   14
                       EOP OPERATING LIMITED PARTNERSHIP

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
                                FOR THE SIX MONTHS ENDED JUNE 30, 1999   FOR THE SIX MONTHS ENDED JUNE 30, 1998
                                --------------------------------------   --------------------------------------
                                  OFFICE      CORPORATE                    OFFICE      CORPORATE
    (DOLLARS IN THOUSANDS)      PROPERTIES    AND OTHER   CONSOLIDATED   PROPERTIES    AND OTHER   CONSOLIDATED
------------------------------  -----------   ---------   ------------   -----------   ---------   ------------
<S>                             <C>           <C>         <C>            <C>           <C>         <C>
Property Operating Revenues...  $   929,672   $  17,747   $   947,419    $   751,047   $ 13,844    $   764,891
Property Operating Expenses...     (323,087)     (4,020)     (327,107)      (269,491)    (3,844)      (273,335)
                                -----------   ---------   -----------    -----------   --------    -----------
  Net operating income........      606,585      13,727       620,312        481,556     10,000        491,556
                                -----------   ---------   -----------    -----------   --------    -----------
Adjustments to arrive at net
  income:
  Other revenues..............        1,092       7,902         8,994            673      8,200          8,873
  Interest expense(1).........      (68,852)   (138,548)     (207,400)       (69,209)   (76,745)      (145,954)
  Depreciation and
    amortization..............     (168,465)     (6,263)     (174,728)      (133,674)    (6,579)      (140,253)
  Ground rent.................       (3,369)        (25)       (3,394)        (3,547)       (25)        (3,572)
  General and
    administrative............         (449)    (38,515)      (38,964)          (222)   (28,218)       (28,440)
                                -----------   ---------   -----------    -----------   --------    -----------
  Total adjustments to arrive
    at net income.............     (240,043)   (175,449)     (415,492)      (205,979)  (103,367)      (309,346)
                                -----------   ---------   -----------    -----------   --------    -----------
Income before allocation to
  minority interests, income
  from investment in
  unconsolidated joint
  ventures, net gain on sales
  of real estate and
  extraordinary
  items.......................      366,542    (161,722)      204,820        275,577    (93,367)       182,210
Minority interests............         (705)       (193)         (898)          (889)      (147)        (1,036)
Income from investment in
  unconsolidated joint
  ventures....................        4,416         634         5,050          2,889      2,137          5,026
Net gain on sales of real
  estate......................        8,085          --         8,085             --         --             --
Extraordinary items...........      (10,318)         --       (10,318)            --     (7,506)        (7,506)
                                -----------   ---------   -----------    -----------   --------    -----------
Net income....................  $   368,020   $(161,281)  $   206,739    $   277,577   $(98,883)   $   178,694
                                ===========   =========   ===========    ===========   ========    ===========
Capital and tenant
  improvements................  $    88,078   $   5,709   $    93,787    $    70,472   $  3,310    $    73,782
                                ===========   =========   ===========    ===========   ========    ===========
Total Assets..................  $13,746,440   $ 593,452   $14,339,892    $12,447,149   $427,985    $12,875,134
                                ===========   =========   ===========    ===========   ========    ===========
</TABLE>

---------------

(1) Interest expense for the Office Properties does not include an allocation of
    interest expense on corporate unsecured debt.

NOTE 11 -- COMMITMENTS AND CONTINGENCIES

Concentration of Credit Risk

     The Company maintains its 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.
Management of the Company believes that the risk is not significant. The Company
from time to time enters into interest rate protection agreements to effectively
convert floating rate debt to a fixed rate basis, as well as to hedge
anticipated financing transactions. The Company believes it has limited exposure
to the risk of non-performance by the swap counterparties since each
counterparty is a major U.S. financial institution; management does not
anticipate any such non-performance. As of June 30, 1999, the Company has one
interest rate protection agreement which effectively fixed the interest rate on
a $93.6 million loan at 6.94% through the maturity of the loan on June 30, 2000.

Environmental

     The Company, as an owner of real estate, is subject to various
environmental laws of federal and local governments. Compliance by the Company
with existing laws has not had a material adverse effect on the Company's
financial condition and results of operations, and management does not believe
it will have such an

                                       14
<PAGE>   15
                       EOP OPERATING LIMITED PARTNERSHIP

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

impact in the future. However, the Company cannot predict the impact of new or
changed laws or regulations on its current Properties or on properties that it
may acquire in the future.

Litigation

     The Company has become a party to various legal actions resulting from the
operational activities transferred to the Operating Partnership in connection
with the Consolidation and the Beacon Merger. These actions are incidental to
the transferred business and management does not believe that these actions will
have a material adverse effect on the Company.

     Neither the Company nor any of the Properties is presently subject to any
material litigation nor, to the Company's knowledge, is any litigation
threatened against the Company or any of the Properties, other than actions
which the Company does not believe to be material, or 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 the liquidity, business, results of operations or
financial condition of the Company.

Geographical

     The Company carries earthquake insurance on all of the Properties,
including those located in California, subject to coverage limitations which the
Company believes are commercially reasonable. In light of the California
earthquake risk, California building codes since the early 1970s have
established construction standards for all new buildings. The current and
strictest construction standards were adopted in 1987. Of the 43 Properties
located in California, 12 have been built since January 1, 1988 and the Company
believes that all of the Properties were constructed in full compliance with the
applicable standards existing at the time of construction. No assurance can be
given that material losses in excess of insurance proceeds will not occur in the
future.

Commitments

     In March 1998, the Board of Trustees of the Company approved the purchase
of Prominence, an office building development in Atlanta, Georgia, consisting of
425,706 square feet and an 11.88-acre land parcel. This office property and land
parcel was acquired on July 13, 1999 for approximately $70.8 million.

     In July 1998, the Company entered into an agreement to purchase the World
Trade Center project in Seattle, Washington. The property consists of
approximately 186,787 square feet of office space and is 100% preleased to a
single tenant. After the tenant takes full occupancy in early 2000, the Company
is expected to purchase the building for approximately $39.0 million. This
transaction is contingent upon certain terms and conditions as set forth in the
purchase agreement. There can be no assurance that this transaction will be
consummated as described above.

     In accordance with the agreement governing the Company's investment in
WRALP, the Company agreed to make available to WRALP up to $20.0 million in
additional financing or credit support for future development. As of June 30,
1999, no amounts have been funded pursuant to this agreement.

Contingencies

     At June 30, 1999, the Company has put option agreements outstanding in
connection with the acquisition of the Wright Runstad Properties. On August 13,
1999, the WR Holders can require the Company to purchase all or a portion of the
3,435,688 Common Shares issued to them in the acquisition at a price equal to
$31.50 per Common Share. Prior to August 13, 1999, if the WR Holders sell all or
a portion of their Common Shares to a third party for a price less than
$29.10625, then the Company shall pay to the WR Holders for each Common Share
sold at such lower price an amount equal to the difference between $29.10625 and
such
                                       15
<PAGE>   16
                       EOP OPERATING LIMITED PARTNERSHIP

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

lower price, not to exceed $3.00 per Common Share. Any amounts paid by the
Company as a result of such sale, will be recorded as a reduction in
shareholders' equity. For put options exercised on August 13, 1999, any amounts
paid up to $29.10625 per Common Share would be reflected as a reduction to
shareholders' equity; the portion of any amounts paid in excess of $29.10625 per
Common Share (not to exceed $2.39375 per Common Share up to an aggregate of
approximately $8.2 million) would be expensed by the Company. The Company will
not incur any loss on this transaction if the put option is not exercised.

     As of August 5, 1999, the Company and the WR Holders have agreed, subject
to documentation, to amend the put option agreement to defer to August 13, 2000
(or to August 13, 2001 at the option of the WR Holders) the exercise date for
50% of the Common Shares affected by the put option agreement (a maximum
exposure to the Company of $54.1 million when and if this put option is
exercised). The Company and the WR Holders also agreed to cancel the put option
on the remaining 50% of the affected Common Shares in exchange for the Company's
payment to the WR Holders of an amount equal to the excess, if any, of (x)
$31.50 over (y) the average price of a Common Share calculated over the five
trading days immediately prior to August 13, 1999, for each of the remaining
1,717,844 Common Shares affected by the put option agreement.

     Effective as of September 3, 1998, the Company amended its pre-existing put
option agreement with the seller of the Columbus America Properties (the "CA
Holder") related to 1,692,546 Units issued at acquisition. The CA Holder has the
option at any time after January 1, 1999 until the earlier of (a) September 3,
2000 or (b) the date the CA Holder has converted all of its Units to Common
Shares, to require the Company to purchase the Units at a price equal to $29.00
per Unit. Under the terms of the agreement, prior to September 3, 1999, the
option shall be limited to an aggregate of 846,273 Units. In the event of any
option exercise, the Company will recognize any cash paid as a reduction of
partners' capital. As of June 30, 1999, the CA Holder has not exercised its
option to require the Company to purchase the Units.

     In connection with the acquisition of Worldwide Plaza on October 1, 1998,
the Company issued a transferable put option on the 6,861,166 Units issued at
acquisition which is exercisable only on the third anniversary of closing with
an estimated fair value of approximately $27.4 million. This option entitles its
holder to additional Common Shares, the number of which shall be determined
using a formula based on the extent, if any, that the Common Shares are then
trading at less than $29.05 per share.

