<PAGE>   1

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

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

                                   FORM 10-Q
                            ------------------------

(MARK ONE)

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

                 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000

                                       OR

     [ ]  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)

<TABLE>
<S>                                            <C>
                   DELAWARE                                      94-3285362
       (STATE OR OTHER JURISDICTION OF                        (I.R.S. EMPLOYER
        INCORPORATION OR ORGANIZATION)                      IDENTIFICATION NO.)

505 MONTGOMERY ST., SAN FRANCISCO, CALIFORNIA                      94111
   (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                      (ZIP CODE)
</TABLE>

                                 (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 [X]  No [ ].

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>   2

                               AMB PROPERTY, L.P.

                                     INDEX

<TABLE>
<CAPTION>
                                                                       PAGE
                                                                       ----
<S>      <C>                                                           <C>
                       PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements
         Consolidated Balance Sheets as of December 31, 1999 and
         March 31, 2000 (unaudited)..................................    1
         Consolidated Statements of Operations for the three months
         ended March 31, 1999 and 2000 (unaudited)...................    2
         Consolidated Statements of Cash Flows for the three months
         ended March 31, 1999 and 2000 (unaudited)...................    3
         Consolidated Statement of Partners' Capital for the three
         months ended March 31, 2000 (unaudited).....................    4
         Notes to Consolidated Financial Statements (unaudited)......    5
Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations...................................   14
Item 3.  Quantitative and Qualitative Disclosures About Market
         Risks.......................................................   24

                        PART II. OTHER INFORMATION

Item 1.  Legal Proceedings...........................................   24
Item 2.  Changes in Securities.......................................   24
Item 3.  Defaults Upon Senior Securities.............................   24
Item 4.  Submission of Matters to a Vote of Security Holders.........   24
Item 5.  Other Information...........................................   25
Item 6.  Exhibits and Reports on Form 8-K............................   36
</TABLE>

                                        i
<PAGE>   3

                                     PART I

ITEM 1. FINANCIAL STATEMENTS

                               AMB PROPERTY, L.P.

                          CONSOLIDATED BALANCE SHEETS
                   AS OF DECEMBER 31, 1999 AND MARCH 31, 2000
             (UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT UNIT AMOUNTS)

                                     ASSETS

<TABLE>
<CAPTION>
                                                              DECEMBER 31,    MARCH 31,
                                                                  1999           2000
                                                              ------------    ----------
<S>                                                           <C>             <C>
Investments in real estate:
  Land and improvements.....................................   $  714,916     $  735,991
  Buildings and improvements................................    2,349,221      2,390,699
  Construction in progress..................................      185,315        161,643
                                                               ----------     ----------
          Total investments in properties...................    3,249,452      3,288,333
  Accumulated depreciation and amortization.................     (103,558)      (120,193)
                                                               ----------     ----------
     Net investments in properties..........................    3,145,894      3,168,140
Investment in unconsolidated joint ventures.................       66,357         67,414
Properties held for divestiture, net........................      181,201        232,109
                                                               ----------     ----------
     Net investments in real estate.........................    3,393,452      3,467,663
Cash and cash equivalents...................................       33,312         26,662
Restricted cash and cash equivalents........................      103,707         62,432
Other assets................................................       91,079         99,870
                                                               ----------     ----------
          Total assets......................................   $3,621,550     $3,656,627
                                                               ==========     ==========

                           LIABILITIES AND PARTNERS' CAPITAL
Debt:
  Secured debt..............................................   $  707,037     $  766,211
  Alliance Fund I credit facility...........................       80,000         53,000
  Unsecured senior debt securities..........................      400,000        400,000
  Unsecured credit facility.................................       83,000         43,000
                                                               ----------     ----------
          Total debt........................................    1,270,037      1,262,211
Other liabilities...........................................       89,371        128,720
                                                               ----------     ----------
          Total liabilities.................................    1,359,408      1,390,931
Commitments and contingencies (note 11)
Minority interests..........................................      278,593        299,828
Partners' capital:
  General partner, 84,903,630 and 83,605,879 units
     outstanding, respectively, and 4,000,000 Series A
     preferred units with a $100,000 liquidation
     preference.............................................    1,829,259      1,782,336
  Limited partners, 4,507,689 and 5,973,615 units
     outstanding, respectively, and 1,300,000 Series B
     preferred units with a $65,000 liquidation
     preference.............................................      154,290        183,532
                                                               ----------     ----------
          Total partners' capital...........................    1,983,549      1,965,868
                                                               ----------     ----------
          Total liabilities and partners' capital...........   $3,621,550     $3,656,627
                                                               ==========     ==========
</TABLE>

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

                                        1
<PAGE>   4

                               AMB PROPERTY, L.P.

                     CONSOLIDATED STATEMENTS OF OPERATIONS
               FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000
      (UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT UNIT AND PER UNIT AMOUNTS)

<TABLE>
<CAPTION>
                                                              FOR THE THREE MONTHS ENDED
                                                                      MARCH 31,
                                                              --------------------------
                                                                 1999           2000
                                                              -----------    -----------
<S>                                                           <C>            <C>
REVENUES
  Rental revenues...........................................  $   107,657    $   108,266
  Equity in earnings of unconsolidated joint ventures.......        1,151          1,242
  Investment management and other income....................          764            815
                                                              -----------    -----------
          Total revenues....................................      109,572        110,323
OPERATING EXPENSES
  Property operating expenses...............................       12,369         11,477
  Real estate taxes.........................................       15,035         13,496
  General and administrative................................        6,202          5,351
  Interest, including amortization..........................       22,967         20,342
  Depreciation and amortization.............................       18,424         19,192
                                                              -----------    -----------
          Total operating expenses..........................       74,997         69,858
                                                              -----------    -----------
     Income from operations before minority interests.......       34,575         40,465
  Minority interests' share of net income...................       (3,821)        (6,065)
                                                              -----------    -----------
     Net income before gain/(loss) from divestiture of real
      estate................................................       30,754         34,400
  Loss from divestiture of real estate......................           --            (11)
                                                              -----------    -----------
     Net income.............................................       30,754         34,389
  Series A preferred unit distributions.....................       (2,125)        (2,125)
  Series B preferred unit distributions.....................       (1,402)        (1,402)
                                                              -----------    -----------
     Net income available to common unitholders.............  $    27,227    $    30,862
                                                              ===========    ===========
Income available to common unitholders attributable to:
  General partner...........................................  $    25,889    $    28,920
  Limited partners..........................................        1,338          1,942
                                                              -----------    -----------
                                                              $    27,227    $    30,862
                                                              ===========    ===========
INCOME PER COMMON UNIT
  Basic.....................................................  $      0.30    $      0.34
                                                              ===========    ===========
  Diluted...................................................  $      0.30    $      0.34
                                                              ===========    ===========
WEIGHTED AVERAGE COMMON UNITS OUTSTANDING
  Basic.....................................................   90,449,529     89,693,900
                                                              ===========    ===========
  Diluted...................................................   90,469,105     89,707,941
                                                              ===========    ===========
</TABLE>

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

                                        2
<PAGE>   5

                               AMB PROPERTY, L.P.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
               FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000
                       (UNAUDITED, DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                     FOR THE
                                                               THREE MONTHS ENDED
                                                                    MARCH 31,
                                                              ---------------------
                                                                1999         2000
                                                              ---------     -------
<S>                                                           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income..................................................  $  30,754     $34,389
Adjustments to reconcile net income to net cash provided by
  operating activities:
  Depreciation and amortization.............................     18,424      19,192
  Straight-line rents.......................................     (2,688)     (3,160)
  Amortization of debt premiums and financing costs.........       (727)     (1,337)
  Minority interests' share of net income...................      3,821       6,065
  Loss on divestitures of real estate.......................         --          11
  Equity in earnings of AMB Investment Management...........       (578)          5
  Equity in earnings of unconsolidated joint ventures.......     (1,151)     (1,242)
Changes in assets and liabilities:
  Other assets..............................................     (2,834)    (17,487)
  Other liabilities.........................................     19,491       8,328
                                                              ---------     -------
     Net cash provided by operating activities..............     64,512      44,764
CASH FLOWS FROM INVESTING ACTIVITIES
Change in restricted cash and cash equivalents..............       (179)     41,275
Cash paid for property acquisitions.........................    (70,100)    (34,460)
Additions to land, building, development costs and other
  first generation improvements.............................    (24,069)    (65,660)
Additions to second generation building improvements and
  lease costs...............................................     (7,139)     (6,991)
Additions to interest in unconsolidated joint ventures......         --        (847)
Distributions received from unconsolidated joint ventures...      1,109       1,032
Net proceeds from divestitures of real estate...............         --      12,351
                                                              ---------     -------
     Net cash used in investing activities..................   (100,378)    (53,300)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock....................................        391         269
Borrowings on unsecured credit facility.....................     82,000      22,000
Borrowings on secured debt..................................        303      60,624
Payments on unsecured credit facility.......................         --     (62,000)
Payments on Alliance Fund I credit facility.................         --     (27,000)
Payments on secured debt....................................     (8,316)     (2,912)
Payment of financing fees...................................        (92)         --
Net proceeds from issuance of Series F preferred units......         --      19,581
Contributions from investors of the Alliance Fund I.........         --       1,381
Distributions paid to common and preferred unitholders......    (33,277)     (3,527)
Distributions to minority interests, including preferred
  units.....................................................     (1,294)     (6,530)
                                                              ---------     -------
     Net cash provided by financing activities..............     39,715       1,886
                                                              ---------     -------
Net increase (decrease) in cash and cash equivalents........      3,849      (6,650)
Cash and cash equivalents at beginning of period............     19,911      33,312
                                                              ---------     -------
Cash and cash equivalents at end of period..................  $  23,760     $26,662
                                                              =========     =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest......................................  $  15,312     $12,850
                                                              =========     =======
Non-cash transactions:
  Acquisitions of properties................................  $ 113,881     $34,460
  Assumption of debt........................................    (43,756)         --
  Minority interest's contribution, including units
     issued.................................................        (25)         --
                                                              ---------     -------
     Net cash paid..........................................  $  70,100     $34,460
                                                              =========     =======
</TABLE>

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

                                        3
<PAGE>   6

                               AMB PROPERTY, L.P.

