##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, DC 20549





Form 10-Q





|                                  |  |                                                                                             
|--------------------------------- |  | --------------------------------------------------------------------------------------------
|(Mark One)                        |  |                                                                                             
|þ                                 |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934 
|                                 
|                                  |  | For the quarterly period ended March 31, 2006                                               
|                                 
|OR                               
|                                 
|o                                 |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
|                                 
|Commission File Number: 001-14245

AMB Property, L.P.


(Exact Name of Registrant as Specified in Its Charter)


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

(415) 394-9000


(Registrants Telephone Number, Including Area Code)


þ o


12b-2


o o þ


12b-2 o þ










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##### 










AMB PROPERTY, L.P.


INDEX


|                                  |  |                                                                                                  |  |      |    | 
|--------------------------------- |  | ------------------------------------------------------------------------------------------------ |  | ---- | -- | 
|                                  |  |                                                                                                  |  | Page |   
|                                  |  |                                                                                                  |  |      |   
|PART I. FINANCIAL
    INFORMATION
|Item 1.                           |  | Financial Statements (unaudited)                                                                 |  |      |    | 
|                                  |  | Consolidated Balance Sheets as of
    March 31, 2006 and December 31, 2005                       |  |      | 1  | 
|                                  |  | Consolidated Statements of Operations for
    the three months ended March 31, 2006
    and 2005 |  |      | 2  | 
|                                  |  | Consolidated Statement of Partners
    Capital for the three months ended March 31, 2006        |  |      | 3  | 
|                                  |  | Consolidated Statements of Cash Flows for
    the three months ended March 31, 2006
    and 2005 |  |      | 4  | 
|                                  |  | Notes to Consolidated Financial
    Statements                                                   |  |      | 5  | 
|Item 2.                           |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations        |  |      | 28 | 
|Item 3.                           |  | Quantitative and Qualitative Disclosures
    About Market Risk                                   |  |      | 52 | 
|Item 4.                           |  | Controls and Procedures                                                                          |  |      | 54 | 
|                                 
|PART II. OTHER INFORMATION       
|Item 1.                           |  | Legal Proceedings                                                                                |  |      | 55 | 
|Item 1A.                          |  | Risk Factors                                                                                     |  |      | 55 | 
|Item 2.                           |  | Unregistered Sales of Equity Securities and
    Use of Proceeds                                  |  |      | 55 | 
|Item 3.                           |  | Defaults Upon Senior Securities                                                                  |  |      | 55 | 
|Item 4.                           |  | Submission of Matters to a Vote of Security
    Holders                                          |  |      | 55 | 
|Item 5.                           |  | Other Information                                                                                |  |      | 55 | 
|Item 6.                           |  | Exhibits                                                                                         |  |      | 55 | 
|EXHIBIT 31.1                     
|EXHIBIT 32.1                     





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##### Table of Contents






PART I







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

AMB PROPERTY, L.P.





CONSOLIDATED BALANCE SHEETS


As of March 31, 2006 and December 31, 2005


|                                                            |                                                                                                                                                                                                                                                                                                                                                                                                          |                                         |                                |           |              |           |         |           |           |           | 
|----------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------- | ------------------------------ | --------- | ------------ | --------- | ------- | --------- | --------- | --------- | 
|                                                            |                                                                                                                                                                                                                                                                                                                                                                                                          | March 31,                               |                                |           | December 31, |          
|                                                            |                                                                                                                                                                                                                                                                                                                                                                                                          | 2006                                    |                                |           | 2005         |          
|                                                            |                                                                                                                                                                                                                                                                                                                                                                                                          |                                         |                                |           |              |          
|                                                            |                                                                                                                                                                                                                                                                                                                                                                                                          | (Unaudited, dollars in                  |                               
|                                                            |                                                                                                                                                                                                                                                                                                                                                                                                          | thousands)                              |                               
|ASSETS                                                     
|Investments in real estate:                                 |                                                                                                                                                                                                                                                                                                                                                                                                          |                                         |                                |           |              |           |         |          
|                                                            | Land                                                                                                                                                                                                                                                                                                                                                                                                     |                                         | $                              | 1,569,681 |              |           | $       | 1,527,072 |          
|                                                            | Buildings and improvements                                                                                                                                                                                                                                                                                                                                                                               |                                         |                                | 4,449,698 |              |           |         | 4,273,716 |          
|                                                            | Construction in progress                                                                                                                                                                                                                                                                                                                                                                                 |                                         |                                | 894,145   |              |           |         | 997,506   |          
|                                                            |                                                                                                                                                                                                                                                                                                                                                                                                          |                                         |                                |           |              |          
|                                                            |                                                                                                                                                                                                                                                                                                                                                                                                          | Total investments in properties         |                                |           | 6,913,524    |           |         |           | 6,798,294 |          
|                                                            | Accumulated depreciation and amortization                                                                                                                                                                                                                                                                                                                                                                |                                         |                                | (736,760  | )            |           |         | (697,388  | )        
|                                                            |                                                                                                                                                                                                                                                                                                                                                                                                          |                                         |                                |           |              |          
|                                                            |                                                                                                                                                                                                                                                                                                                                                                                                          | Net investments in properties           |                                |           | 6,176,764    |           |         |           | 6,100,906 |          
|Investments in unconsolidated joint ventures                |                                                                                                                                                                                                                                                                                                                                                                                                          |                                         | 118,472                        |           |              |           | 118,653 |          
|Properties held for contribution, net                       |                                                                                                                                                                                                                                                                                                                                                                                                          |                                         | 266,311                        |           |              |           | 32,755  |          
|Properties held for divestiture, net                        |                                                                                                                                                                                                                                                                                                                                                                                                          |                                         | 31,201                         |           |              |           | 17,936  |          
|                                                            |                                                                                                                                                                                                                                                                                                                                                                                                          |                                         |                                |           |              |          
|                                                            |                                                                                                                                                                                                                                                                                                                                                                                                          |                                         | Net investments in real estate |           |              | 6,592,748 |         |           |           | 6,270,250 | 
|Cash and cash equivalents                                   |                                                                                                                                                                                                                                                                                                                                                                                                          |                                         | 142,468                        |           |              |           | 232,881 |          
|Restricted cash                                             |                                                                                                                                                                                                                                                                                                                                                                                                          |                                         | 25,539                         |           |              |           | 34,352  |          
|Mortgage and loan receivables                               |                                                                                                                                                                                                                                                                                                                                                                                                          |                                         | 21,589                         |           |              |           | 21,621  |          
|Accounts receivable, net of allowance for doubtful accounts |                                                                                                                                                                                                                                                                                                                                                                                                          |                                         | 148,907                        |           |              |           | 178,682 |          
|Deferred financing costs, net                               |                                                                                                                                                                                                                                                                                                                                                                                                          |                                         | 24,904                         |           |              |           | 25,026  |          
|Other assets                                                |                                                                                                                                                                                                                                                                                                                                                                                                          |                                         | 87,408                         |           |              |           | 39,927  |          
|                                                            |                                                                                                                                                                                                                                                                                                                                                                                                          |                                         |                                |           |              |          
|                                                            |                                                                                                                                                                                                                                                                                                                                                                                                          | Total assets                            |                                | $         | 7,043,563    |           |         | $         | 6,802,739 |          
|                                                            |                                                                                                                                                                                                                                                                                                                                                                                                          |                                         |                                |           |              |          
|                                                           
|LIABILITIES AND PARTNERS CAPITAL                          
|Debt:                                                       |                                                                                                                                                                                                                                                                                                                                                                                                          |                                         |                                |           |              |           |         |          
|                                                            | Secured debt                                                                                                                                                                                                                                                                                                                                                                                             |                                         | $                              | 1,917,805 |              |           | $       | 1,912,526 |          
|                                                            | Unsecured senior debt securities                                                                                                                                                                                                                                                                                                                                                                         |                                         |                                | 950,937   |              |           |         | 975,000   |          
|                                                            | Unsecured credit facilities                                                                                                                                                                                                                                                                                                                                                                              |                                         |                                | 734,110   |              |           |         | 490,072   |          
|                                                            | Other debt                                                                                                                                                                                                                                                                                                                                                                                               |                                         |                                | 63,543    |              |           |         | 23,963    |          
|                                                            |                                                                                                                                                                                                                                                                                                                                                                                                          |                                         |                                |           |              |          
|                                                            |                                                                                                                                                                                                                                                                                                                                                                                                          | Total debt                              |                                |           | 3,666,395    |           |         |           | 3,401,561 |          
|Security deposits                                           |                                                                                                                                                                                                                                                                                                                                                                                                          |                                         | 46,459                         |           |              |           | 47,055  |          
|Distributions payable                                       |                                                                                                                                                                                                                                                                                                                                                                                                          |                                         | 47,796                         |           |              |           | 46,382  |          
|Accounts payable and other liabilities                      |                                                                                                                                                                                                                                                                                                                                                                                                          |                                         | 154,894                        |           |              |           | 170,307 |          
|                                                            |                                                                                                                                                                                                                                                                                                                                                                                                          |                                         |                                |           |              |          
|                                                            |                                                                                                                                                                                                                                                                                                                                                                                                          | Total liabilities                       |                                |           | 3,915,544    |           |         |           | 3,665,305 |          
|Commitments and contingencies (Note 12)                     |                                                                                                                                                                                                                                                                                                                                                                                                          |                                         |                                |           |              |           |         |          
|Minority interests:                                         |                                                                                                                                                                                                                                                                                                                                                                                                          |                                         |                                |           |              |           |         |          
|                                                            | Joint venture partners                                                                                                                                                                                                                                                                                                                                                                                   |                                         |                                | 899,658   |              |           |         | 853,643   |          
|                                                            | Preferred unitholders                                                                                                                                                                                                                                                                                                                                                                                    |                                         |                                | 126,091   |              |           |         | 203,513   |          
|                                                            |                                                                                                                                                                                                                                                                                                                                                                                                          |                                         |                                |           |              |          
|                                                            |                                                                                                                                                                                                                                                                                                                                                                                                          | Total minority interests                |                                |           | 1,025,749    |           |         |           | 1,057,156 |          
|Partners capital:                                          |                                                                                                                                                                                                                                                                                                                                                                                                          |                                         |                                |           |              |           |         |          
|                                                            | General partner, 87,717,934 and 85,585,494 units
    outstanding, respectively; 2,000,000 Series L preferred
    units issued and outstanding with a $50,000 liquidation
    preference, 2,300,000 Series M preferred units issued and
    outstanding with a $57,500 liquidation preference and 3,000,000
    Series O preferred units issued and outstanding with a
    $75,000 liquidation preference |                                         |                                | 1,939,402 |              |           |         | 1,916,299 |          
|                                                            | Limited partners, 4,239,659 and 4,250,977 units,
    respectively; 800,000 Series J preferred units with a
    $40,000 liquidation preference, 800,000 Series K preferred
    units with a $40,000 liquidation preference                                                                                                                                                                                |                                         |                                | 162,868   |              |           |         | 163,979   |          
|                                                            |                                                                                                                                                                                                                                                                                                                                                                                                          |                                         |                                |           |              |          
|                                                            |                                                                                                                                                                                                                                                                                                                                                                                                          | Total partners capital                 |                                |           | 2,102,270    |           |         |           | 2,080,278 |          
|                                                            |                                                                                                                                                                                                                                                                                                                                                                                                          |                                         |                                |           |              |          
|                                                            |                                                                                                                                                                                                                                                                                                                                                                                                          | Total liabilities and partners capital |                                | $         | 7,043,563    |           |         | $         | 6,802,739 |          
|                                                            |                                                                                                                                                                                                                                                                                                                                                                                                          |                                         |                                |           |              |          