NOTE 12 -- SUBSEQUENT EVENTS

1.   In July 1999, the Board of Trustees of the Trust declared a third quarter
     distribution for the Series B Preferred Units of $0.65625 per unit. The
     distribution will be paid on August 16, 1999 to holders of record as of
     August 2, 1999.

2.   In July 1999, the Board of Trustees of the Trust declared a third quarter
     dividend for the Common Shares and Units of $0.42 per Common Share/Unit.
     The dividend will be paid on October 13, 1999 to holders of record as of
     September 30, 1999.

3.   In July 1999, the Company entered into two forward interest rate hedge
     agreements with unaffiliated counterparties for a notional amount of $50.0
     million each at a forward rate of 5.85% and 5.7925%, respectively, in
     anticipation of future financing transactions. Both agreements terminate in
     August 1999 and are referenced to the ten-year U.S. Treasury Note.

4.   On August 9, 1999, the Company prepaid the $328 Million Credit Facility
     with proceeds from the $1.0 Billion Credit Facility.

                                       16
<PAGE>   17

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

OVERVIEW

     The following discussion and analysis of the consolidated financial
condition and results of operations should be read in conjunction with the
Consolidated Financial Statements of the Company and Notes thereto contained
herein. Terms employed herein as defined terms, but without definition, shall
have the meaning set forth in the financial statements. Statements contained in
this "Management's Discussion and Analysis of Financial Condition and Results of
Operations" including without limitation, the "Developments" and "Year 2000"
disclosures, which are not historical facts may be forward-looking statements.
Such statements are subject to certain risks and uncertainties which could cause
actual results to differ materially from those projected or anticipated. Readers
are cautioned not to place undue reliance on these forward-looking statements
which speak only as of June 30, 1999. Among the factors about which the Company
has made assumptions are the following:

     -  Future economic conditions which may impact upon the demand for office
        space and tenant ability to pay rent, either at current or increased
        levels.

     -  Prevailing interest rates.

     -  The extent of any inflation on operating expenses.

     -  The Company's ability to reduce various expenses as a percentage of
        revenues.

     -  The Company's continuing ability to pay amounts due to its noteholders
        and preferred unitholders prior to any distribution to holders of its
        common Units.

     -  The cost to complete and lease-up pending developments.

     -  The continued availability of the $1.0 Billion Credit Facility.

     During the six months ended June 30, 1999, the Company acquired three
Office Properties containing approximately 1.2 million square feet and one
Parking Facility for approximately $241.6 million. The Company also sold four
Office Properties for approximately $98.0 million. In addition, the Company
issued the $1.0 Billion Notes in three tranches with an effective interest rate
of 6.8% per annum and issued the $200 Million Notes with an effective interest
rate of 7.6% per annum.

                                       17
<PAGE>   18

RESULTS OF OPERATIONS

GENERAL

     The following discussion is based primarily on the consolidated financial
statements of the Company as of June 30, 1999 and December 31, 1998 and for the
three and six months ended June 30, 1999 and 1998.

     The Company receives income primarily from rental revenue from the Office
Properties (including reimbursements from tenants for certain operating costs)
and from parking revenue from Office Properties and Parking Facilities.

     Below is a summary of the Company's acquisition and disposition activity
since December 31, 1997:

<TABLE>
<CAPTION>
                                                   OFFICE PROPERTIES
                                                ------------------------   PARKING FACILITIES
                                                            TOTAL SQUARE   ------------------
                                                BUILDINGS       FEET       GARAGES    SPACES
                                                ---------   ------------   --------   -------
<S>                                             <C>         <C>            <C>        <C>
  Properties owned as of:
  December 31, 1997..........................      258       65,291,790       17      16,749
     Acquisitions............................       28       10,425,595        2       1,310
     Developments placed in service..........        3          257,528       --          --
     Dispositions............................       (5)        (986,391)      --          --
     Building remeasurements.................       --          112,205       --          --
                                                   ---       ----------       --      ------
  December 31, 1998..........................      284       75,100,727       19      18,059
     Acquisitions............................        3        1,202,536        2       3,164
     Developments placed in service..........        1          150,181
     Dispositions............................       (4)        (668,796)      --          --
     Building remeasurements.................       --           24,012       --          42
     Reclassifications(1)....................       --               --       (1)       (759)
                                                   ---       ----------       --      ------
  June 30, 1999 ("Total Portfolio")..........      284       75,808,660       20      20,506
                                                   ===       ==========       ==      ======
</TABLE>

---------------

(1) The 601 Tchoupitoulas garage was previously considered a stand-alone garage
    and included in the number of parking facilities owned by the Company.
    Effective with the second quarter of 1999, this garage is no longer
    considered a stand-alone parking facility.

     As a result of the acquisition and disposition of properties, the financial
data presented shows changes in revenues and expenses from period-to-period.
Therefore the Company does not believe its period to period financial data are
comparable. The following analysis shows changes resulting from Properties that
were held during the entire period for the periods being compared (the "Core
Portfolio") and the changes in the Total Portfolio.

                                       18
<PAGE>   19

COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 1999 TO JUNE 30, 1998

     The table below represents selected operating information for the Total
Portfolio and for the Core Portfolio consisting of 249 Office Properties and 16
Parking Facilities acquired or placed in service prior to April 1, 1998.

<TABLE>
<CAPTION>
                                                   TOTAL PORTFOLIO                              CORE PORTFOLIO
                                      ------------------------------------------   -----------------------------------------
                                                            INCREASE/       %                            INCREASE/      %
       (DOLLARS IN THOUSANDS)           1999       1998     (DECREASE)   CHANGE      1999       1998     (DECREASE)   CHANGE
------------------------------------  --------   --------   ----------   -------   --------   --------   ----------   ------
<S>                                   <C>        <C>        <C>          <C>       <C>        <C>        <C>          <C>
Property revenues...................  $477,188   $395,298    $81,890       20.7%   $391,086   $375,151    $15,935       4.2%
Fee income..........................     2,045      1,507        538       35.7          --         --         --        --
Interest/dividend income............     2,046      3,139     (1,093)     (34.8)        439        343         96      28.0
                                      --------   --------    -------     -------   --------   --------    -------     -----
        Total revenues..............   481,279    399,944     81,335       20.3     391,525    375,494     16,031       4.3
                                      --------   --------    -------     -------   --------   --------    -------     -----
Interest expense....................   102,920     76,070     26,850       35.3      29,133     37,906     (8,773)    (23.1)
Depreciation and amortization.......    88,169     72,461     15,708       21.7      73,219     66,805      6,414       9.6
Property operating expenses.........   163,392    137,108     26,284       19.2     134,238    129,999      4,239       3.3
Ground rent.........................     1,548      1,934       (386)     (20.0)      1,448      1,844       (396)    (21.5)
General and administrative..........    20,714     14,492      6,222       42.9         393        277        116      41.9
                                      --------   --------    -------     -------   --------   --------    -------     -----
        Total expenses..............   376,743    302,065     74,678       24.7     238,431    236,831      1,600       0.7
                                      --------   --------    -------     -------   --------   --------    -------     -----
Income before allocation to minority
  interests, income from investment
  in unconsolidated joint ventures,
  net gain on sales of real estate
  and extraordinary items...........   104,536     97,879      6,657        6.8     153,094    138,663     14,431      10.4
Minority interests..................      (353)      (498)       145      (29.1)       (349)      (492)       143     (29.1)
Income from investment in
  unconsolidated joint ventures.....     3,215      1,392      1,823      131.0       2,945        808      2,137     264.5
Net gain on sales of real estate....     8,085         --      8,085         --          --         --         --        --
Extraordinary items.................    (7,135)      (547)    (6,588)    1,204.4     (7,135)        --     (7,135)       --
                                      --------   --------    -------     -------   --------   --------    -------     -----
Net income..........................  $108,348   $ 98,226    $10,122       10.3%   $148,555   $138,979    $ 9,576       6.9%
                                      ========   ========    =======     =======   ========   ========    =======     =====
Property revenues less property
  operating expenses before
  depreciation and amortization,
  general and administrative, ground
  rent and interest expense.........  $313,796   $258,190    $55,606       21.5%   $256,848   $245,152    $11,696       4.8%
                                      ========   ========    =======     =======   ========   ========    =======     =====
</TABLE>

Property Revenues

     The increase in rental revenues, tenant reimbursements, parking income and
other income ("Property Revenues") in the Core Portfolio resulted from a
combination of occupancy and rental rate increases. The weighted average
occupancy of the Core Portfolio increased from approximately 94.5% at April 1,
1998 to 95.1% as of June 30, 1999. This increase represents approximately .4
million square feet of additional occupancy in the Core Portfolio between April
1, 1998 and June 30, 1999.

     Property Revenues for the Total Portfolio include lease termination fees of
approximately $3.1 million and $5.2 million for the three months ended June 30,
1999 and 1998, respectively, substantially all of which is related to the Core
Portfolio (included in the "other revenue" category on the consolidated
statements of operations). These fees are related to specific tenants who have
paid a fee to terminate their lease obligations before the end of the
contractual term of their lease. Although the Company has historically
experienced similar levels of such termination fees, there is no way of
predicting the timing or amounts of future lease termination fees.

     Property Revenues for the Total Portfolio include straight-line rent
adjustments of approximately $15.2 million and $15.6 million for the three
months ended June 30, 1999 and 1998, respectively. Property Revenues for the
Core Portfolio include straight-line rent adjustments of approximately $11.4
million and $15.1 million for the three months ended June 30, 1999 and 1998,
respectively.