                  CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
                   FOR THE THREE MONTHS ENDED MARCH 31, 2000
                       (UNAUDITED, DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
                                               GENERAL PARTNER                               LIMITED PARTNERS
                                ---------------------------------------------   -------------------------------------------
                                  PREFERRED UNITS          COMMON UNITS           PREFERRED UNITS         COMMON UNITS
                                -------------------   -----------------------   -------------------   ---------------------
                                  UNITS     AMOUNT      UNITS        AMOUNT       UNITS     AMOUNT      UNITS       AMOUNT
                                ---------   -------   ----------   ----------   ---------   -------   ----------   --------
<S>                             <C>         <C>       <C>          <C>          <C>         <C>       <C>          <C>
BALANCE AT DECEMBER 31,
  1999........................  4,000,000   $96,100   84,903,630   $1,733,159   1,300,000   $62,190    4,507,689   $ 92,100
Comprehensive income:
  Net income..................         --     2,125           --       28,920          --     1,402           --      1,942
  Unrealized loss on
    securities................         --        --           --      (18,195)         --        --                  (1,286)
         Total comprehensive
           income.............
Issuance of common limited
  partnership units in
  connection with issuance of
  restricted stock............         --        --      155,675        3,143          --        --           --         --
Issuance of common limited
  partnership units in
  connection with issuance of
  stock options...............         --        --       12,500          269          --        --           --         --
Reallocation of operating
  partnership units in
  connection with cancellation
  of common stock.............         --        --   (1,465,926)     (29,319)         --        --    1,465,926     29,319
Deferred compensation.........         --        --           --       (3,143)         --        --           --         --
Deferred compensation
  amortization................         --        --           --          308          --        --           --         --
Reallocation of interests and
  other.......................         --        --           --        2,115          --        --           --      1,477
Distributions.................         --    (2,125)          --      (31,021)         --    (1,402)          --     (2,210)
                                ---------   -------   ----------   ----------   ---------   -------   ----------   --------
BALANCE AT MARCH 31, 2000.....  4,000,000   $96,100   83,605,879   $1,686,236   1,300,000   $62,190    5,973,615   $121,342
                                =========   =======   ==========   ==========   =========   =======   ==========   ========

<CAPTION>

                                  TOTAL
                                ----------
<S>                             <C>
BALANCE AT DECEMBER 31,
  1999........................  $1,983,549
Comprehensive income:
  Net income..................
  Unrealized loss on
    securities................          --
         Total comprehensive
           income.............      14,908
Issuance of common limited
  partnership units in
  connection with issuance of
  restricted stock............       3,143
Issuance of common limited
  partnership units in
  connection with issuance of
  stock options...............         269
Reallocation of operating
  partnership units in
  connection with cancellation
  of common stock.............          --
Deferred compensation.........      (3,143)
Deferred compensation
  amortization................         308
Reallocation of interests and
  other.......................       3,592
Distributions.................     (36,758)
                                ----------
BALANCE AT MARCH 31, 2000.....  $1,965,868
                                ==========
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                        4
<PAGE>   7

                               AMB PROPERTY, L.P.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2000
 (UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT SHARE, PER SHARE AND UNIT AMOUNTS AND
                              PROPERTY STATISTICS)

 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 industrial buildings and community shopping centers in target
markets nationwide. Unless the context otherwise requires, the "Company" means
AMB Property Corporation, the Operating Partnership and its other controlled
subsidiaries.

     As of March 31, 2000, the Company owned an approximate 93.4% general
partner interest in the Operating Partnership, excluding preferred units. The
remaining 6.6% limited partner interest is owned by non-affiliated investors and
certain 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 Company's overall ownership of the interests in the
properties. As the sole general partner of the Operating Partnership, the
Company has the 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.

     Prior to the Company's initial public offering in November 1997, the
Company's predecessor provided real estate investment advisory services to
institutional investors. In connection with the initial public offering, AMB
Investment Management, Inc., a Maryland corporation ("AMB Investment
Management"), was formed to continue the investment management business of
providing real estate investment services on a fee basis to clients. The
Operating Partnership purchased 100% of AMB Investment Management's non-voting
preferred stock (representing a 95% economic interest therein). Certain current
and former executive officers of the Company and a former executive officer of
AMB Investment Management collectively purchased 100% of AMB Investment
Management's voting common stock (representing a 5% economic interest therein).
The Operating Partnership also owns 100% of the non-voting preferred stock of
Headlands Realty Corporation, a Maryland corporation, (representing a 95%
economic interest therein). Certain current and former executive officers of the
Company and a director of Headlands Realty Corporation collectively own 100% of
the voting common stock of Headlands Realty Corporation (representing a 5%
economic interest therein). Headlands Realty Corporation invests in properties
and interests in entities that engage in the management, leasing and development
of properties and similar activities. The Operating Partnership accounts for its
investment in AMB Investment Management and Headlands Realty Corporation using
the equity method of accounting.

     As of March 31, 2000, the Company owned 725 industrial buildings and nine
retail centers, located in 26 markets throughout the United States. As of March
31, 2000, the industrial buildings, principally warehouse distribution
buildings, encompassed approximately 65.9 million rentable square feet and were
96.5% leased to over 2,200 tenants. As of March 31, 2000, the retail centers,
principally grocer-anchored community shopping centers, encompassed
approximately 1.6 million rentable square feet and were 87.5% leased to over 200
tenants.

 2. INTERIM FINANCIAL STATEMENTS

     The 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 disclo-
                                        5
<PAGE>   8
                               AMB PROPERTY, L.P.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                 MARCH 31, 2000
 (UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT SHARE, PER SHARE AND UNIT AMOUNTS AND
                              PROPERTY STATISTICS)

sures normally included in the annual financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted.

     The consolidated financial statements for prior periods have been
reclassified to conform to current classifications with no effect on results of
operations. General and administrative expenses on the Consolidated Statements
of Operations includes internal asset management costs of $2,130 and $2,422 for
the three months ended March 31, 1999 and 2000, respectively. Prior to the third
quarter of 1999, these costs were classified as property operating expenses.

     In the opinion of management, the accompanying unaudited 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 months ended March 31, 1999 and 2000 are
not necessarily indicative of the results expected for the entire year. 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, 1999.

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

 3. REAL ESTATE ACQUISITION AND DEVELOPMENT ACTIVITY

     During the first quarter of 2000, the Operating Partnership invested
$34,460 in operating properties, consisting of six industrial buildings
aggregating approximately 0.6 million square feet. The Operating Partnership
also initiated four new development projects during the quarter, which will
aggregate approximately 1.2 million square feet and have a total estimated cost
of $70,700 upon completion. As of March 31, 2000, the Operating Partnership had
19 industrial projects, which will aggregate approximately 4.8 million square
feet and have an aggregate total estimated investment of $303,400 upon
completion, in its development pipeline and two retail projects (excluding two
development projects held for divestiture), which will aggregate approximately
0.2 million square feet and have an aggregate estimated investment of $33,100
upon completion, in its development pipeline. As of March 31, 2000,
approximately $180,200 had been funded and approximately $156,300 was estimated
to be required to complete projects currently under construction or for which we
have committed to complete.

 4. PROPERTY DIVESTITURES AND PROPERTIES HELD FOR DIVESTITURE

     Property Divestitures. In March 2000, the Operating Partnership divested
itself of four industrial buildings, aggregating approximately 0.3 million
square feet, for an aggregate price of approximately $12,925. These divestitures
resulted in an aggregate net loss of $11.

     Properties Held for Divestiture. The Operating Partnership has decided to
divest itself of six retail centers and one land parcel, which are not in its
core markets and/or which do not meet its strategic objectives. The divestitures
of the properties are subject to negotiation of acceptable terms and other
customary conditions. As of March 31, 2000, the net carrying value of the
properties held for divestiture was $232,109.

                                        6
<PAGE>   9
                               AMB PROPERTY, L.P.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                 MARCH 31, 2000
 (UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT SHARE, PER SHARE AND UNIT AMOUNTS AND
                              PROPERTY STATISTICS)

     The following summarizes the condensed results of operations of the
properties held for divestiture for the quarters ended March 31, 1999 and 2000:

<TABLE>
<CAPTION>
                       PROPERTIES HELD FOR DIVESTITURE
-----------------------------------------------------------------------------
                                                              1999      2000
                                                             ------    ------
<S>                                                          <C>       <C>
Income.....................................................  $6,317    $6,224
Property operating expenses................................   1,811     1,803
                                                             ------    ------
  Net operating income.....................................  $4,506    $4,421
                                                             ======    ======
</TABLE>

 5. DEBT

     As of December 31, 1999 and March 31, 2000, debt consisted of the
following:

<TABLE>
<CAPTION>
                                                             DECEMBER 31,    MARCH 31,
                                                                 1999           2000
                                                             ------------    ----------
<S>                                                          <C>             <C>
Secured debt, varying interest rates from 4.0% to 10.4% due
  May 2000 to January 2014.................................   $  696,931     $  754,594
Alliance Fund I credit facility, variable interest at LIBOR
  plus 87.5 basis points (weighted average interest rate of
  7.0% at March 31, 2000), due April 2001..................       80,000         53,000
Unsecured senior debt securities, weighted average interest
  rate of 7.2%, due June 2008, June 2015 and June 2018.....      400,000        400,000
Unsecured credit facility, variable interest at LIBOR plus
  90 to 120 basis points (weighted average interest rate of
  7.0% at March 31, 2000), due November 2000...............       83,000         43,000
                                                              ----------     ----------
     Subtotal..............................................    1,259,931      1,250,594
     Unamortized premiums..................................       10,106         11,617
                                                              ----------     ----------
          Total consolidated debt..........................   $1,270,037     $1,262,211
                                                              ==========     ==========
</TABLE>

     Secured debt generally requires monthly principal and interest payments.
The secured debt is secured by deeds of trust on certain Properties. As of March
31, 2000, the total gross investment value of those properties secured by debt
was $1,511,318. All of the secured debt bears interest at fixed rates, except
for two loans with an aggregate principal amount of $10,419, which bear interest
at variable rates. The secured debt has various financial and non-financial
covenants. Additionally, certain of the secured debt is cross-collateralized.

     The Alliance Fund I has a $80,000 unsecured credit facility. The debt is
secured by the unfunded capital commitments of the third party investors in the
Alliance REIT, a limited partner in the Alliance Fund I. The debt bears interest
at LIBOR plus 87.5 basis points and matures in April 2001. See Note 6 for a
discussion of the Alliance REIT and the Alliance Fund I.

     Interest on the senior debt securities is payable semiannually in each June
and December commencing December 1998. The 2015 notes are putable and callable
in June 2005. The senior debt securities are subject to various financial and
non-financial covenants.

     The Operating Partnership has a $500,000 unsecured revolving credit
agreement with Morgan Guaranty Trust Company of New York, as agent, and a
syndicate of twelve other banks. The credit facility matures in November 2000
and is subject to a fee that accrues on the daily average undrawn funds, which
varies between 15 and 25 basis points of the undrawn funds based on the
Operating Partnership's credit rating. The credit facility has various financial
and non-financial covenants.

                                        7
<PAGE>   10
                               AMB PROPERTY, L.P.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                 MARCH 31, 2000
 (UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT SHARE, PER SHARE AND UNIT AMOUNTS AND
                              PROPERTY STATISTICS)

     Capitalized interest related to construction projects for the three months
ended March 31, 1999 and 2000 was $2,583 and $3,015, respectively.

