##### Table of Contents









SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549




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Form 10-Q



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|           |  |                                                                                          
|---------- |  | -----------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                          
|þ          |  | QUARTERLY REPORT PURSUANT TO SECTION 13
	OR 15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934
|           |  | For the quarterly period ended
	September 30, 2001                                       
|          
|or        
|          
|o          |  | REPORT PURSUANT TO SECTION 13 OR 15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934           

Commission File Number: 001-14245

AMB Property, L.P.

(Exact Name of Registrant as Specified in Its
Charter)


|                                                                |  |                                      
|--------------------------------------------------------------- |  | -------------------------------------
|Delaware                                                        |  | 94-3285362                           
|(State or Other Jurisdiction of
	Incorporation or Organization) |  | (I.R.S. Employer
	Identification No.)
|                                                               
|Pier 1, Bay 1, San Francisco,
	California                       |  | 94111                                
|(Address of Principal Executive
	Offices)                       |  | (Zip Code)                           

(415) 394-9000

(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 
þ
          No 
 o.



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TABLE OF CONTENTS



|                           |                                                                                               |                                                       |  |  |  |  |  | 
|-------------------------- | --------------------------------------------------------------------------------------------- | ----------------------------------------------------- |  |  |  |  |  | 
|PART I                    
|                           | Item 1. Financial Statements                                                                 
|                           |                                                                                               | CONDENSED CONSOLIDATED BALANCE SHEETS                
|                           |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS      
|                           |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS      
|                           |                                                                                               | CONDENSED CONSOLIDATED STATEMENT OF PARTNERS CAPITAL
|                           |                                                                                               | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
|                           | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                           | Item 7A. Quantitative and Qualitative Disclosures About Market Risk                          
|PART II                   
|                           | Item 1. Legal Proceedings                                                                    
|                           | Item 2. Changes in Securities and Use of Proceeds                                            
|                           | Item 3. Defaults Upon Senior Securities                                                      
|                           | Item 4. Submission of Matters to a Vote of Security Holders                                  
|                           | Item 5. Other Information                                                                    
|BUSINESS RISKS            
|                           | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                
|Revolving Credit Agreement



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##### Table of Contents



AMB PROPERTY, L.P.

INDEX

|                                |  |                                                                                                                   |  |      |  | 
|------------------------------- |  | ----------------------------------------------------------------------------------------------------------------- |  | ---- |  | 
|                                |  |                                                                                                                   |  | Page
|                                |  |                                                                                                                   |  |     
|PART I.  FINANCIAL
	INFORMATION
|Item  1.                        |  | Financial Statements (unaudited)                                                                                  |  |      |  | 
|                                |  | Condensed Consolidated Balance Sheets as of
	September 30, 2001, and December 31, 2000                            |  |      |  | 
|                                |  | Condensed Consolidated Statements of Operations
	for the three and nine months ended September 30, 2001 and
	2000 |  |      |  | 
|                                |  | Condensed Consolidated Statements of Cash Flows
	for the nine months ended September 30, 2001 and 2000            |  |      |  | 
|                                |  | Condensed Consolidated Statement of
	Partners Capital for the nine months ended
	September 30, 2001              |  |      |  | 
|                                |  | Notes to Condensed Consolidated Financial
	Statements                                                             |  |      |  | 
|Item  2.                        |  | Managements Discussion and Analysis of
	Financial Condition and Results of Operations                            |  |      |  | 
|Item  3.                        |  | Quantitative and Qualitative Disclosures About
	Market Risk                                                       |  |      |  | 
|PART II.  OTHER
	INFORMATION   
|Item  1.                        |  | Legal Proceedings                                                                                                 |  |      |  | 
|Item  2.                        |  | Changes in Securities and Use of Proceeds                                                                         |  |      |  | 
|Item  3.                        |  | Defaults Upon Senior Securities                                                                                   |  |      |  | 
|Item  4.                        |  | Submission of Matters to a Vote of Security
	Holders                                                              |  |      |  | 
|Item  5.                        |  | Other Information                                                                                                 |  |      |  | 
|Item  6.                        |  | Exhibits and Reports on Form 8-K                                                                                  |  |      |  | 

1



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##### Table of Contents






PART I




Item 1.Financial Statements

AMB PROPERTY, L.P.






CONDENSED CONSOLIDATED BALANCE
SHEETS


As of September 30, 2001 and
December 31, 2000


(Unaudited, dollars in thousands, except unit
amounts)


|                                             |                                                                                                                                                                                                                                     |                                |                                         |              |           |           |         |           |           |           | 
|-------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------ | --------------------------------------- | ------------ | --------- | --------- | ------- | --------- | --------- | --------- | 
|                                             |                                                                                                                                                                                                                                     | September 30,                  |                                         | December 31,
|                                             |                                                                                                                                                                                                                                     | 2001                           |                                         | 2000        
|                                             |                                                                                                                                                                                                                                     |                                |                                         |             
|ASSETS                                      
|Investments in real estate:                  |                                                                                                                                                                                                                                     |                                |                                         |              |           |           |         |          
|                                             | Land                                                                                                                                                                                                                                |                                | $                                       | 988,699      |           |           | $       | 833,325   |          
|                                             | Buildings and improvements                                                                                                                                                                                                          |                                |                                         | 3,226,073    |           |           |         | 2,915,537 |          
|                                             | Construction in progress                                                                                                                                                                                                            |                                |                                         | 219,075      |           |           |         | 277,735   |          
|                                             |                                                                                                                                                                                                                                     |                                |                                         |              |           |           |         |          
|                                             |                                                                                                                                                                                                                                     |                                | Total investments in properties         |              |           | 4,433,847 |         |           |           | 4,026,597 | 
|                                             | Accumulated depreciation and amortization                                                                                                                                                                                           |                                |                                         | (239,144     | )         |           |         | (177,467  | )        
|                                             |                                                                                                                                                                                                                                     |                                |                                         |              |           |           |         |          
|                                             |                                                                                                                                                                                                                                     | Net investments in properties  |                                         |              | 4,194,703 |           |         |           | 3,849,130 |          
|Investments in unconsolidated joint ventures |                                                                                                                                                                                                                                     |                                | 85,707                                  |              |           |           | 80,432  |          
|Properties held for divestiture, net         |                                                                                                                                                                                                                                     |                                | 106,054                                 |              |           |           | 197,146 |          
|                                             |                                                                                                                                                                                                                                     |                                |                                         |              |           |           |         |          
|                                             |                                                                                                                                                                                                                                     | Net investments in real estate |                                         |              | 4,386,464 |           |         |           | 4,126,708 |          
|Cash and cash equivalents                    |                                                                                                                                                                                                                                     |                                | 243,427                                 |              |           |           | 20,358  |          
|Restricted cash                              |                                                                                                                                                                                                                                     |                                | 13,445                                  |              |           |           | 22,364  |          
|Mortgages receivable                         |                                                                                                                                                                                                                                     |                                | 92,232                                  |              |           |           | 115,969 |          
|Accounts receivable, net                     |                                                                                                                                                                                                                                     |                                | 68,811                                  |              |           |           | 69,874  |          
|Investments in affiliated companies          |                                                                                                                                                                                                                                     |                                |                                        |              |           |           | 35,731  |          
|Investments in other companies               |                                                                                                                                                                                                                                     |                                |                                        |              |           |           | 15,965  |          
|Other assets                                 |                                                                                                                                                                                                                                     |                                | 27,245                                  |              |           |           | 18,657  |          
|                                             |                                                                                                                                                                                                                                     |                                |                                         |              |           |           |         |          
|                                             |                                                                                                                                                                                                                                     |                                | Total assets                            |              | $         | 4,831,624 |         |           | $         | 4,425,626 | 
|                                             |                                                                                                                                                                                                                                     |                                |                                         |              |           |           |         |          
|LIABILITIES AND PARTNERS
	CAPITAL          
|Debt:                                        |                                                                                                                                                                                                                                     |                                |                                         |              |           |           |         |          
|                                             | Secured debt                                                                                                                                                                                                                        |                                | $                                       | 1,102,801    |           |           | $       | 940,276   |          
|                                             | Unsecured senior debt securities                                                                                                                                                                                                    |                                |                                         | 780,000      |           |           |         | 680,000   |          
|                                             | Alliance Fund II credit facility                                                                                                                                                                                                    |                                |                                         | 125,000      |           |           |         |          |          
|                                             | Unsecured credit facility                                                                                                                                                                                                           |                                |                                         |             |           |           |         | 216,000   |          
|                                             |                                                                                                                                                                                                                                     |                                |                                         |              |           |           |         |          
|                                             |                                                                                                                                                                                                                                     |                                | Total debt                              |              |           | 2,007,801 |         |           |           | 1,836,276 | 
|Dividends payable                            |                                                                                                                                                                                                                                     |                                | 42,905                                  |              |           |           | 6,775   |          
|Other liabilities                            |                                                                                                                                                                                                                                     |                                | 154,472                                 |              |           |           | 140,267 |          
|                                             |                                                                                                                                                                                                                                     |                                |                                         |              |           |           |         |          
|                                             |                                                                                                                                                                                                                                     |                                | Total liabilities                       |              |           | 2,205,178 |         |           |           | 1,983,318 | 
|Commitments and contingencies (note 12)      |                                                                                                                                                                                                                                     |                                |                                         |              |           |           |         |          
|Minority interests                           |                                                                                                                                                                                                                                     |                                | 658,125                                 |              |           |           | 496,405 |          
|Partners capital:                           |                                                                                                                                                                                                                                     |                                |                                         |              |           |           |         |          
|                                             | General Partner, 83,935,431 and 83,909,340 units,
	respectively, and 4,000,000 Series A preferred units with a
	$100,000 liquidation preference                                                                                     |                                |                                         | 1,767,388    |           |           |         | 1,767,930 |          
|                                             | Limited Partners, 4,987,828 and 5,827,917 units
	outstanding, respectively, 1,300,000 Series B preferred
	units with a $65,000 liquidation preference, and 800,000
	Series J preferred units with a $40,000 liquidation
	preference |                                |                                         | 200,933      |           |           |         | 177,973   |          
|                                             |                                                                                                                                                                                                                                     |                                |                                         |              |           |           |         |          
|                                             |                                                                                                                                                                                                                                     |                                | Total partners capital                 |              |           | 1,968,321 |         |           |           | 1,945,903 | 
|                                             |                                                                                                                                                                                                                                     |                                |                                         |              |           |           |         |          
|                                             |                                                                                                                                                                                                                                     |                                | Total liabilities and partners capital |              | $         | 4,831,624 |         |           | $         | 4,425,626 | 
|                                             |                                                                                                                                                                                                                                     |                                |                                         |              |           |           |         |          

The accompanying notes are an integral part of
these condensed consolidated financial statements.

2



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##### Table of Contents



AMB PROPERTY, L.P.






CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS


For the Three and Nine Months Ended
September 30, 2001 and 2000


(Unaudited, dollars in thousands, except unit
and per unit amounts)


|                                                                  |                                                      |                                                  |                                         |                     |        |         |        |            |        |         |        |            |         |         |        |            |         |         |  
|----------------------------------------------------------------- | ---------------------------------------------------- | ------------------------------------------------ | --------------------------------------- | ------------------- | ------ | ------- | ------ | ---------- | ------ | ------- | ------ | ---------- | ------- | ------- | ------ | ---------- | ------- | ------- | -
|                                                                  |                                                      |                                                  |                                         |                    
|                                                                  |                                                      | For the Three Months                             |                                         | For the Nine Months
|                                                                  |                                                      | Ended September 30,                              |                                         | Ended September 30,
|                                                                  |                                                      |                                                  |                                         |                    
|                                                                  |                                                      | 2001                                             |                                         | 2000                |        | 2001    |        | 2000      
|                                                                  |                                                      |                                                  |                                         |                     |        |         |        |           
|REVENUES                                                          |                                                      |                                                  |                                         |                     |        |         |        |            |        |         |        |            |         |         |        |           
|                                                                  | Rental revenues                                      |                                                  | $                                       | 146,089             |        |         | $      | 118,493    |        |         | $      | 421,425    |         |         | $      | 337,356    |        
|                                                                  | Equity in earnings of unconsolidated joint
	ventures |                                                  |                                         | 1,636               |        |         |        | 1,447      |        |         |        | 4,365      |         |         |        | 4,006      |        
|                                                                  | Investment management income                         |                                                  |                                         | 2,340               |        |         |        | 940        |        |         |        | 8,022      |         |         |        | 2,160      |        
|                                                                  | Interest and other income                            |                                                  |                                         | 5,392               |        |         |        | 491        |        |         |        | 12,505     |         |         |        | 1,651      |        
|                                                                  |                                                      |                                                  |                                         |                     |        |         |        |            |        |         |        |            |         |         |        |           
|                                                                  |                                                      |                                                  | Total revenues                          |                     |        | 155,457 |        |            |        | 121,371 |        |            |         | 446,317 |        |            |         | 345,173 |  
|OPERATING EXPENSES                                                |                                                      |                                                  |                                         |                     |        |         |        |            |        |         |        |            |         |         |        |           
|                                                                  | Property operating expenses                          |                                                  |                                         | 17,970              |        |         |        | 13,400     |        |         |        | 51,016     |         |         |        | 36,463     |        
|                                                                  | Real estate taxes                                    |                                                  |                                         | 17,379              |        |         |        | 13,994     |        |         |        | 50,893     |         |         |        | 40,992     |        
|                                                                  | Interest, including amortization                     |                                                  |                                         | 32,996              |        |         |        | 22,562     |        |         |        | 94,754     |         |         |        | 62,906     |        
|                                                                  | Depreciation and amortization                        |                                                  |                                         | 38,961              |        |         |        | 23,312     |        |         |        | 93,138     |         |         |        | 65,135     |        
|                                                                  | General and administrative                           |                                                  |                                         | 8,796               |        |         |        | 5,987      |        |         |        | 26,180     |         |         |        | 17,322     |        
|                                                                  | Loss on investments in other companies               |                                                  |                                         |                    |        |         |        |           |        |         |        | 20,758     |         |         |        |           |        
|                                                                  |                                                      |                                                  |                                         |                     |        |         |        |            |        |         |        |            |         |         |        |           
|                                                                  |                                                      |                                                  | Total operating expenses                |                     |        | 116,102 |        |            |        | 79,255  |        |            |         | 336,739 |        |            |         | 222,818 |  
|                                                                  |                                                      |                                                  |                                         |                     |        |         |        |            |        |         |        |            |         |         |        |           
|                                                                  |                                                      | Income from operations before minority interests |                                         |                     | 39,355 |         |        |            | 42,116 |         |        |            | 109,578 |         |        |            | 122,355 |        
|Minority interests:                                               |                                                      |                                                  |                                         |                     |        |         |        |            |        |         |        |            |         |         |        |           
|                                                                  | Preferred units                                      |                                                  |                                         | (5,943              | )      |         |        | (4,804     | )      |         |        | (17,342    | )       |         |        | (13,572    | )      
|                                                                  | Minority interests                                   |                                                  |                                         | (8,756              | )      |         |        | (4,404     | )      |         |        | (20,166    | )       |         |        | (8,567     | )      
|                                                                  |                                                      |                                                  |                                         |                     |        |         |        |            |        |         |        |            |         |         |        |           
|                                                                  |                                                      |                                                  | Minority interests share of net income |                     |        | (14,699 | )      |            |        | (9,208  | )      |            |         | (37,508 | )      |            |         | (22,139 | )
|                                                                  |                                                      |                                                  |                                         |                     |        |         |        |            |        |         |        |            |         |         |        |           
|                                                                  |                                                      | Net income before gains and extraordinary items  |                                         |                     | 24,656 |         |        |            | 32,908 |         |        |            | 72,070  |         |        |            | 100,216 |        
|Gain from development held for sale                               |                                                      |                                                  | 1,341                                   |                     |        |         |       |            |        |         | 1,341  |            |         |         |       |           
|Gain from divestitures of real estate, net of
	minority interests |                                                      |                                                  | 8,773                                   |                     |        |         | 5,815  |            |        |         | 43,332 |            |         |         | 6,220  |           
|                                                                  |                                                      |                                                  |                                         |                     |        |         |        |            |        |         |        |            |         |         |        |           
|                                                                  |                                                      | Net income before extraordinary items            |                                         |                     | 34,770 |         |        |            | 38,723 |         |        |            | 116,743 |         |        |            | 106,436 |        
|Extraordinary items                                               |                                                      |                                                  | 87                                      |                     |        |         |       |            |        |         | (351   | )          |         |         |       |           
|                                                                  |                                                      |                                                  |                                         |                     |        |         |        |            |        |         |        |            |         |         |        |           
|                                                                  |                                                      | Net income                                       |                                         |                     | 34,857 |         |        |            | 38,723 |         |        |            | 116,392 |         |        |            | 106,436 |        
|Series A preferred unit distributions                             |                                                      |                                                  | (2,125                                  | )                   |        |         | (2,125 | )          |        |         | (6,375 | )          |         |         | (6,375 | )         
|Series B preferred unit distributions                             |                                                      |                                                  | (1,402                                  | )                   |        |         | (1,402 | )          |        |         | (4,206 | )          |         |         | (4,206 | )         
|Series J preferred unit distributions                             |                                                      |                                                  | (78                                     | )                   |        |         |       |            |        |         | (78    | )          |         |         |       |           
|                                                                  |                                                      |                                                  |                                         |                     |        |         |        |            |        |         |        |            |         |         |        |           
|                                                                  |                                                      | Net income available to common unitholders       |                                         | $                   | 31,252 |         |        | $          | 35,196 |         |        | $          | 105,733 |         |        | $          | 95,855  |        
|                                                                  |                                                      |                                                  |                                         |                     |        |         |        |            |        |         |        |            |         |         |        |           
|Income available to common unitholders
	attributable to:          |                                                      |                                                  |                                         |                     |        |         |        |            |        |         |        |            |         |         |        |           
|                                                                  | General partner                                      |                                                  |                                         | 29,452              |        |         |        | 32,721     |        |         |        | 99,575     |         |         |        | 89,523     |        
|                                                                  | Limited partners                                     |                                                  |                                         | 1,800               |        |         |        | 2,475      |        |         |        | 6,158      |         |         |        | 6,332      |        
|                                                                  |                                                      |                                                  |                                         |                     |        |         |        |            |        |         |        |            |         |         |        |           
|                                                                  |                                                      | Net income available to common unitholders       |                                         | $                   | 31,252 |         |        | $          | 35,196 |         |        | $          | 105,733 |         |        | $          | 95,855  |        
|                                                                  |                                                      |                                                  |                                         |                     |        |         |        |            |        |         |        |            |         |         |        |           
|BASIC INCOME PER COMMON UNIT                                      |                                                      |                                                  |                                         |                     |        |         |        |            |        |         |        |            |         |         |        |           
|                                                                  | Before extraordinary items                           |                                                  | $                                       | 0.35                |        |         | $      | 0.39       |        |         | $      | 1.18       |         |         | $      | 1.07       |        
|                                                                  | Extraordinary items                                  |                                                  |                                         |                    |        |         |        |           |        |         |        |           |         |         |        |           |        
|                                                                  |                                                      |                                                  |                                         |                     |        |         |        |            |        |         |        |            |         |         |        |           
|                                                                  |                                                      | Net income available to common unitholders       |                                         | $                   | 0.35   |         |        | $          | 0.39   |         |        | $          | 1.18    |         |        | $          | 1.07    |        
|                                                                  |                                                      |                                                  |                                         |                     |        |         |        |            |        |         |        |            |         |         |        |           
|DILUTED INCOME PER COMMON UNIT                                    |                                                      |                                                  |                                         |                     |        |         |        |            |        |         |        |            |         |         |        |           
|                                                                  | Before extraordinary items                           |                                                  | $                                       | 0.34                |        |         | $      | 0.39       |        |         | $      | 1.17       |         |         | $      | 1.06       |        
|                                                                  | Extraordinary items                                  |                                                  |                                         |                    |        |         |        |           |        |         |        |           |         |         |        |           |        
|                                                                  |                                                      |                                                  |                                         |                     |        |         |        |            |        |         |        |            |         |         |        |           
|                                                                  |                                                      | Net income available to common unitholders       |                                         | $                   | 0.34   |         |        | $          | 0.39   |         |        | $          | 1.17    |         |        | $          | 1.06    |        
|                                                                  |                                                      |                                                  |                                         |                     |        |         |        |            |        |         |        |            |         |         |        |           
|WEIGHTED AVERAGE COMMON UNITS                                     |                                                      |                                                  |                                         |                     |        |         |        |            |        |         |        |            |         |         |        |           
|                                                                  | Basic                                                |                                                  |                                         | 89,550,154          |        |         |        | 89,898,511 |        |         |        | 89,300,512 |         |         |        | 89,804,970 |        
|                                                                  |                                                      |                                                  |                                         |                     |        |         |        |            |        |         |        |            |         |         |        |           
|                                                                  | Diluted                                              |                                                  |                                         | 90,799,887          |        |         |        | 90,508,007 |        |         |        | 90,263,046 |         |         |        | 90,104,947 |        
|                                                                  |                                                      |                                                  |                                         |                     |        |         |        |            |        |         |        |            |         |         |        |           

The accompanying notes are an integral part of
these condensed consolidated financial statements.

3



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##### Table of Contents



AMB PROPERTY, L.P.






CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS


For the Nine Months Ended September 30,
2001 and 2000


(Unaudited, dollars in thousands)


|                                                                                    |                                                      |                                           |          |         |          |   |          |         |          |  
|----------------------------------------------------------------------------------- | ---------------------------------------------------- | ----------------------------------------- | -------- | ------- | -------- | - | -------- | ------- | -------- | -
|                                                                                    |                                                      | 2001                                      |          | 2000   
|                                                                                    |                                                      |                                           |          |        
|CASH FLOWS FROM OPERATING ACTIVITIES                                                |                                                      |                                           |          |         |          |   |          |        
|Net income                                                                          |                                                      | $                                         | 116,392  |         |          | $ | 106,436  |        
|Adjustments:                                                                        |                                                      |                                           |          |         |          |   |          |        
|                                                                                    | Depreciation and amortization                        |                                           |          | 93,138  |          |   |          | 65,135  |         
|                                                                                    | Loss on investments in other companies               |                                           |          | 20,758  |          |   |          |        |         
|                                                                                    | Straight-line rents                                  |                                           |          | (7,579  | )        |   |          | (7,158  | )       
|                                                                                    | Amortization of debt premiums and financing costs    |                                           |          | 342     |          |   |          | (5,530  | )       
|                                                                                    | Minority interests share of net income              |                                           |          | 37,508  |          |   |          | 22,139  |         
|                                                                                    | Gain on divestitures of real estate                  |                                           |          | (44,673 | )        |   |          | (6,220  | )       
|                                                                                    | Extraordinary items                                  |                                           |          | 351     |          |   |          |        |         
|                                                                                    | Equity in earnings of AMB Investment Management      |                                           |          | 43      |          |   |          | 2,162   |         
|                                                                                    | Equity in earnings of unconsolidated joint
	ventures |                                           |          | (4,365  | )        |   |          | (4,006  | )       
|                                                                                    | Changes in other assets, net                         |                                           |          | 25,827  |          |   |          | (34,924 | )       
|                                                                                    | Changes in other liabilities, net                    |                                           |          | 14,205  |          |   |          | 23,612  |         
|                                                                                    |                                                      |                                           |          |         |          |   |          |        
|                                                                                    |                                                      | Net cash provided by operating activities |          |         | 251,948  |   |          |         | 161,646  |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                                |                                                      |                                           |          |         |          |   |          |        
|Change in restricted cash                                                           |                                                      |                                           | 8,919    |         |          |   | 57,838   |        
|Cash paid for property acquisitions                                                 |                                                      |                                           | (283,449 | )       |          |   | (331,346 | )      
|Additions to buildings, development costs, and
	other first generation improvements |                                                      |                                           | (143,272 | )       |          |   | (155,787 | )      
|Additions to second generation building
	improvements and lease costs               |                                                      |                                           | (33,198  | )       |          |   | (25,828  | )      
|Additions to interest in unconsolidated joint
	ventures                             |                                                      |                                           | (4,965   | )       |          |   | (10,562  | )      
|Distributions received from unconsolidated joint
	ventures                          |                                                      |                                           | 4,055    |         |          |   | 2,944    |        
|Net proceeds from divestitures of real estate                                       |                                                      |                                           | 194,691  |         |          |   | 26,833   |        
|                                                                                    |                                                      |                                           |          |         |          |   |          |        
|                                                                                    |                                                      | Net cash used in investing activities     |          |         | (257,219 | ) |          |         | (435,908 | )
|CASH FLOWS FROM FINANCING ACTIVITIES                                                |                                                      |                                           |          |         |          |   |          |        
|Issuance of common units                                                            |                                                      |                                           | 2,087    |         |          |   | 1,741    |        
|Retirement of common units                                                          |                                                      |                                           | (22,062  | )       |          |   |         |        
|Borrowings on unsecured credit facility                                             |                                                      |                                           | 198,000  |         |          |   | 307,000  |        
|Borrowings on Alliance Fund I credit facility                                       |                                                      |                                           |         |         |          |   | 25,000   |        
|Borrowings on Alliance Fund II credit facility                                      |                                                      |                                           | 125,000  |         |          |   |         |        
|Borrowings on secured debt                                                          |                                                      |                                           | 232,723  |         |          |   | 57,646   |        
|Payments on unsecured credit facility                                               |                                                      |                                           | (414,000 | )       |          |   | (157,000 | )      
|Payments on Alliance Fund I credit facility                                         |                                                      |                                           |         |         |          |   | (105,000 | )      
|Payments on secured debt                                                            |                                                      |                                           | (67,869  | )       |          |   | (14,599  | )      
|Payment of financing fees                                                           |                                                      |                                           | (4,385   | )       |          |   | (4,149   | )      
|Net proceeds from issuance of unsecured senior
	debt securities                     |                                                      |                                           | 99,406   |         |          |   | 54,808   |        
|Net proceeds from issuance of preferred units                                       |                                                      |                                           | 63,781   |         |          |   | 61,533   |        
|Contributions from co-investment partners                                           |                                                      |                                           | 134,090  |         |          |   | 129,699  |        
|Distributions paid to common and preferred
	unitholders                             |                                                      |                                           | (77,809  | )       |          |   | (72,633  | )      
|Distributions to limited partners minority
	interests, including preferred units   |                                                      |                                           | (40,622  | )       |          |   | (24,292  | )      
|                                                                                    |                                                      |                                           |          |         |          |   |          |        
|                                                                                    |                                                      | Net cash provided by financing activities |          |         | 228,340  |   |          |         | 259,754  |  
|                                                                                    |                                                      |                                           |          |         |          |   |          |        
|Net increase (decrease) in cash and cash
	equivalents                               |                                                      |                                           | 223,069  |         |          |   | (14,508  | )      
|Cash and cash equivalents at beginning of period                                    |                                                      |                                           | 20,358   |         |          |   | 33,312   |        
|                                                                                    |                                                      |                                           |          |         |          |   |          |        
|Cash and cash equivalents at end of period                                          |                                                      | $                                         | 243,427  |         |          | $ | 18,804   |        
|                                                                                    |                                                      |                                           |          |         |          |   |          |        
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION                                   |                                                      |                                           |          |         |          |   |          |        
|Cash paid for interest                                                              |                                                      | $                                         | 102,562  |         |          | $ | 66,005   |        
|                                                                                    |                                                      |                                           |          |         |          |   |          |        
|Non-cash transactions:                                                              |                                                      |                                           |          |         |          |   |          |        
|                                                                                    | Acquisitions of properties                           |                                           | $        | 283,449 |          |   | $        | 407,889 |         
|                                                                                    | Assumption of debt                                   |                                           |          |        |          |   |          | (76,543 | )       
|                                                                                    |                                                      |                                           |          |         |          |   |          |        
|                                                                                    |                                                      | Net cash paid                             |          | $       | 283,449  |   |          | $       | 331,346  |  
|                                                                                    |                                                      |                                           |          |         |          |   |          |        

The accompanying notes are an integral part of
these condensed consolidated financial statements.

4



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##### Table of Contents



AMB PROPERTY, L.P.






CONDENSED CONSOLIDATED STATEMENT OF
PARTNERS CAPITAL


For the Nine Months Ended September 30,
2001


(Unaudited, dollars in thousands)


|                                                                                               |                                           |                            |           |                  |  |                 |        |              |  |       |            |        |  |       |           |        |  |       |           |   |  |   |         |       |  |  |           |   |  |   |         |       |  |   |           |   |         | 
|---------------------------------------------------------------------------------------------- | ----------------------------------------- | -------------------------- | --------- | ---------------- |  | --------------- | ------ | ------------ |  | ----- | ---------- | ------ |  | ----- | --------- | ------ |  | ----- | --------- | - |  | - | ------- | ----- |  |  | --------- | - |  | - | ------- | ----- |  | - | --------- | - | ------- | 
|                                                                                               |                                           |                            |           |                  |  |                
|                                                                                               |                                           | General Partner            |           | Limited Partners |  |                
|                                                                                               |                                           |                            |           |                  |  |                
|                                                                                               |                                           |                            |           |                  |  |                 |        |              |  |      
|                                                                                               |                                           | Preferred Units            |           | Common Units     |  | Preferred Units |        | Common Units |  |      
|                                                                                               |                                           |                            |           |                  |  |                 |        |              |  |      
|                                                                                               |                                           | Units                      |           | Amount           |  | Units           |        | Amount       |  | Units |            | Amount |  | Units |           | Amount |  | Total
|                                                                                               |                                           |                            |           |                  |  |                 |        |              |  |       |            |        |  |       |           |        |  |      
|Balance at December 31, 2000                                                                   |                                           |                            | 4,000,000 |                  |  | $               | 96,100 |              |  |       | 83,909,340 |        |  | $     | 1,671,830 |        |  |       | 1,300,000 |   |  | $ | 62,319  |       |  |  | 5,827,917 |   |  | $ | 115,654 |       |  | $ | 1,945,903 |  
|Contributions                                                                                  |                                           |                            |          |                  |  |                 |        |              |  |       |           |        |  |       |          |        |  |       | 800,000   |   |  |   | 38,909  |       |  |  |           |   |  |   |        |       |  |   | 38,909    |  
|Comprehensive income:                                                                          |                                           |                            |           |                  |  |                 |        |              |  |       |            |        |  |       |           |        |  |       |           |   |  |   |         |       |  |  |           |   |  |   |         |       |  |   |           |  
|                                                                                               | Net Income                                |                            |           |                 |  |                 |        | 6,375        |  |       |            |       |  |       |           | 99,575 |  |       |           |  |  |   |         | 4,284 |  |  |           |   |  |   |         | 6,158 |  |   |           |   |        
|                                                                                               | Reversal of unrealized loss on securities |                            |           |                 |  |                 |        |              |  |       |            |       |  |       |           | 3,732  |  |       |           |  |  |   |         |       |  |  |           |   |  |   |         | 230   |  |   |           |   |        
|                                                                                               |                                           | Total comprehensive income |           |                  |  |                 |        |              |  |       |            |        |  |       |           |        |  |       |           |   |  |   |         |       |  |  |           |   |  |   |         |       |  |   |           |   | 120,353 | 
|Issuance of common limited partnership units in
	connection with issuance of restricted stock  |                                           |                            |          |                  |  |                 |        |              |  |       | 238,260    |        |  |       | 5,861     |        |  |       |          |   |  |   |         |       |  |  |           |   |  |   |        |       |  |   | 5,861     |  
|Issuance of common limited partnership units in
	connection with the exercise of stock options |                                           |                            |          |                  |  |                 |        |              |  |       | 98,534     |        |  |       | 2,087     |        |  |       |          |   |  |   |         |       |  |  |           |   |  |   |        |       |  |   | 2,087     |  
|Conversion of operating partnership units to
	common stock                                     |                                           |                            |          |                  |  |                 |        |              |  |       | 621,997    |        |  |       | 14,987    |        |  |       |          |   |  |   |         |       |  |  | (621,997  | ) |  |   | (12,382 | )     |  |   | 2,605     |  
|Conversion of operating partnership units to cash                                              |                                           |                            |          |                  |  |                 |        |              |  |       |           |        |  |       |          |        |  |       |          |   |  |   |         |       |  |  | (218,092  | ) |  |   | (4,246  | )     |  |   | (4,246    | )
|Retirement of operating partnership units                                                      |                                           |                            |          |                  |  |                 |        |              |  |       | (932,700   | )      |  |       | (22,062   | )      |  |       |          |   |  |   |         |       |  |  |           |   |  |   |        |       |  |   | (22,062   | )
|Deferred compensation                                                                          |                                           |                            |          |                  |  |                 |        |              |  |       |           |        |  |       | (5,861    | )      |  |       |          |   |  |   |         |       |  |  |           |   |  |   |        |       |  |   | (5,861    | )
|Deferred compensation amortization                                                             |                                           |                            |          |                  |  |                 |        |              |  |       |           |        |  |       | 1,928     |        |  |       |          |   |  |   |         |       |  |  |           |   |  |   |        |       |  |   | 1,928     |  
|Reallocation of interests                                                                      |                                           |                            |          |                  |  |                 |        |              |  |       |           |        |  |       | (393      | )      |  |       |          |   |  |   |         |       |  |  |           |   |  |   | 393     |       |  |   |          |  
|Distributions                                                                                  |                                           |                            |          |                  |  |                 | (6,375 | )            |  |       |           |        |  |       | (100,396  | )      |  |       |          |   |  |   | (4,284  | )     |  |  |           |   |  |   | (6,102  | )     |  |   | (117,156  | )
|                                                                                               |                                           |                            |           |                  |  |                 |        |              |  |       |            |        |  |       |           |        |  |       |           |   |  |   |         |       |  |  |           |   |  |   |         |       |  |   |           |  
|Balance at September 30, 2001                                                                  |                                           |                            | 4,000,000 |                  |  | $               | 96,100 |              |  |       | 83,935,431 |        |  | $     | 1,671,288 |        |  |       | 2,100,000 |   |  | $ | 101,228 |       |  |  | 4,987,828 |   |  | $ | 99,705  |       |  | $ | 1,968,321 |  
|                                                                                               |                                           |                            |           |                  |  |                 |        |              |  |       |            |        |  |       |           |        |  |       |           |   |  |   |         |       |  |  |           |   |  |   |         |       |  |   |           |  

The accompanying notes are an integral part of
these condensed consolidated financial statements.

5



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##### Table of Contents



AMB PROPERTY, L.P.






NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS


September 30, 2001


(Unaudited)


1.     Organization
and Basis of Presentation

AMB Property Corporation, a Maryland corporation
(the Company), commenced operations as a fully
integrated real estate company effective with the completion of
its initial public offering on November 26, 1997. The
Company elected to be taxed as a real estate investment trust
under Sections 856 through 860 of the Internal Revenue Code of
1986, commencing with its taxable year ended December 31,
1997, and believes its current organization and method of
operation will enable it to maintain its status as a real estate
investment trust. The Company, through its controlling interest
in its subsidiary, AMB Property, L.P., a Delaware limited
partnership (the Operating Partnership), is engaged
in the acquisition, ownership, operation, management,
renovation, expansion, and development of primarily industrial
buildings in target markets nationwide. Unless the context
otherwise requires, the Company means AMB Property
Corporation, the Operating Partnership, and its other controlled
subsidiaries and the Operating Partnership means AMB
Property, L.P. and its other controlled subsidiaries.

As of September 30, 2001, the Company owned
an approximate 94.4% general partner interest in the Operating
Partnership, excluding preferred units. The remaining 5.6%
limited partner interest is owned by non-affiliated investors
and certain current and former directors and officers of the
Company. For local law purposes, certain properties are owned
through limited partnerships and limited liability companies.
The ownership of such properties through such entities does not
materially affect the Operating Partnerships overall
ownership interests in the properties. As the sole general
partner of the Operating Partnership, the Company has full,
exclusive, and complete responsibility and discretion in the
day-to-day management and control of the Operating Partnership.
Net operating results of the Operating Partnership are allocated
after preferred unit distributions based on the respective
partners ownership interests.

The Operating Partnership enters into
co-investment joint ventures with institutional investors. These
co-investment joint ventures provide the Operating Partnership
with an additional source of capital to fund certain
acquisitions and development and renovation projects. As of
September 30, 2001, the Operating Partnership had
investments in five co-investment joint ventures, which are
consolidated for financial reporting purposes.

AMB Investment Management, Inc., a Maryland
corporation (AMB Investment Management), provides
real estate investment services to clients on a fee basis.
Headlands Realty Corporation, a Maryland corporation, conducts a
variety of businesses that include incremental income programs,
such as the Operating Partnerships CustomerAssist Program
and development projects available for sale to third parties. On
May 31, 2001, the Operating Partnership acquired 100% of
the common stock of AMB Investment Management and Headlands
Realty Corporation from current and former executive officers of
the Company, a former executive officer of AMB Investment
Management, and a director of Headlands Realty Corporation,
thereby acquiring 100% of both entities capital stock. The
Operating Partnership began consolidating its investments in AMB
Investment Management and Headlands Realty Corporation on
May 31, 2001. Prior to May 31, 2001, the Operating
Partnership reflected its investment using the equity method.
The impact of consolidating AMB Investment Management and
Headlands Realty Corporation was not material.

As of September 30, 2001, the Operating
Partnership owned 876 industrial buildings and seven retail
centers, located in 26 markets throughout the United States. The
Operating Partnerships strategy is to become a leading
provider of High Throughput Distribution, or HTD, properties
located near key passenger and cargo airports, highway systems
and ports in major metropolitan areas, such as Atlanta, Chicago,
Dallas/ Fort Worth, Northern New Jersey/ New York City, the
San Francisco Bay Area, Southern California, Miami, and Seattle.
As of September 30, 2001, the industrial buildings,
principally warehouse distribution buildings, encompassed
approximately 78.4 million rentable square feet and were
96.6% leased to over 2,867 tenants. As

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##### Table of Contents



AMB PROPERTY, L.P.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

of September 30, 2001, the retail centers,
principally grocer-anchored community shopping centers,
encompassed approximately 1.3 million rentable square feet
and were 87.6% leased to more than 157 tenants.

As of September 30, 2001, through AMB
Investment Management, the Operating Partnership also managed
industrial buildings and retail centers, totaling approximately
3.3 million rentable square feet on behalf of various
clients. In addition, the Operating Partnership has invested in
industrial buildings, totaling approximately 4.9 million
rentable square feet, through unconsolidated joint ventures.

2.     Interim
Financial Statements

The condensed consolidated financial statements
included herein have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission.
Accordingly, certain information and note disclosures normally
included in the annual financial statements prepared in
accordance with accounting principles generally accepted in the
Unites States have been condensed or omitted.

In the opinion of management, the accompanying
unaudited condensed consolidated financial statements contain
all adjustments, of a normal recurring nature, necessary for a
fair presentation of the Operating Partnerships
consolidated financial position and results of operations for
the interim periods.

The interim results of the three and nine months
ended September 30, 2001 and 2000, are not necessarily
indicative of future results. These financial statements should
be read in conjunction with the financial statements and the
notes thereto included in the Operating Partnerships
Annual Report on Form 10-K for the year ended
December 31, 2000.

The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States 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 period. Actual
results could differ from those estimates.

Investments in other companies are accounted for
on a cost basis and realized gains and losses are included in
current earnings. For its investments in private companies, the
Operating Partnership periodically reviews its investments and
management determines if the value of such investments have been
permanently impaired. Permanent impairment losses for
investments in public and private companies are included in
current earnings. As of June 30, 2001, the Operating
Partnership recognized a realized loss on its investments in
other companies totaling $20.8 million, including its
investment in Webvan Group, Inc. The Operating Partnership had
previously recognized gains and losses on its investment in
Webvan Group, Inc. as a component of other comprehensive income.

In June and August 2001, the Financial Accounting
Standards Board issued Statement of Financial Accounting
Standards Nos. 143, Accounting for Asset Retirement
Obligations, and 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. Under FASB Statement
No. 143, the fair value of a liability for an asset
retirement obligation must be recognized in the period in which
it is incurred if a reasonable estimate of fair value can be
made. The associated asset retirement costs are capitalized as
part of the carrying amount of the long-lived asset. FASB
Statement No. 144 retains FASB Statement
No. 121s, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,fundamental provisions for the: (1) recognition and
measurement of impairment of long-lived assets to be held and
used; and (2) measurement of long-lived assets to be
disposed of by sale. The Operating Partnership does not believe
that either FASB Statement No. 143 or No. 144 will
have a material impact on its financial position or results of
operations. FASB Statement No. 143 is effective for fiscal
years beginning after June 15, 2002, and FASB Statement
No. 144 is effective for fiscal years beginning after
December 15, 2001.

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##### Table of Contents



AMB PROPERTY, L.P.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

In June 2001, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards
Nos. 141, Business Combinations, and 142,
Goodwill and Other Intangible Assets. Under FASB
Statement No. 141, business combinations initiated after
June 30, 2001, must use the purchase method of accounting.
The pooling of interest method of accounting is prohibited.
Under FASB Statement No. 142, intangible assets acquired in
a business combination must be recorded separately from goodwill
if they arise from contractual or other legal right or are
separable from the acquired entity and can be sold, transferred,
licensed, rented, or exchanged, regardless of the
acquirers intent to do so. The Operating Partnership does
not believe that either FASB Statement No. 141 or
No. 142 will have a material impact on its financial
position or results of operations. FASB Statement No. 141
was effective for business combinations initiated after
July 1, 2001, and FASB Statement No. 142 is effective
for fiscal years beginning after December 15, 2001.

The Operating Partnership adopted FASB Statement
No. 133 on derivatives on January 1, 2001, and it did
not impact its financial position or results of operations as
the Operating Partnership does not utilize derivative
instruments in its operations. FASB Statement No. 133,
Accounting for Derivative Instruments and Hedging Activities,as amended by Statement No. 138, Accounting for
Certain Derivative Instruments and Certain Hedging
Activities, established accounting and reporting standards
requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded
in the balance sheet as either an asset or liability measured at
its fair value. The Statement, as amended, requires that changes
in the derivatives fair value be recognized currently in
earnings unless specific hedge accounting criteria are met.

3.     Real Estate
Acquisition and Development Activity

During the third quarter of 2001, the Operating
Partnership invested $118.1 million in operating
properties, consisting of 16 industrial buildings
aggregating approximately 1.7 million square feet, which
included the investment of $41.3 million in seven
industrial buildings aggregating approximately 0.7 million
square feet through two of the Operating Partnerships
co-investment joint ventures. Year to date, the Operating
Partnership has invested $283.4 million in operating
properties, consisting of 42 industrial buildings aggregating
approximately 4.5 million square feet, which included the
investment of $126.1 million in 21 industrial
buildings aggregating approximately 2.3 million square feet
through three of the Operating Partnerships co-investment
joint ventures.

Year to date, the Operating Partnership has
contributed operating properties valued at $539.2 million,
consisting of 111 industrial buildings aggregating approximately
10.8 million square feet, to three of its co-investment
joint ventures. Year to date, the Operating Partnership has
recognized a gain of $19.4 million related to these
contributions representing its partners share of the gain.

The Operating Partnership completed four
development projects during the third quarter, which aggregated
approximately 0.6 million square feet and had a total cost
of $65.7 million. As of September 30, 2001, the
Operating Partnership had in its development pipeline:
(1) 13 industrial projects, which will total approximately
3.8 million square feet and have an aggregate estimated
investment of $204.6 million upon completion; (2) two
retail projects, which will total approximately 0.2 million
square feet and have an aggregate estimated investment of
$34.6 million upon completion; and (3) three
development projects available for sale, which will total
approximately 0.8 million square feet and have an aggregate
estimated investment of $81.0 million upon completion. As
of September 30, 2001, the Operating Partnership and its
Development Alliance Partners have funded an aggregate of
$221.2 million and will need to fund an estimated
additional $99.0 million in order to complete current and
planned projects.

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##### Table of Contents



AMB PROPERTY, L.P.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

4.     Property
Divestitures and Properties Held for Divestiture

During the quarter, the Operating Partnership
divested itself of ten industrial and two retail buildings,
aggregating approximately 1.2 million square feet, for an
aggregate price of $97.3 million, with a resulting net gain
of $5.6 million, net of minority interests share.
Year to date, the Operating Partnership divested itself of 23
industrial and two retail buildings, aggregating approximately
3.1 million square feet, for an aggregate price of
$190.4 million, with a resulting net gain of
$23.9 million, net of minority interests share.

The Operating Partnership has decided to divest
itself of four retail centers and one industrial property, which
are not in its core markets or which do not meet its strategic
objectives. The divestitures of the properties are subject to
negotiation of acceptable terms and other customary conditions.
During the third quarter of 2001, the Operating Partnership
recognized an impairment loss of $10.0 million on two of
its retail assets held for sale. As of September 30, 2001,
the net carrying value of the properties held for divestiture
was $106.1 million.

The following table summarizes the condensed
results of operations of the properties held for divestiture
(dollars in thousands):

Properties Held for Divestiture at September
30, 2001

|                                 |            |      |       |      |  |   |       |   | 
|-------------------------------- | ---------- | ---- | ----- | ---- |  | - | ----- | - | 
|Three months ended September 30, |            | 2001 |       | 2000
|                                 |            |      |       |     
|Income                           |            | $    | 1,920 |      |  | $ | 1,503 |  
|Property operating expenses      |            |      | 913   |      |  |   | 497   |  
|Interest expense                 |            |      | 302   |      |  |   | 632   |  
|Depreciation expense             |            |      | 411   |      |  |   | 374   |  
|                                 |            |      |       |      |  |   |       |  
|                                 | Net income |      | $     | 294  |  |   | $     |  | 
|                                 |            |      |       |      |  |   |       |  

|                                |            |      |       |       |  |   |       |     | 
|------------------------------- | ---------- | ---- | ----- | ----- |  | - | ----- | --- | 
|Nine months ended September 30, |            | 2001 |       | 2000 
|                                |            |      |       |      
|Income                          |            | $    | 6,089 |       |  | $ | 4,227 |    
|Property operating expenses     |            |      | 2,540 |       |  |   | 1,381 |    
|Interest expense                |            |      | 1,013 |       |  |   | 1,548 |    
|Depreciation expense            |            |      | 1,036 |       |  |   | 1,030 |    
|                                |            |      |       |       |  |   |       |    
|                                | Net income |      | $     | 1,500 |  |   | $     | 268 | 
|                                |            |      |       |       |  |   |       |    

5.     Mortgages
Receivable

In September 2000, the Operating Partnership sold
a retail center located in Los Angeles, California. As of
September 30, 2001, the Operating Partnership carried an
8.75% mortgage note in the principal amount of
$79.0 million on the retail center. The maturity date of
the mortgage note, which was originally scheduled to mature on
October 1, 2001, had been extended to October 15,
2001. As of November 13, 2001, the borrower was in default,
however, the Operating Partnership is negotiating an extension
on the maturity date and to change certain terms of the note.
The Operating Partnership has a first lien against the retail
center as collateral for the mortgage note and believes that the
underlying value of the retail center is equal to or greater
than the fair value of the mortgage note.

Through a wholly-owned subsidiary, the Operating
Partnership also holds a mortgage loan receivable on AMB Pier
One, LLC, an unconsolidated joint venture. The note bears
interest at 13.0% and matures in May 2026. As of
September 30, 2001, the outstanding balance on the note was
$13.2 million.