                                       19
<PAGE>   20

Interest Expense

     Interest expense increased for the Total Portfolio as a result of having
more debt outstanding during the three months ended June 30, 1999 than in the
three months ended June 30, 1998. The increase in total debt and the related
increase in interest expense were directly attributable to property
acquisitions. The Company's total debt as a percentage of total assets increased
from approximately 38.4% at June 30, 1998 to 42.2% at June 30, 1999, and the
Company's interest coverage ratio decreased from approximately 3.2 times in 1998
to 2.9 times in 1999. The weighted average interest rate on the Company's debt
decreased from approximately 7.1% at June 30, 1998 to approximately 7.0% at June
30, 1999. The decrease in interest expense in the Core Portfolio is primarily
due to the replacement of secured debt with unsecured debt which is not
allocated to the Core Portfolio.

Depreciation and Amortization

     Depreciation and amortization expense for the Total Portfolio increased as
a result of Properties acquired and capital and tenant improvements made during
1999 and 1998. Depreciation and amortization expense for the Core Portfolio
increased as a result of capital and tenant improvements made to the Properties.

Property Operating Expenses

     Real estate taxes, insurance, repairs and maintenance and other property
operating expenses ("Property Operating Expenses") increased slightly for the
Core Portfolio primarily due to an increase in real estate tax expense.

General and Administrative Expenses

     General and administrative expenses increased due to the size of the
Company's portfolio increasing and additional expenses associated with being a
public company. During 1999, the Company made significant investments in its
information systems, including the hiring of additional personnel, and also
established a real estate services group. In addition, the Company incurred
severance costs relating to the resignation of an employee. While general and
administrative expenses will continue to increase should the size of the
Company's portfolio continue to increase, it is anticipated that the Company
will realize economies of scale with future growth, should it occur.

                                       20
<PAGE>   21

COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1999 TO JUNE 30, 1998

     The table below represents selected operating information for the Total
Portfolio and for the Core Portfolio consisting of 248 Office Properties and 16
Parking Facilities acquired or placed in service prior to January 1, 1998.

<TABLE>
<CAPTION>
                                                   TOTAL PORTFOLIO                             CORE PORTFOLIO
                                      -----------------------------------------   -----------------------------------------
                                                            INCREASE/      %                            INCREASE/      %
(DOLLARS IN THOUSANDS)                  1999       1998     (DECREASE)   CHANGE     1999       1998     (DECREASE)   CHANGE
------------------------------------  --------   --------   ----------   ------   --------   --------   ----------   ------
<S>                                   <C>        <C>        <C>          <C>      <C>        <C>        <C>          <C>
Property revenues...................  $947,419   $764,891    $182,528     23.9%   $761,501   $725,936    $ 35,565      4.9%
Fee income..........................     3,907      2,664       1,243     46.7          --         --          --       --
Interest/dividend income............     5,087      6,209      (1,122)   (18.1)        968        703         265     37.7
                                      --------   --------    --------    -----    --------   --------    --------    -----
        Total revenues..............   956,413    773,764     182,649     23.6     762,469    726,639      35,830      4.9
                                      --------   --------    --------    -----    --------   --------    --------    -----
Interest expense....................   207,400    145,954      61,446     42.1      64,181     75,280     (11,099)   (14.7)
Depreciation and amortization.......   174,728    140,253      34,475     24.6     142,046    129,858      12,188      9.4
Property operating expenses.........   327,107    273,335      53,772     19.7     263,494    260,261       3,233      1.2
Ground rent.........................     3,394      3,572        (178)    (5.0)      3,041      3,469        (428)   (12.3)
General and administrative..........    38,964     28,440      10,524     37.0         529        284         245     86.3
                                      --------   --------    --------    -----    --------   --------    --------    -----
        Total expenses..............   751,593    591,554     160,039     27.1     473,291    469,152       4,139      0.9
                                      --------   --------    --------    -----    --------   --------    --------    -----
Income before allocation to minority
  interests, income from investment
  in unconsolidated joint ventures,
  net gain on sales of real estate
  and extraordinary items...........   204,820    182,210      22,610     12.4     289,178    257,487      31,691     12.3
Minority interests..................      (898)    (1,036)        138    (13.3)       (889)    (1,023)        134    (13.1)
Income from investment in
  unconsolidated joint ventures.....     5,050      5,026          24      0.5       5,103      3,391       1,712     50.5
Net gain on sales of real estate....     8,085         --       8,085       --          --         --          --       --
Extraordinary items.................   (10,318)    (7,506)     (2,812)    37.5      (9,527)        --      (9,527)      --
                                      --------   --------    --------    -----    --------   --------    --------    -----
Net income..........................  $206,739   $178,694    $ 28,045     15.7%   $283,865   $259,855    $ 24,010      9.2%
                                      ========   ========    ========    =====    ========   ========    ========    =====
Property revenues less property
  operating expenses before
  depreciation and amortization,
  general and administrative, ground
  rent and interest expense.........  $620,312   $491,556    $128,756     26.2%   $498,007   $465,675    $ 32,332      6.9%
                                      ========   ========    ========    =====    ========   ========    ========    =====
</TABLE>

Property Revenues

     The increase in rental revenues, tenant reimbursements, parking income and
other income ("Property Revenues") in the Core Portfolio resulted from a
combination of occupancy and rental rate increases. The weighted average
occupancy of the Core Portfolio increased from approximately 93.9% at January 1,
1998 to 95.1% as of June 30, 1999. This increase represents approximately .9
million square feet of additional occupancy in the Core Portfolio between
January 1, 1998 and June 30, 1999.

     Property Revenues for the Total Portfolio include lease termination fees of
approximately $5.3 million and $8.1 million for the six months ended June 30,
1999 and 1998, respectively, and Property Revenues for the Core Portfolio
include lease termination fees of approximately $5.1 million and $8.1 million
for the six months ended June 30, 1999 and 1998, respectively (included in the
"other revenue" category on the consolidated statements of operations). These
fees are related to specific tenants who have paid a fee to terminate their
lease obligations before the end of the contractual term of their lease.
Although the Company has historically experienced similar levels of such
termination fees, there is no way of predicting the timing or amounts of future
lease termination fees.

     Property Revenues for the Total Portfolio include straight-line rent
adjustments of approximately $31.8 million and $32.7 million for the six months
ended June 30, 1999 and 1998, respectively. Property

                                       21
<PAGE>   22

Revenues for the Core Portfolio include straight-line rent adjustments of
approximately $24.3 million and $31.5 million for the six months ended June 30,
1999 and 1998, respectively.

Interest Expense

     Interest expense increased for the Total Portfolio as a result of having
more debt outstanding during the six months ended June 30, 1999 than in the six
months ended June 30, 1998. The increase in total debt and the related increase
in interest expense were directly attributable to property acquisitions. The
Company's total debt as a percentage of total assets increased from
approximately 38.4% at June 30, 1998 to 42.2% at June 30, 1999, and the
Company's interest coverage ratio decreased from approximately 3.2 times in 1998
to 2.9 times in 1999. The weighted average interest rate on the Company's debt
decreased from approximately 7.1% at June 30, 1998 to approximately 7.0% at June
30, 1999. The decrease in interest expense in the Core Portfolio is primarily
due to the replacement of secured debt with unsecured debt which is not
allocated to the Core Portfolio.

Depreciation and Amortization

     Depreciation and amortization expense for the Total Portfolio increased as
a result of Properties acquired and capital and tenant improvements made during
1999 and 1998. Depreciation and amortization expense for the Core Portfolio
increased as a result of capital and tenant improvements made to the Properties.

Property Operating Expenses

     Real estate taxes, insurance, repairs and maintenance and other property
operating expenses ("Property Operating Expenses") increased slightly for the
Core Portfolio primarily due to an increase in real estate tax expense.

General and Administrative Expenses

     General and administrative expenses increased due to the size of the
Company's portfolio increasing and additional expenses associated with being a
public company. During 1999, the Company made significant investments in its
information systems, including the hiring of additional personnel, and also
established a real estate services group. In addition, the Company incurred
severance costs relating to the resignation of an employee. While general and
administrative expenses will continue to increase should the size of the
Company's portfolio continue to increase, it is anticipated that the Company
will realize economies of scale with future growth, should it occur.

                                       22
<PAGE>   23

PARKING OPERATIONS

     The Total Portfolio and Core Portfolio selected operating information for
the three and six months ended June 30, 1999 and 1998 presented above includes
results of operations from the Parking Facilities. Summarized information for
the Parking Facilities is presented below.

COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 1999 TO JUNE 30, 1998

     The table below represents selected operating information for the Total
Portfolio and the Core Portfolio consisting of 16 Parking Facilities acquired
prior to April 1, 1998.