     The scheduled maturities of the Operating Partnership's total debt,
excluding unamortized debt premiums, as of March 31, 2000, are as follows:

<TABLE>
<CAPTION>
                                          UNSECURED                  ALLIANCE
                                            SENIOR      UNSECURED     FUND I
                              SECURED        DEBT        CREDIT       CREDIT
                                DEBT      SECURITIES    FACILITY     FACILITY      TOTAL
                              --------    ----------    ---------    --------    ----------
<S>                           <C>         <C>           <C>          <C>         <C>
2000 (nine months)..........  $ 42,465     $     --      $43,000     $    --     $   85,465
2001........................    38,298           --           --      53,000         91,298
2002........................    63,480           --           --          --         63,480
2003........................    75,488           --           --          --         75,488
2004........................    90,923           --           --          --         90,923
2005........................    70,196      100,000           --          --        170,196
2006........................   134,599           --           --          --        134,599
2007........................    48,246           --           --          --         48,246
2008........................   131,001      175,000           --          --        306,001
2009........................     1,811           --           --          --          1,811
2010........................    53,467           --           --          --         53,467
Thereafter..................     4,620      125,000           --          --        129,620
                              --------     --------      -------     -------     ----------
                              $754,594     $400,000      $43,000     $53,000     $1,250,594
                              ========     ========      =======     =======     ==========
</TABLE>

 6. MINORITY INTERESTS IN CONSOLIDATED JOINT VENTURES

     Minority interests in the Operating Partnership represent the limited
partnership interests in a subsidiary of the Operating Partnership and interests
held by certain third parties (some of which are separate account co-investors
that are Institutional Alliance Partners) in 23 real estate joint ventures,
through which 32 properties are held, that are consolidated for financial
reporting purposes. Such investments are consolidated because (i) the Operating
Partnership owns a majority interest or (ii) the Operating Partnership exercises
significant control of major operating decisions such as approval of budgets,
selection of property managers and changes in financing.

     On September 24, 1999, December 22, 1999 and March 23, 2000, AMB
Institutional Alliance REIT I, Inc. (the "Alliance REIT") issued and sold shares
of its capital stock to 15 third party investors. The Alliance REIT has elected
to be taxed as a real estate investment trust under the Internal Revenue Code,
commencing with its tax year ending December 31, 1999. The Alliance REIT
acquired a limited partnership interest in AMB Institutional Alliance Fund I,
L.P. (the "Alliance Fund I"), which is engaged in the acquisition, ownership,
operation, management, renovation, expansion and development of primarily
industrial buildings in target industrial markets nationwide. In March 2000, the
Operating Partnership contributed seven industrial buildings, aggregating
approximately 0.4 million square feet, to the Alliance Fund I at a cost basis of
approximately $29,400. These contributions resulted in no gain. The Operating
Partnership is the managing general partner of the Alliance Fund I and, together
with an affiliate of the Company, owns, as of March 31, 2000, 38.8% of the
partnership interests in the Alliance Fund I. It is currently expected that the
Operating Partnership, together with an affiliate of the Company, will own 20.0%
of the Alliance Fund I by the end of the second quarter of 2000. The Operating
Partnership consolidates the Alliance Fund I for financial reporting purposes
because it is the sole managing general partner of the Alliance Fund I and, as a
result, controls all of its major operating decisions. As of March 31, 2000, the
Alliance Fund I had a total equity commitment from

                                        8
<PAGE>   11
                               AMB PROPERTY, L.P.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                 MARCH 31, 2000
 (UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT SHARE, PER SHARE AND UNIT AMOUNTS AND
                              PROPERTY STATISTICS)

third party investors totaling $167.0 million, which, when combined with
anticipated debt financings and the Operating Partnership's investment, creates
a total committed capitalization of approximately $410.0 million.

     The following table distinguishes the minority interest ownership held by
certain joint venture partners, separate account co-investors, the Alliance Fund
I, and the Series C, Series D, Series E, and Series F Preferred Unit holders'
interest in a subsidiary of the Operating Partnership as of and for the quarter
ended March 31, 2000.

<TABLE>
<CAPTION>
                                                                                  MINORITY
                                                          MINORITY INTEREST    INTEREST SHARE
                                                              LIABILITY        OF NET INCOME
                                                          -----------------    --------------
<S>                                                       <C>                  <C>
Joint venture partners..................................      $ 19,499             $  629
Separate account co-investors...........................        51,084                859
Alliance Fund I.........................................        15,341                369
Series C preferred units (liquidation preference of
  $110,000).............................................       105,847              2,406
Series D preferred units (liquidation preference of
  $79,767)..............................................        77,688              1,545
Series E preferred units (liquidation preference of
  $11,022)..............................................        10,788                214
Series F preferred units (liquidation preference of
  $19,872)..............................................        19,581                 43
                                                              --------             ------
          Total.........................................      $299,828             $6,065
                                                              ========             ======
</TABLE>

 7. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES

     The Operating Partnership has a 56.1% and a 50.0% non-controlling limited
partnership interest in two separate unconsolidated equity investment joint
ventures, which were purchased in June 1998 and September 1999, respectively.
One of the joint ventures owns an aggregate of 36 industrial buildings totaling
approximately 4.0 million square feet. The other joint venture is a development
project. For the three months ended March 31, 2000, the Operating Partnership's
share of net operating income was $2,008 and the Operating Partnership's share
of the unconsolidated joint ventures' debt was $20,772, with a weighted average
interest rate of 6.9% and a weighted average maturity of 6.2 years.

 8. PARTNER'S CAPITAL

     At the time of the Company's initial public offering, 4,237,750 shares of
Common Stock, known as Performance Shares, were placed in escrow by certain
investors of the Company, which were subject to advisory agreements with the
Company's predecessor that included incentive fee provisions. On January 7,
2000, 2,771,824 shares of Common Stock were released from escrow to these
investors and 1,465,926 shares of Common Stock were returned to the Company and
cancelled. The cancelled shares of Common Stock represent indirect interests in
the Operating Partnership that were reallocated from the Company (thereby
decreasing the number of shares of Common Stock outstanding) to other
unitholders who had an ownership interest in the Company's predecessor,
including certain executive officers of the Company, (thereby increasing the
number of LP Units owned by partners other than the Company). The total number
of outstanding partnership units did not change as a result of this
reallocation. This reallocation did not change the amount of fully diluted
shares of Common Stock and LP Units outstanding.

                                        9
<PAGE>   12
                               AMB PROPERTY, L.P.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                 MARCH 31, 2000
 (UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT SHARE, PER SHARE AND UNIT AMOUNTS AND
                              PROPERTY STATISTICS)

     The following table sets forth the distributions that were declared on
February 29, 2000 and that were paid in connection with the Series F Preferred
Units, which were issued and sold on March 22, 2000:

<TABLE>
<CAPTION>
                                                                                    DIVIDEND
                                                  RECORD                            PAYMENT
        SECURITY               PAYING ENTITY       DATE        PAYMENT PERIOD         DATE     AMOUNT
-------------------------  ---------------------  -------  -----------------------  --------   -------
<S>                        <C>                    <C>      <C>                      <C>        <C>
LP Units                   Operating Partnership  4/05/00  Quarter ended 3/31/00    4/17/00    $0.3700
Series A Preferred Units   Operating Partnership  4/05/00  3 months ended 4/14/00   4/17/00    $0.5313
Series B Preferred Units   Operating Partnership  4/05/00  3 months ended 4/14/00   4/17/00    $1.0781
Series C Preferred Units   AMB Property II, L.P.  4/05/00  3 months ended 4/14/00   4/17/00    $1.0938
Series D Preferred Units   AMB Property II, L.P.  3/15/00  3 months ended 3/24/00   3/25/00    $0.9688
Series E Preferred Units   AMB Property II, L.P.  4/05/00  3 months ended 4/14/00   4/17/00    $0.9688
Series F Preferred Units   AMB Property II, L.P.  4/05/00  3/22/00 through 4/14/00  4/17/00    $0.1092
</TABLE>

     On March 22, 2000, AMB Property II, L.P., one of the Operating
Partnership's subsidiaries, issued and sold 397,439 7.95% Series F 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 $3.975 per annum. The
Series F Preferred Units are redeemable by AMB Property II, L.P. on or after
March 22, 2005, 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 F Preferred Units are exchangeable, at
specified times and subject to certain conditions, on a one-for-one basis, for
shares of the Operating Partnership's Series F Preferred Stock. AMB Property II,
L.P. used the gross proceeds of $19.8 million to pay transaction expenses,
including a placement fee, to make a loan to the Operating Partnership in the
amount of $19.6 million and for general corporate purposes. 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 a
rate of 7.0% per annum and is payable upon demand.

 9. INCOME PER COMMON UNIT

     The Operating Partnership's only dilutive securities outstanding for the
three months ended March 31, 1999 and 2000 were stock options granted under the
Company's stock incentive plan. The effect of the stock options was to increase
weighted average general LP Units outstanding by 19,576 and 14,041 units for the
three months ended March 31, 1999 and 2000, respectively. Such dilution was
computed using the treasury stock method.

10. SEGMENT INFORMATION

     The Operating Partnership has two reportable segments: industrial
properties and retail properties. The 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. The 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, 1999. The Operating Partnership evaluates performance based
upon property net operating income of the combined properties in each segment.
The Operating Partnership's properties are managed separately because each

                                       10
<PAGE>   13
                               AMB PROPERTY, L.P.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                 MARCH 31, 2000
 (UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT SHARE, PER SHARE AND UNIT AMOUNTS AND
                              PROPERTY STATISTICS)

segment requires different operating, pricing and leasing strategies.
Significant information used by the Operating Partnership for the reportable
segments is as follows:

<TABLE>
<CAPTION>
                                                   INDUSTRIAL      RETAIL        TOTAL
                                                   PROPERTIES    PROPERTIES    PROPERTIES
                                                   ----------    ----------    ----------
<S>                                                <C>           <C>           <C>
RENTAL REVENUES(1):
  For the three months ended:
     March 31, 1999..............................  $   79,686     $27,971      $  107,657
     March 31, 2000..............................     101,034       7,232         108,266
PROPERTY NET OPERATING INCOME(2):
  For the three months ended:
     March 31, 1999..............................      59,633      20,620          80,253
     March 31, 2000..............................      78,093       5,200          83,293
GROSS ADDITIONS TO INVESTMENT IN PROPERTIES(3):
  For the three months ended:
     March 31, 1999..............................     143,039       9,307         152,346
     March 31, 2000..............................      84,018       6,092          90,110
INVESTMENT IN PROPERTIES(4):
  As of:
     December 31, 1999...........................   3,177,283      72,169       3,249,452
     March 31, 2000..............................   3,261,705      26,628       3,288,333
</TABLE>

---------------
(1) Includes straight-line rents of $2,688 and $3,160 for the quarters ended
    March 31, 1999 and 2000, respectively.

(2) Property net operating income is defined as rental revenue, including
    reimbursements and straight-line rents, less property level operating
    expenses, including allocated asset management costs and excluding
    depreciation, amortization, general and administrative expenses and interest
    expense.

(3) Represents cost incurred during the period for land, building, building
    improvements, tenant improvements, leasing costs and other related real
    estate costs. Amounts are before divestitures of properties.