9



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##### Table of Contents



AMB PROPERTY, L.P.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

6.     Debt

As of September 30, 2001 and
December 31, 2000, debt consisted of the following (dollars
in thousands):

|                                                                                                                                                                     |                       |                         |           |              |           |   |         |           |           | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------- | ----------------------- | --------- | ------------ | --------- | - | ------- | --------- | --------- | 
|                                                                                                                                                                     |                       | September 30,           |           | December 31,
|                                                                                                                                                                     |                       | 2001                    |           | 2000        
|                                                                                                                                                                     |                       |                         |           |             
|Secured debt, varying interest rates from 4.0% to
	10.4% due November 2001 to June 2023 (weighted average interest
	rate of 7.6% at September 30, 2001)              |                       | $                       | 1,095,272 |              |           | $ | 930,418 |          
|Unsecured senior debt securities (weighted
	average interest rate of 7.3%) due June 2005 to June 2018                                                                |                       |                         | 780,000   |              |           |   | 680,000 |          
|Unsecured credit facility, variable interest at
	LIBOR plus 75 basis points due May 2003                                                                             |                       |                         |          |              |           |   | 216,000 |          
|Alliance Fund II credit facility, variable
	interest at LIBOR plus 87.5 basis points (weighted average
	interest rate of 3.5% at September 30, 2001) due August 2003 |                       |                         | 125,000   |              |           |   |        |          
|                                                                                                                                                                     |                       |                         |           |              |           |   |         |          
|                                                                                                                                                                     | Total before premiums |                         |           | 2,000,272    |           |   |         | 1,826,418 |          
|                                                                                                                                                                     | Unamortized premiums  |                         |           | 7,529        |           |   |         | 9,858     |          
|                                                                                                                                                                     |                       |                         |           |              |           |   |         |          
|                                                                                                                                                                     |                       | Total consolidated debt |           | $            | 2,007,801 |   |         | $         | 1,836,276 | 
|                                                                                                                                                                     |                       |                         |           |              |           |   |         |          

Secured debt generally requires monthly principal
and interest payments. The secured debt is secured by deeds of
trust on certain properties. As of September 30, 2001, the
total gross investment book value of those properties securing
the debt was $1.7 billion. All of the secured debt bears
interest at fixed rates, except for three loans with an
aggregate principal amount of $35.9 million, which bear
interest at variable rates (with a weighted average interest
rate of 4.3% at September 30, 2001). The secured debt has
various financial and non-financial covenants and some loans are
cross-collateralized. As of September 30, 2001, we had 21
non-recourse secured loans, which are cross collateralized by 41
properties. As of September 30, 2001, we had
$430.5 million (not including unamortized debt premium)
outstanding on these loans. Management believes that the
Operating Partnership was in compliance with these covenants at
September 30, 2001.

Interest on the senior debt securities is payable
semi-annually. The 2015 notes are putable and callable in June
2005. The senior debt securities are subject to various
financial and non-financial covenants. Management believes that
the Operating Partnership was in compliance with these covenants
at September 30, 2001.

In August 2000, the Operating Partnership
commenced a medium-term note program for the possible issuance
of up to $400.0 million in principal amount of medium-term
notes, which will be guaranteed by the Company. In September
2001, the Operating Partnership issued and sold
$25.0 million of the notes under this program to Lehman
Brothers Inc., as principal. The Company guaranteed the notes,
which mature on September 6, 2011, and bear interest at
6.75%. The Operating Partnership used the net proceeds of
$24.8 million for general corporate purposes, to partially
repay indebtedness, and to acquire and develop additional
properties. In March 2001, the Operating Partnership issued and
sold $50.0 million of the notes under this program to First
Union Securities, Inc., as principal. The Company guaranteed the
notes, which mature on March 7, 2011, and bear interest at
7.00%. The Operating Partnership used the net proceeds of
$49.7 million for general corporate purposes, to partially
repay indebtedness, and to acquire and develop additional
properties. In January 2001, the Operating Partnership issued
and sold $25.0 million of the notes under this program to
A.G. Edwards & Sons, Inc., as principal. The Company
guaranteed the notes, which mature on January 30, 2006, and
bear interest at 6.90%. The Operating Partnership used the net
proceeds of $24.9 million for general corporate purposes,
to partially repay indebtedness, and to acquire and develop
additional properties. The notes have various financial and
non-financial covenants. Management believes that the Operating
Partnership was in compliance with these covenants at
September 30, 2001.

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##### Table of Contents



AMB PROPERTY, L.P.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

In May 2000, the Operating Partnership entered
into a $500.0 million unsecured revolving credit agreement.
The Company is a guarantor of the Operating Partnerships
obligations under the credit facility. The credit facility
matures in May 2003, has a one-year extension option, and is
subject to a 15 basis point annual facility fee, which is based
on the Companys credit rating. The credit facility has
various financial and non-financial covenants. Management
believes that the Company and the Operating Partnership were in
compliance with these covenants at September 30, 2001. The
Operating Partnership has the ability to increase available
borrowings to $700.0 million by adding additional banks to
the facility or obtaining the agreement of existing banks to
increase their commitments. Monthly debt service payments on the
credit facility are interest only. The total amount available
under the credit facility fluctuates based upon the borrowing
base, as defined in the agreement governing the credit facility.
At September 30, 2001, the remaining amount available under
the credit facility was $500.0 million (excluding the
additional $200.0 million of potential additional capacity).

In July 2001, AMB Institutional Alliance Fund II,
L.P. (Alliance Fund II) obtained a
$150.0 million secured credit facility from Bank of
America N.A. Borrowings currently bear interest at LIBOR
plus 87.5 basis points, which includes the facility fee. As
of September 30, 2001, the outstanding balance was
$125.0 million and the remaining amount available was
$25.0 million. The secured debt facility has various
financial and non-financial covenants. Management believes that
the Operating Partnership was in compliance with these covenants
at September 30, 2001.

Capitalized interest related to construction
projects for the three months ended September 30, 2001 and
2000, was $3.6 million and $4.3 million, respectively,
and for the nine months ended September 30, 2001 and 2000,
was $10.8 million and $11.5 million, respectively.

During the nine months ended September 30,
2001, the Operating Partnership retired $53.9 million of
secured debt prior to maturity. The Operating Partnership
recognized a net extraordinary loss of $0.4 million related
to the early debt retirement.

The scheduled maturities of the Operating
Partnerships total debt, excluding unamortized debt
premiums, as of September 30, 2001, were (dollars in
thousands):

|           |  |         |         |         |  |            |         |            |  |       |         |  |  |   |         |  |  |   |           | 
|---------- |  | ------- | ------- | ------- |  | ---------- | ------- | ---------- |  | ----- | ------- |  |  | - | ------- |  |  | - | --------- | 
|           |  |         |         |         |  | Unsecured  |         |            |  |      
|           |  |         |         | Joint   |  | Senior     |         |            |  |      
|           |  | Secured |         | Venture |  | Debt       |         | Credit     |  |      
|           |  | Debt    |         | Debt    |  | Securities |         | Facilities |  | Total
|           |  |         |         |         |  |            |         |            |  |      
|2001       |  | $       | 2,996   |         |  | $          | 9,014   |            |  | $     |        |  |  | $ |        |  |  | $ | 12,010    | 
|2002       |  |         | 28,194  |         |  |            | 51,937  |            |  |       |        |  |  |   |        |  |  |   | 80,131    | 
|2003       |  |         | 76,296  |         |  |            | 12,005  |            |  |       |        |  |  |   | 125,000 |  |  |   | 213,301   | 
|2004       |  |         | 65,285  |         |  |            | 25,791  |            |  |       |        |  |  |   |        |  |  |   | 91,076    | 
|2005       |  |         | 63,027  |         |  |            | 40,019  |            |  |       | 250,000 |  |  |   |        |  |  |   | 353,046   | 
|2006       |  |         | 94,966  |         |  |            | 72,166  |            |  |       | 25,000  |  |  |   |        |  |  |   | 192,132   | 
|2007       |  |         | 30,198  |         |  |            | 23,470  |            |  |       | 55,000  |  |  |   |        |  |  |   | 108,668   | 
|2008       |  |         | 33,604  |         |  |            | 145,108 |            |  |       | 175,000 |  |  |   |        |  |  |   | 353,712   | 
|2009       |  |         | 5,176   |         |  |            | 29,812  |            |  |       |        |  |  |   |        |  |  |   | 34,988    | 
|2010       |  |         | 52,780  |         |  |            | 69,205  |            |  |       | 75,000  |  |  |   |        |  |  |   | 196,985   | 
|2011       |  |         | 1,311   |         |  |            | 135,820 |            |  |       | 75,000  |  |  |   |        |  |  |   | 212,131   | 
|Thereafter |  |         | 3,307   |         |  |            | 23,785  |            |  |       | 125,000 |  |  |   |        |  |  |   | 152,092   | 
|           |  |         |         |         |  |            |         |            |  |       |         |  |  |   |         |  |  |   |           | 
|           |  | $       | 457,140 |         |  | $          | 638,132 |            |  | $     | 780,000 |  |  | $ | 125,000 |  |  | $ | 2,000,272 | 
|           |  |         |         |         |  |            |         |            |  |       |         |  |  |   |         |  |  |   |           | 

11



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##### Table of Contents



AMB PROPERTY, L.P.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

7.     Minority
Interests

Minority interests in the Operating Partnership
represent the limited partnership interests in the Operating
Partnership and interests held by certain third parties in
several real estate joint ventures, aggregating approximately
27.0 million square feet, which are consolidated for
financial reporting purposes. Such investments are consolidated
because: (1) the Operating Partnership owns a majority
interest; or (2) the Operating Partnership exercises
significant control over major operating decisions such as
approval of budgets, selection of property managers, and changes
in financing.

The Operating Partnership, together with one of
its affiliates, owned, as of September 30, 2001,
approximately 21% of the partnership interests in AMB
Institutional Alliance Fund I, L.P. (Alliance
Fund I). The Alliance Fund I is a co-investment
partnership between the Operating Partnership and AMB
Institutional Alliance REIT I, Inc. (Alliance
REIT I), which includes 15 institutional investors as
stockholders, and is engaged in the acquisition, ownership,
operation, management, renovation, expansion, and development of
primarily industrial buildings in target markets nationwide. As
of September 30, 2001, the Alliance Fund I had received
equity contributions from third party investors totaling
$169.0 million, which, when combined with anticipated debt
financings and the Operating Partnerships investment,
creates a total planned capitalization of $410.0 million.
The Operating Partnership is the managing general partner of the
Alliance Fund I.

On February 14, 2001, the Operating
Partnership formed a partnership, AMB Partners II, L.P.
(Partners II), with the City and County of San
Francisco Employees Retirement System
(CCSFERS) to acquire, manage, develop, and redevelop
distribution facilities nationwide. As of September 30,
2001, Partners II had received an equity contribution from
CCSFERS of $50.0 million, which, when combined with
anticipated debt financings and the Operating Partnerships
investment, creates a total planned capitalization of
$250.0 million. The Operating Partnership is the managing
general partner of Partners II and owned, as of
September 30, 2001, approximately 50% of Partners II.

On March 26, 2001, the Operating Partnership
formed a joint venture, AMB-SGP, L.P. (AMB-SGP),
with a subsidiary of GIC Real Estate Pte Ltd., the real estate
investment subsidiary of the Government of Singapore Investment
Corporation (GIC), to own and operate, through a
private real estate investment trust, distribution facilities
nationwide. As of September 30, 2001, AMB-SGP had received
an equity contribution from GIC of $75.0 million, which,
when combined with anticipated debt financings and the Operating
Partnerships investment in properties, creates a total
planned capitalization of $335.0 million. The Operating
Partnership is the managing general partner of AMB-SGP and
owned, as of September 30, 2001, approximately 50.3% of
AMB-SGP.

On June 28, 2001, the Operating Partnership
formed AMB Institutional Alliance Fund II, L.P.
(Alliance Fund II). The Operating Partnership
owns, as of September 30, 2001, approximately 20% of the
partnership interests in the Alliance Fund II. The Alliance
Fund II is a co-investment partnership between the
Operating Partnership and AMB Institutional Alliance REIT II,
Inc. (Alliance REIT II). The Alliance
REIT II included 12 institutional investors as stockholders
as of September 30, 2001, and 14 institutional investors as
stockholders as of its final closing on October 9, 2001.
The Alliance Fund II is engaged in the acquisition, ownership,
operation, management, renovation, expansion, and development of
primarily industrial buildings in target markets nationwide. As
of September 30, 2001, the Alliance Fund II had received
equity commitments from third party investors totaling
$181.8 million, which, when combined with anticipated debt
financings and the Operating Partnerships investment,
created a total planned capitalization of $456.1 million.
Subsequently, on October 9, 2001, the Alliance Fund II
received additional equity commitments of $13.6 million at
its final closing. Therefore, as of October 9, 2001, the
Alliance Fund II had received total equity commitments from
third party investors of $195.4 million, which, when
combined with anticipated debt financings and the Operating
Partnerships investment, creates a total planned
capitalization of $488.6 million. The Operating Partnership
is the managing general partner of the Alliance Fund II.

12



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##### Table of Contents



AMB PROPERTY, L.P.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following table distinguishes the minority
interest liability and the minority interests share of net
income (dollars in thousands):

|                                                               |       |               |         |                     |  |               |       |        |  |   |        |        | 
|-------------------------------------------------------------- | ----- | ------------- | ------- | ------------------- |  | ------------- | ----- | ------ |  | - | ------ | ------ | 
|                                                               |       |               |         |                    
|                                                               |       |               |         | Share of Net Income
|                                                               |       | Liability     |         |                    
|                                                               |       |               |         | For the Three       |  | For the Nine 
|                                                               |       | As of         |         | Months Ended        |  | Months Ended 
|                                                               |       | September 30, |         | September 30,       |  | September 30,
|                                                               |       | 2001          |         | 2001                |  | 2001         
|                                                               |       |               |         |                     |  |              
|Joint Venture Partners                                         |       | $             | 377,519 |                     |  | $             | 8,756 |        |  | $ | 20,166 |       
|Series C preferred units (liquidation
	preference of $110,000) |       |               | 105,844 |                     |  |               | 2,406 |        |  |   | 7,218  |       
|Series D preferred units (liquidation
	preference of $79,767)  |       |               | 77,687  |                     |  |               | 1,545 |        |  |   | 4,635  |       
|Series E preferred units (liquidation
	preference of $11,022)  |       |               | 10,788  |                     |  |               | 214   |        |  |   | 642    |       
|Series F preferred units (liquidation
	preference of $19,872)  |       |               | 19,597  |                     |  |               | 395   |        |  |   | 1,185  |       
|Series G preferred units (liquidation
	preference of $1,000)   |       |               | 954     |                     |  |               | 20    |        |  |   | 60     |       
|Series H preferred units (liquidation
	preference of $42,000)  |       |               | 40,915  |                     |  |               | 853   |        |  |   | 2,559  |       
|Series I preferred units (liquidation
	preference of $25,500)  |       |               | 24,821  |                     |  |               | 510   |        |  |   | 1,043  |       
|                                                               |       |               |         |                     |  |               |       |        |  |   |        |       
|                                                               | Total |               | $       | 658,125             |  |               | $     | 14,699 |  |   | $      | 37,508 | 
|                                                               |       |               |         |                     |  |               |       |        |  |   |        |       

8.     Investments in
Unconsolidated Joint Ventures

The Operating Partnership has non-controlling
limited partnership interests in three separate unconsolidated
joint ventures; the Operating Partnership accounts for the joint
ventures using the equity method of accounting. The Operating
Partnership has a 56.1% interest in a joint venture, which owns
an aggregate of 36 industrial buildings totaling approximately
4.0 million square feet. The Operating Partnership also has a
50% interest in each of two other operating and development
alliance joint ventures. For the three months ended
September 30, 2001 and 2000, the Operating
Partnerships share of net operating income in the
unconsolidated joint ventures was $2.7 million and
$2.2 million, respectively, and for the nine months ended
September 30, 2001 and 2000, the Operating
Partnerships share of net operating income in the
unconsolidated joint ventures was $7.8 million and
$6.3 million, respectively. As of September 30, 2001,
the Operating Partnerships share of the unconsolidated
joint ventures debt was $32.7 million, with a
weighted average interest rate of 5.7% and a weighted average
maturity of 4.6 years.

9.     Partners
Capital

On September 21, 2001, the Operating
Partnership issued and sold 800,000 7.95% Series J
Cumulative Redeemable Preferred Limited Partnership Units at a
price of $50.00 per unit in a private placement. Distributions
are cumulative from the date of issuance and payable quarterly
in arrears. The Series J Preferred Units are redeemable by
the Operating Partnership on or after September 21, 2006,
subject to certain conditions, for cash at a redemption price
equal to $50.00 per unit, plus accumulated and unpaid
distributions thereon, if any, to the redemption date. The
Series J Preferred Units are exchangeable, at specified
times and subject to certain conditions, on a one-for-one basis,
for shares of the Companys Series J Preferred Stock.
The Operating Partnership used the net proceeds of
$38.9 million for general corporate purposes, which may
include the partial repayment of indebtedness or the acquisition
or development of additional properties.

On March 21, 2001, AMB Property II, L.P.,
one of the Operating Partnerships subsidiaries, issued and
sold 510,000 8.00% Series I Cumulative Redeemable Preferred
Limited Partnership Units at a price of $50.00 per unit in a
private placement. Distributions are cumulative from the date of
issuance and payable quarterly in arrears at a rate per unit
equal to $4.00 per annum. The Series I Preferred Units are
redeemable by AMB Property II, L.P. on or after March 21,
2006, subject to certain conditions, for cash at a redemption
price equal to $50.00 per unit, plus accumulated and unpaid
distributions thereon, if any, to the redemption date. The

13



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##### Table of Contents



AMB PROPERTY, L.P.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Series I Preferred Units are exchangeable,
at specified times and subject to certain conditions, on a
one-for-one basis, for shares of the Companys
Series I Preferred Stock. AMB Property II, L.P. used
the net proceeds of $24.9 million to repay advances from
the Operating Partnership and to make a loan to the Operating
Partnership. The Operating Partnership used the funds to
partially repay borrowings under its unsecured credit facility
and for general corporate purposes. The loan bears interest at
8.0% per annum and is payable on demand.

During the third quarter of 2001, the Operating
Partnership redeemed 218,092 and 23,700 common limited
partnership units of the Operating Partnership for cash and
shares of the Companys common stock, respectively. During
the first quarter of 2001, the Operating Partnership redeemed
598,297 common limited partnership units of the Operating
Partnership for shares of the Companys common stock.

The Companys board of directors has
approved a stock repurchase program for the repurchase of up to
$100.0 million worth of common stock. During the quarter
ended September 30, 2001, the Operating Partnership
repurchased 907,700 shares of the Companys common stock at
an average purchase price of $23.68 per share under this
program. During the quarter ended June 30, 2001, the
Operating Partnership repurchased 25,000 shares of the
Companys common stock at a purchase price of $22.80 per
share under this program. Through September 30, 2001, the
Operating Partnership has repurchased 2,376,300 shares of the
Companys common stock at an average purchase price of
$20.77 per share. The Companys stock repurchase program
expires in December 2001.

The Operating Partnership declared a regular cash
distribution for the quarter ending September 30, 2001, of
$0.395 per common unit. The distributions were payable on
October 15, 2001, to unitholders of record on
October 4, 2001. The Series A, B, C, E, F, G, and J
preferred unit distributions were also payable on
October 15, 2001, to unitholders of record on
October 4, 2001. The Series D, H, and I preferred unit
distributions were payable on September 25, 2001, to
unitholders of record on September 15, 2001. The following
table sets forth the distributions for the three and nine months
ended September 30, 2001 and 2000:

|                                 |  |                       |  |               |  |               |  |        |  |       
|-------------------------------- |  | --------------------- |  | ------------- |  | ------------- |  | ------ |  | ------
|                                 |  |                       |  |               |  |              
|                                 |  |                       |  | For the Three |  | For the Nine 
|                                 |  |                       |  | Months Ended  |  | Months Ended 
|                                 |  |                       |  | September 30, |  | September 30,
|                                 |  |                       |  |               |  |              
|Security                         |  | Paying Entity         |  | 2001          |  | 2000          |  | 2001   |  | 2000  
|                                 |  |                       |  |               |  |               |  |        |  |       
|Common limited partnership units |  | Operating Partnership |  | $0.395        |  | $0.370        |  | $1.185 |  | $1.110
|Series A preferred units         |  | Operating Partnership |  | $0.531        |  | $0.531        |  | $1.594 |  | $1.594
|Series B preferred units         |  | Operating Partnership |  | $1.078        |  | $1.078        |  | $3.234 |  | $3.234
|Series C preferred units         |  | AMB Property II, L.P. |  | $1.094        |  | $1.094        |  | $3.281 |  | $3.281
|Series D preferred units         |  | AMB Property II, L.P. |  | $0.969        |  | $0.969        |  | $2.906 |  | $2.906
|Series E preferred units         |  | AMB Property II, L.P. |  | $0.969        |  | $0.969        |  | $2.906 |  | $2.906
|Series F preferred units         |  | AMB Property II, L.P. |  | $0.994        |  | $0.994        |  | $2.952 |  | $2.097
|Series G preferred units         |  | AMB Property II, L.P. |  | $0.994        |  | $0.357        |  | $2.982 |  | $0.357
|Series H preferred units         |  | AMB Property II, L.P. |  | $1.016        |  | $0.282        |  | $3.048 |  | $0.282
|Series I preferred units         |  | AMB Property II, L.P. |  | $1.000        |  | n/a           |  | $2.044 |  | n/a   
|Series J preferred units         |  | Operating Partnership |  | $0.097        |  | n/a           |  | $0.097 |  | n/a   

14



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##### Table of Contents



AMB PROPERTY, L.P.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

10.     Income Per
Unit

The Operating Partnerships only dilutive
securities outstanding for the three and nine months ended
September 30, 2001 and 2000, were stock options and
restricted stock granted by the Company under its stock
incentive plan. The effect on income per unit was to increase
weighted average common limited partnership units outstanding.
Such dilution was computed using the treasury stock method.

|                              |                                    |                      |  |                     |  |      |  |            |  |  |  |            |  |  |  |            | 
|----------------------------- | ---------------------------------- | -------------------- |  | ------------------- |  | ---- |  | ---------- |  |  |  | ---------- |  |  |  | ---------- | 
|                              |                                    |                      |  |                    
|                              |                                    | For the Three Months |  | For the Nine Months
|                              |                                    | Ended September 30,  |  | Ended September 30,
|                              |                                    |                      |  |                    
|                              |                                    | 2001                 |  | 2000                |  | 2001 |  | 2000      
|                              |                                    |                      |  |                     |  |      |  |           
|WEIGHTED AVERAGE COMMON UNITS |                                    |                      |  |                     |  |      |  |            |  |  |  |            |  |  |  |           
|                              | Basic                              |                      |  | 89,550,154          |  |      |  | 89,898,511 |  |  |  | 89,300,512 |  |  |  | 89,804,970 | 
|                              | Stock options and restricted stock |                      |  | 1,249,733           |  |      |  | 609,496    |  |  |  | 962,534    |  |  |  | 299,977    | 
|                              |                                    |                      |  |                     |  |      |  |            |  |  |  |            |  |  |  |           
|                              | Diluted                            |                      |  | 90,799,887          |  |      |  | 90,508,007 |  |  |  | 90,263,046 |  |  |  | 90,104,947 | 

11.     Segment
Information

The Operating Partnership operates industrial and
retail properties nationwide and manages its business both by
property type and by market. Industrial properties consist
primarily of warehouse distribution facilities suitable for
single or multiple tenants and are typically comprised of
multiple buildings that are leased to tenants engaged in various
types of businesses. As of September 30, 2001, the
Operating Partnership operated industrial properties in eight
hub and gateway markets in addition to 18 other markets
nationwide. As of September 30, 2001, the Operating
Partnership operated retail properties in Miami, Atlanta,
Chicago, the San Francisco Bay Area, Boston, and Baltimore. The
Operating Partnership has so few retail properties that it does
not separately report its retail operations by market. Retail
properties are generally leased to one or more anchor tenants,
such as grocery and drug stores, and various retail businesses.
The accounting policies of the segments are the same as those
described in the Operating Partnerships Annual Report on
Form 10-K for the year ended December 31, 2000. The
Operating Partnership evaluates performance based upon property
net operating income of the combined properties in each segment.
The Operating Partnerships geographic markets for
industrial properties are managed separately because each market
requires different operating, pricing, and leasing strategies.