<TABLE>
<CAPTION>
                                                  TOTAL PORTFOLIO                          CORE PORTFOLIO
                                       --------------------------------------   -------------------------------------
                                                         INCREASE/       %                        INCREASE/      %
       (DOLLARS IN THOUSANDS)           1999     1998    (DECREASE)   CHANGE     1999     1998    (DECREASE)   CHANGE
-------------------------------------  ------   ------   ----------   -------   ------   ------   ----------   ------
<S>                                    <C>      <C>      <C>          <C>       <C>      <C>      <C>          <C>
Property revenues....................  $8,972   $7,245     $1,727       23.8%   $7,961   $7,245     $  716        9.9%
Interest/dividend income.............      93        4         89     2,225.0       38        4         34      850.0
                                       ------   ------     ------     -------   ------   ------     ------     ------
        Total revenues...............   9,065    7,249      1,816       25.0     7,999    7,249        750       10.3
                                       ------   ------     ------     -------   ------   ------     ------     ------
Interest expense.....................     748    1,372       (624)     (45.5)      706    1,372       (666)     (48.5)
Depreciation and amortization........   1,910    1,336        574       43.0     1,426    1,336         90        6.7
Property operating expenses..........   2,055    2,030         25        1.2     1,982    2,030        (48)      (2.4)
Ground rent..........................      13       13         --         --        13       13         --         --
General and administrative...........     149       92         57       62.0       148       92         56       60.9
                                       ------   ------     ------     -------   ------   ------     ------     ------
        Total expenses...............   4,875    4,843         32        0.7     4,275    4,843       (568)     (11.7)
                                       ------   ------     ------     -------   ------   ------     ------     ------
Income before allocation to minority
  interests and income from
  investment in unconsolidated joint
  ventures...........................   4,190    2,406      1,784       74.1     3,724    2,406      1,318       54.8
Minority interests...................      42      (75)       117     (156.0)       42      (75)       117     (156.0)
Income from investment in
  unconsolidated joint ventures......     359      430        (71)     (16.5)      359      430        (71)     (16.5)
                                       ------   ------     ------     -------   ------   ------     ------     ------
Net income...........................  $4,591   $2,761     $1,830       66.3%   $4,125   $2,761     $1,364       49.4%
                                       ======   ======     ======     =======   ======   ======     ======     ======
Property revenues less property
  operating expenses before
  depreciation and amortization,
  general and administrative, ground
  rent and interest expense..........  $6,917   $5,215     $1,702       32.6%   $5,979   $5,215     $  764       14.7%
                                       ======   ======     ======     =======   ======   ======     ======     ======
</TABLE>

                                       23
<PAGE>   24

COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1999 TO JUNE 30, 1998

     The table below represents selected operating information for the Total
Portfolio and the Core Portfolio consisting of 16 Parking Facilities acquired
prior to January 1, 1998.

<TABLE>
<CAPTION>
                                                          TOTAL PORTFOLIO                           CORE PORTFOLIO
                                              ---------------------------------------   ---------------------------------------
                                                                  INCREASE/      %                          INCREASE/      %
(DOLLARS IN THOUSANDS)                         1999      1998     (DECREASE)   CHANGE    1999      1998     (DECREASE)   CHANGE
--------------------------------------------  -------   -------   ----------   ------   -------   -------   ----------   ------
<S>                                           <C>       <C>       <C>          <C>      <C>       <C>       <C>          <C>
Property revenues...........................  $17,747   $13,844    $ 3,903      28.2%   $15,826   $13,844    $ 1,982      14.3%
Interest/dividend income....................       96        37         59     159.5         41        37          4      10.8
                                              -------   -------    -------     -----    -------   -------    -------     -----
        Total revenues......................   17,843    13,881      3,962      28.5     15,867    13,881      1,986      14.3
                                              -------   -------    -------     -----    -------   -------    -------     -----
Interest expense............................    1,676     2,740     (1,064)    (38.8)     1,592     2,740     (1,148)    (41.9)
Depreciation and amortization...............    3,293     2,672        621      23.2      2,809     2,672        137       5.1
Property operating expenses.................    4,020     3,844        176       4.6      3,929     3,844         85       2.2
Ground rent.................................       25        26         (1)     (3.8)        25        26         (1)     (3.8)
General and administrative..................      125        92         33      35.9        124        92         32      34.8
                                              -------   -------    -------     -----    -------   -------    -------     -----
        Total expenses......................    9,139     9,374       (235)     (2.5)     8,479     9,374       (895)     (9.5)
                                              -------   -------    -------     -----    -------   -------    -------     -----
Income before allocation to minority
  interests and income from investment in
  unconsolidated joint ventures.............    8,704     4,507      4,197      93.1      7,388     4,507      2,881      63.9
Minority interests..........................     (193)     (144)       (49)     34.0       (193)     (144)       (49)     34.0
Income from investment in unconsolidated
  joint ventures............................      768     1,111       (343)    (30.9)       768     1,111       (343)    (30.9)
                                              -------   -------    -------     -----    -------   -------    -------     -----
Net income..................................  $ 9,279   $ 5,474    $ 3,805      69.5%   $ 7,963   $ 5,474    $ 2,489      45.5%
                                              =======   =======    =======     =====    =======   =======    =======     =====
Property revenues less property operating
  expenses before depreciation and
  amortization, general and administrative,
  ground rent and interest expense..........  $13,727   $10,000    $ 3,727      37.3%   $11,897   $10,000    $ 1,897      19.0%
                                              =======   =======    =======     =====    =======   =======    =======     =====
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

LIQUIDITY

     Net cash provided from operations represents the primary source of
liquidity to fund distributions, debt service, recurring capital costs and
non-revenue enhancing tenant improvements. The Company currently intends to
continue to make, but has not contractually bound itself to make, regular
quarterly distributions to holders of Units and preferred units. The Company has
established annual distribution rates as follows: $1.48 per annum per Unit,
8.98% per annum ($2.245 per unit) for each Series A Preferred Unit, 5.25% per
annum ($2.625 per unit) for each Series B Preferred Unit and 8.625% per annum
($2.15625 per unit) for each Series C Preferred Unit. In July 1999, the Company
increased its annual distribution rate for Units to $1.68 effective third
quarter 1999.

     The Company intends to continue to fund distributions, debt service,
recurring capital costs and non-revenue enhancing tenant improvements from cash
from operations and draws under the $1.0 Billion Credit Facility. The Company
also expects that the $1.0 Billion Credit Facility will be a source of cash for
temporary working capital, the funding of capital improvements and revenue
enhancing tenant improvements, unanticipated cash needs, acquisitions and
development costs.

     Since the anticipated size of the Company's distributions will not allow
the Company, using only cash from operations, to retire all of its debt as it
comes due, the Company will be required to repay maturing debt with funds from
debt and/or equity financing.

                                       24
<PAGE>   25

DEBT FINANCING

     The table below summarizes the mortgage debt, unsecured notes and lines of
credit indebtedness outstanding at June 30, 1999 and December 31, 1998,
including a net premium on mortgage debt and unsecured notes (net of accumulated
amortization of approximately $3.9 million and $2.7 million) of approximately
$10.6 million and $17.8 million, respectively, recorded in connection with the
Consolidation, debt assumed in connection with certain of the Company's
acquisitions, and issuance of unsecured notes.

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)                                         JUNE 30, 1999   DECEMBER 31, 1998
------------------------------------------------------------   -------------   -----------------
<S>                                                            <C>             <C>
DEBT SUMMARY:
BALANCE
  Fixed rate................................................    $5,423,942        $4,739,018
  Variable rate.............................................       621,760         1,286,387
                                                                ----------        ----------
          Total.............................................    $6,045,702        $6,025,405
                                                                ==========        ==========
PERCENT OF TOTAL DEBT:
  Fixed rate................................................          89.7%             78.7%
  Variable rate.............................................          10.3%             21.3%
                                                                ----------        ----------
          Total.............................................         100.0%            100.0%
                                                                ==========        ==========
EFFECTIVE INTEREST RATE AT END OF PERIOD:
  Fixed rate................................................           7.2%              7.3%
  Variable rate.............................................           5.9%              6.4%
                                                                ----------        ----------
          Effective interest rate...........................           7.0%              7.1%
                                                                ==========        ==========
</TABLE>

     A majority of the variable rate debt shown above bears interest at an
interest rate based on LIBOR.

MORTGAGE FINANCING

     As of June 30, 1999, the Company's total mortgage debt (excluding the
Company's share of unconsolidated debt of approximately $148.7 million)
consisted of approximately $1.8 billion of fixed rate debt with an effective
interest rate of approximately 7.6% and $73.8 million of variable rate debt
based on various spreads over LIBOR. The Company's mortgage debt at June 30,
1999 will mature as follows:

<TABLE>
<CAPTION>
Dollars in thousands
--------------------------------------------------------------------------
<S>                                                             <C>
1999........................................................    $   11,679
2000........................................................       186,399
2001........................................................       198,088
2002........................................................        75,111
2003........................................................       186,565
Thereafter..................................................     1,174,233
                                                                ----------
Subtotal....................................................     1,832,075
Net premium (net of accumulated amortization of $4.1
  million)..................................................        10,674
                                                                ----------
          Total.............................................    $1,842,749
                                                                ==========
</TABLE>

     The instruments encumbering the Properties restrict transfer of the
mortgaged Properties subject to the terms of the mortgage indebtedness, prohibit
additional liens and require payment of taxes on the mortgaged Properties,
maintenance of the mortgaged Properties in good condition, maintenance of
insurance on the mortgaged Properties and obtaining lender consent to leases
with material tenants.

                                       25
<PAGE>   26

CREDIT FACILITIES

Line of Credit

     The $1.0 Billion Credit Facility matures on May 29, 2001. The interest rate
is based on the Company's investment grade credit rating on its unsecured debt
and is currently LIBOR plus 60 basis points with a facility fee equal to 20
basis points in respect to the entire facility, payable quarterly. In addition,
a competitive bid option, whereby the lenders participating in the facility bid
on the interest rate to be charged, is available for up to $350 million of the
facility. The amount outstanding on the $1.0 Billion Credit Facility as of July
30, 1999 was approximately $60.8 million.