(4) Excludes net properties held for divestiture of $181,201 and $232,109 as of
    December 31, 1999 and March 31, 2000, respectively.

                                       11
<PAGE>   14
                               AMB PROPERTY, L.P.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                 MARCH 31, 2000
 (UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT SHARE, PER SHARE AND UNIT AMOUNTS AND
                              PROPERTY STATISTICS)

     The Operating Partnership uses property net operating income as an
operating performance measure. The following is a reconciliation between total
reportable segment revenue and property net operating income to consolidated
revenues and net income.

<TABLE>
<CAPTION>
                                                              FOR THE THREE MONTHS
                                                                ENDED MARCH 31,
                                                              --------------------
                                                                1999        2000
                                                              --------    --------
<S>                                                           <C>         <C>
REVENUES
Total rental revenues for reportable segments...............  $107,657    $108,266
Investment management and other income......................     1,915       2,057
                                                              --------    --------
Total consolidated revenues.................................  $109,572    $110,323
                                                              ========    ========
NET INCOME
Property net operating income for reportable segments.......  $ 80,253    $ 83,293
Equity in earnings of unconsolidated joint ventures.........     1,151       1,242
Investment management and other income......................       764         815
Less:
  General and administrative................................    (6,202)     (5,351)
  Interest expense..........................................   (22,967)    (20,342)
  Depreciation and amortization.............................   (18,424)    (19,192)
  Minority interests........................................    (3,821)     (6,065)
                                                              --------    --------
Net income before gain/(loss) from divestitures of real
  estate....................................................    30,754      34,400
Loss from divestiture of real estate........................        --         (11)
                                                              --------    --------
Net income..................................................  $ 30,754    $ 34,389
                                                              ========    ========
</TABLE>

11. 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
materially adverse effect on the consolidated financial position, results of
operations or cash flows of the Operating Partnership.

  Environmental Matters

     The Operating Partnership follows the policy of monitoring 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.

                                       12
<PAGE>   15
                               AMB PROPERTY, L.P.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                 MARCH 31, 2000
 (UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT SHARE, PER SHARE AND UNIT AMOUNTS AND
                              PROPERTY STATISTICS)

  General Uninsured Losses

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

                                       13
<PAGE>   16

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
Consolidated Financial Statements. Statements contained in this discussion which
are not historical facts may be forward-looking statements. 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 be
achieved or occur. 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 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 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 only as of the date of
this report or 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 controlled subsidiaries. The following marks are
registered trademarks of AMB Property Corporation, our general partner: AMB(R);
Customer Alliance Program(R); Development Alliance Partners(R); Development
Alliance Program(R); Institutional Alliance Partners(R); Management Alliance
Partners(R); Management Alliance Program(R); UPREIT Alliance Partners(R); and
UPREIT Alliance Program(R). The following are unregistered trademarks of AMB
Property Corporation: Broker Alliance Partners(TM); Broker Alliance Program(TM);
Customer Alliance Partners(TM); eSpace(TM); HTD(TM); High Throughput
Distribution(TM); Institutional Alliance Program(TM); iSpace(TM); Strategic
Alliance Partners(TM); and Strategic Alliance Programs(TM).

                                  THE COMPANY

     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, interstate
highways and ports in major metropolitan areas, such as Atlanta, Chicago,
Dallas/Fort Worth, northern New Jersey, the San Francisco Bay Area and Southern
California. Within each of our markets, we focus our investments in in-fill
submarkets. In-fill submarkets 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 air-freight 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. We intend to focus our investment
activities primarily on industrial properties that we believe will benefit from
these changes.

     As of March 31, 2000, we owned and operated 725 industrial buildings and
nine retail centers, totaling approximately 67.5 million rentable square feet,
located in 26 markets nationwide. As of March 31, 2000, these properties were
96.3% leased. As of March 31, 2000, through our subsidiary, AMB Investment

                                       14
<PAGE>   17

Management, we also managed 43 industrial buildings and retail centers,
aggregating approximately 4.4 million rentable square feet, which were 97.8%
leased, on behalf of various institutional investors. In addition, we have
invested in 36 industrial buildings, totaling approximately 4.0 million rentable
square feet, through an unconsolidated joint venture.

     As of March 31, 2000, we had six retail centers, aggregating approximately
1.3 million rentable square feet, and one land parcel, which were held for
divestiture. In addition, during the first quarter of 2000, we disposed of four
industrial buildings, aggregating approximately 0.3 million rentable square
feet, for an aggregate price of approximately $12.9 million. Over the next few
years, we currently intend to dispose of non-strategic assets and redeploy the
resulting capital into High Throughput Distribution properties that better fit
our current investment focus.

     On September 24, 1999, December 22, 1999 and March 23, 2000, AMB
Institutional Alliance REIT I, Inc. (the "Alliance REIT") issued and sold shares
of its capital stock to 15 third party investors. The Alliance REIT has elected
to be taxed as a real estate investment trust under the Internal Revenue Code,
commencing with its tax year ending December 31, 1999. The Alliance REIT
acquired a limited partnership interest in AMB Institutional Alliance Fund I,
L.P. (the "Alliance Fund I"), which is engaged in the acquisition, ownership,
operation, management, renovation, expansion and development of primarily
industrial buildings in target industrial markets nationwide. In March 2000, the
operating partnership contributed seven industrial buildings, aggregating
approximately 0.4 million square feet, to the Alliance Fund I at a cost basis of
approximately $29.4 million. These contributions resulted in no gain. The
operating partnership is the managing general partner of the Alliance Fund I
and, together with one of our other affiliates, owns, as of March 31, 2000,
approximately 38.8% of the partnership interests in the Alliance Fund I. It is
currently expected that we, along with an affiliate of AMB Property Corporation,
will own 20.0% of the Alliance Fund I by the end of the second quarter of 2000.
As of March 31, 2000, the Alliance Fund I had a total equity commitment from
third party investors totaling $167.0 million, which, when combined with
anticipated debt financings and our investment, creates a total committed
capitalization of approximately $410.0 million.

     We are engaged in the acquisition, ownership, operation, management,
renovation, expansion and development of primarily industrial properties in
target industrial markets nationwide. As of March 31, 2000, AMB Property
Corporation owned an approximate 93.4% general partnership interest in us,
excluding preferred units. As the sole general partner of the operating
partnership, AMB Property Corporation has the full, exclusive and complete
responsibility and discretion in our day-to-day management and control.

     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 own employees perform our
administrative and management functions, rather than our relying on an outside
manager for these services. The principal executive office of AMB Property, L.P.
is located at 505 Montgomery Street, San Francisco, California 94111, and our
telephone number is (415) 394-9000. We also maintain a regional office in
Boston, Massachusetts.

ACQUISITION AND DEVELOPMENT ACTIVITY

     During the first quarter of 2000, we invested $34.5 million in operating
properties, consisting of six industrial buildings aggregating approximately 0.6
million square feet. We also initiated four new development projects during the
quarter, which will aggregate approximately 1.2 million square feet and have a
total estimated cost of $70.7 million upon completion. As of March 31, 2000, we
had 19 industrial projects, which will aggregate approximately 4.8 million
square feet and have an aggregate total estimated investment of $303.4 million
upon completion, in our development pipeline and two retail projects (excluding
two development projects held for divestiture), which will aggregate
approximately 0.2 million square feet and have an aggregate estimated investment
of $33.1 million upon completion, in our development pipeline. As of March 31,
2000, approximately $180.2 million had been funded and approximately $156.3
million was estimated to be required to complete projects currently under
construction or for which we have committed to complete.

                                       15
<PAGE>   18

STRATEGIC ALLIANCE PROGRAMS

     Our Strategic Alliance Programs are designed to build value by creating
mutually beneficial relationships. We believe that our strategy of forming
strategic alliances with local and regional real estate experts improves our
operating efficiency and flexibility, strengthens customer satisfaction and
retention and provides us with growth opportunities. Additionally, our strategic
alliances with institutional investors enhance our access to private capital and
our ability to finance transactions.

     Our six Strategic Alliance Programs can be grouped into two categories:

     - Operating Alliances, which allow us to form relationships with local or
       regional real estate experts, thereby becoming their ally rather than
       their competitor; and

     - Investment Alliances, which allow us to establish relationships with a
       variety of capital sources.

OPERATING ALLIANCES

     Broker Alliance Program: Through our Broker Alliance Program, we work
closely with top local leasing companies in each of our markets, whose brokers
provide us with access to high quality customers and local market knowledge.

     Customer Alliance Program: Through our Customer Alliance Program, we seek
to build long-term working relationships with major customers. We are committed
to working with our customers, particularly our larger customers with multi-site
requirements, to make their property searches as efficient as possible.

     Development Alliance Program: Our strategy for the Development Alliance
Program is to form alliances with local development firms to jointly acquire,
renovate and develop properties to serve our customers' needs.

     Management Alliance Program: Our strategy for the Management Alliance
Program is to develop close relationships with, and outsource property
management to, local property management firms that we believe to be among the
best in each of our markets. Our alliances with local property management firms
increase our flexibility, reduce our overhead expenses and improve our customer
service. In addition, these alliances provide us with local market information
related to customer activity and investment opportunities.

INVESTMENT ALLIANCES

     Institutional Alliance Program: Our strategy for the Institutional Alliance
Program is to form alliances with institutional investors, which provide us with
access to private capital, including during those times when the public markets
are less attractive, and also provide us with a source of incremental fee income
and investment returns. This program allows our Institutional Alliance Partners
the opportunity to co-invest with us and to receive professional investment
management of their real estate assets.

     UPREIT Alliance Program: Through our UPREIT Alliance Program, we issue our
limited partnership units to certain property owners in exchange for properties,
thus providing additional growth for the portfolio.

                             RESULTS OF OPERATIONS

     The analysis below shows changes in our results of operations for the three
months ended March 31, 2000 and 1999 which includes changes attributable to
acquisitions and development activity, 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 (90% leased). We
refer to these properties as the same store properties. For the comparison
between the three-month periods ended March 31, 2000 and 1999, the same store
properties consist of properties aggregating 54.6 million square feet. The
properties acquired in 1999 consisted of 154 buildings, aggregating
approximately 8.4 million square feet, and the properties acquired during the
first quarter of 2000 consisted of six buildings, aggregating approximately 0.6
million square feet. In 1999, property divestitures consisted of 30 retail
centers and 15 industrial buildings, aggregating approximately 6.6 million
square feet, and property divestitures during the first quarter of 2000
consisted of four industrial buildings, aggregating approximately 0.3 million
square feet. Our future financial condition and results of
                                       16
<PAGE>   19

operations, including rental revenues, may be impacted by the acquisition of
additional properties. Our future revenues and expenses may vary materially from
their historical rates.

THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (DOLLARS IN MILLIONS)

<TABLE>
<CAPTION>
               RENTAL REVENUES                  2000      1999     $ CHANGE    % CHANGE
               ---------------                 ------    ------    --------    --------
<S>                                            <C>       <C>       <C>         <C>
Same store...................................  $ 81.0    $ 77.1     $  3.9        5.1%
1999 acquisitions............................    22.5       3.3       19.2      581.8%
2000 acquisitions............................     0.4        --        0.4         --
Developments.................................     1.8       1.0        0.8       80.0%
Divestitures.................................     2.6      26.3      (23.7)     (90.1)%
                                               ------    ------     ------      -----
          Total..............................  $108.3    $107.7     $  0.6        0.6%
                                               ======    ======     ======      =====
</TABLE>

     Rental revenues, including straight-line rents, tenant reimbursements and
other property related income, increased by $0.6 million, or 0.6%, for the three
months ended March 31, 2000, to $108.3 million, as compared with the same period
in 1999. Approximately $3.9 million and $19.2 million of this increase was
attributable to same store properties and properties acquired in 1999,
respectively, with an offsetting decrease in revenues of approximately $23.7
million due to properties divested between January 1, 1999 and March 31, 2000.
The growth in rental revenues in same store properties resulted primarily from
the incremental effect of cash rental rate increases and changes in occupancy
and reimbursement of expenses, offset by straight-line rents. During the three
months ended March 31, 2000, the same store properties increase in base rents
(cash basis) was 13.6% on 2.5 million square feet leased.

<TABLE>
<CAPTION>
   INVESTMENT MANAGEMENT AND OTHER INCOME       2000      1999     $ CHANGE    % CHANGE
   --------------------------------------      ------    ------    --------    --------
<S>                                            <C>       <C>       <C>         <C>
Equity earnings in unconsolidated joint
  ventures...................................  $  1.2    $  1.1     $  0.1        9.1%
Investment management income and other.......     0.8       0.8         --         --
                                               ------    ------     ------      -----
          Total..............................  $  2.0    $  1.9     $  0.1        5.3%
                                               ======    ======     ======      =====
</TABLE>

     Other revenues, including equity in earnings of unconsolidated joint
ventures, investment management income, and interest income, totaled $2.0 and
$1.9 million for the three months ended March 31, 2000 and 1999, respectively.
The $0.1 million, or 5.3%, increase was primarily attributable to the earnings
from our equity investment in our unconsolidated joint ventures.

<TABLE>
<CAPTION>
PROPERTY OPERATING EXPENSES AND REAL ESTATE TAXES   2000      1999     $ CHANGE    % CHANGE
-------------------------------------------------  ------    ------    --------    --------
<S>                                                <C>       <C>       <C>         <C>
Rental expenses................................    $ 11.5    $ 12.4     $ (0.9)      (7.3)%
Real estate taxes..............................      13.5      15.0       (1.5)     (10.0)%
                                                   ------    ------     ------      -----
  Property operating expenses..................    $ 25.0    $ 27.4     $ (2.4)      (8.8)%
                                                   ======    ======     ======      =====
Same store.....................................    $ 18.9    $ 19.0     $ (0.1)      (0.3)%
1999 acquisitions..............................       5.2       1.0        4.2      420.0%
2000 acquisitions..............................       0.1        --        0.1         --
Developments...................................       0.6       0.3        0.3      100.0%
Divestitures...................................       0.2       7.1       (6.9)     (97.2)%
                                                   ------    ------     ------      -----
          Total................................    $ 25.0    $ 27.4     $ (2.4)      (8.8)%
                                                   ======    ======     ======      =====
</TABLE>

     Property operating expenses, including asset management costs and real
estate taxes, decreased by $2.4 million, or 8.8%, for the three months ended
March 31, 2000, to $25.0 million as compared with the same period in 1999.
Internal asset management costs of $2.1 million for the three months ended March
31, 1999 have been reclassified to general and administrative expenses to
conform with current year presentation. Same store properties and properties
divested between January 1, 1999 and March 31, 2000 decreased operating expenses
by approximately $0.1 million and $6.9 million, respectively, for the three
months ended March 31, 2000, while operating expenses attributable to
development properties and properties acquired between January 1, 1999 through
March 31, 2000 added $4.6 million. The change in same store properties operating
expenses primarily relates to increases in same store properties' real estate
taxes of approximately $0.2 million

                                       17
<PAGE>   20

for the three months ended March 31, 2000, offset by decreases in same store
properties' insurance of $0.5 million.

<TABLE>
<CAPTION>
                OTHER EXPENSES                   2000     1999     $ CHANGE    % CHANGE
                --------------                   -----    -----    --------    --------
<S>                                              <C>      <C>      <C>         <C>
General and administrative expense.............  $ 5.4    $ 6.2     $(0.8)      (12.9)%
Interest expense...............................   20.3     23.0      (2.7)      (11.7)%
Depreciation expense...........................   19.2     18.4       0.8         4.4%
                                                 -----    -----     -----       -----
          Total................................  $44.9    $47.6     $(2.7)       (5.7)%
                                                 =====    =====     =====       =====
</TABLE>

     General and administrative expenses decreased by $0.8 million, or 12.9%,
for the three months ended March 31, 2000, as compared to the same period in
1999. Internal asset management costs of $2.1 million for the three months ended
March 31, 1999 have been reclassified from property operating expenses to
general and administrative expenses to conform with current year presentation.
The decrease in general and administrative expenses was primarily attributable
to timing differences in incurring corporate expenses from quarter to quarter.
The decrease in interest expense of $2.7 million was primarily due to the
decrease in our unsecured credit facility balance from the prior year to this
year.

                        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 cash flow from operations, borrowings under our unsecured credit
facility, other forms of secured or unsecured financing, proceeds from equity or
debt offerings by us or the operating partnership (including issuances of
limited partnership units in the operating partnership or its subsidiaries) and
net proceeds from divestitures of properties. We presently believe that our
sources of working capital and our ability to access private and public debt and
equity capital are adequate for us to continue to meet our liquidity
requirements for the foreseeable future.

CAPITAL RESOURCES

     Property Divestitures. In March 2000, we divested four industrial
buildings, aggregating approximately 0.3 million square feet, for an aggregate
price of approximately $12.9 million. These divestitures resulted in an
aggregate net loss of $0.01 million.

     Credit Facilities. We have a $500.0 million unsecured revolving credit
agreement with Morgan Guaranty Trust Company of New York, as agent, and a
syndicate of twelve other banks. Our unsecured credit facility has a term of
three years and is subject to a fee that accrues on the daily average undrawn
funds, which varies between 15 and 25 basis points (currently 15 basis points)
of the undrawn funds based on our credit rating. We use our unsecured credit
facility principally for acquisitions and for general working capital
requirements. Borrowings under our credit facility bear interest at LIBOR plus
90 to 120 basis points (currently LIBOR plus 90 basis points), depending our
debt rating at the time of the borrowings. As of March 31, 2000, the outstanding
balance on our unsecured credit facility was $43.0 million and it bore interest
at a weighted average rate of 7.0%. Monthly debt service payments on our credit
facility are interest only. Our credit facility matures in November 2000. The
total amount available under our credit facility fluctuates based upon the
borrowing base, as defined in the agreement governing the credit facility. At
March 31, 2000, the remaining amount available under our unsecured credit
facility was approximately $457.0 million.

     In addition, we have an $80.0 million unsecured credit facility held
through our investment in the Alliance Fund I. The debt is secured by the
unfunded capital commitments of the third party investors in the Alliance REIT
I, a limited partner of the Alliance Fund I. The debt bears interest at LIBOR
plus 87.5 basis points and matures in April 2001. As of March 31, 2000, the
outstanding balance on this credit facility was $53.0 million and bore interest
at a weighted average rate of 7.0%. At March 31, 2000, the remaining amount
available under this credit facility was approximately $27.0 million.

     Debt and Equity Activities. At the time of AMB Property Corporation's
initial public offering, 4,237,750 shares of common stock, known as performance
shares, were placed in escrow by certain of our investors,

                                       18
<PAGE>   21

which were subject to advisory agreements with our predecessor that included
incentive fee provisions. On January 7, 2000, 2,771,824 shares of common stock
were released from escrow to these investors and 1,465,926 shares of common
stock were returned to AMB Property Corporation and cancelled. The cancelled
shares of common stock represent indirect interests in us that were reallocated
from AMB Property Corporation (thereby decreasing the number of shares of common
stock outstanding) to other unitholders who had an ownership interest in our
general partner's predecessor, including certain of AMB Property Corporation's
executive officers, (thereby increasing the number of limited partnership units
owned by partners other than AMB Property Corporation). The total number of
outstanding partnership units did not change as a result of this reallocation.
This reallocation did not change the amount of fully diluted shares of common
stock and limited partnership units outstanding.

     On March 22, 2000, AMB Property II, L.P., one of our subsidiaries, issued
and sold 397,439 7.95% Series F 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 $3.975 per annum. The Series F Preferred
Units are redeemable by AMB Property II, L.P. on or after March 22, 2005,
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 F 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 F Preferred Stock. AMB Property II, L.P. used
the gross proceeds of $19.8 million to pay transaction expenses, including a
placement fee, to make a loan to us in the amount of $19.6 million and for
general corporate purposes. We used the funds to partially repay borrowings
under our unsecured credit facility and for general corporate purposes. The loan
bears interest at a rate of 7.0% per annum and is payable upon demand.

     Market Capitalization. As of March 31, 2000, the aggregate principal amount
of our secured debt was $754.6 million, excluding unamortized debt premiums of
$11.6 million. The secured debt bears interest at rates varying from 4.0% to
10.4% per annum (with a weighted average rate of 7.9%) and final maturity dates
ranging from May 2000 to January 2014. All of the secured debt bears interest at
fixed rates, except for two loans with an aggregate principal amount of $10.4
million as of March 31, 2000, which bear interest at variable rates.

     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 intend to continue to structure our balance sheet 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
board of directors could alter or eliminate these policies.

                                       19
<PAGE>   22

     The tables below summarize our debt maturities and capitalization as of
March 31, 2000 (in thousands, except share amounts and percentages).