15



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##### Table of Contents



AMB PROPERTY, L.P.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

During the first quarter of 2001, the Operating
Partnership split its industrial segment into geographic hub and
gateway markets and other markets. Within the hub and gateway
market categorization, the Operating Partnership operates in
eight major U.S. markets. The other industrial markets category
captures all of the Operating Partnerships other smaller
markets nationwide. The 2000 rental revenue and net operating
income disclosure below has been restated to reflect this
change. Summary information for the reportable segments is as
follows (dollars in thousands):

|                                  |                          |                             |                  |                      |        |         |        |        |        |         |        |        |        |         |        |        |        |        | 
|--------------------------------- | ------------------------ | --------------------------- | ---------------- | -------------------- | ------ | ------- | ------ | ------ | ------ | ------- | ------ | ------ | ------ | ------- | ------ | ------ | ------ | ------ | 
|                                  |                          |                             |                  |                     
|                                  |                          | Rental Revenues(1)          |                  | Property NOI(1)(2)  
|                                  |                          |                             |                  |                     
|                                  |                          |                             |                  |                     
|                                  |                          | For the Three Months        |                  | For the Three Months
|                                  |                          | Ended September 30,         |                  | Ended September 30, 
|                                  |                          |                             |                  |                     
|                                  |                          | 2001                        |                  | 2000                 |        | 2001    |        | 2000  
|                                  |                          |                             |                  |                      |        |         |        |       
|Industrial Hub & Gateway Markets: |                          |                             |                  |                      |        |         |        |        |        |         |        |        |        |         |        |       
|                                  | Atlanta                  |                             | $                | 7,218                |        |         | $      | 6,036  |        |         | $      | 5,775  |        |         | $      | 4,979  |       
|                                  | Chicago                  |                             |                  | 10,416               |        |         |        | 9,191  |        |         |        | 7,492  |        |         |        | 6,323  |       
|                                  | Dallas/ Ft. Worth        |                             |                  | 8,369                |        |         |        | 6,775  |        |         |        | 5,328  |        |         |        | 4,792  |       
|                                  | No. New Jersey/ New York |                             |                  | 10,846               |        |         |        | 9,790  |        |         |        | 7,367  |        |         |        | 7,614  |       
|                                  | San Francisco Bay Area   |                             |                  | 28,033               |        |         |        | 20,107 |        |         |        | 23,374 |        |         |        | 16,389 |       
|                                  | Southern California      |                             |                  | 16,201               |        |         |        | 9,585  |        |         |        | 12,693 |        |         |        | 7,846  |       
|                                  | Miami                    |                             |                  | 7,877                |        |         |        | 4,802  |        |         |        | 6,108  |        |         |        | 3,623  |       
|                                  | Seattle                  |                             |                  | 6,679                |        |         |        | 5,832  |        |         |        | 5,201  |        |         |        | 4,784  |       
|                                  |                          |                             |                  |                      |        |         |        |        |        |         |        |        |        |         |        |       
|                                  |                          | Total hub & gateway markets |                  |                      | 95,639 |         |        |        | 72,118 |         |        |        | 73,338 |         |        |        | 56,350 |       
|Total other industrial markets    |                          |                             | 40,108           |                      |        |         | 37,451 |        |        |         | 29,343 |        |        |         | 28,166 |       
|Total retail markets              |                          |                             | 6,229            |                      |        |         | 7,109  |        |        |         | 3,946  |        |        |         | 4,768  |       
|                                  |                          |                             |                  |                      |        |         |        |        |        |         |        |        |        |         |        |       
|                                  |                          |                             | Total properties |                      | $      | 141,976 |        |        | $      | 116,678 |        |        | $      | 106,627 |        |        | $      | 89,284 | 
|                                  |                          |                             |                  |                      |        |         |        |        |        |         |        |        |        |         |        |       



---



|    |                                                                                                                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Excludes straight-line rents of $4.1 million
	and $1.8 million for the three months ended
	September 30, 2001 and 2000, respectively.                                                                                                                               
|   
|(2) | Property net operating income is defined as
	rental revenue, including reimbursements and excluding
	straight-line rents, less property level operating expenses,
	excluding depreciation, amortization, general and administrative
	expenses, and interest expense.

16



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##### Table of Contents



AMB PROPERTY, L.P.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                  |                          |                             |                  |                     |         |                           |         |              |         |         |        |        |         |         |        |        |         |         |           |         |           |           |           |         |           |           | 
|--------------------------------- | ------------------------ | --------------------------- | ---------------- | ------------------- | ------- | ------------------------- | ------- | ------------ | ------- | ------- | ------ | ------ | ------- | ------- | ------ | ------ | ------- | ------- | --------- | ------- | --------- | --------- | --------- | ------- | --------- | --------- | 
|                                  |                          |                             |                  |                     |         |                           |         |             
|                                  |                          | Rental Revenues(1)          |                  | Property NOI(1)(2)  |         |                           |         |             
|                                  |                          |                             |                  |                     |         |                           |         |             
|                                  |                          |                             |                  |                     |         |                          
|                                  |                          | For the Nine Months         |                  | For the Nine Months |         | Total Gross Investment(3)
|                                  |                          | Ended September 30,         |                  | Ended September 30, |         |                          
|                                  |                          |                             |                  |                     |         | September 30,             |         | December 31,
|                                  |                          | 2001                        |                  | 2000                |         | 2001                      |         | 2000         |         | 2001    |        | 2000  
|                                  |                          |                             |                  |                     |         |                           |         |              |         |         |        |       
|Industrial Hub & Gateway Markets: |                          |                             |                  |                     |         |                           |         |              |         |         |        |        |         |         |        |        |         |         |           |         |           |           |           |        
|                                  | Atlanta                  |                             | $                | 21,207              |         |                           | $       | 17,112       |         |         | $      | 17,031 |         |         | $      | 14,103 |         |         | $         | 265,456 |           |           | $         | 225,352 |          
|                                  | Chicago                  |                             |                  | 30,333              |         |                           |         | 28,657       |         |         |        | 20,800 |         |         |        | 19,867 |         |         |           | 337,203 |           |           |           | 303,489 |          
|                                  | Dallas/ Ft. Worth        |                             |                  | 24,600              |         |                           |         | 19,392       |         |         |        | 16,042 |         |         |        | 13,892 |         |         |           | 237,917 |           |           |           | 240,933 |          
|                                  | No. New Jersey/ New York |                             |                  | 33,379              |         |                           |         | 23,869       |         |         |        | 23,628 |         |         |        | 18,550 |         |         |           | 402,694 |           |           |           | 382,285 |          
|                                  | San Francisco Bay Area   |                             |                  | 77,993              |         |                           |         | 56,756       |         |         |        | 65,668 |         |         |        | 46,550 |         |         |           | 769,979 |           |           |           | 641,137 |          
|                                  | Southern California      |                             |                  | 46,514              |         |                           |         | 26,747       |         |         |        | 37,248 |         |         |        | 21,775 |         |         |           | 618,744 |           |           |           | 552,055 |          
|                                  | Miami                    |                             |                  | 24,696              |         |                           |         | 13,832       |         |         |        | 18,541 |         |         |        | 10,481 |         |         |           | 297,161 |           |           |           | 281,710 |          
|                                  | Seattle                  |                             |                  | 19,615              |         |                           |         | 16,525       |         |         |        | 15,292 |         |         |        | 13,555 |         |         |           | 211,634 |           |           |           | 203,786 |          
|                                  |                          |                             |                  |                     |         |                           |         |              |         |         |        |        |         |         |        |        |         |         |           |         |           |           |           |        
|                                  |                          | Total hub & gateway markets |                  |                     | 278,337 |                           |         |              | 202,890 |         |        |        | 214,250 |         |        |        | 158,773 |         |           |         | 3,140,788 |           |           |         | 2,830,747 |          
|Total other industrial markets    |                          |                             | 116,484          |                     |         |                           | 105,968 |              |         |         | 85,099 |        |         |         | 79,158 |        |         |         | 1,237,897 |         |           |           | 1,045,455 |        
|Total retail markets              |                          |                             | 19,025           |                     |         |                           | 21,340  |              |         |         | 12,588 |        |         |         | 14,812 |        |         |         | 55,162    |         |           |           | 150,395   |        
|                                  |                          |                             |                  |                     |         |                           |         |              |         |         |        |        |         |         |        |        |         |         |           |         |           |           |           |        
|                                  |                          |                             | Total properties |                     | $       | 413,846                   |         |              | $       | 330,198 |        |        | $       | 311,937 |        |        | $       | 252,743 |           |         | $         | 4,433,847 |           |         | $         | 4,026,597 | 
|                                  |                          |                             |                  |                     |         |                           |         |              |         |         |        |        |         |         |        |        |         |         |           |         |           |           |           |        



---



|    |                                                                                                                                                                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Excludes straight-line rents of $7.6 million
	and $7.2 million for the nine months ended
	September 30, 2001 and 2000, respectively.                                                                                                                                                                                              
|   
|(2) | Property net operating income is defined as
	rental revenue, including reimbursements and excluding
	straight-line rents, less property level operating expenses,
	excluding depreciation, amortization, general and administrative
	expenses, and interest expense.                                                              
|   
|(3) | Excludes net properties held for divestiture of
	$106.1 million, which is comprised of $18.9 million in
	industrial and $87.2  million in retail properties, as of
	September 30, 2001, and $197.1 million, which is
	comprised of $158.7 million in industrial and
	$38.4 million in retail properties, as of December 31,
	2000.

17



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##### Table of Contents



AMB PROPERTY, L.P.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The Operating Partnership uses property net
operating income as an operating performance measure. The
following table reconciles total reportable segment revenue and
property net operating income to rental revenues and income from
operations (dollars in thousands):

|                                                       |                                        |                        |         |                     |         |      |         |         |         |   |         |         |         |   |         |         |         | 
|------------------------------------------------------ | -------------------------------------- | ---------------------- | ------- | ------------------- | ------- | ---- | ------- | ------- | ------- | - | ------- | ------- | ------- | - | ------- | ------- | ------- | 
|                                                       |                                        |                        |         |                    
|                                                       |                                        | For the Three Months   |         | For the Nine Months
|                                                       |                                        | Ended September 30,    |         | Ended September 30,
|                                                       |                                        |                        |         |                    
|                                                       |                                        | 2001                   |         | 2000                |         | 2001 |         | 2000   
|                                                       |                                        |                        |         |                     |         |      |         |        
|Rental Revenues                                        |                                        |                        |         |                     |         |      |         |         |         |   |         |         |         |   |         |        
|Total rental revenues for reportable segments          |                                        | $                      | 141,976 |                     |         | $    | 116,678 |         |         | $ | 413,846 |         |         | $ | 330,198 |        
|Straight-line rents                                    |                                        |                        | 4,113   |                     |         |      | 1,815   |         |         |   | 7,579   |         |         |   | 7,158   |        
|                                                       |                                        |                        |         |                     |         |      |         |         |         |   |         |         |         |   |         |        
|                                                       |                                        | Total rental revenues  |         | $                   | 146,089 |      |         | $       | 118,493 |   |         | $       | 421,425 |   |         | $       | 337,356 | 
|                                                       |                                        |                        |         |                     |         |      |         |         |         |   |         |         |         |   |         |        
|Income from Operations                                 |                                        |                        |         |                     |         |      |         |         |         |   |         |         |         |   |         |        
|Property net operating income for reportable
	segments |                                        | $                      | 106,627 |                     |         | $    | 89,284  |         |         | $ | 311,937 |         |         | $ | 252,743 |        
|Straight-line rents                                    |                                        |                        | 4,113   |                     |         |      | 1,815   |         |         |   | 7,579   |         |         |   | 7,158   |        
|Equity in earnings of unconsolidated joint
	ventures   |                                        |                        | 1,636   |                     |         |      | 1,447   |         |         |   | 4,365   |         |         |   | 4,006   |        
|Investment management income                           |                                        |                        | 2,340   |                     |         |      | 940     |         |         |   | 8,022   |         |         |   | 2,160   |        
|Other income                                           |                                        |                        | 5,392   |                     |         |      | 491     |         |         |   | 12,505  |         |         |   | 1,651   |        
|Less:                                                  |                                        |                        |         |                     |         |      |         |         |         |   |         |         |         |   |         |        
|                                                       | Interest, including amortization       |                        |         | (32,996             | )       |      |         | (22,562 | )       |   |         | (94,754 | )       |   |         | (62,906 | )      
|                                                       | Depreciation and amortization          |                        |         | (38,961             | )       |      |         | (23,312 | )       |   |         | (93,138 | )       |   |         | (65,135 | )      
|                                                       | General, administrative, and other     |                        |         | (8,796              | )       |      |         | (5,987  | )       |   |         | (26,180 | )       |   |         | (17,322 | )      
|                                                       | Loss on investments in other companies |                        |         |                    |         |      |         |        |         |   |         | (20,758 | )       |   |         |        |        
|                                                       |                                        |                        |         |                     |         |      |         |         |         |   |         |         |         |   |         |        
|                                                       |                                        | Income from operations |         | $                   | 39,355  |      |         | $       | 42,116  |   |         | $       | 109,578 |   |         | $       | 122,355 | 
|                                                       |                                        |                        |         |                     |         |      |         |         |         |   |         |         |         |   |         |        

18



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##### Table of Contents



AMB PROPERTY, L.P.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

12.     Commitments
and Contingencies

Litigation.In the
normal course of business, from time to time, the Operating
Partnership is involved in legal actions relating to the
ownership and operations of its properties. In managements
opinion, the liabilities, if any, that may ultimately result
from such legal actions are not expected to have a material
adverse effect on the consolidated financial position, results
of operations, or cash flows of the Operating Partnership.

Environmental Matters.The Operating Partnership monitors its
properties for the presence of hazardous or toxic substances.
The Operating Partnership is not aware of any environmental
liability with respect to the properties that would have a
material adverse effect on the Operating Partnerships
business, assets, or results of operations. However, there can
be no assurance that such a material environmental liability
does not exist. The existence of any such material environmental
liability would have an adverse effect on the Operating
Partnerships results of operations and cash flow.

General Uninsured Losses.The Operating Partnership carries
property and rental loss, liability, flood, and environmental
insurance. The Operating Partnership believes that the policy
terms and conditions, limits, and deductibles are adequate and
appropriate under the circumstances, given the relative risk of
loss, the cost of such coverage, and industry practice. In
addition, certain of the Operating Partnerships properties
are located in areas that are subject to earthquake activity;
therefore, the Operating Partnership has obtained limited
earthquake insurance on those properties. There are, however,
certain types of extraordinary losses that may be either
uninsurable or not economically insurable. Should an uninsured
loss occur, the Operating Partnership could lose its investment
in, and anticipated profits and cash flows from, a property.

19



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##### Table of Contents






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

You should read the following discussion and
analysis of our consolidated financial condition and results of
operations in conjunction with the Notes to Condensed
Consolidated Financial Statements. Statements contained in this
discussion that are not historical facts may be forward-looking
statements. Such statements relate to our future performance and
plans, results of operations, capital expenditures,
acquisitions, and operating improvements and costs. You can
identify forward-looking statements by the use of
forward-looking terminology such as believes,
expects, may, will,
should, seeks,
approximately, intends,
plans, pro forma, estimates,
or anticipates or the negative of these words and
phrases or similar words or phrases. You can also identify
forward-looking statements by discussions of strategy, plans, or
intentions. Forward-looking statements involve numerous risks
and uncertainties and you should not rely upon them as
predictions of future events. There is no assurance that the
events or circumstances reflected in forward-looking statements
will occur or be achieved. Forward-looking statements are
necessarily dependent on assumptions, data, or methods that may
be incorrect or imprecise and we may not be able to realize
them.

The following factors, among others, could
cause actual results and future events to differ materially from
those set forth or contemplated in the forward-looking
statements:



| |   |                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | defaults or non-renewal of leases by
	tenants;                                                                                                                                                                  
|
| |  | increased interest rates and operating
	costs;                                                                                                                                                                  
|
| |  | our failure to obtain necessary outside
	financing;                                                                                                                                                             
|
| |  | difficulties in identifying properties to
	acquire and in effecting acquisitions;                                                                                                                               
|
| |  | our failure to successfully integrate acquired
	properties and operations;                                                                                                                                      
|
| |  | our failure to divest of properties that we
	have contracted to sell or to timely reinvest proceeds from any
	such divestitures;                                                                                
|
| |  | risks and uncertainties affecting property
	development and construction (including construction delays,
	cost overruns, our inability to obtain necessary permits, and
	public opposition to these activities);
|
| |  | environmental uncertainties;                                                                                                                                                                                    
|
| |  | risks related to natural disasters;                                                                                                                                                                             
|
| |  | financial market fluctuations;                                                                                                                                                                                  
|
| |  | changes in real estate and zoning laws;
	and                                                                                                                                                                    
|
| |  | increases in real property tax
	rates.                                                                                                                                                                          

Our success also depends upon economic trends
generally, including interest rates, income tax laws,
governmental regulation, legislation, population changes, and
those other risk factors discussed in the section entitled
Business Risks in this report. We caution you not to
place undue reliance on forward-looking statements, which
reflect our analysis only and speak as of the date of this
report or as of the dates indicated in the statements.

Unless the context otherwise requires, the terms
we, us, and our refer to AMB
Property, L.P. and our other controlled subsidiaries. The
following marks are the registered trademarks of AMB Property
Corporation, our general partner: AMB®; Customer Alliance
Partners®; Customer Alliance Program®; Development
Alliance Partners®; Development Alliance Program®;
High Throughput Distribution®; Institutional Alliance
Partners®; Institutional Alliance Program®; Management
Alliance Partners®; Management Alliance Program®;
UPREIT Alliance Partners®; and UPREIT Alliance
Program®. The following marks are the unregistered
trademarks of AMB Property Corporation, our general partner:
Broker Alliance Partners; Broker Alliance Program;
HTD; Strategic Alliance Partners; and Strategic
Alliance Programs.

20



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##### Table of Contents



THE OPERATING PARTNERSHIP

AMB Property, L.P., a Delaware limited
partnership, is one of the leading owners and operators of
industrial real estate nationwide. Our investment strategy is to
become a leading provider of High Throughput Distribution, or
HTD, properties located near key passenger and cargo airports,
highway systems and ports in major metropolitan areas, such as
Atlanta, Chicago, Dallas/ Fort Worth, Northern New Jersey/ New
York City, the San Francisco Bay Area, Southern California,
Miami, and Seattle. Within each of our markets, we focus our
investments in in-fill submarkets. In-fill sub-markets are
characterized by supply constraints on the availability of land
for competing projects. High Throughput Distribution facilities
are designed to serve the high-speed, high-value freight
handling needs of todays supply chain, as opposed to
functioning as long-term storage facilities. We believe that the
rapid growth of the airfreight business, the outsourcing of
supply chain management to third party logistics companies and
e-commerce are indicative of the changes that are occurring in
the supply chain and the manner in which goods are distributed.
In addition, we believe that inventory levels as a percentage of
final sales are falling and that goods are moving more rapidly
through the supply chain. As a result, we intend to focus our
investment activities primarily on industrial properties that we
believe will benefit from these changes.

As of September 30, 2001, we owned and
operated 876 industrial buildings and seven retail centers,
totaling approximately 79.7 million rentable square feet,
located in 26 markets nationwide. As of September 30, 2001,
our industrial and retail properties were 96.6% and 87.6%
leased, respectively. As of September 30, 2001, through our
subsidiary, AMB Investment Management, we also managed
industrial buildings and retail centers, totaling approximately
3.3 million rentable square feet on behalf of various
clients. In addition, we have invested in industrial buildings,
totaling approximately 4.9 million rentable square feet,
through unconsolidated joint ventures.

As of September 30, 2001, we had four retail
centers and one industrial property, which were held for
divestiture. In addition, during the quarter, we disposed of ten
industrial buildings and two retail properties, aggregating
approximately 1.2 million rentable square feet, for an
aggregate price of $97.3 million. Year to date, we have
disposed of 23 industrial buildings and two retail buildings,
aggregating approximately 3.1 million rentable square feet,
for an aggregate price of $190.4 million. Over the next few
years, we intend to dispose of non-strategic assets and redeploy
the resulting capital into High Throughput Distribution
properties that better fit our current investment focus.

We are engaged in the acquisition, ownership,
operation, management, renovation, expansion, and development of
primarily industrial properties in target markets nationwide. As
of September 30, 2001, AMB Property Corporation owned an
approximate 94.4% general partnership interest in us, excluding
preferred units. As our sole general partner, AMB Property
Corporation, has the full, exclusive, and complete
responsibility and discretion in our day-to-day management and
control.

We enter into co-investment joint ventures with
institutional investors. These co-investment joint ventures
provide us with an additional source of capital to fund certain
acquisitions, development projects, and renovation projects. As
of September 30, 2001, we had investments in five
co-investment joint ventures, which are consolidated for
financial reporting purposes.

We are the managing general partner of AMB
Institutional Alliance Fund I, L.P. and, together with an
affiliate, own, as of September 30, 2001, approximately 21%
of the partnership interests in the Alliance Fund I. The
Alliance Fund I is a co-investment partnership between us
and AMB Institutional Alliance REIT I, Inc., a limited
partner of the Alliance Fund I, which includes 15
institutional investors as stockholders and is engaged in the
acquisition, ownership, operation, management, renovation,
expansion, and development of primarily industrial buildings in
target markets nationwide. As of September 30, 2001, the
Alliance Fund I had received equity contributions from
third party investors totaling $169.0 million, which, when
combined with anticipated debt financings and our investment,
creates a total planned capitalization of $410.0 million.
We are the managing general partner of the Alliance Fund I.

On February 14, 2001, we formed AMB
Partners II, L.P. with the City and County of San Francisco
Employees Retirement System to acquire, develop, and
redevelop distribution facilities nationwide. As of

21



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##### Table of Contents



September 30, 2001, AMB Partners II had
received an equity contribution from third party investors of
$50.0 million, which, when combined with anticipated debt
financings and our investment, creates a total planned
capitalization of $250.0 million. We are the managing
general partner of AMB Partners II, L.P. and owned, as of
September 30, 2001, 50% of AMB Partners II, L.P.


On March 26, 2001, we formed a joint
venture, AMB-SGP, L.P., with a subsidiary of GIC Real Estate Pte
Ltd., the real estate investment subsidiary of the Government of
Singapore Investment Corporation, to own and operate, through a
private real estate investment trust, distribution facilities
nationwide. As of September 30, 2001, AMB-SGP, L.P. had
received an equity contribution from GIC of $75.0 million,
which, when combined with anticipated debt financings and our
investment, creates a total planned capitalization of
$335.0 million. We are the managing general partner of
AMB-SGP, L.P. and owned, as of September 30, 2001,
approximately 50.3% of AMB-SGP, L.P.

On June 28, 2001, we formed AMB
Institutional Alliance Fund II, L.P. We are the managing
general partner and owned, as of September 30, 2001,
approximately 20% of the partnership interests in the Alliance
Fund II. The Alliance Fund II is a co-investment
partnership between us and AMB Institutional Alliance
REIT II, Inc., a limited partner of the Alliance
Fund II, which includes 12 institutional investors as
stockholders as of September 30, 2001. The Alliance
Fund II is engaged in the acquisition, ownership,
operation, management, renovation, expansion, and development of
primarily industrial buildings in target markets nationwide. As
of September 30, 2001, the Alliance Fund II had
received equity commitments from third party investors totaling
$181.8 million, which, when combined with anticipated debt
financings and our investment, creates a total planned
capitalization of $456.1 million. Subsequently, on
October 9, 2001, the Alliance Fund II received
additional equity commitments of $13.6 million at its final
closing. Therefore, as of October 9, 2001, the Alliance
Fund II had received total equity commitments from third
party investors of $195.4 million, which, when combined
with anticipated debt financings and our investment, creates a
total planned capitalization of $488.6 million.

AMB Property Corporation is a self-administered
and self-managed and expects that it has qualified and will
continue to qualify as a real estate investment trust for
federal income tax purposes beginning with the year ending
December 31, 1997. Because AMB Property Corporation is a
self-administered and self-managed real estate investment trust,
our employees perform its administrative and management
functions, rather than it relying on an outside manager for
these services. The principal executive office of AMB Property,
L.P. is located at Pier 1, Bay 1, San Francisco,
CA 94111, and our telephone number is (415) 394-9000.
We also maintain a regional office in Boston, Massachusetts.

Acquisition and Development Activity

During the quarter, we invested
$118.1 million in operating properties, consisting of 16
industrial buildings aggregating approximately 1.7 million
square feet, including the investment of $41.3 million in
seven industrial buildings, aggregating approximately
0.7 million square feet, for two of our co-investment joint
ventures. Year to date, we have invested $283.4 million in
operating properties, consisting of 42 industrial buildings
aggregating approximately 4.5 million square feet,
including the investment of $126.1 million in 17 industrial
buildings, aggregating approximately 2.3 million square
feet, for three of our co-investment joint ventures.

Year to date, we also have contributed
$539.2 million in operating properties, consisting of 111
industrial buildings aggregating approximately 10.8 million
square feet, to three of our co-investment joint ventures. Year
to date, we have recognized gains of $19.4 million on the
contributions.