1



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##### Table of Contents



AMB PROPERTY, L.P.





CONSOLIDATED STATEMENTS OF OPERATIONS


For the Three Months Ended March 31, 2006 and 2005


|                                                        |                                                                                                                                           |                                                                                                   |                                                                                                                       |            |          |         |        |            |         |         |  
|------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------- | ---------- | -------- | ------- | ------ | ---------- | ------- | ------- | -
|                                                        |                                                                                                                                           | For the Three Months                                                                              |                                                                                                                      
|                                                        |                                                                                                                                           | Ended March 31,                                                                                   |                                                                                                                      
|                                                        |                                                                                                                                           |                                                                                                   |                                                                                                                      
|                                                        |                                                                                                                                           | 2006                                                                                              |                                                                                                                       |            | 2005     |        
|                                                        |                                                                                                                                           |                                                                                                   |                                                                                                                       |            |          |        
|                                                        |                                                                                                                                           | (Unaudited, dollars in                                                                            |                                                                                                                      
|                                                        |                                                                                                                                           | thousands, except unit                                                                            |                                                                                                                      
|                                                        |                                                                                                                                           | and per unit amounts)                                                                             |                                                                                                                      
|REVENUES                                                |                                                                                                                                           |                                                                                                   |                                                                                                                       |            |          |         |        |           
|                                                        | Rental revenues                                                                                                                           |                                                                                                   | $                                                                                                                     | 176,407    |          |         | $      | 153,404    |        
|                                                        | Private capital income                                                                                                                    |                                                                                                   |                                                                                                                       | 5,106      |          |         |        | 3,318      |        
|                                                        |                                                                                                                                           |                                                                                                   |                                                                                                                       |            |          |        
|                                                        |                                                                                                                                           | Total revenues                                                                                    |                                                                                                                       |            | 181,513  |         |        |            | 156,722 |        
|COSTS AND EXPENSES                                      |                                                                                                                                           |                                                                                                   |                                                                                                                       |            |          |         |        |           
|                                                        | Property operating expenses                                                                                                               |                                                                                                   |                                                                                                                       | (25,234    | )        |         |        | (21,788    | )      
|                                                        | Real estate taxes                                                                                                                         |                                                                                                   |                                                                                                                       | (20,463    | )        |         |        | (17,981    | )      
|                                                        | Depreciation and amortization                                                                                                             |                                                                                                   |                                                                                                                       | (43,360    | )        |         |        | (39,532    | )      
|                                                        | General and administrative                                                                                                                |                                                                                                   |                                                                                                                       | (23,048    | )        |         |        | (18,544    | )      
|                                                        | Other expenses                                                                                                                            |                                                                                                   |                                                                                                                       | (537       | )        |         |        | (936       | )      
|                                                        | Fund costs                                                                                                                                |                                                                                                   |                                                                                                                       | (614       | )        |         |        | (364       | )      
|                                                        |                                                                                                                                           |                                                                                                   |                                                                                                                       |            |          |        
|                                                        |                                                                                                                                           | Total costs and expenses                                                                          |                                                                                                                       |            | (113,256 | )       |        |            | (99,145 | )      
|                                                        |                                                                                                                                           |                                                                                                   |                                                                                                                       |            |          |        
|OTHER INCOME AND EXPENSES                               |                                                                                                                                           |                                                                                                   |                                                                                                                       |            |          |         |        |           
|                                                        | Equity in earnings of unconsolidated joint ventures, net                                                                                  |                                                                                                   |                                                                                                                       | 2,088      |          |         |        | 1,242      |        
|                                                        | Other income                                                                                                                              |                                                                                                   |                                                                                                                       | 3,063      |          |         |        | 136        |        
|                                                        | Gains from dispositions of real estate interests                                                                                          |                                                                                                   |                                                                                                                       |           |          |         |        | 1,301      |        
|                                                        | Development profits, net of taxes                                                                                                         |                                                                                                   |                                                                                                                       | 674        |          |         |        | 17,949     |        
|                                                        | Interest expense, including amortization                                                                                                  |                                                                                                   |                                                                                                                       | (39,789    | )        |         |        | (36,874    | )      
|                                                        |                                                                                                                                           |                                                                                                   |                                                                                                                       |            |          |        
|                                                        |                                                                                                                                           | Total other income and expenses, net                                                              |                                                                                                                       |            | (33,964  | )       |        |            | (16,246 | )      
|                                                        |                                                                                                                                           |                                                                                                   |                                                                                                                       |            |          |        
|                                                        |                                                                                                                                           |                                                                                                   | Income before minority interests, discontinued operations and
    cumulative effect of change in accounting principle |            |          | 34,293  |        |            |         | 41,331  |  
|                                                        |                                                                                                                                           |                                                                                                   |                                                                                                                       |            |          |        
|                                                        | Minority interests share of income:                                                                                                      |                                                                                                   |                                                                                                                       |            |          |         |        |            |        
|                                                        |                                                                                                                                           | Joint venture partners share of income before minority
    interests and discontinued operations |                                                                                                                       |            | (8,825   | )       |        |            | (9,349  | )      
|                                                        |                                                                                                                                           | Joint venture partners share of development profits                                              |                                                                                                                       |            |         |         |        |            | (9,379  | )      
|                                                        |                                                                                                                                           | Preferred unitholders                                                                             |                                                                                                                       |            | (3,437   | )       |        |            | (3,789  | )      
|                                                        |                                                                                                                                           |                                                                                                   |                                                                                                                       |            |          |        
|                                                        |                                                                                                                                           |                                                                                                   | Total minority interests share of income                                                                             |            |          | (12,262 | )      |            |         | (22,517 | )
|                                                        |                                                                                                                                           |                                                                                                   |                                                                                                                       |            |          |        
|                                                        |                                                                                                                                           |                                                                                                   | Income from continuing operations before cumulative effect of
    change in accounting principle                      |            |          | 22,031  |        |            |         | 18,814  |  
|                                                        |                                                                                                                                           |                                                                                                   |                                                                                                                       |            |          |        
|Discontinued operations:                                |                                                                                                                                           |                                                                                                   |                                                                                                                       |            |          |         |        |           
|                                                        | Income attributable to discontinued operations, net of minority
    interests                                                             |                                                                                                   |                                                                                                                       | 779        |          |         |        | 2,475      |        
|                                                        | Gains from dispositions of real estate, net of minority interests                                                                         |                                                                                                   |                                                                                                                       | 7,366      |          |         |        | 29,591     |        
|                                                        |                                                                                                                                           |                                                                                                   |                                                                                                                       |            |          |        
|                                                        |                                                                                                                                           | Total discontinued operations                                                                     |                                                                                                                       |            | 8,145    |         |        |            | 32,066  |        
|                                                        |                                                                                                                                           |                                                                                                   |                                                                                                                       |            |          |        
|                                                        | Net income before cumulative effect of change in accounting
    principle                                                                 |                                                                                                   |                                                                                                                       | 30,176     |          |         |        | 50,880     |        
|                                                        | Cumulative effect of change in accounting principle                                                                                       |                                                                                                   |                                                                                                                       | 193        |          |         |        |           |        
|                                                        |                                                                                                                                           |                                                                                                   |                                                                                                                       |            |          |        
|                                                        | Net income                                                                                                                                |                                                                                                   |                                                                                                                       | 30,369     |          |         |        | 50,880     |        
|Series L, M and O preferred unit distributions          |                                                                                                                                           |                                                                                                   | (3,096                                                                                                                | )          |          |         | (1,783 | )         
|Series J and K preferred unit distributions             |                                                                                                                                           |                                                                                                   | (1,590                                                                                                                | )          |          |         | (1,590 | )         
|                                                        | Preferred unit redemption issuance costs                                                                                                  |                                                                                                   |                                                                                                                       | (1,097     | )        |         |        |           |        
|                                                        |                                                                                                                                           |                                                                                                   |                                                                                                                       |            |          |        
|                                                        |                                                                                                                                           | Net income available to common unitholders                                                        |                                                                                                                       | $          | 24,586   |         |        | $          | 47,507  |        
|                                                        |                                                                                                                                           |                                                                                                   |                                                                                                                       |            |          |        
|Income available to common unitholders attributable to: |                                                                                                                                           |                                                                                                   |                                                                                                                       |            |          |         |        |           
|                                                        | General partner                                                                                                                           |                                                                                                   | $                                                                                                                     | 23,384     |          |         | $      | 44,984     |        
|                                                        | Limited partners                                                                                                                          |                                                                                                   |                                                                                                                       | 1,202      |          |         |        | 2,523      |        
|                                                        |                                                                                                                                           |                                                                                                   |                                                                                                                       |            |          |        
|                                                        |                                                                                                                                           |                                                                                                   | Net income available to common unitholders                                                                            |            | $        | 24,586  |        |            | $       | 47,507  |  
|                                                        |                                                                                                                                           |                                                                                                   |                                                                                                                       |            |          |        
|Basic income per common unit                            |                                                                                                                                           |                                                                                                   |                                                                                                                       |            |          |         |        |           
|                                                        | Income from continuing operations (after preferred unit
    distributions) before cumulative effect of change in accounting
    principle |                                                                                                   | $                                                                                                                     | 0.18       |          |         | $      | 0.18       |        
|                                                        | Discontinued operations                                                                                                                   |                                                                                                   |                                                                                                                       | 0.09       |          |         |        | 0.36       |        
|                                                        | Cumulative effect of change in accounting principle                                                                                       |                                                                                                   |                                                                                                                       |           |          |         |        |           |        
|                                                        |                                                                                                                                           |                                                                                                   |                                                                                                                       |            |          |        
|                                                        |                                                                                                                                           |                                                                                                   | Net income available to common unitholders                                                                            |            | $        | 0.27    |        |            | $       | 0.54    |  
|                                                        |                                                                                                                                           |                                                                                                   |                                                                                                                       |            |          |        
|Diluted income per common unit                          |                                                                                                                                           |                                                                                                   |                                                                                                                       |            |          |         |        |           
|                                                        | Income from continuing operations (after preferred unit
    distributions) before cumulative effect of change in accounting
    principle |                                                                                                   | $                                                                                                                     | 0.17       |          |         | $      | 0.17       |        
|                                                        | Discontinued operations                                                                                                                   |                                                                                                   |                                                                                                                       | 0.09       |          |         |        | 0.35       |        
|                                                        | Cumulative effect of change in accounting principle                                                                                       |                                                                                                   |                                                                                                                       |           |          |         |        |           |        
|                                                        |                                                                                                                                           |                                                                                                   |                                                                                                                       |            |          |        
|                                                        |                                                                                                                                           |                                                                                                   | Net income available to common unitholders                                                                            |            | $        | 0.26    |        |            | $       | 0.52    |  
|                                                        |                                                                                                                                           |                                                                                                   |                                                                                                                       |            |          |        
|WEIGHTED AVERAGE COMMON UNITS OUTSTANDING               |                                                                                                                                           |                                                                                                   |                                                                                                                       |            |          |         |        |           
|                                                        | Basic                                                                                                                                     |                                                                                                   |                                                                                                                       | 90,821,246 |          |         |        | 87,857,933 |        
|                                                        |                                                                                                                                           |                                                                                                   |                                                                                                                       |            |          |        
|                                                        | Diluted                                                                                                                                   |                                                                                                   |                                                                                                                       | 94,567,680 |          |         |        | 91,240,898 |        
|                                                        |                                                                                                                                           |                                                                                                   |                                                                                                                       |            |          |        