<TABLE>
<CAPTION>
                                                       DEBT
-------------------------------------------------------------------------------------------------------------------
                                    INDUSTRIAL       RETAIL     UNSECURED    UNSECURED     ALLIANCE
                                     SECURED        SECURED    SENIOR DEBT    CREDIT     FUND I CREDIT     TOTAL
                                       DEBT           DEBT     SECURITIES    FACILITY      FACILITY         DEBT
                                    ----------      --------   -----------   ---------   -------------   ----------
<S>                                 <C>             <C>        <C>           <C>         <C>             <C>
2000 (9 months)...................   $ 34,578       $  7,887    $     --      $43,000      $     --      $   85,465
2001..............................     13,817         24,481          --           --        53,000          91,298
2002..............................     40,967         22,513          --           --            --          63,480
2003..............................     74,962            526          --           --            --          75,488
2004..............................     90,353            570          --           --            --          90,923
2005..............................     69,578            618     100,000           --            --         170,196
2006..............................    133,929            670          --           --            --         134,599
2007..............................     47,519            727          --           --            --          48,246
2008..............................    123,243          7,758     175,000           --            --         306,001
2009..............................      1,493            318          --           --            --           1,811
2010..............................     53,122            345          --           --            --          53,467
Thereafter........................      3,356          1,264     125,000           --            --         129,620
                                     --------       --------    --------      -------      --------      ----------
  Subtotal........................    686,917         67,677     400,000       43,000        53,000       1,250,594
  Unamortized premiums............     10,834            783          --           --            --          11,617
                                     --------       --------    --------      -------      --------      ----------
         Total consolidated
           debt...................    697,751         68,460     400,000       43,000        53,000       1,262,211
Our share of unconsolidated joint
  venture debt....................     20,772             --          --           --            --          20,772
                                     --------       --------    --------      -------      --------      ----------
         Total debt...............    718,523         68,460     400,000       43,000        53,000       1,282,983
Joint venture partners' share of
  consolidated joint venture
  debt............................    (88,369)       (16,579)         --           --       (42,400)       (147,348)
                                     --------       --------    --------      -------      --------      ----------
    Our share of total debt.......   $630,154       $ 51,881    $400,000      $43,000      $ 10,600      $1,135,635
                                     ========       ========    ========      =======      ========      ==========
Weighed average interest rate.....        7.9%(1)        7.8%        7.2%         7.0%          7.0%            7.6%
Weighed average maturity (in
  years)..........................        6.1(1)         3.3        10.6          0.7           1.1             7.3
</TABLE>

---------------
(1) Does not include unconsolidated joint venture debt. The weighted average
    interest and weighted average maturity for the two unconsolidated joint
    venture debts were 6.9% and 6.2 years, respectively.

<TABLE>
<CAPTION>
                                              MARKET EQUITY
----------------------------------------------------------------------------------------------------------
                                                              SHARES/UNITS
                          SECURITY                            OUTSTANDING     MARKET PRICE    MARKET VALUE
                          --------                            ------------    ------------    ------------
<S>                                                           <C>             <C>             <C>
Common stock................................................   83,835,290        $21.50        $1,802,459
Common limited partnership units............................    5,973,615         21.50           128,432
                                                               ----------                      ----------
         Total..............................................   89,808,905                      $1,930,891
                                                               ==========                      ==========
</TABLE>

<TABLE>
<CAPTION>
                                           PREFERRED UNITS
------------------------------------------------------------------------------------------------------
                                                              DIVIDEND    LIQUIDATION     REDEMPTION
                          SECURITY                              RATE      PREFERENCE      PROVISIONS
                          --------                            --------    -----------    -------------
<S>                                                           <C>         <C>            <C>
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
                                                                ----       --------
         Weighted Average/Total.............................    8.40%      $385,661
                                                                ====       ========
</TABLE>

<TABLE>
<CAPTION>
                      CAPITALIZATION RATIOS
------------------------------------------------------------------
<S>                                                           <C>
Total debt-to-total market capitalization...................  35.6%
Our share of total debt-to-total market capitalization......  32.9%
Total debt plus preferred-to-total market capitalization....  46.4%
Our share of total debt plus preferred-to-total market
  capitalization............................................  44.1%
Our share of total debt-to-total book capitalization........  35.6%
</TABLE>

                                       20
<PAGE>   23

  Liquidity

     As of March 31, 2000, we had approximately $89.1 million in cash,
restricted cash and cash equivalents and $484.0 million of additional available
borrowings under our credit facilities. We intend to use cash from operations,
borrowings under our credit facilities, other forms of secured and unsecured
financing, proceeds from any future debt or equity offerings by us or AMB
Property Corporation (including issuances of limited partnership units by us or
a subsidiary or shares of stock of AMB Property Corporation), and proceeds from
divestitures of properties to fund acquisitions, development activities and
capital expenditures and to provide for general working capital requirements.

     The following table sets forth the distributions that were declared on
February 29, 2000 and that were paid in connection with the Series F Preferred
Units, which were issued and sold on March 22, 2000:

<TABLE>
<CAPTION>
                                                                                   DIVIDEND
                                                 RECORD                            PAYMENT
        SECURITY              PAYING ENTITY       DATE        PAYMENT PERIOD         DATE     AMOUNT
------------------------  ---------------------  -------  -----------------------  --------   -------
<S>                       <C>                    <C>      <C>                      <C>        <C>
LP Units                  Operating Partnership  4/05/00  Quarter ended 3/31/00    4/17/00    $0.3700
Series A Preferred Units  Operating Partnership  4/05/00  3 months ended 4/14/00   4/17/00    $0.5313
Series B Preferred Units  Operating Partnership  4/05/00  3 months ended 4/14/00   4/17/00    $1.0781
Series C Preferred Units  AMB Property II, L.P.  4/05/00  3 months ended 4/14/00   4/17/00    $1.0938
Series D Preferred Units  AMB Property II, L.P.  3/15/00  3 months ended 3/24/00   3/25/00    $0.9688
Series E Preferred Units  AMB Property II, L.P.  4/05/00  3 months ended 4/14/00   4/17/00    $0.9688
Series F Preferred Units  AMB Property II, L.P.  4/05/00  3/22/00 through 4/14/00  4/17/00    $0.1092
</TABLE>

     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 and/or
equity financings. 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 March 31, 2000, our development pipeline included 21
projects representing a total estimated investment of $336.5 million upon
completion. Of this total, approximately $180.2 million had been funded as of
March 31, 2000 and approximately $156.3 million is estimated to be required to
complete projects currently under construction or for which we have committed to
complete. We presently expect to fund these expenditures with cash from
operations, borrowings under our credit facilities, debt or equity issuances and
net proceeds from property divestitures. Other than these capital items, we have
no material capital commitments.

     During the period from January 1, 2000 to March 31, 2000, we invested:

     - $34.5 million in six operating industrial buildings, aggregating
       approximately 0.6 million rentable square feet, and

     - $19.5 million in four new development projects (with a total cost upon
       completion estimated to be $70.7 million), aggregating approximately 1.2
       million square feet upon completion.

     We funded these acquisitions and initiated development projects through
borrowings under our credit facilities, cash, debt and equity issuances, and net
proceeds from property divestitures.

                              YEAR 2000 COMPLIANCE

     As a result of our year 2000 efforts, we have experienced no significant
problems with any of our financial or non-financial systems, nor did any of the
systems at our properties malfunction, as a result of year 2000 issues. In
addition, we have not experienced any significant year 2000 issues with respect
to our third party suppliers. The costs incurred by us in connection with our
year 2000 compliance program have been, and are expected to remain, immaterial
to our financial position, results of operations and cash flows.

                                       21
<PAGE>   24

                             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 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.

     The following table reflects the calculation of our funds from operations
for three months ended March 31, 1999 and 2000 (dollars in thousands, except
unit and per unit data).

<TABLE>
<CAPTION>
                                                                 FOR THE THREE MONTHS
                                                                        ENDED
                                                                      MARCH 31,
                                                              --------------------------
                                                                 1999           2000
                                                              -----------    -----------
<S>                                                           <C>            <C>
Income from operations before minority interests............  $    34,575    $    40,465
Real estate related depreciation and amortization:
  Total depreciation and amortization.......................       18,424         19,192
  Furniture, fixtures, and equipment depreciation and ground
    lease amortization......................................         (114)          (403)
FFO attributable to minority interests(1)(2):
  Separate account co-investors.............................       (1,474)        (1,264)
  Alliance Fund I...........................................           --           (756)
  Other joint venture partners..............................         (551)          (606)
  Series C, D, E, and F preferred units.....................       (2,406)        (4,208)
Adjustments to derive FFO in unconsolidated joint
  venture(3):
  Our share of net income...................................       (1,151)        (1,242)
  Our share of FFO..........................................        1,645          1,736
Series A preferred unit distributions.......................       (2,125)        (2,125)
Series B preferred unit distributions.......................       (1,402)        (1,402)
                                                              -----------    -----------
FFO(1)......................................................  $    45,421    $    49,387
                                                              ===========    ===========
FFO per common unit:
  Basic.....................................................  $      0.50    $      0.55
                                                              ===========    ===========
  Diluted...................................................  $      0.50    $      0.55
                                                              ===========    ===========
Weighted average common units:
  Basic.....................................................   90,449,529     89,693,900
                                                              ===========    ===========
  Diluted(4)................................................   90,469,105     89,707,941
                                                              ===========    ===========
</TABLE>

---------------
(1) Funds from operations, or 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 the funds from operations of unconsolidated joint
    ventures, less minority interests' pro rata share of the funds from
    operations of consolidated joint ventures and perpetual preferred stock
    dividends. In accordance with NAREIT White Paper on funds from operations,
    we include the effects of straight-line rents in funds from operations.
    Further, we do not adjust funds from operations to eliminate the effects of
    non-recurring charges.

(2) Represents funds from operations attributable to minority interest in
    consolidated joint ventures for the period presented, which has been
    computed as minority interests' share of net income plus minority interests'
    share of real estate-related depreciation and amortization of the
    consolidated joint ventures for such period. These minority interests are
    not convertible into shares of AMB Property Corporation's common stock. In
    addition, the amount includes minority interest held by the Series C, D, E,
    and F preferred unit holders.

(3) Represents our pro rata share of funds from operations in unconsolidated
    joint ventures for the period presented, which has been computed as our
    share of net income plus our share of real estate-related depreciation and
    amortization of the unconsolidated joint ventures for such period.

(4) Includes the dilutive effect of stock options for the purchase of shares of
    AMB Property Corporation's common stock, which has the effect of increasing
    weighted average general limited partnership units outstanding.

                                       22
<PAGE>   25

                    OPERATING AND LEASING STATISTICS SUMMARY

     The following summarizes key operating and leasing statistics for the all
of our industrial and retail properties as of and for the period ended March 31,
2000.

<TABLE>
<CAPTION>
                                               INDUSTRIAL       RETAIL         TOTAL
                                               -----------    ----------    -----------
<S>                                            <C>            <C>           <C>
Square feet owned(1).........................   65,906,481     1,607,135     67,513,616
Occupancy percentage.........................         96.5%         87.5%          96.3%
Lease expirations as percentage of total
  square feet (next 12 months)...............         15.9%          9.5%          15.7%
Weighted average lease term..................      6 years      12 years        6 years
Tenant retention:
  Quarter (2.4 million sq. ft. expired)......         65.5%         17.4%          64.6%
Cash basis rent increases on renewals and
  rollovers:
  Quarter (2.8 million sq. ft. leased).......         13.9%         (4.0)%         13.6%
Same store cash basis NOI growth(2):
  Quarter....................................          6.9%          5.0%           6.8%
Second generation tenant improvements and
  leasing commissions per sq. ft.(3):
  Quarter:
     Renewals................................  $      0.75    $     0.00    $      0.75
     Re-tenanted.............................         1.79          0.00           1.79
                                               -----------    ----------    -----------
       Weighted average......................  $      1.35    $     0.00    $      1.35
                                               ===========    ==========    ===========
Recurring capital expenditures(4)............  $     6,986    $        5    $     6,991
                                               ===========    ==========    ===========
</TABLE>

---------------
(1) In addition to owned square feet as of March 31, 2000, we managed, through
    our subsidiary, AMB Investment Management, 3.7 million, 0.6 million, and 0.1
    million additional square feet of industrial, retail and other properties,
    respectively. We also have an investment in 4.0 million square feet of
    industrial properties through our investments in the unconsolidated joint
    ventures.