We also completed three industrial projects and
one retail development project during the third quarter, which
aggregated approximately 0.6 million square feet and had a
total cost of $65.7 million. As of September 30, 2001,
we had in our development pipeline: (1) 13 industrial
projects, which will total approximately 3.8 million square
feet and have a total estimated investment of
$204.6 million upon completion; (2) two retail
projects, which will total approximately 0.2 million square
feet and have a total estimated investment of $34.6 million
upon completion; and (3) three development projects
available for sale, which will total approximately
0.8 million square feet and have an aggregate estimated
investment of

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$81.0 million upon completion. As of
September 30, 2001, we and our Development Alliance
Partners have funded an aggregate of $221.2 million and
will need to fund an estimated additional $99.0 million in
order to complete projects currently under construction.


Operating Strategy

We are a full-service real estate company with
in-house expertise in acquisitions, development and
redevelopment, asset management and leasing, finance and
accounting, and market research. We have long-standing
relationships with many real estate management and development
firms across the country, our Strategic Alliance Partners.

We believe that real estate is fundamentally a
local business and that the most effective way for us to operate
is by forging alliances with service providers in every market.
We believe that these collaborations allow us to:
(1) leverage our national presence with the local market
expertise of brokers, developers, and property managers;
(2) improve the operating efficiency and flexibility of our
national portfolio; (3) strengthen customer satisfaction
and retention; and (4) provide a continuous pipeline of
growth.

We believe that our partners give us local market
expertise and flexibility allowing us to focus on our core
competencies: developing and refining our strategic approach to
real estate investment and management and raising private
capital to finance growth and enhance returns.

Growth Strategies



| |                          
| | -------------------------
| | Growth Through Operations

We seek to generate internal growth through rent
increases on existing space and renewal on re-tenanted space. We
do this by maintaining a high occupancy rate at our properties
and by controlling expenses by capitalizing on the economies of
owning, operating, and growing a large national portfolio. As of
September 30, 2001, our industrial properties and retail
centers were 96.6% leased and 87.6% leased, respectively. Year
to date, we have increased average industrial base rental rates
(on a cash basis) by 27.8% from the expiring rent for that
space, on leases entered into or renewed during the period. This
amount excludes expense reimbursements, rental abatements, and
percentage rents. Year to date, we also have increased
same-store net operating income by 7.2% on our industrial
properties.



| |                                                      
| | -----------------------------------------------------
| | Growth Through Acquisitions and Capital
	Redeployment

We believe that our significant acquisition
experience, our alliance-based operating strategy, and our
extensive network of property acquisition sources will continue
to provide opportunities for external growth. We believe that
our relationships with third party local property management
firms through our Management Alliance Program also will create
acquisition opportunities, as such managers market properties on
behalf of sellers. Our operating structure also enables us to
acquire properties through our UPREIT Alliance Program in
exchange for our limited partnership units, thereby enhancing
our attractiveness to owners and developers seeking to transfer
properties on a tax-deferred basis. In addition to acquisitions,
we seek to redeploy capital from non-strategic assets into
properties that better fit our current investment focus.

We are generally in various stages of
negotiations for a number of acquisitions and dispositions,
which may include acquisitions and dispositions of individual
properties, acquisitions of large multi-property portfolios, and
acquisitions of other real estate companies. There can be no
assurance that we will consummate any of these transactions.
Such transactions, if we consummate them, may be material
individually or in the aggregate. Sources of capital for
acquisitions may include undistributed cash flow from
operations, borrowings under the operating partnerships
unsecured credit facility, other forms of secured or unsecured
debt financing, issuances of debt or limited partnership unit
offerings (including issuances of limited partnership units by
our subsidiaries), proceeds from divestitures of properties, and
assumption of debt related to the acquired properties.

23



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| |                           
| | --------------------------
| | Growth Through Development

We believe that renovation and expansion of
value-added properties and development of well-located,
high-quality industrial properties should continue to provide us
with attractive opportunities for increased cash flow and a
higher rate of return than we may obtain from the purchase of
fully leased, renovated properties. Value-added properties are
typically characterized as properties with available space or
near-term leasing exposure, undeveloped land acquired in
connection with another property that provides an opportunity
for development, or properties that are well located but require
redevelopment or renovation. Value-added properties require
significant management attention or capital investment to
maximize their return. We have developed the in-house expertise
to create value through acquiring and managing value-added
properties and believe that our national market presence and
expertise will enable us to continue to generate and capitalize
on these opportunities. Through our Development Alliance
Program, we have established strategic alliances with national
and regional developers to enhance our development capabilities.

The multidisciplinary backgrounds of our
employees provide us with the skills and experience to
capitalize on strategic renovation, expansion, and development
opportunities. Several of the officers of our general partner
have extensive experience in real estate development, both with
us and with national development firms. We generally pursue
development projects in joint ventures with local developers.
This way, we leverage the development skill, access to
opportunities, and capital of such developers, and we eliminate
the need and expense of an in-house development staff. Under a
typical joint venture agreement with a Development Alliance
Partner, we would fund 95% of the construction costs and our
partner would fund 5%. Upon completion, we generally would
purchase our partners interest in the joint venture.



| |                              
| | -----------------------------
| | Growth Through Co-Investments

We co-invest with third party partners (some of
whom may be clients of AMB Investment Management, Inc., to the
extent such clients newly commit investment capital), through
partnerships, limited liability companies, or joint ventures. We
currently use a co-investment formula with each third party
whereby we will own at least a 20% interest in all ventures. We
currently have five co-investment joint ventures. In general, we
control all significant operating and investment decisions of
our co-investment entities.



| |                          
| | -------------------------
| | AMB Investment Management

AMB Investment Management, Inc. provides real
estate investment management services on a fee basis to clients.
As of May 31, 2001, we hold all of the outstanding capital
stock of AMB Investment Management. AMB Investment Management,
Inc. conducts its operations through AMB Investment Management
Limited Partnership, a Maryland limited partnership, of which it
is the sole general partner.



| |                             
| | ----------------------------
| | Headlands Realty Corporation

Headlands Realty Corporation conducts a variety
of businesses that include incremental income programs, such as
our AMB CustomerAssist Program and development projects
available for sale to third parties. As of May 31, 2001, we
hold all of the outstanding capital stock of Headlands Realty
Corporation.

24



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##### Table of Contents



RESULTS OF OPERATIONS

The analysis below includes changes attributable
to acquisitions, development activity and divestitures and the
changes resulting from properties that we owned during both the
current and prior year reporting periods, excluding development
properties prior to being stabilized (generally defined as 90%
leased). We refer to these properties as the same store
properties. For the comparison between the three and nine months
ended September 30, 2001 and 2000, the same store
industrial properties consisted of properties aggregating
approximately 60.2 million square feet. The properties
acquired in 2000 consisted of 145 buildings, aggregating
approximately 10.5 million square feet, and the properties
acquired during the nine months of 2001 consisted of 42
buildings, aggregating 4.5 million square feet. In 2000,
property divestitures consisted of one retail center and 25
industrial buildings, aggregating approximately 2.5 million
square feet, and property divestitures during the first nine
months of 2001 consisted of 23 industrial and two retail
buildings, aggregating approximately 3.1 million square
feet. Our future financial condition and results of operations,
including rental revenues, may be impacted by the acquisition of
additional properties and dispositions. Our future revenues and
expenses may vary materially from historical rates.

Three Months Ended September 30, 2001
Compared to the Three Months Ended September 30,
2000

(dollars in millions):


|                    |       |      |       |       |  |          |      |          |  |   |      |      |  |  |       |      |  
|------------------- | ----- | ---- | ----- | ----- |  | -------- | ---- | -------- |  | - | ---- | ---- |  |  | ----- | ---- | -
|Rental Revenues     |       | 2001 |       | 2000  |  | $ Change |      | % Change
|                    |       |      |       |       |  |          |      |         
|Same store          |       | $    | 100.8 |       |  | $        | 95.6 |          |  | $ | 5.2  |      |  |  | 5.4   | %   
|2000 acquisitions   |       |      | 29.2  |       |  |          | 9.8  |          |  |   | 19.4 |      |  |  | 198.0 | %   
|2001 acquisitions   |       |      | 6.6   |       |  |          |     |          |  |   | 6.6  |      |  |  |      |     
|Developments        |       |      | 1.7   |       |  |          | 0.7  |          |  |   | 1.0  |      |  |  | 142.9 | %   
|Divestitures        |       |      | 3.7   |       |  |          | 10.6 |          |  |   | (6.9 | )    |  |  | (65.1 | )%  
|Straight-line rents |       |      | 4.1   |       |  |          | 1.8  |          |  |   | 2.3  |      |  |  | 127.8 | %   
|                    |       |      |       |       |  |          |      |          |  |   |      |      |  |  |       |     
|                    | Total |      | $     | 146.1 |  |          | $    | 118.5    |  |   | $    | 27.6 |  |  |       | 23.3 | %
|                    |       |      |       |       |  |          |      |          |  |   |      |      |  |  |       |     

The growth in rental revenues in same store
properties resulted primarily from the incremental effect of
cash rental rate increases on renewals and rollovers, fixed rent
increases on existing leases, and reimbursement of expenses,
partially offset by lower same-store industrial occupancy of
96.5% at September 30, 2001, compared to 97.2% at
September 30, 2000. During the three months ended
September 30, 2001, the same store rent increases on
industrial renewals and rollovers (cash basis) was 16.8% on
2.7 million square feet leased.

|                                         |       |      |     |      |  |          |     |          |  |   |     |     |  |  |       |       |  
|---------------------------------------- | ----- | ---- | --- | ---- |  | -------- | --- | -------- |  | - | --- | --- |  |  | ----- | ----- | -
|Investment Management and Other Income   |       | 2001 |     | 2000 |  | $ Change |     | % Change
|                                         |       |      |     |      |  |          |     |         
|Equity in earnings of unconsolidated JVs |       | $    | 1.6 |      |  | $        | 1.5 |          |  | $ | 0.1 |     |  |  | 6.7   | %    
|Investment management income             |       |      | 2.3 |      |  |          | 0.9 |          |  |   | 1.4 |     |  |  | 155.6 | %    
|Interest and other income                |       |      | 5.4 |      |  |          | 0.5 |          |  |   | 4.9 |     |  |  | 980.0 | %    
|                                         |       |      |     |      |  |          |     |          |  |   |     |     |  |  |       |      
|                                         | Total |      | $   | 9.3  |  |          | $   | 2.9      |  |   | $   | 6.4 |  |  |       | 220.7 | %
|                                         |       |      |     |      |  |          |     |          |  |   |     |     |  |  |       |      

The $1.4 million increase in investment
management income was due primarily to increased management fees
and priority distributions from our co-investment joint
ventures. The $4.9 million increase in interest and other
income was primarily due to interest income from our mortgage
note on the retail center that we sold in 2000 and interest
income resulting from increased average cash balances.

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##### Table of Contents



|                                                  |                             |       |      |      |      |          |      |          |      |   |      |     |     |  |       |      |      |  
|------------------------------------------------- | --------------------------- | ----- | ---- | ---- | ---- | -------- | ---- | -------- | ---- | - | ---- | --- | --- |  | ----- | ---- | ---- | -
|Property Operating Expenses and Real Estate Taxes |                             | 2001  |      | 2000 |      | $ Change |      | % Change
|                                                  |                             |       |      |      |      |          |      |         
|                                                  |                             |       |      |      |      |         
|(Exclusive of depreciation and amortization)      |                             |       |      |      |      |         
|Rental expenses                                   |                             | $     | 17.9 |      |      | $        | 13.4 |          |      | $ | 4.5  |     |     |  | 33.6  | %   
|Real estate taxes                                 |                             |       | 17.4 |      |      |          | 14.0 |          |      |   | 3.4  |     |     |  | 24.3  | %   
|                                                  |                             |       |      |      |      |          |      |          |      |   |      |     |     |  |       |     
|                                                  | Property operating expenses |       | $    | 35.3 |      |          | $    | 27.4     |      |   | $    | 7.9 |     |  |       | 28.8 | %   
|                                                  |                             |       |      |      |      |          |      |          |      |   |      |     |     |  |       |     
|Same store                                        |                             | $     | 23.3 |      |      | $        | 22.7 |          |      | $ | 0.6  |     |     |  | 2.6   | %   
|2000 acquisitions                                 |                             |       | 8.5  |      |      |          | 2.0  |          |      |   | 6.5  |     |     |  | 325.0 | %   
|2001 acquisitions                                 |                             |       | 1.3  |      |      |          |     |          |      |   | 1.3  |     |     |  |      |     
|Developments                                      |                             |       | 1.2  |      |      |          | 0.1  |          |      |   | 1.1  |     |     |  |      |     
|Divestitures                                      |                             |       | 1.0  |      |      |          | 2.6  |          |      |   | (1.6 | )   |     |  | (61.5 | )%  
|                                                  |                             |       |      |      |      |          |      |          |      |   |      |     |     |  |       |     
|                                                  |                             | Total |      | $    | 35.3 |          |      | $        | 27.4 |   |      | $   | 7.9 |  |       |      | 28.8 | %
|                                                  |                             |       |      |      |      |          |      |          |      |   |      |     |     |  |       |     

The increase in same store properties
operating expenses primarily relates to increases in insurance
expense of $0.6 million.

|                                 |       |      |      |      |  |          |      |          |  |   |      |      |  |  |      |      |  
|-------------------------------- | ----- | ---- | ---- | ---- |  | -------- | ---- | -------- |  | - | ---- | ---- |  |  | ---- | ---- | -
|Other Expenses                   |       | 2001 |      | 2000 |  | $ Change |      | % Change
|                                 |       |      |      |      |  |          |      |         
|Interest, including amortization |       | $    | 33.0 |      |  | $        | 22.6 |          |  | $ | 10.4 |      |  |  | 46.0 | %   
|Depreciation and amortization    |       |      | 39.0 |      |  |          | 23.3 |          |  |   | 15.7 |      |  |  | 67.4 | %   
|General and administrative       |       |      | 8.8  |      |  |          | 6.0  |          |  |   | 2.8  |      |  |  | 46.7 | %   
|                                 |       |      |      |      |  |          |      |          |  |   |      |      |  |  |      |     
|                                 | Total |      | $    | 80.8 |  |          | $    | 51.9     |  |   | $    | 28.9 |  |  |      | 55.7 | %
|                                 |       |      |      |      |  |          |      |          |  |   |      |      |  |  |      |     

The increase in interest expense was primarily
due to the issuance of additional unsecured senior debt
securities and an increase in secured debt balances, partially
offset by a decrease in credit facility balances. The secured
debt issuances were primarily for our co-investment joint
ventures properties. The increase in depreciation expense
was due to unrealized losses on assets held for sale of
$10.0 million and the increase in our net investment in
real estate. The increase in general and administrative expenses
was primarily due to increased personnel and occupancy costs. In
addition, the consolidation of AMB Investment Management, Inc.
and Headlands Realty Corporation on May 31, 2001, resulted
in an increase in general and administrative expenses of
$0.5 million.

During the three months ended September 30,
2001, we retired $43.5 million of secured debt prior to
maturity primarily in connection with property divestitures. We
recognized a net extraordinary gain of $0.1 million related
to the early retirement of debt, resulting from the write-off of
debt premiums partially offset by prepayment penalties.

Nine Months Ended September 30, 2001
Compared to the Nine Months Ended September 30,
2000

(dollars in millions):


|                    |       |      |       |       |  |          |       |          |  |   |       |      |  |  |       |      |  
|------------------- | ----- | ---- | ----- | ----- |  | -------- | ----- | -------- |  | - | ----- | ---- |  |  | ----- | ---- | -
|Rental Revenues     |       | 2001 |       | 2000  |  | $ Change |       | % Change
|                    |       |      |       |       |  |          |       |         
|Same store          |       | $    | 299.4 |       |  | $        | 279.9 |          |  | $ | 19.5  |      |  |  | 7.0   | %   
|2000 acquisitions   |       |      | 81.0  |       |  |          | 17.6  |          |  |   | 63.4  |      |  |  | 360.2 | %   
|2001 acquisitions   |       |      | 12.3  |       |  |          |      |          |  |   | 12.3  |      |  |  |      |     
|Developments        |       |      | 4.5   |       |  |          | 1.3   |          |  |   | 3.2   |      |  |  | 246.2 | %   
|Divestitures        |       |      | 16.6  |       |  |          | 31.4  |          |  |   | (14.8 | )    |  |  | (47.1 | )%  
|Straight-line rents |       |      | 7.6   |       |  |          | 7.2   |          |  |   | 0.4   |      |  |  | 5.6   | %   
|                    |       |      |       |       |  |          |       |          |  |   |       |      |  |  |       |     
|                    | Total |      | $     | 421.4 |  |          | $     | 337.4    |  |   | $     | 84.0 |  |  |       | 24.9 | %
|                    |       |      |       |       |  |          |       |          |  |   |       |      |  |  |       |     

The growth in rental revenues in same store
properties resulted primarily from the incremental effect of
cash rental rate increases on renewals and rollovers, fixed rent
increases on existing leases, and reimbursement of expenses,
partially offset by lower occupancy. During the nine months
ended September 30, 2001, the same

26



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##### Table of Contents



store rent increases on industrial renewals and
rollovers (cash basis) was 32.1% on 6.8 million square feet
leased.


|                                         |       |      |      |      |  |          |     |          |  |   |      |      |  |  |       |       |  
|---------------------------------------- | ----- | ---- | ---- | ---- |  | -------- | --- | -------- |  | - | ---- | ---- |  |  | ----- | ----- | -
|Investment Management and Other Income   |       | 2001 |      | 2000 |  | $ Change |     | % Change
|                                         |       |      |      |      |  |          |     |         
|Equity in earnings of unconsolidated JVs |       | $    | 4.4  |      |  | $        | 4.0 |          |  | $ | 0.4  |      |  |  | 10.0  | %    
|Investment management income             |       |      | 8.0  |      |  |          | 2.2 |          |  |   | 5.8  |      |  |  | 263.6 | %    
|Interest and other income                |       |      | 12.5 |      |  |          | 1.6 |          |  |   | 10.9 |      |  |  | 681.3 | %    
|                                         |       |      |      |      |  |          |     |          |  |   |      |      |  |  |       |      
|                                         | Total |      | $    | 24.9 |  |          | $   | 7.8      |  |   | $    | 17.1 |  |  |       | 219.2 | %
|                                         |       |      |      |      |  |          |     |          |  |   |      |      |  |  |       |      

The $5.8 million increase in investment
management income was due primarily to increased management and
acquisition fees and priority distributions from our
co-investment joint ventures. The $10.9 million increase in
interest and other income was primarily due to interest income
from our mortgage note on the retail center that we sold in 2000
and from interest income resulting from increased average cash
balances.

|                                                  |                             |       |      |       |       |          |      |          |      |   |      |      |      |  |       |      |      |  
|------------------------------------------------- | --------------------------- | ----- | ---- | ----- | ----- | -------- | ---- | -------- | ---- | - | ---- | ---- | ---- |  | ----- | ---- | ---- | -
|Property Operating Expenses and Real Estate Taxes |                             | 2001  |      | 2000  |       | $ Change |      | % Change
|                                                  |                             |       |      |       |       |          |      |         
|                                                  |                             |       |      |       |       |         
|(Exclusive of depreciation and amortization)      |                             |       |      |       |       |         
|Rental expenses                                   |                             | $     | 51.0 |       |       | $        | 36.5 |          |      | $ | 14.5 |      |      |  | 39.7  | %   
|Real estate taxes                                 |                             |       | 50.9 |       |       |          | 41.0 |          |      |   | 9.9  |      |      |  | 24.1  | %   
|                                                  |                             |       |      |       |       |          |      |          |      |   |      |      |      |  |       |     
|                                                  | Property operating expenses |       | $    | 101.9 |       |          | $    | 77.5     |      |   | $    | 24.4 |      |  |       | 31.5 | %   
|                                                  |                             |       |      |       |       |          |      |          |      |   |      |      |      |  |       |     
|Same store                                        |                             | $     | 69.5 |       |       | $        | 65.1 |          |      | $ | 4.4  |      |      |  | 6.8   | %   
|2000 acquisitions                                 |                             |       | 24.3 |       |       |          | 4.4  |          |      |   | 19.9 |      |      |  | 452.3 | %   
|2001 acquisitions                                 |                             |       | 2.5  |       |       |          |     |          |      |   | 2.5  |      |      |  |      |     
|Developments                                      |                             |       | 2.2  |       |       |          | 0.1  |          |      |   | 2.1  |      |      |  |      |     
|Divestitures                                      |                             |       | 3.4  |       |       |          | 7.9  |          |      |   | (4.5 | )    |      |  | (57.0 | )%  
|                                                  |                             |       |      |       |       |          |      |          |      |   |      |      |      |  |       |     
|                                                  |                             | Total |      | $     | 101.9 |          |      | $        | 77.5 |   |      | $    | 24.4 |  |       |      | 31.5 | %
|                                                  |                             |       |      |       |       |          |      |          |      |   |      |      |      |  |       |     

The increase in same store properties
operating expenses primarily relates to increases in common area
maintenance expenses of $1.7 million, real estate taxes of
$1.8 million, and insurance expense of $0.6 million.

|                                 |       |      |      |       |  |          |      |          |  |   |      |      |  |  |      |      |  
|-------------------------------- | ----- | ---- | ---- | ----- |  | -------- | ---- | -------- |  | - | ---- | ---- |  |  | ---- | ---- | -
|Other Expenses                   |       | 2001 |      | 2000  |  | $ Change |      | % Change
|                                 |       |      |      |       |  |          |      |         
|Interest, including amortization |       | $    | 94.8 |       |  | $        | 62.9 |          |  | $ | 31.9 |      |  |  | 50.7 | %   
|Depreciation and amortization    |       |      | 93.1 |       |  |          | 65.1 |          |  |   | 28.0 |      |  |  | 43.0 | %   
|General and administrative       |       |      | 26.2 |       |  |          | 17.4 |          |  |   | 8.8  |      |  |  | 50.6 | %   
|                                 |       |      |      |       |  |          |      |          |  |   |      |      |  |  |      |     
|                                 | Total |      | $    | 214.1 |  |          | $    | 145.4    |  |   | $    | 68.7 |  |  |      | 47.2 | %
|                                 |       |      |      |       |  |          |      |          |  |   |      |      |  |  |      |     

The increase in interest expense was primarily
due to the issuance of additional unsecured senior debt
securities and an increase in secured debt balances, partially
offset by a decrease in credit facility balances. The secured
debt issuances were primarily for our co-investment joint
ventures properties. The increase in depreciation expense
was due to unrealized losses on assets held for sale of
$10.0 million and the increase in our net investment in
real estate. The increase in general and administrative expenses
was primarily due to increased personnel and occupancy costs. In
addition, the consolidation of AMB Investment Management, Inc.
and Headlands Realty Corporation on May 31, 2001, resulted
in an increase in general and administrative expenses of
$2.3 million.

The $20.8 million loss on investments in
other companies during the nine months ended September 30,
2001, related to our investment in Webvan Group, Inc. and other
technology-based companies. The loss reflects a 100% write-down
of the book value of the investments.

During the nine months ended September 30,
2001, we retired $55.2 million of secured debt prior to
maturity primarily in connection with property divestitures. We
recognized a net extraordinary loss of $0.4 million related
to the early retirement of debt, resulting from prepayment
penalties, partially offset by the write-off of debt premiums.

27



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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES

We currently expect that our principal sources of
working capital and funding for acquisitions, development,
expansion, and renovation of properties will include:
(1) cash flow from operations; (2) borrowings under
our unsecured credit facility; (3) other forms of secured
or unsecured financing; (4) proceeds from debt or limited
partnership unit offerings (including issuances of limited
partnership units by our subsidiaries); and (5) net
proceeds from divestitures of properties. Additionally, our
co-investment program will also continue to serve as a source of
capital for acquisitions and developments. We believe that our
sources of working capital and our ability to access private and
public debt and equity capital are adequate for us to meet our
liquidity requirements for the foreseeable future.

Capital Resources

Property Divestitures.In the third quarter, we divested
ourselves of ten industrial and two retail buildings for an
aggregate price of $97.3 million, with a resulting net gain
of $5.6 million, net of minority interests share.
Year to date, we have divested ourselves of 23 industrial
and two retail buildings for an aggregate price of
$190.4 million, with a resulting net gain of
$23.9 million, net of minority interest partners
share.

Properties Held for Divestiture.We have decided to divest ourselves of
one industrial property and four retail centers, which are not
in our core markets or which do not meet our strategic
objectives. The divestitures of the properties are subject to
negotiation of acceptable terms and other customary conditions.
As of September 30, 2001, the net carrying value of the
properties held for divestiture was $106.1 million.