Term Loan Facilities

     The $328 Million Credit Facility is priced at 90-day LIBOR plus 80 basis
points and is prepayable on any interest payment date and matures on August 15,
2000. On August 9, 1999, the Company prepaid the $328 Million Credit Facility
with proceeds from the $1.0 Billion Credit Facility.

     The $200 Million Credit Facility bears interest at either a money market
rate or LIBOR plus 50 basis points with a facility fee equal to 20 basis points
per annum, at the Company's option. As of June 30, 1999, the Company elected the
money market rate which equated to 5.8%. The interest rate may be reset after
the first twelve months for an additional six months and again after eighteen
months for an additional six months for a ten basis point fee.

UNSECURED NOTES

     The table below summarizes the Company's unsecured notes as of June 30,
1999:

<TABLE>
<CAPTION>
TRANCHE                                         AMOUNT            STATED RATE    EFFECTIVE RATE(1)
-------                                 ----------------------    -----------    -----------------
                                        (Dollars in thousands)
<S>                                     <C>                       <C>            <C>
3 Year Notes due 2002(2)............          $  200,000              6.4%              6.6%
4 Year MOPPRS due 2002(3)...........             250,000              6.4%              6.3%
5 Year Notes due 2003...............             300,000              6.4%              6.8%
5 Year Notes due 2004(2)............             300,000              6.5%              6.7%
6 Year Notes due 2004...............             250,000              6.5%              6.7%
7 Year Notes due 2004...............              30,000              7.2%              7.3%
7 Year Notes due 2005...............             400,000              6.6%              7.0%
8 Year Notes due 2005...............              50,000              7.4%              7.7%
9 Year Notes due 2006...............              50,000              7.4%              7.7%
9 Year Notes due 2007(4)............             300,000              6.8%              6.8%
10 Year Notes due 2007..............              50,000              7.4%              7.7%
10 Year Notes due 2008..............             300,000              6.8%              7.0%
10 Year Notes due 2009(2)...........             500,000              6.8%              6.9%
20 Year Notes due 2018..............             250,000              7.3%              7.6%
30 Year Notes due 2028..............             225,000              7.3%              7.3%
30 Year Notes due 2029(5)...........             200,000              7.5%              7.6%
                                              ----------             ----              ----
          Subtotal..................          $3,655,000              6.8%              7.0%
                                              ==========             ====              ====
</TABLE>

---------------

(1) Includes the cost of terminated interest rate protection agreements,
    offering and transaction costs, the premium on the warrants and the discount
    on unsecured notes.

(2) These notes were issued on January 26, 1999. The net proceeds of
    approximately $989.2 million were used to repay mortgage debt and amounts
    outstanding on the $1.0 Billion Credit Facility.

(3) The MOPPRS are subject to mandatory redemption in 2002 but do not mature
    until 2012.

(4) These notes were issued along with 300,000 warrants to purchase an
    additional $300 million in unsecured notes at a later date. Each warrant
    entitles its holder thereof to purchase a new $1,000 note at par on

                                       26
<PAGE>   27

    December 15, 1999 (or in certain circumstances on January 18, 2000) at a
    stated rate of 6.763%, which will mature on June 15, 2008 and will have
    other terms substantially similar to the $300 million nine year notes due
    2007.

(5) These notes were issued in April 1999. The net proceeds of approximately
    $196.6 million were used to repay amounts outstanding on the $1.0 Billion
    Credit Facility.

     The Company filed a shelf registration statement, which was declared
effective on July 22, 1998, relating to the potential issuance from time to time
of up to $2.0 billion of unsecured debt securities and warrants exercisable for
debt securities in amounts, at initial prices and on terms to be determined at
the time of offering. The securities may be issued separately or together, in
separate series and in amounts, at prices and on terms to be described in one or
more supplements to the prospectus. The Company sold $1.0 billion of unsecured
notes in January 1999 and $200 million of unsecured notes in April 1999 under
this registration statement.

Restrictions and Covenants

     Agreements or instruments relating to the unsecured notes and lines of
credit contain certain restrictions and requirements regarding total debt to
assets ratios, secured debt to total assets ratios, debt service coverage
ratios, minimum ratio of unencumbered assets to unsecured debt and other
limitations.

EQUITY SECURITIES

     During the three months ended June 30, 1999, the Trust issued 70,955 Common
Shares as a result of share options exercised and, as a result, the Company
issued a corresponding number of Units to the Trust. There were also 33,862
Units redeemed into Common Shares on a one-for-one basis. In addition, the Trust
retired 20,000 restricted Common Shares and, as a result, the Company retired a
corresponding number of Units.

CAPITAL IMPROVEMENTS

     The Company takes capital improvements and revenue enhancing tenant
improvements into consideration at the time of acquisition in determining the
amount of equity and debt financing required to purchase the property and fund
the improvements. Therefore, capital improvements made in the year of
acquisition and the two following years are treated separately from typical
recurring capital expenditures, non-revenue enhancing tenant improvements and
leasing commissions required once these Properties have reached stabilized
occupancy, and deferred maintenance and renovations planned at the time of
acquisition have been completed. Capital improvements (including tenant
improvements and leasing commissions for shell space) for the six months ended
June 30, 1999 were approximately $12.9 million or $0.17 per square foot. These
amounts exclude capital and tenant improvements of approximately $45.8 million
for developments.

     The Company considers capital expenditures to be recurring expenditures
relating to the ongoing maintenance of the Office Properties. The table below
summarizes capital expenditures for the six months ended June 30, 1999. The
capital expenditures set forth below are not necessarily indicative of future
capital expenditures.

<TABLE>
<S>                                                           <C>
Number of Office Properties.................................    284
Rentable square feet (in millions)..........................   75.8
Capital Expenditures per square foot........................  $0.08
</TABLE>

                                       27
<PAGE>   28

TENANT IMPROVEMENTS AND LEASING COMMISSION COSTS

     The Company distinguishes its tenant improvements and leasing commissions
between those that are revenue enhancing (i.e., required for space which is
vacant at the time of acquisition or that has been vacant for nine months or
more) and non-revenue enhancing (i.e., required to maintain the revenue being
generated from currently leased space). The table below summarizes the revenue
enhancing and non-revenue enhancing tenant improvements and leasing commissions
for the six months ended June 30, 1999. The tenant improvement and leasing
commission costs set forth below are presented on an aggregate basis and do not
reflect significant regional variations and, in any event, are not necessarily
indicative of future tenant improvements and leasing commission costs:

<TABLE>
<CAPTION>
                                                              FOR THE SIX MONTHS ENDED
(DOLLARS IN THOUSANDS)                                            JUNE 30, 1999(1)
------------------------------------------------------------  ------------------------
<S>                                                           <C>
Number of Office Properties.................................              284
Rentable square feet (in millions)..........................             75.8
Revenue enhancing tenant improvements and leasing
  commissions:
  Amounts (in thousands)....................................          $10,587
  Per square foot improved..................................          $ 18.51
  Per total square foot.....................................          $  0.28
Non-revenue enhancing tenant improvements and leasing
  commissions:
Renewal space:
  Amounts (in thousands)....................................          $14,938
  Per square foot improved..................................          $  6.93
  Per total square foot.....................................          $  0.39
Retenanted space:
  Amounts (in thousands)....................................          $22,750
  Per square foot improved..................................          $ 13.47
  Per total square foot.....................................          $  0.60
                                                                      -------
Total non-revenue enhancing (in thousands)..................          $37,688
Per square foot improved....................................          $  9.80
Per total square foot.......................................          $  0.99
</TABLE>

---------------

(1) The per square foot calculations as of June 30, 1999 are calculated taking
    the total dollars anticipated to be incurred on tenant improvements for
    tenants taking occupancy during the six months ended June 30, 1999, divided
    by the total square footage being improved or total building square footage.
    The actual amounts incurred for the six months ended June 30, 1999 for
    revenue enhancing, non-revenue enhancing renewal and retenanted space are
    summarized below:

<TABLE>
<CAPTION>
                       (Dollars in thousands)
--------------------------------------------------------------------
<S>                                                          <C>
Revenue enhancing........................................    $ 9,920
Non-revenue enhancing renewal............................    $11,579
Non-revenue enhancing retenanted.........................    $18,118
</TABLE>

                                       28
<PAGE>   29

DEVELOPMENT

     In connection with the Beacon Merger and other acquisitions, the Company
acquired certain Properties that are currently in various stages of development
or pre-development. The Company funds these developments with proceeds from
working capital and the credit facilities. Specifically identifiable direct and
indirect acquisition, development and construction costs are capitalized
including, where applicable, salaries and related costs, real estate taxes,
interest and certain pre-construction costs essential to the development of a
property. During the second quarter of 1999, the Company acquired 517 Marquette
Garage and Metropoint II received its Certificate of Occupancy. As a result, the
properties are now considered operational and are no longer disclosed in the
table below. In addition, two properties previously classified as "Other
Projects" totaling $39.9 million were reclassified as land held available for
development based on their current status. As of June 30, 1999, the Company had
incurred approximately $107.3 million of costs in connection with the Properties
being developed. The Properties under development as of June 30, 1999 are as
follows:

<TABLE>
<CAPTION>
                                                                                     ESTIMATED
                                                                                     RENTABLE                       TOTAL
                                                      ESTIMATED PLACE IN   PERCENT    SQUARE                      ESTIMATED
PROPERTY                           LOCATION            SERVICE DATE(A)     LEASED     FOOTAGE    COSTS INCURRED   COSTS(A)
--------                           --------           ------------------   -------   ---------   --------------   ---------
                                                                                                   (Dollars in thousands)
<S>                                <C>                <C>                  <C>       <C>         <C>              <C>
Reston Town Center Garage          Reston, VA              4Q/1999           N/A           (b)      $  6,334      $ 13,000
150 California                     San Francisco, CA       1Q/2000            0%      201,554         26,625        66,000
John Marshall III                  McLean, VA              1Q/2000          100%      180,000         31,446        48,000
Riverside Center                   Newton, MA              2Q/2000            0%      494,710         42,157       112,000
                                                                                      -------       --------      --------
        Total                                                                         876,264       $106,562(c)   $239,000
                                                                                      =======       ========      ========
</TABLE>

     In addition, the Company has entered into agreements to acquire the
following properties upon completion:

<TABLE>
<CAPTION>
                                                                                     ESTIMATED
                                                                                     RENTABLE                       TOTAL
                                                      ESTIMATED PLACE IN   PERCENT    SQUARE                      ESTIMATED
PROPERTY                           LOCATION            SERVICE DATE (A)    LEASED     FOOTAGE    COSTS INCURRED   COSTS (A)
--------                           --------           ------------------   -------   ---------   --------------   ---------
                                                                                                   (Dollars in thousands)
<S>                                <C>                <C>                  <C>       <C>         <C>              <C>
Prominence (d)                     Atlanta, GA             3Q/1999           16%      425,706       $    709      $ 87,000
World Trade Center (e)             Seattle, WA             1Q/2000          100%      186,787             58        39,000
                                                                                      -------       --------      --------
        Total                                                                         612,493       $    767      $126,000
                                                                                      =======       ========      ========
</TABLE>

     The above transactions are contingent upon certain terms and conditions as
set forth in their respective purchase agreements. There can be no assurance
that these transactions will be consummated as described above.

     In addition, the Company has entered into separate joint ventures to
develop the following properties:

<TABLE>
<CAPTION>
                                                                                     ESTIMATED
                                                                                     RENTABLE                       TOTAL
                                                      ESTIMATED PLACE IN   PERCENT    SQUARE                      ESTIMATED
PROPERTY                           LOCATION            SERVICE DATE (A)    LEASED     FOOTAGE    COSTS INCURRED   COSTS (A)
--------                           --------           ------------------   -------   ---------   --------------   ---------
                                                                                                   (Dollars in thousands)
<S>                                <C>                <C>                  <C>       <C>         <C>              <C>
Sunset North Corporate Campus (f)  Bellevue, WA            4Q/1999           53%      460,663       $ 54,056      $ 81,000
Three Bellevue Center (g)          Bellevue, WA            2Q/2000            0%      471,635         15,000        72,000
                                                                                      -------       --------      --------
        Total                                                                         932,298       $ 69,056      $153,000
                                                                                      =======       ========      ========
</TABLE>

---------------

(a) The Estimated Place in Service Date represents the date the certificate of
    occupancy has been or is anticipated to be obtained. Subsequent to obtaining
    the certificate of occupancy, the Property will undergo a lease up period.
    The Total Estimated Costs include amounts attributable to tenanting the
    Property.

                                       29
<PAGE>   30

(b) This property is a parking facility that will consist of approximately 530
    parking spaces and 34,700 square feet of retail space.

(c) Includes $1,771 related to deferred leasing costs. Deferred leasing costs
    are classified separately on the Company's balance sheet.

(d) The estimated cost of this property excludes a vacant land parcel valued at
    approximately $7.0 million. The property was acquired on July 13, 1999 and
    is currently undergoing lease up.

(e) The Company expects to acquire this property upon full occupancy in 2000.

(f) The Costs Incurred and Total Estimated Costs reflect the Company's 80%
    interest in this project including the Company's share of the development
    loan. The total cost of the project including the joint venture partner's
    share is approximately $101 million of which $68 million will be funded by a
    development loan. The Company's share of the development loan outstanding at
    June 30, 1999 is approximately $28.4 million.

(g) The Costs Incurred and Total Estimated Costs reflect the Company's 80%
    interest in this project including the Company's pro-rata share of the
    development loan. The total cost of the project including the joint venture
    partner's share is approximately $90 million of which up to $60 million will
    be funded by a development loan. The Company's share of the development loan
    outstanding at June 30, 1999 is approximately $.3 million.

     In addition to the properties described above, the Company owns various
land parcels available for development. However, no significant development
activity is taking place on these sites at this time.

YEAR 2000

OVERVIEW OF Y2K PROBLEM

     The Year 2000 or "Y2K" problem refers to the inability of many existing
computer programs to properly recognize a year that begins with "20" instead of
the familiar "19". If left uncorrected, many computer programs having
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. The failure to accurately recognize the year 2000 and other
key dates could result in a variety of problems from data miscalculations to the
failure of entire systems. Among the assumptions the Company has made in the
course of this discussion are the following:

-   The Company's ability to accurately determine its Y2K readiness on a
     cost-effective basis.

-   The availability of personnel and systems as required to correct any Y2K
     problems known to the Company.

-   The continued availability of such personnel and systems on a commercially
    reasonable basis throughout 1999.

THE YEAR 2000 PROGRAM

     In the early months of 1998, the Company formed a Year 2000 committee for
the purpose of creating a program (the "Program") to identify, understand and
address the myriad of issues associated with the Y2K problem. Such committee is
comprised of representatives from senior management and various departments at
the home and regional offices, including the legal, engineering,
telecommunications, information systems and office services departments. Due to
the wide-ranging implications of the Y2K problem, management decided to carry
out the Program in multiple phases during 1998 and the remainder of 1999. What
follows is a description of the activities that have been or are expected to be
conducted in each phase of the Program, including a summary of the results
obtained to date and a time table for completion. Although many of the phases of
the Program are being carried out simultaneously, the various phases will be
discussed separately.

                                       30
<PAGE>   31

PHASE ONE -- ASSESSING THE COMPANY'S Y2K READINESS

     The initial step in assessing the Company's Y2K readiness consists of
conducting a study to identify any systems and applications (collectively
referred to as "systems") that are date sensitive and, accordingly, could have
potential Y2K problems. The study includes an examination of information
technology and non-information technology systems at the Company's home and
regional offices and at the Company's Properties. For the most part, the initial
step of identifying potentially problematic systems has been completed by the
Company's Information Systems department, building engineers and third party
consultants through a combination of physical inspections and informational
interviews with Company employees.

     After identifying systems that could have a potential Y2K problem, the
second step of Phase I was to attempt to determine which of the systems actually
have a Y2K problem. Much of the required information is within the exclusive
control of the Company's vendors and manufacturers, who have been contacted
through standard form letters and telephone calls requesting information. In
many cases, information was also available on vendor and manufacturer web sites.
Even if a particular system has been represented to be Y2K ready or compliant,
the Company, in many cases, will not consider the system to be Y2K ready until
after the Company has confirmed the system's readiness by independent validation
testing. The Company currently plans to perform, or has already performed,
validation testing for: (i) all Building Management Systems (described below);
and (ii) except in limited circumstances where testing is not practical, all
information systems (described below) whose failure could have a catastrophic
effect on the daily operation of the Company. A standard questionnaire has been
developed for the purpose of assessing the need to perform validation testing on
information systems whose failure could have a significant adverse effect on the
daily operation of any of the Company's departments. Based on the results of the
questionnaire, the Company will decide, on a case-by-case basis, whether to
perform validation testing with respect to specific systems that have received a
criticality rating of significant or minimal. In addition to examining the
Company's systems for Y2K readiness, the Company continues to assess the
progress of the Building Owners and Managers Association ("BOMA"), the General
Services Administration ("GSA") and other industry leaders that are monitoring
the compliance efforts of the major utility and telecommunications companies.
The following is a summary of the Phase One results obtained to date.

BUILDING MANAGEMENT SYSTEMS

     The Company has identified six categories of building management systems in
which it has the most exposure to potential Y2K problems. These categories
include:

-   Building automation (e.g. energy management, HVAC)

-   Security card access

-   Fire and life safety

-   Elevator

-   Garage revenue control

-   Telephone

     Prior to January 1999, the Company completed a preliminary Y2K readiness
study of the building management systems outlined above at each of the Company's
Properties. Based upon this study, the Company will upgrade or replace specific
building management systems that were represented not to be Year 2000 ready or
compliant. The estimated cost of such upgrades and replacements is described in
the Phase Two summary that follows. It is possible that independent testing of
the building management systems may reveal the need for additional upgrades and
replacements. As of July 20, 1999, the Company has completed validation testing
for approximately 63% of the building management systems. It should be noted
that the garage revenue control systems for the Equity Capital Holdings parking
garages are being inventoried, assessed and tested separate from the building
management systems for the remainder of the Company. The inventory and
assessment phase for these systems is currently scheduled to be completed in the
third quarter of 1999. Validation testing is currently scheduled to be completed
in November, 1999.
                                       31
<PAGE>   32

INFORMATION SYSTEMS

     The Company's information systems falls into four general categories:
accounting and property management, network operating systems, desktop software
and secondary systems.