(2) Consists of industrial buildings and retail centers aggregating 53.8 million
    and 0.8 million square feet, respectively, that have been owned by us prior
    to January 1, 1999, and excludes development properties prior to
    stabilization.

(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.

     The following summarizes key same store properties' operating statistics
for our industrial and retail properties as of and for the period ending March
31, 2000.

<TABLE>
<CAPTION>
                                                   INDUSTRIAL    RETAIL       TOTAL
                                                   ----------    -------    ----------
<S>                                                <C>           <C>        <C>
Square feet in same store pool(1)................  53,785,523    791,291    54,576,814
Occupancy percentage.............................        97.4%      97.8%         97.4%
Tenant retention:
  Quarter........................................        76.6%      17.4%         75.1%
Cash basis rent increases on renewals and
  rollovers:
  Quarter........................................        13.9%      (4.0)%        13.6%
Cash basis NOI growth % increase (decrease):
  Quarter:
     Revenues....................................         5.2%       2.0%          5.1%
     Expenses....................................        (0.1)%     (5.5)%        (0.3)%
     Net operating income........................         6.9%       5.0%          6.8%
</TABLE>

---------------
(1) Consists of industrial buildings and retail centers aggregating 53.8 million
    and 0.8 million square feet, respectively, that have been owned by us prior
    to January 1, 1999, and excludes development properties prior to
    stabilization.

                                       23
<PAGE>   26

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

     Our exposure to market risk includes the rising interest rates in
connection with our unsecured credit facilities and other variable rate
borrowings, and our ability to incur more debt without stockholder approval,
thereby increasing our debt service obligations, which could adversely affect
our cash flows. See "Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital
Resources -- Capital Resources -- Market Capitalization."

                                    PART II

ITEM 1. LEGAL PROCEEDINGS

     As of March 31, 2000, 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

     At the time of AMB Property Corporation's initial public offering,
4,237,750 shares of common stock, known as performance shares, were placed in
escrow by certain investors, which were subject to advisory agreements with our
general partner's predecessor that included incentive fee provisions. On January
7, 2000, 2,771,824 shares of common stock were released from escrow to these
investors and 1,465,926 shares of common stock were returned to AMB Property
Corporation and cancelled. The cancelled shares of common stock represent
indirect interests in the operating partnership that were reallocated from AMB
Property Corporation (thereby decreasing the number of shares of common stock
outstanding) to other unitholders who had an ownership interest in our general
partner's predecessor, including certain of AMB Property Corporation's executive
officers, (thereby increasing the number of limited partnership units owned by
partners other than AMB Property Corporation). The total number of outstanding
partnership units did not change as a result of this reallocation. This
reallocation did not change the amount of fully diluted shares of common stock
and limited partnership units outstanding.

     On March 22, 2000, AMB Property II, L.P. issued and sold 397,439 7.95%
Series F Cumulative Redeemable Preferred Limited Partnership Units at a price of
$50.00 per unit, for a gross sales price of approximately $19.9 million, to a
limited liability company. The issuance and sale of the Series F 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 F 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 F Preferred
Stock.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     None.

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

     None.

                                       24
<PAGE>   27

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, 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. 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 approximately 28.2% of the leased square footage of our properties as of
March 31, 2000 will expire on or prior to December 31, 2001, with leases on
12.3% of the leased square footage of our properties as of March 31, 2000
expiring during the 9 months ending December 31, 2000. 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.

     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, 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.

                                       25
<PAGE>   28

     A SIGNIFICANT NUMBER OF OUR PROPERTIES ARE LOCATED IN CALIFORNIA

     Our properties located in California as of March 31, 2000 represented
approximately 23.1% of the aggregate square footage of our properties as of
March 31, 2000 and approximately 28.8% of our annualized base rent. Annualized
base rent means the monthly contractual amount under existing leases at March
31, 2000, 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.

     OUR PROPERTIES ARE CURRENTLY CONCENTRATED IN THE INDUSTRIAL SECTOR

     Our properties are currently concentrated predominantly in the industrial
real estate sector. Our concentration in a certain property type may expose 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 have an adverse
effect on our financial condition, results of operations, cash flow and ability
to make distributions to our unitholders and payments to our noteholders.

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 which 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. 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, 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 March 31,
2000, 212 industrial buildings aggregating approximately 15.2 million rentable
square feet (representing 22.5% of our properties based on aggregate square
footage and 26.8% based on annualized base rent) and one retail center
aggregating approximately 0.4 million rentable square feet (representing 0.6% of
our properties based on aggregate square footage and 2.0% 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 which 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. We own 100% of the
non-voting preferred stock of AMB Investment Management, Inc. 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.

                                       26
<PAGE>   29

WE ARE SUBJECT TO RISKS AND LIABILITIES IN CONNECTION WITH PROPERTIES OWNED
THROUGH JOINT VENTURES, LIMITED LIABILITY COMPANIES AND PARTNERSHIPS

     As of March 31, 2000, we had ownership interests in 23 joint ventures,
limited liability companies or partnerships with third parties, as well as
interests in two unconsolidated entities. As of March 31, 2000, we owned 32
(excluding the two 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 with clients of AMB Investment Management and
certain Development Alliance Partners, who share certain approval rights over
major decisions. Partnership, limited liability company or joint venture
investments may involve risks such as the following:

     - 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);

     - our partners, co-members or joint venturers might at any time have
       economic or other business interests or goals which are inconsistent with
       our business interests or goals;

     - our partners, co-members or joint venturers may be in a position to take
       action contrary to our instructions, requests, policies or objectives;
       and

     - 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 have an adverse effect on 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
new 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
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 equity or debt offerings by us or AMB Property
Corporation (including issuances of limited partnership units by) us or a
subsidiary or shares of stock by AMB Property Corporation), 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.

                                       27
<PAGE>   30

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:

     - 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;

     - 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;

     - new or renovated properties may perform below anticipated levels,
       producing cash flow below budgeted amounts;

     - 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 which could divert
       management's time from our day-to-day operations; and

     - activities that we finance through 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 have an adverse effect on 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 intend to dispose of properties from time to time that do not conform
with our current investment strategy or that we have otherwise determined should
be divested, including, as of March 31, 2000, six retail centers, aggregating
approximately 1.3 million square feet, and one land parcel, which are held for
divestiture. 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 and/or our inability to redeploy the
proceeds of property divestitures in accordance with our investment strategy
could adversely 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 and AMB Property Corporation 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. In spite of this policy, neither our nor
AMB Property Corporation's organizational documents contain any limitation on
the amount of indebtedness that they may incur. Accordingly, AMB Property
Corporation's board of directors could alter or eliminate this policy. If we
change this policy, 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.

                                       28
<PAGE>   31

     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 March 31, 2000, we had total debt outstanding of approximately $1.3
billion including:

     - approximately $754.6 million of secured indebtedness (excluding
       unamortized debt premiums) with an average maturity of six years and a
       weighted average interest rate of 7.9%;

     - approximately $53.0 million outstanding under the unsecured credit
       facility related to the Alliance Fund I, with a maturity date of April
       2001 and a weighted average interest rate of 7.0%;

     - approximately $43.0 million outstanding under our unsecured $500.0
       million credit facility with a maturity date of November 2000 and a
       weighted average interest rate of 7.0%; and

     - $400.0 million aggregate principal amount of unsecured senior debt
       securities with maturities in June 2008, 2015 and 2018 and a weighted
       average interest rate of 7.2%.

     If we are unable to refinance or extend principal payments due at maturity
or pay them with proceeds of other capital transactions, we expect that our cash
flow will not be sufficient in all years to pay 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, 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, 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.

     RISING INTEREST RATES COULD ADVERSELY AFFECT OUR CASH FLOW

     As of March 31, 2000, we had $43.0 million and $53.0 million outstanding
under our unsecured credit facility and the unsecured credit facility related to
the Alliance Fund I, respectively. 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, we may in the
future engage in transactions to limit our exposure to rising interest rates.

     WE ARE DEPENDENT ON EXTERNAL SOURCES OF CAPITAL

     In order for AMB Property Corporation to qualify as a real estate
investment trust under the Internal Revenue Code, AMB Property Corporation is
required each year to distribute to its stockholders at least 95% of its real
estate investment trust taxable income (determined without regard to the
dividends-paid deduction and by excluding any net capital gain). 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 general market conditions and the market's perception of our growth
potential and our current and potential future earnings and cash distributions
and the market price of the shares of AMB Property Corporation's capital stock.
Additional debt financing may substantially increase our leverage.

                                       29
<PAGE>   32

     WE COULD DEFAULT ON CROSS-COLLATERALIZED AND CROSS-DEFAULTED DEBT

     As of March 31, 2000, we had 19 non-recourse secured loans, which are
cross-collateralized by 20 properties. As of March 31, 2000, we had $246.6
million (not including unamortized debt premium) outstanding on these loans. If
we default on any of these loans, we will 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 our 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 the credit
facilities and the senior debt securities in addition to any mortgage or other
debt which 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

     AMB Property Corporation's predecessors have been in existence for varying
lengths of time up to 17 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 are 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 our formation. Existing liabilities for indebtedness generally were
taken into account in connection with the allocation of our limited partnership
units and/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:

     - liabilities for clean-up or remediation of undisclosed environmental
       conditions;

     - 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;

     - accrued but unpaid liabilities incurred in the ordinary course of
       business;

     - tax liabilities; and

     - 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 EXECUTIVE OFFICERS ARE INVOLVED IN OTHER
    REAL ESTATE ACTIVITIES AND INVESTMENTS

     Some of the executive officers of AMB Property Corporation, our general
partner, own interests in real estate-related businesses and investments. These
interests include minority ownership of AMB Institutional Housing Partners, a
residential housing finance company, and ownership of AMB Development, Inc. and
AMB Development, L.P., developers which own property that we believe is not
suitable for ownership by us.

                                       30
<PAGE>   33

AMB Development, Inc. and AMB Development, L.P. have agreed not to initiate any
new development projects following 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. AMB Institutional Housing Partners, AMB Development, Inc. and AMB
Development, L.P. continue to use the name "AMB" pursuant to royalty-free
license arrangements. 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 AMB
Property Corporation's ability to enforce these agreements.

     We could also, in the future, subject to the unanimous approval of the
disinterested members of AMB Property Corporation's board of directors with
respect to such transaction, acquire property from executive officers, enter
into leases with executive officers, and/or engage in other related activities
in which the interests pursued by AMB Property Corporation's executive officers
may not be in the best interests of our unitholders or noteholders.