Co-investment Program.Year to date, we have contributed
$539.2 million in operating properties, consisting of
111 industrial buildings aggregating approximately
10.8 million square feet, to three of our co-investment
joint ventures.

On June 28, 2001, we formed the Alliance
Fund II to acquire, develop, and redevelop distribution
facilities nationwide. As of September 30, 2001, the
Alliance Fund II had received equity commitments from
third-party investors of $181.8 million, which, when
combined with anticipated debt financings and our investment,
creates a total planned capitalization of $456.1 million.
Subsequently, on October 9, 2001, the Alliance Fund II
received additional equity commitments of $13.6 million at
its final closing. Therefore, as of October 9, 2001, the
Alliance Fund II had received total equity commitments from
third party investors of $195.4 million, which, when
combined with anticipated debt financings and our investment,
creates a total planned capitalization of $488.6 million.
We are the managing general partner of the Alliance Fund II
and owned, as of September 30, 2001, approximately 20% of
the co-investment joint venture.

On March 26, 2001, we formed a joint
venture, AMB-SGP, L.P., with a subsidiary of GIC Real Estate Pte
Ltd., the real estate investment subsidiary of the Government of
Singapore Investment Corporation, to own and operate, through a
private real estate investment trust, distribution facilities
nationwide. As of September 30, 2001, AMB-SGP, L.P. had
received an equity contribution from GIC of $75.0 million,
which, when combined with anticipated debt financings and our
investment, creates a total planned capitalization of
$335.0 million. We are the managing general partner of
AMB-SGP, L.P. and owned, as of September 30, 2001,
approximately 50.3% of the co-investment joint venture.

On February 14, 2001, we formed AMB
Partners II, L.P. with the City and County of San Francisco
Employees Retirement System to acquire, develop, and
redevelop distribution facilities nationwide. As of
September 30, 2001, AMB Partners II had received an
equity contribution from third party investors of
$50.0 million, which, when combined with anticipated debt
financings and our investment, creates a total planned
capitalization of $250.0 million. We are the managing
general partner of Partners II and owned, as of
September 30, 2001, approximately 50% of the co-investment
joint venture.

Credit Facilities.In May 2000, we entered into a
$500.0 million unsecured revolving credit agreement. AMB
Property Corporation guarantees our obligations under the credit
facility. The credit facility matures in May 2003, has a
one-year extension option, and is subject to a 15 basis
point annual facility fee, which is based on our credit rating.
We have the ability to increase available borrowings to
$700.0 million by adding

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additional banks to the facility or obtaining the
agreement of existing banks to increase its commitments. We use
our unsecured credit facility principally for acquisitions and
for general working capital requirements. Borrowings under our
credit facility currently bear interest at LIBOR plus
75 basis points. As of September 30, 2001, there was
no outstanding balance on our unsecured credit facility. Monthly
debt service payments on our credit facility are interest only.
The total amount available under our credit facility fluctuates
based upon the borrowing base, as defined in the agreement
governing the credit facility. At September 30, 2001, the
remaining amount available under our unsecured credit facility
was $500.0 million (excluding the additional
$200.0 million of potential additional capacity).


In July 2001, the Alliance Fund II obtained
a $150.0 million secured credit facility from Bank of
America N.A. Borrowings currently bear interest at LIBOR plus
87.5 basis points, which includes the facility fee. As of
September 30, 2001, the outstanding balance was
$125.0 million and the remaining amount available was
$25.0 million.

Equity.In September
2001, we issued and sold 800,000 7.95% Series J Cumulative
Redeemable Preferred Limited Partnership Units at a price of
$50.00 per unit in a private placement. Distributions are
cumulative from the date of issuance and payable quarterly in
arrears. The Series J Preferred Units are redeemable by us
on or after September 21, 2006, subject to certain
conditions, for cash at a redemption price equal to $50.00 per
unit, plus accumulated and unpaid distributions thereon, if any,
to the redemption date. The Series J Preferred Units are
exchangeable, at specified times and subject to certain
conditions, on a one-for-one basis, for shares of AMB Property
Corporations Series J Preferred Stock. We used the
net proceeds of $38.9 million for general corporate
purposes, which may include the partial repayment of
indebtedness or the acquisition or development of additional
properties.

In March 2001, AMB Property II, L.P., one of
our subsidiaries, issued and sold 510,000 8.00% Series I
Cumulative Redeemable Preferred Limited Partnership Units at a
price of $50.00 per unit in a private placement.
Distributions are cumulative from the date of issuance and
payable quarterly in arrears at a rate per unit equal to
$4.00 per annum. The Series I Preferred Units are
redeemable by AMB Property II, L.P. on or after
March 21, 2006, subject to certain conditions, for cash at
a redemption price equal to $50.00 per unit, plus accumulated
and unpaid distributions thereon, if any, to the redemption
date. The Series I Preferred Units are exchangeable, at
specified times and subject to certain conditions, on a
one-for-one basis, for shares of AMB Property Corporations
Series I Preferred Stock. AMB Property II, L.P. used
the net proceeds of $24.9 million to repay advances from us
and to make a loan to us. We used the funds to partially repay
borrowings under our unsecured credit facility and for general
corporate purposes. The loan bears interest at 8.0% per annum
and is payable on demand.

During the third quarter of 2001, we redeemed
218,092 and 23,700 common limited partnership units for cash and
shares of AMB Property Corporations common stock,
respectively. During the first quarter of 2001, we redeemed
598,297 common limited partnership units for shares of AMB
Property Corporations common stock.

AMB Property Corporations board of
directors approved a stock repurchase program in 1999 for the
repurchase of up to $100.0 million worth of its common
stock. During the third quarter, AMB Property Corporation
repurchased 907,700 shares of its common stock at an average
purchase price of $23.68 per share under the program. During the
second quarter, AMB Property Corporation repurchased 25,000
shares of its common stock at a purchase price of $22.80 per
share under the program. Under the program to date, AMB Property
Corporation has repurchased 2,376,300 shares our common stock at
an average purchase price of $20.77 per share. AMB Property
Corporations stock repurchase program expires in December
2001.

Debt.As of
September 30, 2001, the aggregate principal amount of our
secured debt was $1.1 billion, excluding unamortized debt
premiums of $7.5 million. The secured debt bears interest
at rates varying from 4.0% to 10.4% per annum (with a weighted
average rate of 7.6%) and final maturity dates ranging from
November 2001 to June 2023. All of the secured debt bears
interest at fixed rates, except for three loans with an
aggregate principal amount of $35.9 million as of
September 30, 2001, which bear interest at variable rates
(with a weighted average interest rate of 4.3% at
September 30, 2001).

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In August 2000, we commenced a medium-term note
program for the possible issuance of up to $400.0 million
in principal amount of medium-term notes, which will be
guaranteed by AMB Property Corporation. As of September 30,
2001, we had issued $380.0 million of medium-term notes
under this program, leaving $20.0 million available for
issuance. In January 2001, we issued and sold $25.0 million
of the notes under this program to A.G. Edwards &
Sons, Inc., as principal. AMB Property Corporation has
guaranteed the notes, which mature on January 30, 2006, and
bear interest at 6.90% per annum. We used the net proceeds of
$24.9 million for general corporate purposes, to partially
repay indebtedness, and to acquire and develop additional
properties. In March 2001, we issued and sold $50.0 million
of the notes under this program to First Union Securities, Inc.,
as principal. AMB Property Corporation has guaranteed the notes,
which mature on March 7, 2011, and bear interest at 7.00%
per annum. We used the net proceeds of $49.7 million for
general corporate purposes, to partially repay indebtedness, and
to acquire and develop additional properties. In September 2001,
we issued and sold $25.0 million of the notes under this
program to Lehman Brothers, Inc., as principal. AMB Property
Corporation has guaranteed the notes, which mature on
September 6, 2011, and bear interest at 6.75% per annum. We
used the net proceeds of $24.8 million for general
corporate purposes and to acquire and develop additional
properties.

Mortgage Receivables.In September 2000, we sold our retail
center located in Los Angeles, California. As of
September 30, 2001, we carried an 8.75% mortgage note in
the principal amount of $79.0 million on the retail center.
The maturity date of the mortgage note, which was originally
scheduled to mature on October 1, 2001, had been extended
to October 15, 2001. As of November 13, 2001, the
borrower was in default, however, we are negotiating an
extension on the maturity date and to change certain terms of
the note. We have a first lien against the retail center as
collateral for the mortgage note and we believe that the
underlying value of the retail center is equal to or greater
than the fair value of the mortgage note. Through a wholly-owned
subsidiary, we also hold a mortgage loan receivable on AMB Pier
One, LLC, an unconsolidated joint venture. The note bears
interest at 13.0% and matures in May 2026. As of
September 30, 2001, the outstanding balance on the note was
$13.2 million.

In order to maintain financial flexibility and
facilitate the rapid deployment of capital through market
cycles, we presently intend to operate with a debt-to-total
market capitalization ratio of approximately 45% or less.
Additionally, we presently manage our capitalization in order to
maintain an investment grade rating on our senior unsecured
debt. In spite of these policies, our organizational documents
do not contain any limitation on the amount of indebtedness that
we may incur. Accordingly, our general partner could alter or
eliminate these policies without unitholder or noteholder
approval.

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##### Table of Contents



The tables below summarize our debt maturities
and capitalization as of September 30, 2001 (dollars in
thousands):

Debt

|                                                                  |                      |                         |                         |         |         |             |          |               |         |         |         |         |         |         |          |         |        |         |          |           |           |           | 
|----------------------------------------------------------------- | -------------------- | ----------------------- | ----------------------- | ------- | ------- | ----------- | -------- | ------------- | ------- | ------- | ------- | ------- | ------- | ------- | -------- | ------- | ------ | ------- | -------- | --------- | --------- | --------- | 
|                                                                  |                      | Our                     |                         | Joint   |         | Unsecured   |          |               |         |        
|                                                                  |                      | Secured                 |                         | Venture |         | Senior Debt |          | Credit        |         | Total  
|                                                                  |                      | Debt(1)                 |                         | Debt    |         | Securities  |          | Facilities(2) |         | Debt   
|                                                                  |                      |                         |                         |         |         |             |          |               |         |        
|2001                                                              |                      | $                       | 2,996                   |         |         | $           | 9,014    |               |         | $       |        |         |         | $       |         |         |        | $       | 12,010   |          
|2002                                                              |                      |                         | 28,194                  |         |         |             | 51,937   |               |         |         |        |         |         |         |         |         |        |         | 80,131   |          
|2003                                                              |                      |                         | 76,296                  |         |         |             | 12,005   |               |         |         |        |         |         |         | 125,000  |         |        |         | 213,301  |          
|2004                                                              |                      |                         | 65,285                  |         |         |             | 25,791   |               |         |         |        |         |         |         |         |         |        |         | 91,076   |          
|2005                                                              |                      |                         | 63,027                  |         |         |             | 40,019   |               |         |         | 250,000 |         |         |         |         |         |        |         | 353,046  |          
|2006                                                              |                      |                         | 94,966                  |         |         |             | 72,166   |               |         |         | 25,000  |         |         |         |         |         |        |         | 192,132  |          
|2007                                                              |                      |                         | 30,198                  |         |         |             | 23,470   |               |         |         | 55,000  |         |         |         |         |         |        |         | 108,668  |          
|2008                                                              |                      |                         | 33,604                  |         |         |             | 145,108  |               |         |         | 175,000 |         |         |         |         |         |        |         | 353,712  |          
|2009                                                              |                      |                         | 5,176                   |         |         |             | 29,812   |               |         |         |        |         |         |         |         |         |        |         | 34,988   |          
|2010                                                              |                      |                         | 52,780                  |         |         |             | 69,205   |               |         |         | 75,000  |         |         |         |         |         |        |         | 196,985  |          
|2011                                                              |                      |                         | 1,311                   |         |         |             | 135,820  |               |         |         | 75,000  |         |         |         |         |         |        |         | 212,131  |          
|Thereafter                                                        |                      |                         | 3,307                   |         |         |             | 23,785   |               |         |         | 125,000 |         |         |         |         |         |        |         | 152,092  |          
|                                                                  |                      |                         |                         |         |         |             |          |               |         |         |         |         |         |         |          |         |        |         |          |          
|                                                                  | Subtotal             |                         |                         | 457,140 |         |             |          | 638,132       |         |         |         | 780,000 |         |         |          | 125,000 |        |         |          | 2,000,272 |          
|                                                                  | Unamortized premiums |                         |                         | 7,529   |         |             |          |              |         |         |         |        |         |         |          |        |        |         |          | 7,529     |          
|                                                                  |                      |                         |                         |         |         |             |          |               |         |         |         |         |         |         |          |         |        |         |          |          
|                                                                  |                      |                         | Total consolidated debt |         |         | 464,669     |          |               |         | 638,132 |         |         |         | 780,000 |          |         |        | 125,000 |          |           |           | 2,007,801 | 
|Our share of unconsolidated joint venture debt(3)                 |                      |                         |                        |         |         |             | 32,694   |               |         |         |        |         |         |         |         |         |        |         | 32,694   |          
|                                                                  |                      |                         |                         |         |         |             |          |               |         |         |         |         |         |         |          |         |        |         |          |          
|                                                                  |                      |                         | Total debt              |         |         | 464,669     |          |               |         | 670,826 |         |         |         | 780,000 |          |         |        | 125,000 |          |           |           | 2,040,495 | 
|Joint venture partners share of
	consolidated joint venture debt |                      |                         |                        |         |         |             | (326,970 | )             |         |         |        |         |         |         | (100,000 | )       |        |         | (426,970 | )        
|                                                                  |                      |                         |                         |         |         |             |          |               |         |         |         |         |         |         |          |         |        |         |          |          
|                                                                  |                      | Our share of total debt |                         | $       | 464,669 |             |          | $             | 343,856 |         |         | $       | 780,000 |         |          | $       | 25,000 |         |          | $         | 1,613,525 |          
|                                                                  |                      |                         |                         |         |         |             |          |               |         |         |         |         |         |         |          |         |        |         |          |          
|Weighed average interest rate                                     |                      |                         | 8.1                     | %       |         |             | 7.3      | %             |         |         | 7.3     | %       |         |         | 3.5      | %       |        |         | 7.2      | %        
|Weighed average maturity (in years)                               |                      |                         | 5.0                     |         |         |             | 7.5      |               |         |         | 7.9     |         |         |         | 1.9      |         |        |         | 6.6      |          



---



|    |                                                                                                                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | All of the secured debt bears interest at fixed
	rates, except for two loans with an aggregate principal amount
	of $35.9 million as of September 30, 2001, which bear
	interest at variable rates (with a weighted average interest
	rate of 4.3% at September 30, 2001).                           
|   
|(2) | The 2003 maturity represents a credit facility
	obtained by the Alliance Fund  II, which will repay the
	facility with capital contributions and secured debt proceeds.
	We also have a $500.0 million credit facility, which
	matures in 2003 and had no outstanding balance at
	September 30, 2001.
|   
|(3) | The weighted average interest and weighted
	average maturity for the unconsolidated joint venture debt were
	5.7% and 4.6  years, respectively.                                                                                                                                                      

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Market Capital

|                                 |       |             |            |              |  |              |       |  |  |   |           |           | 
|-------------------------------- | ----- | ----------- | ---------- | ------------ |  | ------------ | ----- |  |  | - | --------- | --------- | 
|                                 |       | Units       |            |              |  |             
|Security                         |       | Outstanding |            | Market Price |  | Market Value
|                                 |       |             |            |              |  |             
|Common general partnership units |       |             | 84,164,842 |              |  | $            | 24.50 |  |  | $ | 2,062,039 |          
|Common limited partnership units |       |             | 4,987,828  |              |  |              | 24.50 |  |  |   | 122,202   |          
|                                 |       |             |            |              |  |              |       |  |  |   |           |          
|                                 | Total |             |            | 89,152,670   |  |              |       |  |  |   | $         | 2,184,241 | 
|                                 |       |             |            |              |  |              |       |  |  |   |           |          

Preferred Units

|                         |                         |          |      |             |   |            |         |         |  |  |                |  | 
|------------------------ | ----------------------- | -------- | ---- | ----------- | - | ---------- | ------- | ------- |  |  | -------------- |  | 
|                         |                         | Dividend |      | Liquidation |   | Redemption
|Security                 |                         | Rate     |      | Preference  |   | Provisions
|                         |                         |          |      |             |   |           
|Series A preferred units |                         |          | 8.50 | %           |   | $          | 100,000 |         |  |  | July 2003      | 
|Series B preferred units |                         |          | 8.63 | %           |   |            | 65,000  |         |  |  | November 2003  | 
|Series C preferred units |                         |          | 8.75 | %           |   |            | 110,000 |         |  |  | November 2003  | 
|Series D preferred units |                         |          | 7.75 | %           |   |            | 79,767  |         |  |  | May 2004       | 
|Series E preferred units |                         |          | 7.75 | %           |   |            | 11,022  |         |  |  | August 2004    | 
|Series F preferred units |                         |          | 7.95 | %           |   |            | 19,872  |         |  |  | March 2005     | 
|Series G preferred units |                         |          | 7.95 | %           |   |            | 1,000   |         |  |  | August 2005    | 
|Series H preferred units |                         |          | 8.13 | %           |   |            | 42,000  |         |  |  | September 2005 | 
|Series I preferred units |                         |          | 8.00 | %           |   |            | 25,500  |         |  |  | March 2006     | 
|Series J preferred units |                         |          | 7.95 | %           |   |            | 40,000  |         |  |  | September 2006 | 
|                         |                         |          |      |             |   |            |         |         |  |  |                | 
|                         | Weighted Average/ Total |          |      | 8.31        | % |            | $       | 494,161 |  |  |                |  | 
|                         |                         |          |      |             |   |            |         |         |  |  |                | 

Capitalization Ratios

|                                                                       |  |  |      |  
|---------------------------------------------------------------------- |  |  | ---- | -
|Total debt-to-total market capitalization                              |  |  | 43.2 | %
|Our share of total debt-to-total market
	capitalization                |  |  | 37.6 | %
|Total debt plus preferred-to-total market
	capitalization              |  |  | 53.7 | %
|Our share of total debt plus preferred-to-total
	market capitalization |  |  | 49.1 | %
|Our share of total debt-to-total book
	capitalization                  |  |  | 42.9 | %

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

As of September 30, 2001, we had
approximately $256.9 million in cash, restricted cash, and
cash equivalents, and $500.0 million of additional
available borrowings under our credit facility. To fund
acquisitions, development activities, and capital expenditures
and to provide for general working capital requirements, we
intend to use: (1) cash from operations;
(2) borrowings under our credit facility; (3) other
forms of secured and unsecured financing; (4) proceeds from
any future debt or limited partnership unit offerings (including
issuances of limited partnership units by our subsidiaries);
(5) proceeds from divestitures of properties; and
(6) private capital

We declared a regular cash distribution for the
quarter ending September 30, 2001, of $0.395 per common
unit. The distributions were payable on October 15, 2001,
to unitholders of record on October 4, 2001. The
Series A, B, C, E, F, G, and J preferred unit distributions
were also payable on October 15, 2001, to unitholders of
record on October 4, 2001. The Series D, H, and I
preferred unit distributions were payable on September 25,
2001, to unitholders of record on September 15, 2001. The
following table sets forth the distributions:

|                                 |  |                       |  |               |  |               |  |        |  |       
|-------------------------------- |  | --------------------- |  | ------------- |  | ------------- |  | ------ |  | ------
|                                 |  |                       |  |               |  |              
|                                 |  |                       |  | For the Three |  | For the Nine 
|                                 |  |                       |  | Months Ended  |  | Months Ended 
|                                 |  |                       |  | September 30, |  | September 30,
|                                 |  |                       |  |               |  |              
|Security                         |  | Paying Entity         |  | 2001          |  | 2000          |  | 2001   |  | 2000  
|                                 |  |                       |  |               |  |               |  |        |  |       
|Common Limited partnership units |  | AMB Property, L.P.    |  | $0.395        |  | $0.370        |  | $1.185 |  | $1.110
|Series A preferred units         |  | AMB Property, L.P.    |  | $0.531        |  | $0.531        |  | $1.594 |  | $1.594
|Series B preferred units         |  | AMB Property, L.P.    |  | $1.078        |  | $1.078        |  | $3.234 |  | $3.234
|Series C preferred units         |  | AMB Property II, L.P. |  | $1.094        |  | $1.094        |  | $3.281 |  | $3.281
|Series D preferred units         |  | AMB Property II, L.P. |  | $0.969        |  | $0.969        |  | $2.906 |  | $2.906
|Series E preferred units         |  | AMB Property II, L.P. |  | $0.969        |  | $0.969        |  | $2.906 |  | $2.906
|Series F preferred units         |  | AMB Property II, L.P. |  | $0.994        |  | $0.994        |  | $2.952 |  | $2.097
|Series G preferred units         |  | AMB Property II, L.P. |  | $0.994        |  | $0.357        |  | $2.982 |  | $0.357
|Series H preferred units         |  | AMB Property II, L.P. |  | $1.016        |  | $0.282        |  | $3.048 |  | $0.282
|Series I preferred units         |  | AMB Property II, L.P. |  | $1.000        |  | n/a           |  | $2.044 |  | n/a   
|Series J preferred units         |  | AMB Property, L.P.    |  | $0.097        |  | n/a           |  | $0.097 |  | n/a   

The anticipated size of our distributions, using
only cash from operations, will not allow us to retire all of
our debt as it comes due. Therefore, we intend to also repay
maturing debt with net proceeds from future debt or limited
partnership unit offerings. However, we may not be able to
obtain future financings on favorable terms or at all.



| |                    
| | -------------------
| | Capital Commitments

In addition to recurring capital expenditures and
costs to renew or re-tenant space, as of September 30,
2001, we are developing 18 projects representing a total
estimated investment of $320.2 million upon completion. Of
this total, $221.2 million had been funded as of
September 30, 2001, and approximately $99.0 million is
estimated to be required to complete current and planned
projects. We expect to fund these expenditures with cash from
operations, borrowings under our credit facility, debt or
limited partnership unit issuances, and net proceeds from
property divestitures. We have no other material capital
commitments.

Year to date, we have invested
$283.4 million in 42 operating industrial buildings,
aggregating approximately 4.5 million rentable square feet.
We funded these acquisitions and initiated development and
renovation projects through private capital contributions,
borrowings under our credit facility, cash, debt and limited
partnership unit issuances, and net proceeds from property
divestitures.

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FUNDS FROM OPERATIONS

We believe that funds from operations, or FFO, as
defined by the National Association of Real Estate Investment
Trusts, is an appropriate measure of performance for an equity
real estate investment trust, such as AMB Property Corporation,
our general partner. While funds from operations is a relevant
and widely used measure of operating performance of real estate
investment trusts, it does not represent cash flow from
operations or net income as defined by U.S. generally accepted
accounting principles and it should not be considered as an
alternative to those indicators in evaluating liquidity or
operating performance. Further, funds from operations as
disclosed by other real estate investment trusts may not be
comparable.

FFO is defined as income from operations before
minority interest, gains or losses from sale of real estate, and
extraordinary items plus real estate depreciation and adjustment
to derive our pro rata share of FFO of unconsolidated joint
ventures, less minority interests pro rata share of FFO of
consolidated joint ventures and perpetual preferred stock
dividends. In accordance with the NAREIT White Paper on funds
from operations, we include the effects of straight-line rents
in funds from operations. Further, we do not adjust FFO to
eliminate the effects of non-recurring charges.