2



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##### Table of Contents



AMB PROPERTY, L.P.





CONSOLIDATED STATEMENT OF PARTNERS CAPITAL


For the Three Months Ended March 31, 2006


|                                |                                                                                                                                                                |                                                        |           |   |                  |   |         |                 |   |  |              |           |  |       |           |         |        |  |           |       |  |   |        |        |   |       |           |         |   |   |        |        |   |   |           |         |        | 
|------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------ | --------- | - | ---------------- | - | ------- | --------------- | - |  | ------------ | --------- |  | ----- | --------- | ------- | ------ |  | --------- | ----- |  | - | ------ | ------ | - | ----- | --------- | ------- | - | - | ------ | ------ | - | - | --------- | ------- | ------ | 
|                                |                                                                                                                                                                | General Partner                                        |           |   | Limited Partners |   |         |                
|                                |                                                                                                                                                                |                                                        |           |   |                  |   |         |                
|                                |                                                                                                                                                                | Preferred Units                                        |           |   | Common Units     |   |         | Preferred Units |   |  | Common Units |           |  |      
|                                |                                                                                                                                                                |                                                        |           |   |                  |   |         |                 |   |  |              |           |  |      
|                                |                                                                                                                                                                | Units                                                  |           |   | Amount           |   |         | Units           |   |  | Amount       |           |  | Units |           |         | Amount |  |           | Units |  |   | Amount |        |   | Total |          
|                                |                                                                                                                                                                |                                                        |           |   |                  |   |         |                 |   |  |              |           |  |       |           |         |        |  |           |       |  |   |        |        |   |       |          
|                                |                                                                                                                                                                | (Unaudited, dollars in thousands, except unit amounts) |          
|Balance as of December 31, 2005 |                                                                                                                                                                |                                                        | 7,300,000 |   |                  | $ | 175,548 |                 |   |  | 85,585,494   |           |  | $     | 1,740,751 |         |        |  | 1,600,000 |       |  | $ | 77,815 |        |   |       | 4,250,977 |         |   | $ | 86,164 |        |   | $ | 2,080,278 |        
|Comprehensive income:           |                                                                                                                                                                |                                                        |           |   |                  |   |         |                 |   |  |              |           |  |       |           |         |        |  |           |       |  |   |        |        |   |       |           |         |   |   |        |        |   |   |           |        
|                                | Net income                                                                                                                                                     |                                                        |           |  |                  |   |         | 3,096           |   |  |              |          |  |       |           | 23,384  |        |  |           |      |  |   |        | 1,590  |   |       |           |        |   |   |        | 1,202  |   |   |           |         |       
|                                | Unrealized loss on securities and derivatives                                                                                                                  |                                                        |           |  |                  |   |         |                |   |  |              |          |  |       |           | (352    | )      |  |           |      |  |   |        |       |   |       |           |        |   |   |        |       |   |   |           |         |       
|                                | Currency translation adjustment                                                                                                                                |                                                        |           |  |                  |   |         |                |   |  |              |          |  |       |           | 1,363   |        |  |           |      |  |   |        |       |   |       |           |        |   |   |        |       |   |   |           |         |       
|                                |                                                                                                                                                                | Total comprehensive income                             |           |   |                  |   |         |                 |   |  |              |           |  |       |           |         |        |  |           |       |  |   |        |        |   |       |           |         |   |   |        |        |   |   |           |         | 30,283 | 
|                                | Stock-based compensation amortization and issuance of common
    limited partnership units in connection with the issuance of
    restricted stock and options |                                                        |           |  |                  |   |         |                |   |  |              | 401,707   |  |       |           | 4,829   |        |  |           |      |  |   |        |       |   |       |           |        |   |   |        |       |   |   |           | 4,829   |       
|                                | Issuance of common limited partnership units in connection with
    the exercise of stock options                                                              |                                                        |           |  |                  |   |         |                |   |  |              | 1,719,415 |  |       |           | 29,469  |        |  |           |      |  |   |        |       |   |       |           |        |   |   |        |       |   |   |           | 29,469  |       
|                                | Conversion of operating partnership units to common stock                                                                                                      |                                                        |           |  |                  |   |         |                |   |  |              | 11,318    |  |       |           | 576     |        |  |           |      |  |   |        |       |   |       |           | (11,318 | ) |   |        | (216   | ) |   |           | 360     |       
|                                | Forfeiture of common limited partnership units in connection
    with the forfeiture of restricted stock                                                       |                                                        |           |  |                  |   |         |                |   |  |              |          |  |       |           | (1,263  | )      |  |           |      |  |   |        |       |   |       |           |        |   |   |        |       |   |   |           | (1,263  | )     
|                                | Cumulative effect of change in accounting principle                                                                                                            |                                                        |           |   |                  |   |         |                 |   |  |              |           |  |       |           | (193    | )      |  |           |       |  |   |        |        |   |       |           |         |   |   |        |        |   |   |           | (193    | )     
|                                | Offering costs                                                                                                                                                 |                                                        |           |   |                  |   |         | (217            | ) |  |              |           |  |       |           |         |        |  |           |       |  |   |        |        |   |       |           |         |   |   |        |        |   |   |           | (217    | )     
|                                | Reallocation of interests                                                                                                                                      |                                                        |           |  |                  |   |         |                |   |  |              |          |  |       |           | 5,945   |        |  |           |      |  |   |        |       |   |       |           |        |   |   |        | (74    | ) |   |           | 5,871   |       
|                                | Distributions                                                                                                                                                  |                                                        |           |  |                  |   |         | (3,096          | ) |  |              |          |  |       |           | (40,438 | )      |  |           |      |  |   |        | (1,590 | ) |       |           |        |   |   |        | (2,023 | ) |   |           | (47,147 | )     
|                                |                                                                                                                                                                |                                                        |           |   |                  |   |         |                 |   |  |              |           |  |       |           |         |        |  |           |       |  |   |        |        |   |       |          
|Balance as of March 31, 2006    |                                                                                                                                                                |                                                        | 7,300,000 |   |                  | $ | 175,331 |                 |   |  | 87,717,934   |           |  | $     | 1,764,071 |         |        |  | 1,600,000 |       |  | $ | 77,815 |        |   |       | 4,239,659 |         |   | $ | 85,053 |        |   | $ | 2,102,270 |        
|                                |                                                                                                                                                                |                                                        |           |   |                  |   |         |                 |   |  |              |           |  |       |           |         |        |  |           |       |  |   |        |        |   |       |          



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AMB PROPERTY, L.P.