ACCOUNTING AND PROPERTY MANAGEMENT

     Management believes that it has determined the Company's exposure with
respect to the Company's accounting and property management software (MRI).
Testing of the MRI software and installation of Y2K upgrades has been completed,
bringing that system to full Y2K readiness.

     The Company is actively preparing to replace the general ledger (GL)
component of the MRI system during third quarter of 1999 to a new JD Edwards
implementation. The software is certified by the vendor to be fully Y2K
compliant and is known to have successfully been tested for Y2K compliance by
other companies that use it. Management is therefore currently reviewing whether
additional Y2K testing is warranted. Accounts Payable and Property Management
modules of the JD Edwards software are currently being prepared for future
implementation. Those modules within MRI will continue to be used until such
replacement occurs.

NETWORK OPERATING SYSTEMS

     Management believes that the network operating systems on its servers are
currently approximately 75% Y2K ready. The servers that are not currently Y2K
ready require a software patch that is being acquired from the software
manufacturer. Upgrades of the Company's network operating systems are expected
to be installed by September, 1999, bringing the network operating systems on
its servers into full year 2000 readiness. Management believes that testing of
this new software is not necessary, as it has already been proven in the
industry to be Y2K compliant.

DESKTOP SOFTWARE

     Management believes that all of the Company's desktop systems and software
applications have been reviewed. Management has identified those that are not in
compliance and compiled a list of necessary upgrades. The efforts to ready the
Company's desktop systems for Y2K are being directed towards a broader Company
initiative referred to as EO 2000. As part of the EO 2000 program, the Company
currently intends to install Windows NT and Microsoft Office 97 on all field and
home office desktop systems. It is currently anticipated that all field
installations will be completed by the end of November, 1999. The Company does
not intend to install Windows NT and Microsoft Office 97 in the corporate office
until the first and second quarters of 2000. As such, a software patch will be
installed to upgrade the Windows95 operating system currently used in the
corporate office and to install Microsoft Office 97 software.

     The Company's time frame for EO 2000 is expected to be as follows:

-   Systems (hardware and software) testing for Y2K readiness -- Complete

-   Install updated software that will also provide Y2K readiness -- In Progress

-   Complete installation/full Y2K readiness at Company Properties -- November
    1999

-   Complete installation of software patches at corporate office -- November
     1999

SECONDARY INFORMATION SYSTEMS

     The Company's "secondary" information systems include, but are not limited
to: payroll, human resources, fixed-asset system, forecasting modeling software,
and all types of internally developed software, such as the Company's budget
program and tenant-services system. The Company has retained a third party
consultant to assist in identifying and assessing the readiness of its
information systems, including the secondary systems. As mentioned above, the
Company currently plans to test a number of the systems, including secondary
systems, that were represented by the vendors or manufacturers to be Year 2000
ready or

                                       32
<PAGE>   33

compliant. With limited expectations, all systems that received a criticality
rating of catastrophic will be (or have been) tested. The need to test systems
receiving a criticality rating of significant or minimal will be determined
based on the results of questionnaires to be completed by an end user of each
individual system.

TELECOMMUNICATION SYSTEMS

     Management generally believes that the Company's internal telephone systems
are not date sensitive and should not be materially affected by Y2K problems.
Although there could be some convenience issues such as inaccurate voice-mail
message date stamps, such problems are not expected to be material and, in large
part, should be corrected prior to the year 2000.

PHASE TWO -- DETERMINING THE COST OF ACHIEVING Y2K READINESS AND IMPLEMENTING
THE Y2K ACTION PLAN

     Based upon the preliminary studies that were completed in January 1999, the
Company has budgeted approximately $7.4 million for the upgrade and replacement
of building management systems having potential Y2K related problems. This
amount equates to an average of approximately $.10 per rentable square foot at
each of the Company's Properties and does not include any costs to upgrade or
replace garage revenue control systems in the Equity Capital Holdings parking
garages. The Company currently estimates that it will spend approximately
$350,000 for the testing, validation and remediation of the Equity Capital
Holdings parking garage revenue control systems. An estimate of costs to upgrade
or replace any of the garage revenue control systems will be prepared following
the completion of the Year 2000 assessment for such systems. It is management's
belief that, with respect to the Company's Office Properties, a large part of
the cost of bringing the building management systems into compliance will be
considered to be reimbursable to the Company under most tenant leases or is
being incurred as part of a broader initiative to improve building operating
systems.

     The estimated cost of the EO 2000 initiative is $1.7 million. Most of the
work related to EO 2000 is not Y2K related. The Company is still in the process
of completing Phases One and Two of the Program with respect to Information
Systems. Approximately $.3 million was spent in Phase I to identify information
systems that could have potential Y2K problems and to obtain information from
the vendors and manufacturers of such systems concerning Y2K readiness. The
Company currently projects that it will cost approximately $.65 million to
complete testing, validation and remediation of all corporate and desktop
information systems.

PHASE THREE -- ASSESSING THE RISKS TO THE COMPANY OF NON-COMPLIANCE

     Management does not currently believe that the impact of the Y2K problem
will have a material adverse effect on the Company's financial condition and
results of operations. Such belief is based on management's analysis of the
risks to the Company related to the Company's own potential Y2K problems
discussed above, as well as its assessment of the Y2K problems of the Company's
vendors, suppliers and customers.

FAILURE OF BUILDING MANAGEMENT SYSTEMS

     Management believes that the Y2K risks to the Company's financial condition
and operation associated with a failure of building management systems is
immaterial due to the fact that most building management systems can be operated
in a manual or by-pass mode, thereby negating the Y2K problem until it can be
corrected. Also, each of the Company's Properties has, for the most part,
separate building management systems. Accordingly, a Y2K problem that is
experienced at one Property should have no effect on other Properties. In
addition, based upon the study results received to date, management believes
that the Company will have sufficient time to correct those system problems
within its control before the year 2000.

     In the event the Company does experience a failure of essential building
management systems at one or more of the Company's buildings, whether due to a
failure of one of its systems or an interruption of utilities, management
believes that the individual tenant leases will protect the Company from claims
of constructive eviction or other remedies that could result in a termination of
lease rights. It is also management's belief that most of its leases eliminate,
limit or quantify the rights of a tenant to receive an abatement under such
circumstances. Although there is always a risk of claims being brought on a
non-contractual basis (e.g. in
                                       33
<PAGE>   34

tort), it is the Company's belief that its efforts to identify and solve Y2K
problems will minimize such risk. The Company has also attempted to allocate the
risk of non-compliance to the vendors and manufacturers of the building
management and information systems by establishing standard riders and addenda
to be attached to new contracts for systems using time sensitive data.

FAILURE OF INFORMATION SYSTEMS

     Since the Company's major source of income is rental payments under long
term leases, the failure of key information systems is not expected to have a
material adverse effect on the Company's financial condition and results of
operations. Even if the Company were to experience problems with its information
systems, the payment of rent under the leases would not be excused. In addition,
the Company expects to correct those information system problems within its
control before the year 2000, thereby minimizing or avoiding the increased cost
of correcting problems after the fact.

THE Y2K PROBLEMS OF THE COMPANY'S VENDORS

     The success of the Company's business is not closely tied to the operations
of any one manufacturer, vendor or supplier. Accordingly, if any of the
Company's manufacturers, vendors or suppliers ceases to conduct business due to
Y2K related problems, the Company expects to be able to contract with alternate
providers without experiencing any material adverse effect on the Company's
financial condition and results of operations. The Company has received a Year
2000 Readiness Disclosure from its transfer agent, Equiserve, indicating that it
is on track with all of its system readiness and testing, as well as its
development of contingency plans.

THE Y2K PROBLEMS OF THE COMPANY'S CUSTOMERS

     Due to our broad customer/tenant base, the success of the Company's
business is not closely tied to the success of any particular tenant.
Accordingly, management believes that there should not be a material adverse
effect on the Company's financial condition and results of operations if any one
of its tenants ceased to conduct business (and pay rent) due to Y2K related
problems. This would not necessarily be the case, however, were Y2K problems
sufficiently pervasive as to affect the financial conditions of a material
number of the Company's tenants. As part of its efforts to keep its tenants
advised as to the steps the Company is taking to address potential Y2K problems,
the Company has also requested that its tenants provide it with periodic updates
as to their Y2K readiness.

DOOMSDAY SCENARIO

     The Company is aware that it is generally believed that the world's Y2K
problem, if uncorrected, may result in an economic crisis of global proportions.
The Company is unable to determine whether such predictions are true or false.
As mentioned above, the Company expects that the nature of its income (rent from
good credit tenants under long term leases) should serve as a hedge against any
short term disruptions of business. However, if the doomsday scenarios prove
true, all companies (including Equity Office Properties Trust) will experience
the effects.

PHASE FOUR -- DEVELOPING CONTINGENCY PLANS

     A Y2K Operating Contingency Plan template and Y2K Systems Contingency Plan
template have been completed and distributed to all of the Company Properties.
The Operating Contingency Plan addresses a variety of issues involved with the
operation of the Company Properties, including a plan for communicating with the
Company's tenants pre-millennium and post-millennium. The Systems Contingency
Plan focuses on a potential failure of building management systems. Based upon
the templates, the Company's office building managers and engineers will develop
building specific contingency plans. Such plans are currently scheduled to be
completed by October 22, 1999. Upon completion, the individual building plans
will be subject to review and approval by each Regional Vice President of
Management and Regional Engineer. In certain instances (e.g. third party
operated garages), contingency plans will be prepared by the third party
managers for review

                                       34
<PAGE>   35

and approval by the Company. The determination of whether or not to develop
contingency plans for specific information systems will be made on a
case-by-case basis based upon the criticality rating of the individual system
(i.e. catastrophic, significant or minimal), the results of the standard
questionnaire referred to above and the likelihood that a contingency plan could
be successfully implemented.