The following table reflects the calculation of
funds from operations (dollars in thousands, except share and
per share data):

|                                                               |                                                     |                       |        |                     |        |      |        |        |        |   |         |         |         |   |         |         |         | 
|-------------------------------------------------------------- | --------------------------------------------------- | --------------------- | ------ | ------------------- | ------ | ---- | ------ | ------ | ------ | - | ------- | ------- | ------- | - | ------- | ------- | ------- | 
|                                                               |                                                     |                       |        |                    
|                                                               |                                                     | For the Three Months  |        | For the Nine Months
|                                                               |                                                     | Ended September 30,   |        | Ended September 30,
|                                                               |                                                     |                       |        |                    
|                                                               |                                                     | 2001                  |        | 2000                |        | 2001 |        | 2000  
|                                                               |                                                     |                       |        |                     |        |      |        |       
|Income from operations                                         |                                                     | $                     | 39,355 |                     |        | $    | 42,116 |        |        | $ | 109,578 |         |         | $ | 122,355 |        
|Gains on developments held for sale                            |                                                     |                       | 1,341  |                     |        |      |       |        |        |   | 1,341   |         |         |   |        |        
|Real estate related depreciation and amortization:             |                                                     |                       |        |                     |        |      |        |        |        |   |         |         |         |   |         |        
|                                                               | Total depreciation and amortization                 |                       |        | 38,961              |        |      |        | 23,312 |        |   |         | 93,138  |         |   |         | 65,135  |        
|                                                               | FF&E depreciation and ground lease
	amortization(1) |                       |        | (483                | )      |      |        | (223   | )      |   |         | (1,456  | )       |   |         | (857    | )      
|FFO attributable to minority interests:                        |                                                     |                       |        |                     |        |      |        |        |        |   |         |         |         |   |         |        
|                                                               | Joint venture partners(2)                           |                       |        | (13,393             | )      |      |        | (4,262 | )      |   |         | (29,119 | )       |   |         | (9,569  | )      
|                                                               | Series C-I preferred unit distributions             |                       |        | (5,943              | )      |      |        | (4,804 | )      |   |         | (17,342 | )       |   |         | (13,572 | )      
|Adjustments to derive FFO in unconsolidated joint
	venture(3): |                                                     |                       |        |                     |        |      |        |        |        |   |         |         |         |   |         |        
|                                                               | Our share of net income                             |                       |        | (1,636              | )      |      |        | (1,447 | )      |   |         | (4,365  | )       |   |         | (4,006  | )      
|                                                               | Our share of FFO                                    |                       |        | 2,235               |        |      |        | 1,941  |        |   |         | 6,488   |         |   |         | 5,488   |        
|Series A preferred unit distributions                          |                                                     |                       | (2,125 | )                   |        |      | (2,125 | )      |        |   | (6,375  | )       |         |   | (6,375  | )      
|Series B preferred unit distributions                          |                                                     |                       | (1,402 | )                   |        |      | (1,402 | )      |        |   | (4,206  | )       |         |   | (4,206  | )      
|                                                               |                                                     |                       |        |                     |        |      |        |        |        |   |         |         |         |   |         |        
|Series J preferred unit distributions                          |                                                     |                       | (78    | )                   |        |      |       |        |        |   | (78     | )       |         |   |        |        
|                                                               |                                                     |                       |        |                     |        |      |        |        |        |   |         |         |         |   |         |        
|                                                               |                                                     | Funds from operations |        | $                   | 56,832 |      |        | $      | 53,106 |   |         | $       | 147,604 |   |         | $       | 154,393 | 
|                                                               |                                                     |                       |        |                     |        |      |        |        |        |   |         |         |         |   |         |        



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | FF&E depreciation represents depreciation on
	furniture, fixtures, and equipment that isnt real-estate
	related. Ground lease amortization represents the amortization
	of our investments in ground lease properties, for which we do
	not have a purchase option.                                                                                                                                                                                 
|   
|(2) | Represents FFO attributable to minority interests
	in consolidated joint ventures whose interests are not
	exchangeable into common stock of AMB Property Corporation. The
	minority interests share of net operating income for the
	quarters ended September 30, 2001 and 2000, was
	$18.2 million and $6.8 million, respectively, and for
	the nine months ended September 30, 2001 and 2000, was
	$44.4 million and $16.9 million, respectively.
|   
|(3) | Our share of net operating income for the
	quarters ended September 30, 2001 and 2000, was
	$2.7 million and $2.2 million, respectively, and for
	the nine months ended September  30, 2001 and 2000, was
	$7.8 million and $6.3 million, respectively.                                                                                                                                                                                              

34



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##### Table of Contents



OPERATING AND LEASING STATISTICS
SUMMARY

The following table summarizes key operating and
leasing statistics for all of our industrial properties as of
and for the periods ended September 30, 2001 (dollars in
thousands):

|                                                                               |                    |                                         |                  |                    |        |        |            |           |        |        | 
|------------------------------------------------------------------------------ | ------------------ | --------------------------------------- | ---------------- | ------------------ | ------ | ------ | ---------- | --------- | ------ | ------ | 
|                                                                               |                    | Three Months                            |                  | Nine Months       
|                                                                               |                    | Ended                                   |                  | Ended             
|                                                                               |                    | September 30, 2001                      |                  | September 30, 2001
|                                                                               |                    |                                         |                  |                   
|Square feet owned(1)(2)                                                        |                    |                                         | 78,428,611       |                    |        |        | 78,428,611 |          
|Occupancy percentage(1)                                                        |                    |                                         | 96.6             | %                  |        |        | 96.6       | %        
|Weighted average lease terms:                                                  |                    |                                         |                  |                    |        |        |            |          
|                                                                               | Original           |                                         |                  | 6.3 years          |        |        |            | 6.3 years |       
|                                                                               | Remaining          |                                         |                  | 3.3 years          |        |        |            | 3.3 years |       
|Tenant retention                                                               |                    |                                         | 68.4             | %                  |        |        | 66.2       | %        
|Rent increases on renewals and rollovers                                       |                    |                                         | 14.4             | %                  |        |        | 27.8       | %        
|                                                                               | Square feet leased |                                         |                  | 3,088,069          |        |        |            | 8,091,402 |       
|Second generation tenant improvements and leasing
	commissions per sq. ft.(3): |                    |                                         |                  |                    |        |        |            |          
|                                                                               |                    | Renewals                                |                  | $                  | 1.22   |        |            | $         | 1.05   |       
|                                                                               |                    | Re-tenanted                             |                  |                    | 4.18   |        |            |           | 3.66   |       
|                                                                               |                    |                                         |                  |                    |        |        |            |          
|                                                                               |                    |                                         | Weighted average |                    | $      | 2.71   |            |           | $      | 2.28   | 
|                                                                               |                    |                                         |                  |                    |        |        |            |          
|Recurring capital expenditures(4)                                              |                    |                                         |                  |                    |        |        |            |          
|                                                                               |                    | Tenant improvements                     |                  | $                  | 1,980  |        |            | $         | 6,019  |       
|                                                                               |                    | Lease commissions and other lease costs |                  |                    | 8,760  |        |            |           | 16,043 |       
|                                                                               |                    | Building improvements                   |                  |                    | 5,584  |        |            |           | 11,136 |       
|                                                                               |                    |                                         |                  |                    |        |        |            |          
|                                                                               |                    |                                         | Sub-total        |                    |        | 16,324 |            |           |        | 33,198 | 
|                                                                               |                    | Partners share of capital expenditures |                  |                    | (1,154 | )      |            |           | (2,829 | )     
|                                                                               |                    |                                         |                  |                    |        |        |            |          
|                                                                               |                    |                                         | Total            |                    | $      | 15,170 |            |           | $      | 30,369 | 
|                                                                               |                    |                                         |                  |                    |        |        |            |          



---



|    |                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes all industrial consolidated operating
	properties and excludes development and renovation projects.
	Excludes retail and other properties square feet of
	1,314,533, occupancy of 87.6%, and annualized base rent of
	$14.6  million.                                                                                                                                         
|   
|(2) | In addition to owned square feet as of
	September 30, 2001, we managed, through our subsidiary,
	AMB Investment Management, approximately 3.3 million
	additional square feet of industrial, retail, and other
	properties. We also have an investment in approximately
	4.9 million square feet of industrial properties through
	our investments in the unconsolidated joint ventures.
|   
|(3) | Consists of all second-generation leases renewing
	or re-tenanting with lease terms greater than one year.                                                                                                                                                                                                                                                                              
|   
|(4) | Includes second generation leasing costs and
	building improvements.                                                                                                                                                                                                                                                                                                                    

35



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##### Table of Contents



The following summarizes key same store
properties operating statistics for our industrial
properties as of and for the three and nine month periods ended
September 30, 2001:

|                                                   |                        |                    |            |                    |   |  |            |           |  
|-------------------------------------------------- | ---------------------- | ------------------ | ---------- | ------------------ | - |  | ---------- | --------- | -
|                                                   |                        | Three Months       |            | Nine Months       
|                                                   |                        | Ended              |            | Ended             
|                                                   |                        | September 30, 2001 |            | September 30, 2001
|                                                   |                        |                    |            |                   
|Square feet in same store pool(1)                  |                        |                    | 60,196,156 |                    |   |  | 60,196,156 |          
|                                                   | % of total square feet |                    |            | 76.8               | % |  |            | 76.8      | %
|Occupancy percentage at period end                 |                        |                    |            |                    |   |  |            |          
|                                                   | September 30, 2001     |                    |            | 96.5               | % |  |            | 96.5      | %
|                                                   | September 30, 2000     |                    |            | 97.2               | % |  |            | 97.2      | %
|Tenant retention                                   |                        |                    | 65.7       | %                  |   |  | 64.7       | %        
|Rent increases on lease commencements              |                        |                    | 16.8       | %                  |   |  | 32.1       | %        
|                                                   | Square feet leased     |                    |            | 2,682,235          |   |  |            | 6,792,332 |  
|Cash basis net operating income growth % increase: |                        |                    |            |                    |   |  |            |          
|                                                   | Revenues               |                    |            | 5.7                | % |  |            | 7.2       | %
|                                                   | Expenses               |                    |            | 2.5                | % |  |            | 6.9       | %
|                                                   | Net operating income   |                    |            | 6.7                | % |  |            | 7.2       | %



---



|    |                                                                                   
|--- | ----------------------------------------------------------------------------------
|(1) | Excludes properties purchased or developments
	stabilized after December 31, 1999.




Item 7A.     Quantitative and Qualitative Disclosures About Market
Risk

Market risk is the risk of loss from adverse
changes in market prices and interest rates. Our future earnings
and cash flows are dependent upon prevalent market rates.
Accordingly, we manage our market risk by matching projected
cash inflows from operating, investing, and financing activities
with projected cash outflows for debt service, acquisitions,
capital expenditures, distributions to unitholders, and other
cash requirements. The majority of our outstanding debt has
fixed interest rates, which minimizes the risk of fluctuating
interest rates. Our exposure to market risk includes:
(1) interest rate fluctuations in connection with our
credit facilities and other variable rate borrowings; and
(2) our ability to incur more debt without unitholder or
noteholder approval, thereby increasing our debt service
obligations, which could adversely affect our cash flows. As of
September 30, 2001, we had no interest rate caps or swaps.
See Item 2: Managements Discussion and Analysis
of Financial Condition and Results of Operations 
Liquidity and Capital Resources  Capital
Resources  Market Capitalization.

The table below summarizes the market risks
associated with our fixed and variable rated debt outstanding as
of September 30, 2001:

|                      |  |                        |        |      |  |      |        |      |  |      |         |            |  |            |        |   |  |   |         |   |  |   |           |   |  |   |           |  
|--------------------- |  | ---------------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------- | ---------- |  | ---------- | ------ | - |  | - | ------- | - |  | - | --------- | - |  | - | --------- | -
|                      |  |                       
|                      |  | Expected Maturity Date
|                      |  |                       
|                      |  | 2001                   |        | 2002 |  | 2003 |        | 2004 |  | 2005 |         | Thereafter |  | Total Debt
|                      |  |                        |        |      |  |      |        |      |  |      |         |            |  |           
|Fixed rate debt(1)    |  | $                      | 12,010 |      |  | $    | 58,315 |      |  | $    | 88,301  |            |  | $          | 86,895 |   |  | $ | 353,046 |   |  | $ | 1,240,785 |   |  | $ | 1,839,352 |  
|Average interest rate |  |                        | 8.0    | %    |  |      | 8.0    | %    |  |      | 7.8     | %          |  |            | 8.1    | % |  |   | 7.3     | % |  |   | 7.5       | % |  |   | 7.5       | %
|Variable rate debt(2) |  |                        |       |      |  | $    | 21,816 |      |  | $    | 125,000 |            |  | $          | 4,181  |   |  |   |        |   |  | $ | 9,923     |   |  | $ | 160,920   |  
|Average interest rate |  |                        |       |      |  |      | 4.3    | %    |  |      | 3.5     | %          |  |            | 4.3    | % |  |   |        |   |  |   | 4.3       | % |  |   | 3.7       | %



---



|    |                                          
|--- | -----------------------------------------
|(1) | Represents 92.0% of all outstanding debt.
|   
|(2) | Represents 8.0% of all outstanding debt. 

If market rates of interest on our variable rate
debt increased by 10% (or approximately 37 basis points),
then the increase in interest expense on the variable rate debt
would be approximately $0.6 million annually.

36



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##### Table of Contents






PART II




Item 1.     Legal Proceedings

As of September 30, 2001, there were no
pending legal proceedings to which we are a party or of which
any of our properties is the subject, the adverse determination
of which we anticipate would have a material adverse effect upon
our financial condition and results of operations.




Item 2.     Changes in Securities and Use of Proceeds

In September 2001, we retired 907,700 general
partnership units.

On August 17, 2001, we redeemed 68,092
common limited partnership units for cash to two individuals. On
September 7, 2001, we redeemed 150,000 common limited
partnership units for cash to two individuals. On
September 18, 2001, we redeemed 23,700 common limited
partnership units for 23,700 shares of AMB Property
Corporations common stock. The issuance of the
23,700 shares of AMB Property Corporations
common stock in exchange for the common limited partnership
units was exempt from the registration requirement of the
Securities Act pursuant to Section 4(2) of the Securities
Act and Rule 506 of Regulation D.

On September 21, 2001, we issued and sold
800,000 7.95% Series J Cumulative Redeemable Preferred
Limited Partnership Units at a price of $50.00 per unit, for an
aggregate offering price of $40.0 million, less a sales
commission of $1.1 million, in a private placement. The
issuance and sale of the Series J Preferred Units
constituted a private placement of securities that was exempt
from the registration requirement of the Securities Act pursuant
to Section 4(2) of the Securities Act and Rule 506 of
Regulation D. The Series J Preferred Units are
exchangeable, at specified times and subject to certain
conditions, on a one-for-one basis, for shares of AMB Property
Corporations Series J Preferred Stock.




Item 3.     Defaults Upon Senior Securities

None.




Item 4.     Submission of Matters to a Vote of Security
Holders

None.

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##### Table of Contents






Item 5.     Other Information




BUSINESS RISKS

Our operations involve various risks that could
have adverse consequences to us. These risks include, among
others:

General Real Estate Risks



| |                                                                                                   
| | --------------------------------------------------------------------------------------------------
| | There are Factors Outside of Our Control
	that Affect the Performance and Value of Our
	Properties

Real property investments are subject to varying
degrees of risk. The yields available from equity investments in
real estate depend on the amount of income earned and capital
appreciation generated by the related properties as well as the
expenses incurred in connection with the properties. If our
properties do not generate income sufficient to meet operating
expenses, including debt service and capital expenditures, then
our ability to make distributions to our unitholders and
payments to our noteholders could be adversely affected. Income
from, and the value of, our properties may be adversely affected
by the general economic climate, local conditions such as
oversupply of industrial space, or a reduction in demand for
industrial space, the attractiveness of our properties to
potential customers, competition from other properties, our
ability to provide adequate maintenance and insurance, and an
increase in operating costs. Periods of economic slowdown or
recession in the United States and in other countries, rising
interest rates, or declining demand for real estate, or public
perception that any of these events may occur would result in a
general decrease in rents or an increased occurrence of defaults
under existing leases, which would adversely affect our
financial condition and results of operations.

Future terrorist attacks in the United States may
result in declining economic activity, which could harm the
demand for and the value of our properties. To the extent that
our tenants are impacted by future attacks, their businesses
similarly could be adversely affected, including their ability
to continue to honor their existing leases. Our properties are
currently concentrated predominantly in the industrial real
estate sector. Our concentration in a certain property type
exposes us to the risk of economic downturns in this sector to a
greater extent than if our portfolio also included other
property types. As a result of such concentration, economic
downturns in the industrial real estate sector could adversely
affect our financial condition, results of operations, cash
flow, and ability to make distributions to our unitholders and
payments to our noteholders. In addition, revenues from
properties and real estate values are also affected by factors
such as the cost of compliance with regulations, the potential
for liability under applicable laws (including changes in tax
laws), interest rate levels, and the availability of financing.
Our income would be adversely affected if a significant number
of customers were unable to pay rent or if we were unable to
rent our industrial space on favorable terms. Certain
significant expenditures associated with an investment in real
estate (such as mortgage payments, real estate taxes, and
maintenance costs) generally do not decline when circumstances
cause a reduction in income from the property.



| |                                                                  
| | -----------------------------------------------------------------
| | We May Be Unable to Renew Leases or Relet
	Space as Leases Expire

We are subject to the risks that leases may not
be renewed, space may not be relet, or the terms of renewal or
reletting (including the cost of required renovations) may be
less favorable than current lease terms. Leases on a total of
5.3% of our industrial properties (based on annualized base
rent) as of September 30, 2001, will expire on or prior to
December 31, 2001. In addition, numerous properties compete
with our properties in attracting customers to lease space,
particularly with respect to retail centers. The number of
competitive commercial properties in a particular area could
have a material adverse effect on our ability to lease space in
our properties and on the rents that we are able to charge. Our
financial condition, results of operations, cash flow, and our
ability to make distributions to our unitholders and payments to
our noteholders could be adversely affected if we are unable to
promptly relet or renew the leases for all or a substantial
portion of expiring leases, if the rental rates upon renewal or
reletting is significantly lower than expected, or if our
reserves for these purposes prove inadequate.

38



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##### Table of Contents





| |                                      
| | -------------------------------------
| | Real Estate Investments are
	Illiquid

Because real estate investments are relatively
illiquid, our ability to vary our portfolio promptly in response
to economic or other conditions is limited. The limitations in
the Internal Revenue Code and related regulations on a real
estate investment trust holding property for sale, which
limitations are applicable to us as a subsidiary of AMB Property
Corporation, may affect our ability to sell properties without
adversely affecting distributions to our unitholders and
payments to our noteholders. The relative illiquidity of our
holdings and Internal Revenue Code prohibitions and related
regulations could impede our ability to respond to adverse
changes in the performance of our investments and could
adversely affect our financial condition, results of operations,
cash flow, and our ability to make distributions to our
unitholders and payments to our noteholders.



| |                                                                  
| | -----------------------------------------------------------------
| | A Significant Number of Our Properties are
	Located in California

Our industrial properties located in California
as of September 30, 2001, represented approximately 27% of
the aggregate square footage of our industrial properties as of
September 30, 2001, and 34% of our annualized base rent.
Annualized base rent means the monthly contractual amount under
existing leases at September 30, 2001, multiplied by 12.
This amount excludes expense reimbursements and rental
abatements. Our revenue from, and the value of, our properties
located in California may be affected by a number of factors,
including local real estate conditions (such as oversupply of or
reduced demand for industrial properties) and the local economic
climate. Business layoffs, downsizing, industry slowdowns,
changing demographics, and other factors may adversely impact
the local economic climate. A downturn in either the California
economy or in California real estate conditions could adversely
affect our financial condition, results of operations, cash
flow, and our ability to make distributions to our unitholders
and payments to our noteholders. Certain of our properties are
also subject to possible loss from seismic activity.

Some Potential Losses are not Covered by
Insurance

We carry comprehensive liability, fire, extended
coverage, and rental loss insurance covering all of our
properties, with policy specifications and insured limits that
we believe are adequate and appropriate under the circumstances
given relative risk of loss, the cost of such coverage, and
industry practice. There are, however, certain losses that are
not generally insured because it is not economically feasible to
insure against them, including losses due to riots or acts of
war. Under our current policies, we are insured for acts of
terrorism, however, there can be no assurance that we will be
able to maintain this coverage in the future. Certain losses
such as losses due to floods or seismic activity may be insured
subject to certain limitations including large deductibles or
co-payments and policy limits. If an uninsured loss or a loss in
excess of insured limits occurs with respect to one or more of
our properties, then we could lose the capital we invested in
the properties, as well as the anticipated future revenue from
the properties and, in the case of debt, which is with recourse
to us, we would remain obligated for any mortgage debt or other
financial obligations related to the properties. Any such
liability could adversely affect our financial condition,
results of operations, cash flow, and ability to make
distributions to our unitholders and payments to our noteholders.

A number of our properties are located in areas
that are known to be subject to earthquake activity, including
California where, as of September 30, 2001, 267 industrial
buildings aggregating approximately 21.0 million square
feet (representing 27% of our properties based on aggregate
square footage and 34% based on annualized base rent) are
located. We carry replacement cost earthquake insurance on all
of our properties located in areas historically subject to
seismic activity, subject to coverage limitations and
deductibles that we believe are commercially reasonable. This
insurance coverage also applies to the properties managed by AMB
Investment Management, with a single aggregate policy limit and
deductible applicable to those properties and our properties.
Through an annual analysis prepared by outside consultants, we
evaluate our earthquake insurance coverage in light of current
industry practice and determine the appropriate amount of
earthquake insurance to carry. We may incur material losses in
excess of insurance proceeds and we may not be able to continue
to obtain insurance at commercially reasonable rates.

39



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##### Table of Contents



We are Subject to Risks and Liabilities In
Connection With Properties Owned Through Joint Ventures, Limited
Liability Companies, and Partnerships

As of September 30, 2001, we had ownership
interests in several joint ventures, limited liability
companies, or partnerships with third parties, as well as
interests in three unconsolidated entities. As of
September 30, 2001, we owned approximately
27.0 million square feet (excluding three unconsolidated
joint ventures) of our properties through these entities. We may
make additional investments through these ventures in the future
and presently plan to do so. Such partners may share certain
approval rights over major decisions. Partnership, limited
liability company, or joint venture investments may involve
risks such as the following: (1) our partners, co-members,
or joint venturers might become bankrupt (in which event we and
any other remaining general partners, members, or joint
venturers would generally remain liable for the liabilities of
the partnership, limited liability company, or joint venture);
(2) our partners, co-members, or joint venturers might at
any time have economic or other business interests or goals that
are inconsistent with our business interests or goals;
(3) our partners, co-members, or joint venturers may be in
a position to take action contrary to our instructions,
requests, policies, or objectives; and (4) agreements
governing joint ventures, limited liability companies, and
partnerships often contain restrictions on the transfer of a
joint venturers, members, or partners interest
or buy-sell or other provisions, which may result in
a purchase or sale of the interest at a disadvantageous time or
on disadvantageous terms.

We will, however, generally seek to maintain
sufficient control of our partnerships, limited liability
companies, and joint ventures to permit us to achieve our
business objectives. Our organizational documents do not limit
the amount of available funds that we may invest in
partnerships, limited liability companies, or joint ventures.
The occurrence of one or more of the events described above
could adversely affect our financial condition, results of
operations, cash flow, and ability to make distributions to our
unitholders and payments to our noteholders.

We May be Unable to Consummate Acquisitions on
Advantageous Terms

We intend to continue to acquire primarily
industrial properties. Acquisitions of properties entail risks
that investments will fail to perform in accordance with
expectations. Estimates of the costs of improvements necessary
for us to bring an acquired property up to market standards may
prove inaccurate. In addition, there are general investment
risks associated with any real estate investment. Further, we
anticipate significant competition for attractive investment
opportunities from other major real estate investors with
significant capital including both publicly traded real estate
investment trusts, such as our general partner, and private
institutional investment funds. We expect that future
acquisitions will be financed through a combination of
borrowings under our unsecured credit facility, proceeds from
debt or limited partnership unit offerings (including issuances
of limited partnership units by our subsidiaries), and proceeds
from property divestitures, which could have an adverse effect
on our cash flow. We may not be able to acquire additional
properties. Our inability to finance any future acquisitions on
favorable terms or the failure of acquisitions to conform with
our expectations or investment criteria, or our failure to
timely reinvest the proceeds from property divestitures could
adversely affect our financial condition, results of operations,
cash flow, and ability to make distributions to our unitholders
and payments to our noteholders.

We May be Unable to Complete Renovation and
Development on Advantageous Terms

The real estate development business, including
the renovation and rehabilitation of existing properties,
involves significant risks. These risks include the following:
(1) we may not be able to obtain financing on favorable
terms for development projects and we may not complete
construction on schedule or within budget, resulting in
increased debt service expense and construction costs and delays
in leasing such properties and generating cash flow; (2) we
may not be able to obtain, or we may experience delays in
obtaining, all necessary zoning, land-use, building, occupancy,
and other required governmental permits and authorizations;
(3) new or renovated properties may perform below
anticipated levels, producing cash flow below budgeted amounts;
(4) substantial renovation as well as new development
activities, regardless of whether or not they are ultimately
successful, typically require a substantial portion of
managements time and attention that could divert
managements time from our day-to-day operations; and
(5) activities that we finance through

40



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##### Table of Contents



construction loans involve the risk that, upon
completion of construction, we may not be able to obtain
permanent financing or we may not be able to obtain permanent
financing on advantageous terms. These risks could adversely
affect our financial condition, results of operations, cash
flow, and ability to make distributions to our unitholders and
payments to our noteholders.