CONSOLIDATED STATEMENTS OF CASH FLOWS


For the Three Months Ended March 31, 2006 and 2005


|                                                                                           |                                                                         |                                                                   |                                           |                                                      |         |          |          |         |         |         |         |  
|------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------- | ----------------------------------------------------------------- | ----------------------------------------- | ---------------------------------------------------- | ------- | -------- | -------- | ------- | ------- | ------- | ------- | -
|                                                                                           |                                                                         | 2006                                                              |                                           |                                                      | 2005    |         
|                                                                                           |                                                                         |                                                                   |                                           |                                                      |         |         
|                                                                                           |                                                                         | (Unaudited, dollars in                                            |                                          
|                                                                                           |                                                                         | thousands)                                                        |                                          
|CASH FLOWS FROM OPERATING ACTIVITIES                                                       |                                                                         |                                                                   |                                           |                                                      |         |          |          |        
|Net income                                                                                 |                                                                         | $                                                                 | 30,369                                    |                                                      |         | $        | 50,880   |        
|Adjustments to net income:                                                                 |                                                                         |                                                                   |                                           |                                                      |         |          |          |        
|                                                                                           | Straight-line rents and amortization of lease intangibles               |                                                                   |                                           | (5,146                                               | )       |          |          | (4,497  | )      
|                                                                                           | Depreciation and amortization                                           |                                                                   |                                           | 43,360                                               |         |          |          | 39,532  |        
|                                                                                           | Stock-based compensation amortization                                   |                                                                   |                                           | 4,829                                                |         |          |          | 4,280   |        
|                                                                                           | Equity in earnings of unconsolidated joint ventures                     |                                                                   |                                           | (2,088                                               | )       |          |          | (1,242  | )      
|                                                                                           | Operating distributions received from unconsolidated joint
    ventures |                                                                   |                                           | 326                                                  |         |          |          |        |        
|                                                                                           | Gains from dispositions of real estate interest                         |                                                                   |                                           |                                                     |         |          |          | (1,301  | )      
|                                                                                           | Development profits, net of taxes                                       |                                                                   |                                           | (674                                                 | )       |          |          | (17,949 | )      
|                                                                                           | Debt premiums, discounts and finance cost amortization, net             |                                                                   |                                           | 2,850                                                |         |          |          | 1,313   |        
|                                                                                           | Total minority interests share of net income                           |                                                                   |                                           | 12,262                                               |         |          |          | 22,517  |        
|                                                                                           | Discontinued operations:                                                |                                                                   |                                           |                                                      |         |          |          |         |        
|                                                                                           |                                                                         | Depreciation and amortization                                     |                                           |                                                      | (92     | )        |          |         | 4,591   |        
|                                                                                           |                                                                         | Joint venture partners share of net income                       |                                           |                                                      | (286    | )        |          |         | 2,254   |        
|                                                                                           |                                                                         | Gains from dispositions of real estate, net of minority interests |                                           |                                                      | (7,366  | )        |          |         | (29,591 | )      
|                                                                                           |                                                                         | Cumulative effect of change in accounting principle               |                                           |                                                      | (193    | )        |          |         |        |        
|                                                                                           | Changes in assets and liabilities:                                      |                                                                   |                                           |                                                      |         |          |          |         |        
|                                                                                           |                                                                         | Accounts receivable and other assets                              |                                           |                                                      | 271     |          |          |         | (34,222 | )      
|                                                                                           |                                                                         | Accounts payable and other liabilities                            |                                           |                                                      | (26,323 | )        |          |         | 11,038  |        
|                                                                                           |                                                                         |                                                                   |                                           |                                                      |         |         
|                                                                                           |                                                                         |                                                                   | Net cash provided by operating activities |                                                      |         | 52,099   |          |         |         | 47,603  |        
|CASH FLOWS FROM INVESTING ACTIVITIES                                                       |                                                                         |                                                                   |                                           |                                                      |         |          |          |        
|Change in restricted cash                                                                  |                                                                         |                                                                   | 9,032                                     |                                                      |         |          | (10,244  | )      
|Cash paid for property acquisitions                                                        |                                                                         |                                                                   | (121,197                                  | )                                                    |         |          | (58,957  | )      
|Additions to land, buildings, development costs, building
    improvements and lease costs |                                                                         |                                                                   | (218,630                                  | )                                                    |         |          | (130,977 | )      
|Net proceeds from divestiture of real estate                                               |                                                                         |                                                                   | 20,707                                    |                                                      |         |          | 184,287  |        
|Additions to interests in unconsolidated joint ventures                                    |                                                                         |                                                                   | 999                                       |                                                      |         |          | (48,910  | )      
|Capital distributions received from unconsolidated joint ventures                          |                                                                         |                                                                   |                                          |                                                      |         |          | 261      |        
|Repayment and (issuance) of mortgage and loan receivables                                  |                                                                         |                                                                   | 32                                        |                                                      |         |          | (7,972   | )      
|                                                                                           |                                                                         |                                                                   |                                           |                                                      |         |         
|                                                                                           |                                                                         |                                                                   | Net cash used in investing activities     |                                                      |         | (309,057 | )        |         |         | (72,512 | )      
|CASH FLOWS FROM FINANCING ACTIVITIES                                                       |                                                                         |                                                                   |                                           |                                                      |         |          |          |        
|Issuance of common units                                                                   |                                                                         |                                                                   | 29,469                                    |                                                      |         |          | 10,951   |        
|Borrowings on secured debt                                                                 |                                                                         |                                                                   | 1,631                                     |                                                      |         |          | 38,734   |        
|Payments on secured debt                                                                   |                                                                         |                                                                   | (26,778                                   | )                                                    |         |          | (20,731  | )      
|Borrowings on other debt                                                                   |                                                                         |                                                                   | 43,086                                    |                                                      |         |          |         |        
|Payments on other debt                                                                     |                                                                         |                                                                   | (420                                      | )                                                    |         |          | (159     | )      
|Borrowings on unsecured credit facilities                                                  |                                                                         |                                                                   | 284,185                                   |                                                      |         |          | 292,928  |        
|Payments on unsecured credit facilities                                                    |                                                                         |                                                                   | (47,686                                   | )                                                    |         |          | (210,818 | )      
|Payment of financing fees                                                                  |                                                                         |                                                                   | (2,997                                    | )                                                    |         |          | (824     | )      
|Payments on senior debt securities                                                         |                                                                         |                                                                   | (25,000                                   | )                                                    |         |          |         |        
|Issuance costs on preferred units                                                          |                                                                         |                                                                   | (217                                      | )                                                    |         |          |         |        
|Repurchase of preferred units                                                              |                                                                         |                                                                   | (77,392                                   | )                                                    |         |          |         |        
|Contributions from co-investment partners                                                  |                                                                         |                                                                   | 65,859                                    |                                                      |         |          | 52,526   |        
|Distributions paid to partners                                                             |                                                                         |                                                                   | (43,710                                   | )                                                    |         |          | (38,673  | )      
|Distributions to minority interests, including preferred units                             |                                                                         |                                                                   | (34,473                                   | )                                                    |         |          | (38,826  | )      
|                                                                                           |                                                                         |                                                                   |                                           |                                                      |         |         
|                                                                                           |                                                                         |                                                                   | Net cash provided by financing activities |                                                      |         | 165,557  |          |         |         | 85,108  |        
|                                                                                           |                                                                         |                                                                   |                                           | Net effect of exchange rate changes on cash          |         |          | 988      |         |         |         | (1,810  | )
|                                                                                           |                                                                         |                                                                   |                                           | Net increase (decrease) in cash and cash equivalents |         |          | (90,413  | )       |         |         | 58,389  |  
|                                                                                           |                                                                         |                                                                   |                                           | Cash and cash equivalents at beginning of period     |         |          | 232,881  |         |         |         | 109,392 |  
|                                                                                           |                                                                         |                                                                   |                                           |                                                      |         |         
|                                                                                           |                                                                         |                                                                   |                                           | Cash and cash equivalents at end of period           |         | $        | 142,468  |         |         | $       | 167,781 |  
|                                                                                           |                                                                         |                                                                   |                                           |                                                      |         |         
|Supplemental Disclosures of Cash Flow Information                                          |                                                                         |                                                                   |                                           |                                                      |         |          |          |        
|Cash paid for interest, net of capitalized interest                                        |                                                                         | $                                                                 | 29,678                                    |                                                      |         | $        | 33,679   |        
|Non-cash transactions:                                                                     |                                                                         |                                                                   |                                           |                                                      |         |          |          |        
|                                                                                           | Acquisition of properties                                               |                                                                   | $                                         | 153,355                                              |         |          | $        | 84,404  |        
|                                                                                           | Assumption of secured debt                                              |                                                                   |                                           | (28,300                                              | )       |          |          | (15,477 | )      
|                                                                                           | Assumption of other assets and liabilities                              |                                                                   |                                           | (802                                                 | )       |          |          | (1,873  | )      
|                                                                                           | Acquisition capital                                                     |                                                                   |                                           | (3,056                                               | )       |          |          | (8,097  | )      
|                                                                                           |                                                                         |                                                                   |                                           |                                                      |         |         
|                                                                                           |                                                                         |                                                                   | Net cash paid for property acquisitions   |                                                      | $       | 121,197  |          |         | $       | 58,957  |        
|                                                                                           |                                                                         |                                                                   |                                           |                                                      |         |         
|                                                                                           | Preferred unit redemption issuance costs                                |                                                                   | $                                         | 1,097                                                |         |          | $        |        |        



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AMB PROPERTY, L.P.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


March 31, 2006


(unaudited)




|   |                                                        
|-- | -------------------------------------------------------
|1. | Organization and Formation of the Operating Partnership

® ®


day-to








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AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |   |                                                                                                                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | on a consolidated basis, the Operating Partnership owned or
    partially owned 907 industrial buildings, principally warehouse
    distribution buildings, encompassing approximately
    89.8 million rentable square feet that were 94.7% leased;                                                           
|
| |  | the Operating Partnership managed, but did not have an ownership
    interest in, industrial and other properties, totaling
    approximately 1.5 million rentable square feet;                                                                                                                                
|
| |  | through unconsolidated joint ventures, the Operating Partnership
    had investments in 85 industrial operating properties, totaling
    approximately 12.8 million rentable square feet, and in two
    industrial development projects, expected to total approximately
    0.3 million rentable square feet;
|
| |  | on a consolidated basis, the Operating Partnership had
    investments in 45 industrial development projects which are
    expected to total approximately 12.4 million rentable
    square feet upon completion; and                                                                                          
|
| |  | on a consolidated basis, the Operating Partnership owned six
    development projects, with a total estimated investment of
    approximately $293.1 million and approximately
    2.4 million rentable square feet, that were available for
    sale or contribution.                                         



|   |                             
|-- | ----------------------------
|2. | Interim Financial Statements



10-K




Investments in Real Estate.


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AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Reclassifications.


Comprehensive Income.


International Operations.