     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 March 31, 2000, AMB Development, L.P. owns interests in 11 retail
development projects in the U.S., 10 of which consist of a single free-standing
Walgreens drugstore and one of which consists of a free-standing Walgreens
drugstore, a ground lease to McDonald's and a 14,000 square foot retail center.
In addition, Messrs. Abbey, Moghadam and Burke, each a founder and director of
AMB Property Corporation, own less than 1% interests in two partnerships which
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 $75,000, in a limited
partnership which owns an office building located in Oakland, California.

     In addition, several of our executive officers individually own:

     - less than 1% interests in the stocks of certain publicly-traded real
       estate investment trusts;

     - certain interests in and rights to developed and undeveloped real
       property located outside the United States; and

     - certain other de minimis 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 as of
March 31, 2000 at approximately $1.2 million. Messrs. Abbey, Moghadam and Burke
each have an approximately 26.7% interest in the partnership, each valued as of
March 31, 2000 at approximately $1.6 million.

     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 of AMB Property Corporation,
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 by 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 AMB Property Corporation's 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.

                                       31
<PAGE>   34

     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 May 11, 2000, 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 Capital Research and Management Company (with respect to various client
accounts for which Capital Research and Management Company serves as investment
advisor) beneficially owned approximately 10.9% of AMB Property Corporation's
outstanding common stock. In addition, AMB Property Corporation's executive
officers and directors beneficially owned approximately 5.6% of AMB Property
Corporation's outstanding common stock as of May 11, 2000, and will have
influence on AMB Property Corporation's and 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 our 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 and our affairs if they
choose to do so.

     WE COULD INVEST IN REAL ESTATE MORTGAGES

     We may invest in mortgages, and may do so as a strategy for ultimately
acquiring the underlying property. In general, investments in mortgages include
the risks that borrowers may not be able to make debt service payments or pay
principal when due, that the value of the mortgaged property may be less than
the principal amount of the mortgage note secured by the property and that
interest rates payable on the mortgages may be lower than our cost of funds to
acquire these mortgages. In any of these events, our funds from operations and
our ability to make distributions to our unitholders and payments to our
noteholders could be adversely affected. Funds from operations means income
(loss) from operations before disposal of real estate properties, minority
interests and extraordinary items plus our pro rata share of the funds from
operations of the unconsolidated joint ventures, depreciation and amortization,
excluding depreciation of furniture, fixtures and equipment less funds from
operations attributable to minority interests in consolidated joint ventures
which are not convertible into shares of AMB Property Corporation's common
stock.

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, 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, our cash flow and the
amounts available for distributions to our unitholders and payments to our
noteholders may be adversely affected.

     WE COULD ENCOUNTER COSTLY 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

                                       32
<PAGE>   35

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 and/or
other costs, including investigation and clean-up costs, resulting from
environmental contamination present at or emanating from that site.

     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 dry cleaners that operate on-site dry cleaning plants, to
owners and operators of gas stations or to owners or operators of other
businesses that use, store or otherwise handle petroleum products or other
hazardous or toxic substances. Some of these properties contain, or may have
contained, underground storage tanks for the storage of petroleum products and
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 underground storage tanks used to store petroleum products or
other hazardous or toxic substances. In addition, certain of our properties are
on, or are adjacent to or 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. In connection
with certain of the 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
or shortly after acquisition. Phase I assessments are intended to discover and
evaluate information regarding the environmental condition of the surveyed
property and surrounding properties. Phase I assessments generally 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, but do not include soil sampling or subsurface investigations and
typically do not include an asbestos survey. 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.

     We have formed a limited liability company with AIG Global Real Estate
Investment Corp. to acquire, develop, manage and operate environmentally
impaired properties in target markets nationwide. We are the managing member of
this venture. We and AIG have each committed $50 million to this venture. This
venture currently intends to invest primarily in industrial properties located
near major airports, ports and in-fill areas with known and quantifiable
environmental issues, as well as, to a more limited extent, well-located,
value-added retail properties. Environmental issues for each property are
evaluated and quantified prior to acquisition. Phase I environmental assessments
are performed on the property; Phase II testing is completed, if necessary, to
supplement existing environmental data on the property; and detailed remedial
cost estimates are prepared by independent third party engineers. Our and AIG
Global Real Estate Investment Corp.'s risk management teams then review the
various environmental reports and determine whether the property is appropriate
for 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.
                                       33
<PAGE>   36

     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, and 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, future laws, ordinances or
regulations may impose material environmental liability and the current
environmental condition of our properties may be affected by tenants, by the
condition of land, by 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 environmental laws and regulations now existing
or adopted in the future exceed our budgets for these items, 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, 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 expenditures could have
an adverse effect on our financial condition, results of operations, cash flow
and ability to make distributions to our unitholders and payments to our
noteholders.

FEDERAL INCOME TAX RISKS

     WE MAY INVEST IN HIGHLY SPECULATIVE EARLY-STAGE COMPANIES IN WHICH WE MAY
     LOSE OUR ENTIRE INVESTMENT OR WHICH MAY JEOPARDIZE AMB PROPERTY
     CORPORATION'S STATUS AS A REAL ESTATE INVESTMENT TRUST

     We believe that our investments in highly speculative early-stage companies
have been structured so that AMB Property Corporation currently qualifies as a
real estate investment trust under the Internal Revenue Code. However, if the
value of these investments, either individually or in the aggregate, appreciates
significantly, these investments may adversely affect our ability to continue to
qualify as a real estate investment trust, unless we are able to restructure or
dispose of our holdings on a timely basis. To date, we have invested
approximately $14.0 million in early-stage companies. One of these investments,
in an initial amount of $5.0 million, has appreciated to a market value in
excess of $16.5 million at March 31, 2000, if it were freely tradable.

     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 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 Internal Revenue Service
successfully argues that a transfer or disposition of property constituted a
prohibited transaction we would be required to pay a 100% penalty tax on any
gain allocable to us from the prohibited transaction.

                                       34
<PAGE>   37

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, 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.

WE MAY INVEST IN HIGHLY SPECULATIVE EARLY-STAGE COMPANIES IN WHICH WE MAY LOSE
OUR ENTIRE INVESTMENT

     From time to time, we may invest in highly speculative early-stage
companies that we believe will enhance our understanding of changes occurring in
the movement of goods, which may, in turn, sharpen our real estate investment
focus, create real estate provider relationships with growth companies and
provide the potential for significant returns on invested capital. We currently
expect that each of these investments will generally be in the amount of $10.0
million or less. As a result, we believe that the amounts of our investments in
early-stage companies are immaterial, both individually and in the aggregate.
However, these investments are highly speculative and it is possible that we may
lose our entire investment in an early-stage company.

AMB INVESTMENT MANAGEMENT, INC. AND HEADLANDS REALTY CORPORATION

     WE DO NOT CONTROL THE ACTIVITIES OF AMB INVESTMENT MANAGEMENT, INC. AND
     HEADLANDS REALTY CORPORATION

     We own 100% of the non-voting preferred stock of AMB Investment Management,
Inc. and Headlands Realty Corporation (representing approximately 95% of the
economic interest in each entity). Some of AMB Property Corporation's current
and former executive officers and a former executive officer of AMB Investment
Management, Inc. own all of the outstanding voting common stock of AMB
Investment Management, Inc. (representing approximately 5% of the economic
interest in AMB Investment Management, Inc.). Some of AMB Property Corporation's
current and former executive officers and a director of Headlands Realty
Corporation own all of the outstanding voting common stock of Headlands Realty
Corporation (representing approximately 5% of the economic interest in Headlands
Realty Corporation). The ownership structure of AMB Investment Management, Inc.
and Headlands Realty Corporation permits us to share in the income of those
corporations while allowing AMB Property Corporation to maintain its status as a
real estate investment trust. We receive substantially all of the economic
benefit of the businesses carried on by AMB Investment Management, Inc. and
Headlands Realty Corporation through our right to receive dividends. However, we
are not able to elect the directors or officers of AMB Investment Management,
Inc. and Headlands Realty Corporation and, as a result, we do not have the
ability to influence their operation or to require that their boards of
directors declare and pay cash dividends on the non-voting stock of AMB
Investment Management, Inc. and Headlands Realty Corporation held by us. The
boards of directors and management of AMB Investment Management, Inc. and
Headlands Realty Corporation might implement business policies or decisions that
would not have been implemented by persons controlled by us and that may be
adverse to the interests of our unitholders and noteholders or that may
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, AMB Investment Management, Inc. and Headlands Realty
Corporation are subject to tax on their income, reducing their cash available
for distribution to us.

     AMB INVESTMENT MANAGEMENT, INC. MAY NOT BE ABLE TO GENERATE SUFFICIENT FEES

     Fees earned by AMB Investment Management, Inc. depend on various factors
affecting the ability to attract and retain investment management clients and
the overall returns achieved on managed assets. These

                                       35
<PAGE>   38

factors are beyond our control. AMB Investment Management, Inc.'s failure to
attract investment management clients or achieve sufficient overall returns on
managed assets could reduce its ability to make distributions on the stock owned
by us and could also limit co-investment opportunities to us. This would limit
the our ability to generate rental revenues from such co-investments and use the
co-investment program as a source to finance property acquisitions and leverage
acquisition opportunities.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

<TABLE>
<CAPTION>
    EXHIBIT
    NUMBER                             DESCRIPTION
    -------                            -----------
    <C>        <S>
     10.1      Sixth Amended and Restated Agreement of Limited Partnership
               of AMB Property II, L.P., dated as of March 22, 2000
               (incorporated by reference to Exhibit 10.1 of the
               Registrant's Current Report on Form 8-K filed on April 14,
               2000).
     27.1      Financial Data Schedule -- AMB Property, L.P.
</TABLE>

(b) Reports on Form 8-K:

     - The Registrant filed a Current Report on Form 8-K on April 14, 2000, in
       connection with the issuance and sale by AMB Property II, L.P. of the
       7.95% Series F Preferred Units.

                                       36
<PAGE>   39

                                   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

Date: May 11, 2000                        By:      /s/ MICHAEL A. COKE
                                            ------------------------------------
                                                      Michael A. Coke
                                                Chief Financial Officer and
                                                     Managing Director
                                                (Duly Authorized Officer and
                                                Principal Financial Officer)

                                          By:       /s/ NINA A. TRAN
                                            ------------------------------------
                                                        Nina A. Tran
                                                       Vice President
                                                (Duly Authorized Officer and
                                               Principal Accounting Officer)

                                       37
<PAGE>   40

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                             DESCRIPTION
-------                            -----------
<C>        <S>
 10.1      Sixth Amended and Restated Agreement of Limited Partnership
           of AMB Property II, L.P., dated as of March 22, 2000
           (incorporated by reference to Exhibit 10.1 of the
           Registrant's Current Report on Form 8-K filed on April 14,
           2000).
 27.1      Financial Data Schedule -- AMB Property, L.P.
</TABLE>

                                       38