We May be Unable to Complete Divestitures on
Advantageous Terms

We have decided to divest ourselves of four
retail centers and one industrial property, which are not in our
core markets of which do not meet our strategic objectives. The
divestitures of the properties are subject to negotiation of
acceptable terms and other customary conditions. Our ability to
dispose of properties on advantageous terms is dependent upon
factors beyond our control, including competition from other
owners (including other real estate investment trusts) that are
attempting to dispose of industrial and retail properties and
the availability of financing on attractive terms for potential
buyers of our properties. Our inability to dispose of properties
on favorable terms or our inability to redeploy the proceeds of
property divestitures in accordance with our investment strategy
could adversely affect our financial condition, results of
operations, cash flow, and ability to make distributions to our
unitholders and payments to our noteholders.

Debt Financing



| |                         
| | ------------------------
| | We Could Incur More Debt

We operate with a policy of incurring debt,
either directly or through our subsidiaries, only if upon such
incurrence our debt-to-total market capitalization ratio would
be approximately 45% or less. The aggregate amount of
indebtedness that we may incur under our policy varies directly
with the valuation of AMB Property Corporations capital
stock and the number of shares of capital stock outstanding.
Accordingly, we would be able to incur additional indebtedness
under our policy as a result of increases in the market price
per share of AMB Property Corporations common stock or
other outstanding classes of capital stock, and future issuance
of shares of AMB Property Corporations capital stock.
However, our organizational documents do not contain any
limitation on the amount of indebtedness that we may incur.
Accordingly, AMB Property Corporation, as our general partner,
could alter or eliminate this policy without unitholder or
noteholder consent. If we change this policy, then we could
become more highly leveraged, resulting in an increase in debt
service that could adversely affect our financial condition,
results of operations, cash flow, and ability to make
distributions to our unitholders and payments to our noteholders.



| |                                                                        
| | -----------------------------------------------------------------------
| | Scheduled Debt Payments Could Adversely
	Affect Our Financial Condition

We are subject to risks normally associated with
debt financing, including the risks that cash flow will be
insufficient to make distributions to our unitholders and
payments to our noteholders, that we will be unable to refinance
existing indebtedness on our properties (which in all cases will
not have been fully amortized at maturity) and that the terms of
refinancing will not be as favorable as the terms of existing
indebtedness. As of September 30, 2001, we had total debt
outstanding of approximately $2.0 billion.

If we are unable to refinance or extend principal
payments due at maturity or pay them with proceeds of other
capital transactions, then we expect that our cash flow will not
be sufficient in all years to make distributions to our
unitholders and payments to our noteholders and to repay all
such maturing debt. Furthermore, if prevailing interest rates or
other factors at the time of refinancing (such as the reluctance
of lenders to make commercial real estate loans) result in
higher interest rates upon refinancing, then the interest
expense relating to that refinanced indebtedness would increase.
This increased interest expense would adversely affect our
financial condition, results of operations, cash flow, and
ability to make distributions to our unitholders and payments to
our noteholders. In addition, if we mortgage one or more of our
properties to secure payment of indebtedness and we are unable
to meet mortgage payments, then the property could be foreclosed
upon or transferred to the mortgagee with a consequent loss of
income and asset value. A foreclosure on one or more of our
properties could adversely affect our financial condition,
results of operations, cash flow, and ability to make
distributions to our unitholders and payments to our noteholders.

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| |                                                            
| | -----------------------------------------------------------
| | Rising Interest Rates Could Adversely
	Affect Our Cash Flow

As of September 30, 2001, we had
approximately $125.0 million outstanding under our Alliance
Fund II secured credit facility and we had two secured
loans with an aggregate principal amount of $35.9 million,
which bear interest at variable rates (with weighted average
interest rate of 4.3% at September 30, 2001). In addition,
we may incur other variable rate indebtedness in the future.
Increases in interest rates on this indebtedness could increase
our interest expense, which would adversely affect our financial
condition, results of operations, cash flow, and ability to make
distributions to our unitholders and payments to our
noteholders. Accordingly, in the future, we may engage in
transactions to limit our exposure to rising interest rates.



| |                                                 
| | ------------------------------------------------
| | We Are Dependent on External Sources of
	Capital

In order for our general partner, AMB Property
Corporation, to qualify as a real estate investment trust under
the Internal Revenue Code, it is required each year to
distribute to its stockholders at least 90% of its real estate
investment trust taxable income (determined without regard to
the dividends-paid deduction and by excluding any net capital
gain) and it is subject to tax on its income to the extent it is
not distributed. Because of this distribution requirement, we
may not be able to fund all future capital needs, including
capital needs in connection with acquisitions, from cash
retained from operations. As a result, to fund capital needs, we
rely on third party sources of capital, which we may not be able
to obtain on favorable terms or at all. Our access to third
party sources of capital depends upon a number of factors,
including: (1) general market conditions; (2) the
markets perception of our growth potential; (3) our
current and potential future earnings and cash distributions;
and (4) the market price of AMB Property Corporations
capital stock. Additional debt financing may substantially
increase our debt-to-total capitalization ratio.



| |                                                                   
| | ------------------------------------------------------------------
| | We Could Default on Cross-Collateralized
	and Cross-Defaulted Debt

As of September 30, 2001, we had 21
non-recourse secured loans, which are cross collateralized by 41
properties. As of September 30, 2001, we had
$430.5 million (not including unamortized debt premium)
outstanding on these loans. If we default on any of these loans,
then we could be required to repay the aggregate of all
indebtedness, together with applicable prepayment charges, to
avoid foreclosure on all the cross-collateralized properties
within the applicable pool. Foreclosure on our properties, or
our inability to refinance our loans on favorable terms, could
adversely impact our financial condition, results of operations,
cash flow, and ability to make distributions to our unitholders
and payments to our noteholders. In addition, our credit
facilities and senior debt securities contain certain
cross-default provisions, which are triggered in the event that
our other material indebtedness is in default. These
cross-default provisions may require us to repay or restructure
our credit facilities and senior debt securities in addition to
any mortgage or other debt that is in default, which could
adversely affect our financial condition, results of operations,
cash flow, and ability to make distributions to our unitholders
and payments to our noteholders.

Contingent or Unknown Liabilities Could
Adversely Affect Our Financial Condition

Our predecessors have been in existence for
varying lengths of time up to 18 years. At the time of our
formation we acquired the assets of these entities subject to
all of their potential existing liabilities. There may be
current liabilities or future liabilities arising from prior
activities that we are not aware of and therefore have not
disclosed in this report. AMB Property Corporation assumed these
liabilities as the surviving entity in the various merger and
contribution transactions that occurred at the time of its
formation. Existing liabilities for indebtedness generally were
taken into account in connection with the allocation of our
limited partnership units or shares of AMB Property
Corporations common stock in the formation transactions,
but no other liabilities were taken into account for these
purposes. We do not have recourse against AMB Property
Corporations predecessors or any of their respective
stockholders or partners or against any individual account
investors with respect to any unknown liabilities. Unknown
liabilities might include the following: (1) liabilities
for clean-up or remediation of undisclosed environmental
conditions; (2) claims of customers, vendors, or other
persons dealing with AMB Property Corporations
predecessors prior to the formation transactions that had not
been asserted prior to the formation transactions;
(3) accrued but unpaid liabilities incurred in the

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ordinary course of business; (4) tax
liabilities; and (5) claims for indemnification by the
officers and directors of AMB Property Corporations
predecessors and others indemnified by these entities.


Certain customers may claim that the formation
transactions gave rise to a right to purchase the premises that
they occupy. We do not believe any such claims would be material
and, to date, no such claims have been filed. See
 Government Regulations  We Could
Encounter Costly Environmental Problems below regarding
the possibility of undisclosed environmental conditions
potentially affecting the value of our properties. Undisclosed
material liabilities in connection with the acquisition of
properties, entities and interests in properties, or entities
could adversely affect our financial condition, results of
operations, cash flow, and ability to make distributions to our
unitholders and payments to our noteholders.

Conflicts of Interest



| |                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------
| | Some of AMB Property Corporations
	Directors and Executive Officers are Involved in Other Real
	Estate Activities and Investments

Some of AMB Property Corporations executive
officers own interests in real estate-related businesses and
investments. These interests include minority ownership of
Institutional Housing Partners, L.P., a residential housing
finance company, and ownership of Aspire Development, Inc. and
Aspire Development, L.P., developers that own property not
suitable for ownership by us. Aspire Development, Inc. and
Aspire Development, L.P. have agreed not to initiate any new
development projects not contemplated at AMB Property
Corporations initial public offering in November 1997.
These entities have also agreed that they will not make any
further investments in industrial properties other than those
currently under development at the time of AMB Property
Corporations initial public offering. The continued
involvement in other real estate-related activities by some of
AMB Property Corporations executive officers and directors
could divert managements attention from our day-to-day
operations. Most of AMB Property Corporations executive
officers have entered into non-competition agreements with AMB
Property Corporation pursuant to which they have agreed not to
engage in any activities, directly or indirectly, in respect of
commercial real estate, and not to make any investment in
respect of industrial real estate, other than through ownership
of not more than 5% of the outstanding shares of a public
company engaged in such activities or through the existing
investments referred to in this report. State law may limit our
ability to enforce these agreements.



| |                                                                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Certain of AMB Property Corporations
	Executive Officers and Directors May Have Conflicts of Interest
	with Us in Connection with Other Properties that They Own or
	Control

As of September 30, 2001, Aspire
Development, L.P. owns interests in three retail development
projects in the U.S., one of which are single freestanding
Walgreens drugstores and two of which are Walgreens drugstores
plus shop buildings, which are less than 10,000 feet. In
addition, Messrs. Abbey, Moghadam, and Burke, each a
founder and director of AMB Property Corporation, own less than
1% interests in two partnerships that own office buildings in
various markets; these interests have negligible value. Luis A.
Belmonte, an executive officer of AMB Property Corporation, owns
less than a 10% interest, representing an estimated value of
$150,000, in a limited partnership, which owns an office
building located in Oakland, California.

In addition, several of AMB Property
Corporations executive officers individually own:
(1) less than 1% interests in the stocks of certain
publicly-traded real estate investment trusts; (2) certain
interests in and rights to developed and undeveloped real
property located outside the United States; and (3) certain
other de minimus holdings in equity securities of real estate
companies.

Thomas W. Tusher, a member of AMB Property
Corporations board of directors, is a limited partner in a
partnership in which Messrs. Abbey, Moghadam, and Burke are
general partners and which owns a 75% interest in an office
building. Mr. Tusher owns a 20% interest in the
partnership, valued at approximately $1.7 million.
Messrs. Abbey, Moghadam, and Burke each have a 26.7%
interest in the partnership, each valued at approximately
$2.2 million.

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We believe that the properties and activities set
forth above generally do not directly compete with any of our
properties. However, it is possible that a property in which an
executive officer or director, or an affiliate of an executive
officer or director of AMB Property Corporation, has an interest
may compete with us in the future if we were to invest in a
property similar in type and in close proximity to that
property. In addition, the continued involvement of AMB Property
Corporations executive officers and directors in these
properties could divert managements attention from our
day-to-day operations. Our policy prohibits us from acquiring
any properties from our executive officers or their affiliates
without the approval of the disinterested members of AMB
Property Corporations board of directors with respect to
that transaction.



| |                                                                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | AMB Property Corporations Directors,
	Executive Officers, and Significant Stockholders Could Act in a
	Manner that is Not in the Best Interest of Our Limited Partners
	or Noteholders

As of November 2, 2001, AMB Property
Corporations two largest stockholders, Cohen &
Steers Capital Management, Inc. (with respect to various client
accounts for which Cohen & Steers Capital Management, Inc.
serves as investment advisor) and PREEF Real Estate Security
Advisors, L.P. (with respect to various client accounts for
which PREEF Real Estate Security Advisors, L.P. serves as
investment advisor) beneficially owned approximately 13.0% of
AMB Property Corporations outstanding common stock. In
addition, AMB Property Corporations executive officers and
directors beneficially owned approximately 5.4% of AMB Property
Corporations outstanding common stock as of
November 2, 2001, and will have influence on our management
and operation and, as stockholders of AMB Property Corporation,
will have influence on the outcome of any matters submitted to a
vote of AMB Property Corporations stockholders. This
influence might be exercised in a manner that is inconsistent
with the interests of our limited partners and noteholders.
Although there is no understanding or arrangement for these
directors, officers, and stockholders and their affiliates to
act in concert, these parties would be in a position to exercise
significant influence over AMB Property Corporations
affairs if they choose to do so.

Government Regulations

Many laws and governmental regulations are
applicable to our properties and changes in these laws and
regulations, or their interpretation by agencies and the courts,
occur frequently.



| |                                                          
| | ---------------------------------------------------------
| | Costs of Compliance with Americans with
	Disabilities Act

Under the Americans with Disabilities Act, places
of public accommodation must meet certain federal requirements
related to access and use by disabled persons. Compliance with
the Americans with Disabilities Act might require us to remove
structural barriers to handicapped access in certain public
areas where such removal is readily achievable. If
we fail to comply with the Americans with Disabilities Act, then
we might be required to pay fines to the government or damages
to private litigants. The impact of application of the Americans
with Disabilities Act to our properties, including the extent
and timing of required renovations, is uncertain. If we are
required to make unanticipated expenditures to comply with the
Americans with Disabilities Act, then our cash flow and the
amounts available for distribution to our unitholders and
payments to our noteholders may be adversely affected.



| |                                           
| | ------------------------------------------
| | We Could Encounter Environmental
	Problems

Federal, state, and local laws and regulations
relating to the protection of the environment impose liability
on a current or previous owner or operator of real estate for
contamination resulting from the presence or discharge of
hazardous or toxic substances or petroleum products at the
property. A current or previous owner may be required to
investigate and clean up contamination at or migrating from a
site. These laws typically impose liability and clean-up
responsibility without regard to whether the owner or operator
knew of or caused the presence of the contaminants. Even if more
than one person may have been responsible for the contamination,
each person covered by the environmental laws may be held
responsible for all of the clean-up costs incurred. In addition,
third parties may sue the owner or operator of a site for
damages based on personal injury, property damage, or other
costs, including investigation and clean-up costs, resulting
from environmental contamination present at or emanating from
that site.

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Environmental laws also govern the presence,
maintenance, and removal of asbestos. These laws require that
owners or operators of buildings containing asbestos properly
manage and maintain the asbestos, that they adequately inform or
train those who may come into contact with asbestos, and that
they undertake special precautions, including removal or other
abatement in the event that asbestos is disturbed during
renovation or demolition of a building. These laws may impose
fines and penalties on building owners or operators for failure
to comply with these requirements and may allow third parties to
seek recovery from owners or operators for personal injury
associated with exposure to asbestos fibers. Some of our
properties may contain asbestos-containing building materials.

Some of our properties are leased or have been
leased, in part, to owners and operators of businesses that use,
store, or otherwise handle petroleum products or other hazardous
or toxic substances. These operations create a potential for the
release of petroleum products or other hazardous or toxic
substances. Some of our properties are adjacent to or near other
properties that have contained or currently contain petroleum
products or other hazardous or toxic substances. In addition,
certain of our properties are on, are adjacent to, or are near
other properties upon which others, including former owners or
tenants of the properties, have engaged or may in the future
engage in activities that may release petroleum products or
other hazardous or toxic substances. From time to time, we may
acquire properties, or interests in properties, with known
adverse environmental conditions where we believe that the
environmental liabilities associated with these conditions are
quantifiable and the acquisition will yield a superior
risk-adjusted return. Environmental issues for each property are
evaluated and quantified prior to acquisition. The costs of
environmental investigation, clean-up, and monitoring are
underwritten into the cost of the acquisition and appropriate
environmental insurance is obtained for the property. In
connection with certain divested properties, we have agreed to
remain responsible for, and to bear the cost of, remediating or
monitoring certain environmental conditions on the properties.

All of our properties were subject to a
Phase I or similar environmental assessments by independent
environmental consultants at the time of acquisition.
Phase I assessments are intended to discover and evaluate
information regarding the environmental condition of the
surveyed property and surrounding properties and include an
historical review, a public records review, an investigation of
the surveyed site and surrounding properties, and preparation
and issuance of a written report. We may perform additional
Phase II testing if recommended by the independent
environmental consultant. Phase II testing may include the
collection and laboratory analysis of soil and groundwater
samples, completion of surveys for asbestos-containing building
materials, and any other testing that the consultant considers
prudent in order to test for the presence of hazardous materials.

None of the environmental assessments of our
properties has revealed any environmental liability that we
believe would have a material adverse effect on our financial
condition or results of operations taken as a whole.
Furthermore, we are not aware of any such material environmental
liability. Nonetheless, it is possible that the assessments do
not reveal all environmental liabilities and that there are
material environmental liabilities of which we are unaware or
that known environmental conditions may give rise to liabilities
that are materially greater than anticipated. Moreover, the
current environmental condition of our properties may be
affected by tenants, the condition of land, operations in the
vicinity of the properties (such as releases from underground
storage tanks), or by third parties unrelated to us. If the
costs of compliance with existing or future environmental laws
and regulations exceed our budgets for these items, then our
financial condition, results of operations, cash flow, and
ability to make distributions to our unitholders and payments to
our noteholders could be adversely affected.



| |                                                                                                  
| | -------------------------------------------------------------------------------------------------
| | Our Financial Condition could be Adversely
	Affected if We Fail to Comply with Other
	Regulations

Our properties are also subject to various
federal, state, and local regulatory requirements such as state
and local fire and life safety requirements. If we fail to
comply with these requirements, then we might incur fines by
governmental authorities or be required to pay awards of damages
to private litigants. We believe that our properties are
currently in substantial compliance with all such regulatory
requirements. However, these requirements may change or new
requirements may be imposed, which could require significant
unanticipated expenditures by us. Any such unanticipated
expenditure could adversely affect our financial condition,
results of operations, cash flow, and ability to make
distributions to our unitholders and payments to our noteholders.

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Certain Property Transfers May Generate
Prohibited Transaction Income

From time to time, we may transfer or otherwise
dispose of some of our properties. Under the Internal Revenue
Code, any gain resulting from transfers of properties that we
hold as inventory or primarily for sale to customers in the
ordinary course of business would be treated as income from a
prohibited transaction. We would be required to pay a 100%
penalty tax on that income. Since we acquire properties for
investment purposes, we believe that any transfer or disposal of
property by us would not be deemed by the Internal Revenue
Service to be a prohibited transaction with any resulting gain
allocable to us being subject to a 100% penalty tax. However,
whether property is held for investment purposes is a question
of fact that depends on all the facts and circumstances
surrounding the particular transaction. The Internal Revenue
Service may contend that certain transfers or disposals of
properties by us are prohibited transactions. While we believe
that the Internal Revenue Service would not prevail in any such
dispute, if the IRS successfully argued that a transfer or
disposition of property constituted a prohibited transaction,
then we would be required to pay a 100% penalty tax on any gain
allocable to us from the prohibited transaction.

We Are Dependent On Our General Partners
Key Personnel

We depend on the efforts of the executive
officers of our general partner. While we believe that AMB
Property Corporation could find suitable replacements for these
key personnel, the loss of their services or the limitation of
their availability could adversely affect our financial
condition, results of operations, cash flow, and ability to make
distributions to our unitholders and payments to our
noteholders. AMB Property Corporation does not have employment
agreements with any of its executive officers.

We May Be Unable to Manage Our
Growth

Our business has grown rapidly and continues to
grow through property acquisitions and developments. If we fail
to effectively manage our growth, then our financial condition,
results of operations, cash flow, and ability to make
distributions to our unitholders and payments to our noteholders
could be adversely affected.




Item 6.Exhibits and Reports on
Form 8-K

(a)  Exhibits:

|        |      |             |  |                                                                                                                                                                                                                                                                                                                                                
|------- | ---- | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |            
|Number  |      | Description
|        |      |            
|        | 4.1  |             |  | $25,000,000 6.75% Fixed Rate Note No. 10
	dated September  6, 2001, attaching the Parent Guarantee
	dated September 6, 2001 (incorporated by reference to
	Exhibit 4.1 of the Registrants Current Report on
	Form 8-K filed on September  18, 2001).                                                                                          
|        | 10.1 |             |  | Terms Agreement dated as of August 30, 2001,
	by and among Lehman Brothers Inc. and AMB Property, L.P. and AMB
	Property Corporation (incorporated by reference to
	Exhibit 1.1 of the Registrants Current Report on
	Form 8-K filed on September 18, 2001)                                                                                   
|        | 10.2 |             |  | Fifth Amended and Restated Agreement of Limited
	Partnership of AMB Property, L.P., dated September 21, 2001
	(incorporated by reference to Exhibit 10.1 of the
	Registrants Current Report on Form 8-K filed on
	October  3, 2001)                                                                                                           
|        | 10.3 |             |  | Revolving Credit Agreement dated as of
	August 23, 2001, among AMB Institutional Alliance
	Fund II, L.P. and AMB Institutional Alliance REIT II,
	Inc., the banks and financial institutions listed therein, Bank
	of America, N.A. as Administrative Agent, Dresdner Bank AG, as
	Syndication Agent, and Bank One, NA, as Documentation Agent.

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(b)  Reports on Form 8-K:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Registrant filed a Current Report on
	Form 8-K on September l8, 2001, in connection with the
	issuance of $25.0 million in senior unsecured notes by AMB
	Property, L.P. under its medium-term note program.                                                                                                                                                                                      
|
| |  | The Registrant filed a Current Report on
	Form 8-K on October 3, 2001, in connection with the
	issuance and sale by AMB Property, L.P. of 800,000 7.95%
	Series J Cumulative Redeemable Preferred Limited
	Partnership Units and the filing by the Registrant Articles
	Supplementary establishing and fixing the rights and preferences
	of the 7.95% Series J Cumulative Redeemable Preferred Stock.

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SIGNATURES

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



| |                   
| | ------------------
| | AMB PROPERTY, L.P.
| | Registrant        



| |     |                         
| | --- | ------------------------
| | By: | AMB Property Corporation

| |                    
| | -------------------
| | Its General Partner



| |     |                    
| | --- | -------------------
| | By: | /s/ MICHAEL A. COKE

| |                                        
| | ---------------------------------------
| |                                        
| | Michael A. Coke                        
| | Chief Financial Officer and            
| | Executive Vice President               
| | (Duly Authorized Officer and
	Principal
| | Financial and Accounting Officer)      

Date: November 13, 2001

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EXHIBIT INDEX

|        |      |              |  |                                                                                                                                                                                                                                                                                                                                                
|------- | ---- | ------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |             
|Number  |      | Exhibit List
|        |      |             
|        | 4.1  |              |  | $25,000,000 6.75% Fixed Rate Note No. 10
	dated September  6, 2001, attaching the Parent Guarantee
	dated September 6, 2001 (incorporated by reference to
	Exhibit 4.1 of the Registrants Current Report on
	Form 8-K filed on September  18, 2001).                                                                                          
|        | 10.1 |              |  | Terms Agreement dated as of August 30, 2001,
	by and among Lehman Brothers Inc. and AMB Property, L.P. and AMB
	Property Corporation (incorporated by reference to
	Exhibit 1.1 of the Registrants Current Report on
	Form 8-K filed on September 18, 2001)                                                                                   
|        | 10.2 |              |  | Fifth Amended and Restated Agreement of Limited
	Partnership of AMB Property, L.P., dated September 21, 2001
	(incorporated by reference to Exhibit 10.1 of the
	Registrants Current Report on Form 8-K filed on
	October  3, 2001)                                                                                                           
|        | 10.3 |              |  | Revolving Credit Agreement dated as of
	August 23, 2001, among AMB Institutional Alliance
	Fund II, L.P. and AMB Institutional Alliance REIT II,
	Inc., the banks and financial institutions listed therein, Bank
	of America, N.A. as Administrative Agent, Dresdner Bank AG, as
	Syndication Agent, and Bank One, NA, as Documentation Agent.

49