Stock-based Compensation Expense. Share Based Payment,


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AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




New Accounting Pronouncements. 04-5, Determining Whether a General Partner, or the General
Partners as a Group, Controls a Limited Partnership or Similar
Entity When the Limited Partners Have Certain Rights Investors Accounting for an Investee
When the Investor has a Majority of the Voting Interest but the
Minority Shareholder or Shareholders Have Certain Approval or
Veto Rights




|   |                                                 
|-- | ------------------------------------------------
|3. | Real Estate Acquisition and Development Activity









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AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|   |                                                                                          
|-- | -----------------------------------------------------------------------------------------
|4. | Gains from Dispositions of Real Estate, Development Sales and
    Discontinued Operations

Dispositions of Real Estate Interests.


Development Sales.


Discontinued Operations. Accounting for the Impairment or
Disposal of Long-Lived Assets


Properties Held for Contribution.


Properties Held for Divestiture.


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AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                          |  |               |      |   |      |   |        |  
|--------------------------------------------------------- |  | ------------- | ---- | - | ---- | - | ------ | -
|                                                          |  | For the Three |     
|                                                          |  | Months Ended  |     
|                                                          |  | March 31,     |     
|                                                          |  |               |     
|                                                          |  | 2006          |      |   | 2005 |  
|                                                          |  |               |      |   |      |  
|Rental revenues                                           |  | $             | 369  |   |      | $ | 19,586 |  
|Straight-line rents and amortization of lease intangibles |  |               | 174  |   |      |   | 198    |  
|Property operating expenses                               |  |               | (522 | ) |      |   | (3,544 | )
|Real estate taxes                                         |  |               | (7   | ) |      |   | (2,485 | )
|Depreciation and amortization                             |  |               | 92   |   |      |   | (4,591 | )
|Other income and expenses, net                            |  |               | 4    |   |      |   | (6     | )
|Interest, including amortization                          |  |               | 383  |   |      |   | (4,429 | )
|Joint venture partners share of loss (income)            |  |               | 286  |   |      |   | (2,254 | )
|                                                          |  |               |      |   |      |  
|Income attributable to discontinued operations            |  | $             | 779  |   |      | $ | 2,475  |  
|                                                          |  |               |      |   |      |  



|                                       |  |           |       |  |              |   |       | 
|-------------------------------------- |  | --------- | ----- |  | ------------ | - | ----- | 
|                                       |  | March 31, |       |  | December 31, |  
|                                       |  | 2006      |       |  | 2005         |  
|                                       |  |           |       |  |              |  
|Accounts receivable, net               |  | $         | 1,112 |  |              | $ | 946   | 
|Other assets                           |  | $         | 188   |  |              | $ | 5     | 
|Accounts payable and other liabilities |  | $         | 2,711 |  |              | $ | 1,149 | 



|   |                              
|-- | -----------------------------
|5. | Mortgage and Loan Receivables



|                              |                                     |             |  |               |  |           |        |        |              |   |        |        |  |  |       |  | 
|----------------------------- | ----------------------------------- | ----------- |  | ------------- |  | --------- | ------ | ------ | ------------ | - | ------ | ------ |  |  | ----- |  | 
|                              |                                     |             |  |               |  | March 31, |        |        | December 31, |   |        |       
|Mortgage and Loan Receivables |                                     | Market      |  | Maturity      |  | 2006      |        |        | 2005         |   |        | Rate   | 
|                              |                                     |             |  |               |  |           |        |        |              |   |        |        | 
|1. Pier 1                     |                                     | SF Bay Area |  | May 2026      |  | $         | 12,789 |        |              | $ | 12,821 |        |  |  | 13.0% | 
|2. G.Accion                   |                                     | Various     |  | November 2006 |  |           | 8,800  |        |              |   | 8,800  |        |  |  | 12.0% | 
|                              |                                     |             |  |               |  |           |        |        |              |   |        |        |  |  |       | 
|                              | Total Mortgage and Loan Receivables |             |  |               |  |           | $      | 21,589 |              |   | $      | 21,621 |  |  |       |  | 
|                              |                                     |             |  |               |  |           |        |        |              |   |        |        | 

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AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |     
|-- | ----
|6. | Debt



|                                                                                                                                                                                                                                         |                                               |                         |           |           |              |   |           |           |           | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------- | ----------------------- | --------- | --------- | ------------ | - | --------- | --------- | --------- | 
|                                                                                                                                                                                                                                         |                                               | March 31,               |           |           | December 31, |  
|                                                                                                                                                                                                                                         |                                               | 2006                    |           |           | 2005         |  
|                                                                                                                                                                                                                                         |                                               |                         |           |           |              |  
|Operating Partnership secured debt, varying interest rates from
    0.7% to 10.4%, due November 2006 to December 2022 (weighted
    average interest rate of 4.0% and 4.1% at March 31, 2006
    and December 31, 2005, respectively)    |                                               | $                       | 507,850   |           |              | $ | 522,459   |          
|Consolidated joint venture secured debt, varying interest rates
    from 3.5% to 9.4%, due October 2006 to January 2025 (weighted
    average interest rates of 6.3% and 6.3% at March 31, 2006
    and December 31, 2005, respectively) |                                               |                         | 1,398,790 |           |              |   | 1,378,083 |          
|Unsecured senior debt securities, varying interest rates from
    3.5% to 8.0%, due November 2006 to June 2018 (weighted average
    interest rates of 6.3% and 6.2% at March 31, 2006 and
    December 31, 2005, respectively)          |                                               |                         | 962,491   |           |              |   | 987,491   |          
|Other debt, varying interest rates from 6.3% to 8.6%, due August
    2006 to November 2015 (weighted average interest rates of 7.3%
    and 8.2% at March 31, 2006 and December 31, 2005,
    respectively)                              |                                               |                         | 63,543    |           |              |   | 23,963    |          
|Unsecured credit facilities, variable interest rate, due June
    2007 to February 2010 (weighted average interest rates of 3.2%
    and 2.2% at March 31, 2006 and December 31, 2005,
    respectively)                                 |                                               |                         | 734,110   |           |              |   | 490,072   |          
|                                                                                                                                                                                                                                         |                                               |                         |           |           |              |  
|                                                                                                                                                                                                                                         | Total debt before unamortized net (discounts) |                         |           | 3,666,784 |              |   |           | 3,402,068 |          
|                                                                                                                                                                                                                                         | Unamortized net (discounts)                   |                         |           | (389      | )            |   |           | (507      | )        
|                                                                                                                                                                                                                                         |                                               |                         |           |           |              |  
|                                                                                                                                                                                                                                         |                                               | Total consolidated debt |           | $         | 3,666,395    |   |           | $         | 3,401,561 | 
|                                                                                                                                                                                                                                         |                                               |                         |           |           |              |  







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AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










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AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






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AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|           |       |             |         |              |         |   |         |            |  |   |            |         |  |       |         |         |       |   |        |        |  |   |         |           | 
|---------- | ----- | ----------- | ------- | ------------ | ------- | - | ------- | ---------- |  | - | ---------- | ------- |  | ----- | ------- | ------- | ----- | - | ------ | ------ |  | - | ------- | --------- | 
|           |       |             |         | Consolidated |         |   |         |            |  |   |            |         | 
|           |       | Operating   |         |              | Joint   |   |         | Unsecured  |  |   |            |         |  |       |        
|           |       | Partnership |         |              | Venture |   |         | Senior     |  |   |            |         |  |       |        
|           |       | Secured     |         |              | Secured |   |         | Debt       |  |   | Credit     |         |  | Other |         |         |      
|           |       | Debt        |         |              | Debt    |   |         | Securities |  |   | Facilities |         |  | Debt  |         |         | Total |  
|           |       |             |         |              |         |   |         |            |  |   |            |         |  |       |         |         |       |  
|2006       |       | $           | 48,607  |              |         | $ | 70,806  |            |  | $ | 50,000     |         |  | $     |        |         |       | $ | 15,860 |        |  | $ | 185,273 |          
|2007       |       |             | 12,744  |              |         |   | 58,139  |            |  |   | 75,000     |         |  |       | 610,160 |         |       |   | 752    |        |  |   | 756,795 |          
|2008       |       |             | 40,958  |              |         |   | 179,144 |            |  |   | 175,000    |         |  |       |        |         |       |   | 810    |        |  |   | 395,912 |          
|2009       |       |             | 5,326   |              |         |   | 121,367 |            |  |   | 100,000    |         |  |       |        |         |       |   | 873    |        |  |   | 227,566 |          
|2010       |       |             | 71,143  |              |         |   | 117,716 |            |  |   | 250,000    |         |  |       | 123,950 |         |       |   | 40,941 |        |  |   | 603,750 |          
|2011       |       |             | 22,015  |              |         |   | 357,699 |            |  |   | 75,000     |         |  |       |        |         |       |   | 1,014  |        |  |   | 455,728 |          
|2012       |       |             | 255,109 |              |         |   | 171,891 |            |  |   |           |         |  |       |        |         |       |   | 1,093  |        |  |   | 428,093 |          
|2013       |       |             | 15,108  |              |         |   | 197,427 |            |  |   |           |         |  |       |        |         |       |   | 920    |        |  |   | 213,455 |          
|2014       |       |             | 15,408  |              |         |   | 5,197   |            |  |   |           |         |  |       |        |         |       |   | 616    |        |  |   | 21,221  |          
|2015       |       |             | 1,996   |              |         |   | 86,860  |            |  |   | 112,491    |         |  |       |        |         |       |   | 664    |        |  |   | 202,011 |          
|Thereafter |       |             | 19,436  |              |         |   | 32,544  |            |  |   | 125,000    |         |  |       |        |         |       |   |       |        |  |   | 176,980 |          
|           |       |             |         |              |         |   |         |            |  |   |            |         |  |       |         |         |       |  
|           | Total |             | $       | 507,850      |         |   | $       | 1,398,790  |  |   | $          | 962,491 |  |       | $       | 734,110 |       |   | $      | 63,543 |  |   | $       | 3,666,784 | 
|           |       |             |         |              |         |   |         |            |  |   |            |         |  |       |         |         |       |  



|   |                                                                          
|-- | -------------------------------------------------------------------------
|7. | Minority Interests in Consolidated Joint Ventures and
    Preferred Units