INFLATION

     Substantially all of the office leases require the tenant to pay, as
additional rent, a portion of any increases in real estate taxes (except, in the
case of certain California leases, which limit the ability of the landlord to
pass through to the tenants the effect of increased real estate taxes
attributable to a sale of real property interests) and operating expenses over a
base amount. In addition, many of the office leases provide for fixed increases
in base rent or indexed escalations (based on the Consumer Price Index or other
measures). The Company believes that inflationary increases in expenses will be
offset, in part, by the expense reimbursements and contractual rent increases
described above.

FUNDS FROM OPERATIONS

     Management of the Company believes Funds from Operations, as defined by the
National Association of Real Estate Investment Trusts, Inc. ("NAREIT"), to be an
appropriate measure of performance for an equity REIT. While Funds from
Operations is a relevant and widely used measure of operating performance of
equity REITs, it does not represent cash flow from operations or net income as
defined by generally accepted accounting principles ("GAAP"), and it should not
be considered as an alternative to these indicators in evaluating liquidity or
operating performance of the Company.

     The following table reflects the calculation of the Company's Funds from
Operations for the three months ended June 30, 1999 and 1998 on a historical
basis:

<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED JUNE 30,
                                                              ---------------------------
                  (DOLLARS IN THOUSANDS)                         1999           1998
-----------------------------------------------------------   -----------   -------------
<S>                                                           <C>           <C>
Income before allocation to minority interests, income from
  investment in unconsolidated joint ventures, net gain on
  sales of real estate and extraordinary items.............    $ 104,536     $    97,879
Add back (deduct):
  (Income) allocated to minority interests for partially
     owned properties......................................         (353)           (498)
  Income from investment in unconsolidated joint
     ventures..............................................        3,215           1,392
  Depreciation and amortization (real estate related)......       90,143          73,592
  Net amortization of discount/premium on mortgage debt....           77             257
  Preferred distributions..................................      (10,907)         (8,432)
                                                               ---------     -----------
Funds from Operations(1)...................................      186,711         164,190
  Less deferred rental revenue.............................      (15,233)        (15,601)
  Plus deferred rental expense.............................          463             751
                                                               ---------     -----------
Adjusted Funds from Operations.............................    $ 171,941     $   149,340
                                                               =========     ===========
Cash Flow Provided By (Used For):
  Operating Activities.....................................    $ 237,811     $   234,926
  Investing Activities.....................................    $ (86,845)    $(1,005,038)
  Financing Activities.....................................    $(157,015)    $   811,182
Ratio of earnings to combined fixed charges and preferred
  share distributions......................................          1.8             2.0
</TABLE>

                                       35
<PAGE>   36

     The following table reflects the calculation of the Company's Funds from
Operations for the six months ended June 30, 1999 and 1998 on a historical
basis:

<TABLE>
<CAPTION>
                                                              SIX MONTHS ENDED JUNE 30,
                                                              -------------------------
                  (DOLLARS IN THOUSANDS)                         1999          1998
-----------------------------------------------------------   ----------   ------------
<S>                                                           <C>          <C>
Income before allocation to minority interests, income from
  investment in unconsolidated joint ventures, net gain on
  sales of real estate and extraordinary items.............   $ 204,820    $   182,210
Add back (deduct):
  (Income) allocated to minority interests for partially
     owned properties......................................        (898)        (1,036)
  Income from investment in unconsolidated joint
     ventures..............................................       5,050          5,026
  Depreciation and amortization (real estate related)......     179,231        142,998
  Net amortization of discount/premium on mortgage debt....        (376)           531
  Preferred distributions..................................     (21,788)       (14,703)
                                                              ---------    -----------
Funds from Operations (1)..................................     366,039        315,026
  Less deferred rental revenue.............................     (31,773)       (32,720)
  Plus deferred rental expense.............................       1,116          1,306
                                                              ---------    -----------
Adjusted Funds from Operations.............................   $ 335,382    $   283,612
                                                              =========    ===========
Cash Flow Provided By (Used For):
  Operating Activities.....................................   $ 340,723    $   345,691
  Investing Activities.....................................   $(240,778)   $(1,275,985)
  Financing Activities.....................................   $(131,108)   $   754,192
Ratio of earnings to combined fixed charges and preferred
  share distributions......................................         1.7            2.0
</TABLE>

---------------

(1) The White Paper on Funds from Operations approved by the Board of Governors
    of the National Association of Real Estate Investment Trusts ("NAREIT") in
    March 1995 defines Funds from Operations as net income (loss) (computed in
    accordance with GAAP), excluding gains (or losses) from debt restructuring
    and sales of properties, plus real estate related depreciation and
    amortization and after adjustments for unconsolidated partnerships and joint
    ventures. The Company believes that Funds from Operations is helpful to
    investors as a measure of the performance of an equity REIT because, along
    with cash flow from operating activities, financing activities and investing
    activities, it provides investors with an indication of the ability of the
    Company to incur and service debt, to make capital expenditures and to fund
    other cash needs. The Company computes Funds from Operations in accordance
    with standards established by NAREIT which may not be comparable to Funds
    from Operations reported by other REITs that do not define the term in
    accordance with the current NAREIT definition or that interpret the current
    NAREIT definition differently than the Company. Funds from Operations 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 the Company's financial performance or to
    cash flow from operating activities (determined in accordance with GAAP) as
    a measure of the Company's liquidity, nor is it indicative of funds
    available to fund the Company's cash needs, including its ability to make
    cash distributions.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Since December 31, 1998, there have been no material changes in the
information regarding market risk that was provided in the Company's Form 10-K
for the year ended December 31, 1998, except as provided below.

     In July 1999, the Company entered into two forward interest rate hedge
agreements with unaffiliated counterparties for a notional amount of $50 million
each at a forward rate of 5.85% and 5.7925%, respectively,

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<PAGE>   37

in anticipation of future financing transactions. Both agreements terminate in
August 1999 and are referenced to the ten-year U.S. Treasury Note. Upon
settlement of the agreements, the Company may have to pay monies to, or receive
monies from, the counterparties depending on the referenced ten-year U.S.
Treasury Note on the settlement date. If the ten-year U.S. Treasury Notes are
10% lower than the forward rate of the agreements, the Company would have to pay
approximately $4.4 million to the counterparties. If the ten-year U.S. Treasury
Notes are 10% higher than the forward rate of the agreements, the Company would
receive approximately $4.4 million from the counterparties. As of August 3,
1999, the market value of the agreements is approximately $.9 million.

     At June 30, 1999, the Company has put option agreements outstanding in
connection with the acquisition of the Wright Runstad Properties. On August 13,
1999, the WR Holders can require the Company to purchase all or a portion of the
3,435,688 Common Shares issued to them in the acquisition at a price equal to
$31.50 per Common Share. Prior to August 13, 1999, if the WR Holders sell all or
a portion of their Common Shares to a third party for a price less than
$29.10625, then the Company is obligated to pay to the WR Holders for each
Common Share sold at such lower price an amount equal to the difference between
$29.10625 and such lower price, not to exceed $3.00 per Common Share. Any
amounts paid by the Company as a result of such sales will be recorded as a
reduction in shareholders' equity. For put options exercised on August 13, 1999,
any amounts paid up to $29.10625 per Common Share would be reflected as a
reduction in shareholders' equity; the portion of any amounts paid in excess of
$29.10625 per Common Share (not to exceed $2.39375 per Common Share up to an
aggregate of approximately $8.2 million) would be expensed by the Company. The
Company will not incur any loss on this transaction if the put option is not
exercised.

     As of August 5, 1999, the Company and the WR Holders have agreed, subject
to documentation, to amend the put option agreement to defer to August 13, 2000
(or to August 13, 2001 at the option of the WR Holders) the exercise date for
50% of the Common Shares affected by the put option agreement (a maximum
exposure to the Company of approximately $54.1 million when and if this put
option is exercised). The Company and the WR Holders also agreed to cancel the
put option on the remaining 50% of the affected Common Shares in exchange for
the Company's payment to the WR Holders of an amount equal to the excess, if any
of (x) $31.50 over (y) the average price of a Common Share calculated over the
five trading days immediately prior to August 13, 1999, for each of the
remaining 1,717,844 Common Shares affected by the put option agreement.

     As a result of this amendment, the Company's cash flows could decrease by
up to $5.2 million if, prior to August 13, 2000, the WR Holders sell all their
Common Shares to third parties. Cash flows of the Company may decrease by up to
approximately $54.1 million if the WR Holders exercise their rights under the
put option agreement on August 13, 2000 (or August 13, 2001, if extended at the
option of the WR Holders). There will be no impact on cash flows from this
transaction if the put option is not exercised.

     Although the Company anticipates full execution of the documentation
confirming the aforesaid amendment on or before August 13, 1999, in the event
this does not occur, the maximum amount that the Company's cash flows would
decrease is approximately $108.2 million.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits:

          (27) Financial Data Schedule

     (b) Reports on Form 8-K:

          - A report on Form 8-K, dated April 13, 1999 containing Item 5.

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