Consolidation of Variable
Interest Entities




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AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                          |       |                                                                   |  |               |     |                  |                   |   |         |                 |  |   |           |           |  |              |         |           |  |   |         |           | 
|----------------------------------------- | ----- | ----------------------------------------------------------------- |  | ------------- | --- | ---------------- | ----------------- | - | ------- | --------------- |  | - | --------- | --------- |  | ------------ | ------- | --------- |  | - | ------- | --------- | 
|                                          |       |                                                                   |  |               |     | Total Investment |                   |   |        
|                                          |       |                                                                   |  | Operating     |     |                  | in Real Estate(6) |   |         | Secured Debt(7) | 
|                                          |       |                                                                   |  | Partnerships |     |                  |                   |   |         |                 | 
|                                          |       |                                                                   |  | Ownership     |     |                  | March 31,         |   |         | December 31,    |  |   | March 31, |           |  | December 31, |        
|Co-investment Joint Venture               |       | Joint Venture Partner                                             |  | Percentage    |     |                  | 2006              |   |         | 2005            |  |   | 2006      |           |  | 2005         |        
|                                          |       |                                                                   |  |               |     |                  |                   |   |         |                 |  |   |           |           |  |              |        
|AMB/ Erie, L.P.                           |       | Erie Insurance Company and affiliates                             |  |               | 50% |                  |                   | $ | 100,023 |                 |  | $ | 99,722    |           |  | $            | 40,528  |           |  | $ | 40,710  |          
|AMB Partners II, L.P.                     |       | City and County of San Francisco Employees Retirement
    System |  |               | 20% |                  |                   |   | 596,444 |                 |  |   | 592,115   |           |  |              | 286,166 |           |  |   | 291,684 |          
|AMB-SGP, L.P.                             |       | Industrial JV Pte Ltd (1)                                         |  |               | 50% |                  |                   |   | 438,035 |                 |  |   | 436,713   |           |  |              | 238,770 |           |  |   | 239,944 |          
|AMB Institutional Alliance Fund II, L.P.  |       | AMB Institutional Alliance REIT II, Inc.(2)                       |  |               | 20% |                  |                   |   | 510,860 |                 |  |   | 507,493   |           |  |              | 243,905 |           |  |   | 245,056 |          
|AMB-AMS, L.P.(3)                          |       | PMT, SPW and TNO(4)                                               |  |               | 39% |                  |                   |   | 146,685 |                 |  |   | 146,007   |           |  |              | 62,734  |           |  |   | 63,143  |          
|AMB Institutional Alliance Fund III, L.P. |       | AMB Institutional Alliance REIT III, Inc.(5)                      |  |               | 20% |                  |                   |   | 842,835 |                 |  |   | 749,634   |           |  |              | 448,040 |           |  |   | 421,290 |          
|                                          |       |                                                                   |  |               |     |                  |                   |   |         |                 |  |   |           |           |  |              |        
|                                          | Total |                                                                   |  |               |     |                  |                   |   | $       | 2,634,882       |  |   | $         | 2,531,684 |  |              | $       | 1,320,143 |  |   | $       | 1,301,827 | 
|                                          |       |                                                                   |  |               |     |                  |                   |   |         |                 |  |   |           |           |  |              |        






|    |                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | A subsidiary of the real estate investment subsidiary of the
    Government of Singapore Investment Corporation.                                                                                                  
|   
|(2) | Comprised of 14 institutional investors as stockholders and one
    third-party limited partner as of March 31, 2006.                                                                                             
|   
|(3) | AMB-AMS, L.P. is a co-investment partnership with three Dutch
    pension funds advised by Mn Services NV.                                                                                                        
|   
|(4) | PMT is Stichting Pensioenfonds Metaal en Techniek, SPW is
    Stichting Pensioenfonds voor de Woningcorporaties and TNO is
    Stichting Pensioenfonds TNO.                                                       
|   
|(5) | AMB Institutional Alliance Fund III, L.P. is an open-ended
    co-investment partnership formed in 2004 with institutional
    investors.                                                                         
|   
|(6) | The Operating Partnership also had other consolidated joint
    ventures with total investments in real estate of
    $399.8 million and $378.7 million at March 31,
    2006 and December 31, 2005, respectively.
|   
|(7) | The Operating Partnership also had other consolidated joint
    ventures with secured debt of $87.5 million and
    $85.7 million at March 31, 2006 and December 31,
    2005, respectively.                      

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AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                    |                                                              |                          |         |        |              |   |         |                          |           |     |             | 
|----------------------------------- | ------------------------------------------------------------ | ------------------------ | ------- | ------ | ------------ | - | ------- | ------------------------ | --------- | --- | ----------- | 
|                                    |                                                              | March 31,                |         |        | December 31, |   |         |                         
|                                    |                                                              | 2006                     |         |        | 2005         |   |         | Redemption/Callable Date
|                                    |                                                              |                          |         |        |              |   |         |                         
|Joint Venture Partners              |                                                              | $                        | 899,658 |        |              | $ | 853,643 |                          |           | N/A
|Held through AMB Property II, L.P.: |                                                              |                          |         |        |              |   |         |                          |           |    
|                                    | Class B Limited Partners                                     |                          |         | 2,920  |              |   |         | 2,950                    |           |     | N/A        
|                                    | Series D preferred units (liquidation preference of $79,767) |                          |         | 77,684 |              |   |         | 77,684                   |           |     | May 2004   
|                                    | Series E preferred units (liquidation preference of $11,022) |                          |         | 10,788 |              |   |         | 10,788                   |           |     | August 2004
|                                    | Series F preferred units (liquidation preference of $10,057) |                          |         | 9,900  |              |   |         | 9,900                    |           |     | March 2005 
|                                    | Series H preferred units (liquidation preference of $42,000) |                          |         |       |              |   |         | 40,912                   |           |     | N/A        
|                                    | Series I preferred units (liquidation preference of $25,500) |                          |         | 24,799 |              |   |         | 24,800                   |           |     | March 2006 
|                                    | Series N preferred units (liquidation preference of $36,479) |                          |         |       |              |   |         | 36,479                   |           |     | N/A        
|                                    |                                                              |                          |         |        |              |   |         |                         
|                                    |                                                              | Total minority interests |         | $      | 1,025,749    |   |         | $                        | 1,057,156 |     |             | 
|                                    |                                                              |                          |         |        |              |   |         |                         



|                                                     |                                                              |                                           |       |       |        |   |       |       |        | 
|---------------------------------------------------- | ------------------------------------------------------------ | ----------------------------------------- | ----- | ----- | ------ | - | ----- | ----- | ------ | 
|                                                     |                                                              | For the Three Months                      |      
|                                                     |                                                              | Ended March 31,                           |      
|                                                     |                                                              |                                           |      
|                                                     |                                                              | 2006                                      |       |       | 2005   |  
|                                                     |                                                              |                                           |       |       |        |  
|Joint Venture Partners share of income              |                                                              | $                                         | 8,825 |       |        | $ | 9,349 |      
|Joint Venture Partners share of development profits |                                                              |                                           |      |       |        |   | 9,379 |      
|Held through AMB Property II, L.P.:                  |                                                              |                                           |       |       |        |   |       |      
|                                                     | Class B common limited partnership units                     |                                           |       | 26    |        |   |       | 11    |       
|                                                     | Series D preferred units (liquidation preference of $79,767) |                                           |       | 1,545 |        |   |       | 1,545 |       
|                                                     | Series E preferred units (liquidation preference of $11,022) |                                           |       | 214   |        |   |       | 214   |       
|                                                     | Series F preferred units (liquidation preference of $10,057) |                                           |       | 200   |        |   |       | 200   |       
|                                                     | Series H preferred units (liquidation preference of $42,000) |                                           |       | 815   |        |   |       | 853   |       
|                                                     | Series I preferred units (liquidation preference of $25,500) |                                           |       | 510   |        |   |       | 510   |       
|                                                     | Series N preferred units (liquidation preference of $36,479) |                                           |       | 127   |        |   |       | 456   |       
|                                                     |                                                              |                                           |       |       |        |  
|                                                     |                                                              | Total minority interests share of income |       | $     | 12,262 |   |       | $     | 22,517 | 
|                                                     |                                                              |                                           |       |       |        |  



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AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










|   |                                             
|-- | --------------------------------------------
|8. | Investments in Unconsolidated Joint Ventures



|                                            |                        |                                     |                 |        |           |           |            |  |        |               |         |  |            |        |         |  |     |     |  | 
|------------------------------------------- | ---------------------- | ----------------------------------- | --------------- | ------ | --------- | --------- | ---------- |  | ------ | ------------- | ------- |  | ---------- | ------ | ------- |  | --- | --- |  | 
|                                            |                        |                                     |                 |        |           |           |            |  |        | Operating     |        
|                                            |                        |                                     |                 |        |           |           |            |  |        | Partnerships |        
|                                            |                        |                                     |                 | Square |           |           | March 31,  |  |        | December 31,  |         |  | Ownership  |       
|Unconsolidated Joint Ventures               |                        | Market                              |                 | Feet   |           |           | 2006       |  |        | 2005          |         |  | Percentage |       
|                                            |                        |                                     |                 |        |           |           |            |  |        |               |         |  |            |       
|Co-Investment Joint Ventures                |                        |                                     |                 |        |           |           |            |  |        |               |         |  |            |        |         |  |     |    
|                                            | AMB-SGP Mexico, LLC    |                                     | Various, Mexico |        |           | 1,894,076 |            |  | $      | 16,508        |         |  | $          | 16,218 |         |  |     | 20% | 
|                                            | AMB Japan Fund I, L.P. |                                     | Various, Japan  |        |           | 1,211,503 |            |  |        | 10,762        |         |  |            | 10,112 |         |  |     | 20% | 
|Other Industrial Operating Joint Ventures   |                        |                                     |                 |        | 9,255,658 |           |            |  | 42,595 |               |         |  | 41,520     |        |         |  | 52% |    
|Other Industrial Development Joint Ventures |                        |                                     |                 |        | 719,267   |           |            |  | 3,856  |               |         |  | 6,176      |        |         |  | 49% |    
|Other Investment  G. Accion                |                        | Various                             |                 |        | n/a       |           |            |  | 44,751 |               |         |  | 44,627     |        |         |  | 39% |    
|                                            |                        |                                     |                 |        |           |           |            |  |        |               |         |  |            |       
|                                            |                        | Total Unconsolidated Joint Ventures |                 |        |           |           | 13,080,504 |  |        | $             | 118,472 |  |            | $      | 118,653 |  |     |     |  | 
|                                            |                        |                                     |                 |        |           |           |            |  |        |               |         |  |            |       





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AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










|   |                  
|-- | -----------------
|9. | Partners Capital





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AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                      |  |                                          |  |               |       |  |      |   |       | 
|--------------------- |  | ---------------------------------------- |  | ------------- | ----- |  | ---- | - | ----- | 
|                      |  |                                          |  | For the Three |      
|                      |  |                                          |  | Months Ended  |      
|                      |  |                                          |  | March 31,     |      
|                      |  |                                          |  |               |      
|Paying Entity         |  | Security                                 |  | 2006          |       |  | 2005 |  
|                      |  |                                          |  |               |       |  |      |  
|Operating Partnership |  | Common limited partnership units         |  | $             | 0.460 |  |      | $ | 0.440 | 
|Operating Partnership |  | Series J preferred units                 |  | $             | 0.994 |  |      | $ | 0.994 | 
|Operating Partnership |  | Series K preferred units                 |  | $             | 0.994 |  |      | $ | 0.994 | 
|AMB Property II, L.P. |  | Class B common limited partnership units |  | $             | 0.460 |  |      | $ | 0.440 | 
|AMB Property II, L.P. |  | Series D preferred units                 |  | $             | 0.969 |  |      | $ | 0.969 | 
|AMB Property II, L.P. |  | Series E preferred units                 |  | $             | 0.969 |  |      | $ | 0.969 | 
|AMB Property II, L.P. |  | Series F preferred units                 |  | $             | 0.994 |  |      | $ | 0.994 | 
|AMB Property II, L.P. |  | Series H preferred units(1)              |  | $             | 0.970 |  |      | $ | 1.016 | 
|AMB Property II, L.P. |  | Series I preferred units                 |  | $             | 1.000 |  |      | $ | 1.000 | 
|AMB Property II, L.P. |  | Series N preferred units(2)              |  | $             | 0.215 |  |      | $ | 0.625 | 






|    |                                                                                                                                                                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In March 2006, AMB Property II, L.P. repurchased all of its
    Series H preferred units.                                                                                                                                                                            
|   
|(2) | The holder of the series N preferred units exercised its
    put option in January 2006 and sold all of its series N
    preferred units to the Operating Partnership and AMB
    Property II, L.P. repurchased all of such units from the
    Operating Partnership.



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AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                
|--- | ---------------
|10. | Income Per Unit



|                               |                                                                                                                                           |                                            |   |            |        |  |   |            |        | 
|------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | - | ---------- | ------ |  | - | ---------- | ------ | 
|                               |                                                                                                                                           | For the Three Months Ended                 |  
|                               |                                                                                                                                           | March 31,                                  |  
|                               |                                                                                                                                           |                                            |  
|                               |                                                                                                                                           | 2006                                       |   |            | 2005   | 
|                               |                                                                                                                                           |                                            |   |            |        | 
|Numerator                      |                                                                                                                                           |                                            |   |            |        |  |   |           
|                               | Income from continuing operations before cumulative effect of
    change in accounting principle                                          |                                            | $ | 22,031     |        |  | $ | 18,814     |       
|                               | Preferred unit distributions                                                                                                              |                                            |   | (4,686     | )      |  |   | (3,373     | )     
|                               | Preferred unit redemption issuance costs                                                                                                  |                                            |   | (1,097     | )      |  |   |           |       
|                               |                                                                                                                                           |                                            |   |            |        | 
|                               | Income from continuing operations before cumulative effect of
    change in accounting principle (after preferred unit dividends)         |                                            |   | 16,248     |        |  |   | 15,441     |       
|                               | Income attributable to discontinued operations, net of minority
    interests                                                             |                                            |   | 779        |        |  |   | 2,475      |       
|                               | Gains from dispositions of real estate, net of minority interests                                                                         |                                            |   | 7,366      |        |  |   | 29,591     |       
|                               | Cumulative effect of change in accounting principle                                                                                       |                                            |   | 193        |        |  |   |           |       
|                               |                                                                                                                                           |                                            |   |            |        | 
|                               |                                                                                                                                           | Net income available to common unitholders |   | $          | 24,586 |  |   | $          | 47,507 | 
|                               |                                                                                                                                           |                                            |   |            |        | 
|Denominator                    |                                                                                                                                           |                                            |   |            |        |  |   |           
|                               | Basic                                                                                                                                     |                                            |   | 90,821,246 |        |  |   | 87,857,933 |       
|                               | Stock options and restricted stock dilution                                                                                               |                                            |   | 3,746,434  |        |  |   | 3,382,965  |       
|                               |                                                                                                                                           |                                            |   |            |        | 
|                               | Diluted weighted average common units                                                                                                     |                                            |   | 94,567,680 |        |  |   | 91,240,898 |       
|                               |                                                                                                                                           |                                            |   |            |        | 
|Basic income per common unit   |                                                                                                                                           |                                            |   |            |        |  |   |           
|                               | Income from continuing operations (after preferred unit
    distributions) before cumulative effect of change in accounting
    principle |                                            | $ | 0.18       |        |  | $ | 0.18       |       
|                               | Discontinued operations                                                                                                                   |                                            |   | 0.09       |        |  |   | 0.36       |       
|                               | Cumulative effect of change in accounting principle                                                                                       |                                            |   |           |        |  |   |           |       
|                               |                                                                                                                                           |                                            |   |            |        | 
|                               |                                                                                                                                           | Net income available to common unitholders |   | $          | 0.27   |  |   | $          | 0.54   | 
|                               |                                                                                                                                           |                                            |   |            |        | 
|Diluted income per common unit |                                                                                                                                           |                                            |   |            |        |  |   |           
|                               | Income from continuing operations (after preferred unit
    distributions) before cumulative effect of change in accounting
    principle |                                            | $ | 0.17       |        |  | $ | 0.17       |       
|                               | Discontinued operations                                                                                                                   |                                            |   | 0.09       |        |  |   | 0.35       |       
|                               | Cumulative effect of change in accounting principle                                                                                       |                                            |   |           |        |  |   |           |       
|                               |                                                                                                                                           |                                            |   |            |        | 
|                               |                                                                                                                                           | Net income available to common unitholders |   | $          | 0.26   |  |   | $          | 0.52   | 
|                               |                                                                                                                                           |                                            |   |            |        | 

20



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AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                    
|--- | -------------------
|11. | Segment Information







|                                                          |                               |                                   |        |        |                      |  |         |        |         |  |        |        |         |  |         |        |         | 
|--------------------------------------------------------- | ----------------------------- | --------------------------------- | ------ | ------ | -------------------- |  | ------- | ------ | ------- |  | ------ | ------ | ------- |  | ------- | ------ | ------- | 
|                                                          |                               | Rental Revenues                   |        |        | Property NOI(1)      | 
|                                                          |                               |                                   |        |        |                      | 
|                                                          |                               | For the Three Months              |        |        | For the Three Months | 
|                                                          |                               | Ended March 31,                   |        |        | Ended March 31,      | 
|                                                          |                               |                                   |        |        |                      | 
|Segments                                                  |                               | 2006                              |        |        | 2005                 |  |         | 2006   |         |  | 2005   |       
|                                                          |                               |                                   |        |        |                      |  |         |        |         |  |        |       
|Industrial U.S. hub and gateway markets:                  |                               |                                   |        |        |                      |  |         |        |         |  |        |        |         |  |         |       
|                                                          | Atlanta                       |                                   | $      | 5,356  |                      |  | $       | 5,457  |         |  | $      | 4,155  |         |  | $       | 4,237  |        
|                                                          | Chicago                       |                                   |        | 13,629 |                      |  |         | 13,653 |         |  |        | 9,324  |         |  |         | 9,206  |        
|                                                          | Dallas/ Fort Worth            |                                   |        | 3,758  |                      |  |         | 4,081  |         |  |        | 2,515  |         |  |         | 2,808  |        
|                                                          | Los Angeles                   |                                   |        | 26,790 |                      |  |         | 25,480 |         |  |        | 21,327 |         |  |         | 20,157 |        
|                                                          | Northern New Jersey/ New York |                                   |        | 19,653 |                      |  |         | 19,542 |         |  |        | 13,347 |         |  |         | 13,639 |        
|                                                          | San Francisco Bay Area        |                                   |        | 21,554 |                      |  |         | 21,922 |         |  |        | 16,953 |         |  |         | 17,435 |        
|                                                          | Miami                         |                                   |        | 9,251  |                      |  |         | 8,648  |         |  |        | 6,295  |         |  |         | 5,946  |        
|                                                          | Seattle                       |                                   |        | 9,354  |                      |  |         | 10,838 |         |  |        | 7,246  |         |  |         | 8,486  |        
|                                                          | On-Tarmac                     |                                   |        | 14,055 |                      |  |         | 13,793 |         |  |        | 7,869  |         |  |         | 7,970  |        
|                                                          |                               |                                   |        |        |                      |  |         |        |         |  |        |       
|                                                          |                               | Total industrial U.S. hub markets |        |        | 123,400              |  |         |        | 123,414 |  |        |        | 89,031  |  |         |        | 89,884  | 
|Other U.S. target markets                                 |                               |                                   | 23,591 |        |                      |  | 28,335  |        |         |  | 16,622 |        |         |  | 19,991  |       
|Other U.S. non-target markets                             |                               |                                   | 5,346  |        |                      |  | 9,310   |        |         |  | 3,830  |        |         |  | 7,010   |       
|International target markets                              |                               |                                   | 19,459 |        |                      |  | 6,929   |        |         |  | 16,087 |        |         |  | 5,554   |       
|Straight-line rents and amortization of lease intangibles |                               |                                   | 5,146  |        |                      |  | 4,497   |        |         |  | 5,146  |        |         |  | 4,497   |       
|Total other markets                                       |                               |                                   | 8      |        |                      |  | 703     |        |         |  | 8      |        |         |  | 454     |       
|Discontinued operations                                   |                               |                                   | (543   | )      |                      |  | (19,784 | )      |         |  | (14    | )      |         |  | (13,755 | )     
|                                                          |                               |                                   |        |        |                      |  |         |        |         |  |        |       
|                                                          |                               | Total                             |        | $      | 176,407              |  |         | $      | 153,404 |  |        | $      | 130,710 |  |         | $      | 113,635 | 
|                                                          |                               |                                   |        |        |                      |  |         |        |         |  |        |       






|    |                                                                                                                                                                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Property net operating income (NOI) is defined as
    rental revenue, including reimbursements, less property
    operating expenses, which excludes depreciation, amortization,
    general and administrative expenses and interest expense. For a
    reconciliation of NOI to net income, see the table below.



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AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                                                    |            |                      |         |        |      |   |         |        | 
|--------------------------------------------------- | ---------- | -------------------- | ------- | ------ | ---- | - | ------- | ------ | 
|                                                    |            | For the Three Months |        
|                                                    |            | Ended March 31,      |        
|                                                    |            |                      |        
|                                                    |            | 2006                 |         |        | 2005 |  
|                                                    |            |                      |         |        |      |  
|Property NOI                                        |            | $                    | 130,710 |        |      | $ | 113,635 |       
|Private capital income                              |            |                      | 5,106   |        |      |   | 3,318   |       
|Depreciation and amortization                       |            |                      | (43,360 | )      |      |   | (39,532 | )     
|General and administrative                          |            |                      | (23,048 | )      |      |   | (18,544 | )     
|Other expenses                                      |            |                      | (537    | )      |      |   | (936    | )     
|Fund costs                                          |            |                      | (614    | )      |      |   | (364    | )     
|Equity in earnings of unconsolidated joint ventures |            |                      | 2,088   |        |      |   | 1,242   |       
|Other income                                        |            |                      | 3,063   |        |      |   | 136     |       
|Gains from dispositions of real estate              |            |                      |        |        |      |   | 1,301   |       
|Development profits, net of taxes                   |            |                      | 674     |        |      |   | 17,949  |       
|Interest, including amortization                    |            |                      | (39,789 | )      |      |   | (36,874 | )     
|Total minority interests share of income           |            |                      | (12,262 | )      |      |   | (22,517 | )     
|Total discontinued operations                       |            |                      | 8,145   |        |      |   | 32,066  |       
|Cumulative effect of change in accounting principle |            |                      | 193     |        |      |   |        |       
|                                                    |            |                      |         |        |      |  
|                                                    | Net income |                      | $       | 30,369 |      |   | $       | 50,880 | 
|                                                    |            |                      |         |        |      |  

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AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                             |                               |                                   |           |           |                   |  |         |         |           | 
|-------------------------------------------- | ----------------------------- | --------------------------------- | --------- | --------- | ----------------- |  | ------- | ------- | --------- | 
|                                             |                               | Total Assets as of                |          
|                                             |                               |                                   |          
|                                             |                               | March 31, 2006                    |           |           | December 31, 2005 | 
|                                             |                               |                                   |           |           |                   | 
|Industrial U.S. hub and gateway markets:     |                               |                                   |           |           |                   |  |         |        
|                                             | Atlanta                       |                                   | $         | 240,310   |                   |  | $       | 208,751 |          
|                                             | Chicago                       |                                   |           | 506,459   |                   |  |         | 504,581 |          
|                                             | Dallas/ Fort Worth            |                                   |           | 136,897   |                   |  |         | 137,112 |          
|                                             | Los Angeles                   |                                   |           | 1,028,489 |                   |  |         | 930,917 |          
|                                             | Northern New Jersey/ New York |                                   |           | 790,595   |                   |  |         | 756,719 |          
|                                             | San Francisco Bay Area        |                                   |           | 784,725   |                   |  |         | 789,129 |          
|                                             | Miami                         |                                   |           | 404,605   |                   |  |         | 372,728 |          
|                                             | Seattle                       |                                   |           | 392,538   |                   |  |         | 371,029 |          
|                                             | On-Tarmac                     |                                   |           | 241,527   |                   |  |         | 245,046 |          
|                                             |                               |                                   |           |           |                   | 
|                                             |                               | Total industrial U.S. hub markets |           |           | 4,526,145         |  |         |         | 4,316,012 | 
|Other U.S. target markets                    |                               |                                   | 692,399   |           |                   |  | 693,287 |        
|Other non-target markets                     |                               |                                   | 266,481   |           |                   |  | 264,954 |        
|International target markets                 |                               |                                   | 1,165,079 |           |                   |  | 975,960 |        
|Total other markets                          |                               |                                   |          |           |                   |  | 10,277  |        
|Investments in unconsolidated joint ventures |                               |                                   | 118,472   |           |                   |  | 118,653 |        
|Non-segment assets                           |                               |                                   | 274,987   |           |                   |  | 423,596 |        
|                                             |                               |                                   |           |           |                   | 
|                                             |                               | Total assets                      |           | $         | 7,043,563         |  |         | $       | 6,802,739 | 
|                                             |                               |                                   |           |           |                   | 



|    |                              
|--- | -----------------------------
|12. | Commitments and Contingencies



| |            
| | -----------
| | Commitments

Lease Commitments.


Standby Letters of Credit.


Guarantees.


Performance and Surety Bonds.


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##### Table of Contents



AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Promoted Interests and Other Contractual Obligations.




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

Litigation.


Environmental Matters.


General Uninsured Losses.




Captive Insurance Company.


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AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|    |                      
|--- | ---------------------
|13. | Stock Incentive Plans

Stock Incentive Plans.


Share Based
Payment Accounting for Stock-Based Compensation




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AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                                              |  |              |            |          |                |         |             |         |  |  |       | 
|--------------------------------------------- |  | ------------ | ---------- | -------- | -------------- | ------- | ----------- | ------- |  |  | ----- | 
|                                              |  |              |            |          |                | Options |            
|                                              |  |              |            | Weighted |                |         | Exercisable |        
|                                              |  | Shares Under |            |          | Average        |         |             | at Year | 
|                                              |  | Option       |            |          | Exercise Price |         |             | End     | 
|                                              |  |              |            |          |                |         |             |         | 
|Outstanding as of December 31, 2005           |  |              | 9,148      |          |                | $       | 27.14       |         |  |  | 7,237 | 
|                                              |  |              |            |          |                |         |             |         | 
|Granted                                       |  |              | 709        |          |                |         | 51.88       |         |  |  |       | 
|Exercised                                     |  |              | (2,104     | )        |                |         | 23.01       |         |  |  |       | 
|Forfeited                                     |  |              | (14        | )        |                |         | 38.76       |         |  |  |       | 
|                                              |  |              |            |          |                |         |             |         | 
|Outstanding as of March 31, 2006              |  |              | 7,739      |          |                | $       | 30.50       |         |  |  | 6,209 | 
|                                              |  |              |            |          |                |         |             |         | 
|Remaining average contractual life            |  |              | 6.55 years |          |                |         |             |         |  |  |       | 
|                                              |  |              |            |          |                |         |             |         | 
|Fair value of options granted during the year |  | $            | 8.54       |          |                |         |             |         |  |  |       | 
|                                              |  |              |            |          |                |         |             |         | 



|               |                 |  |            |          |       |                |           |   |                       |  |  |            |     |  |                |  |       |  |  |   |       | 
|-------------- | --------------- |  | ---------- | -------- | ----- | -------------- | --------- | - | --------------------- |  |  | ---------- | --- |  | -------------- |  | ----- |  |  | - | ----- | 
|               |                 |  |            |          |       | Weighted       |           |   | Currently Exercisable | 
|               |                 |  |            |          |       | Average        |           |   |                       | 
|               |                 |  |            | Weighted |       |                | Remaining |   |                       |  |  | Weighted   |    
|Range of       |                 |  | Number     |          |       | Average        |           |   | Contractual           |  |  | Number     |     |  | Average        | 
|Exercise Price |                 |  | of Options |          |       | Exercise Price |           |   | Life in Years         |  |  | of Options |     |  | Exercise Price | 
|               |                 |  |            |          |       |                |           |   |                       |  |  |            |     |  |                | 
|               | $20.00 - $24.60 |  |            |          | 1,990 |                |           | $ | 22.15                 |  |  |            | 3.8 |  |                |  | 1,990 |  |  | $ | 22.15 | 
|               | $24.64 - $27.12 |  |            |          | 2,756 |                |           |   | 26.51                 |  |  |            | 6.3 |  |                |  | 2,747 |  |  |   | 26.51 | 
|               | $27.14 - $38.56 |  |            |          | 2,143 |                |           |   | 35.63                 |  |  |            | 8.2 |  |                |  | 1,289 |  |  |   | 34.56 | 
|               | $39.09 - $54.96 |  |            |          | 850   |                |           |   | 50.11                 |  |  |            | 9.7 |  |                |  | 183   |  |  |   | 51.45 | 
|               |                 |  |            |          |       |                |           |   |                       |  |  |            |     |  |                | 
|               |                 |  |            |          | 7,739 |                |           |   |                       |  |  |            |     |  |                |  | 6,209 |  |  |   |       | 
|               |                 |  |            |          |       |                |           |   |                       |  |  |            |     |  |                | 



|                            |  |            |        |   |                |   |       | 
|--------------------------- |  | ---------- | ------ | - | -------------- | - | ----- | 
|                            |  | Number     |        |   | Average        |  
|                            |  | of Options |        |   | Exercise Price |  
|                            |  |            |        |   |                |  
|Unvested at January 1, 2006 |  |            | 1,911  |   |                | $ | 35.38 | 
|Granted                     |  |            | 709    |   |                | $ | 51.88 | 
|Vested                      |  |            | (1,076 | ) |                | $ | 35.91 | 
|Forfeited                   |  |            | (14    | ) |                | $ | 38.76 | 
|                            |  |            |        |   |                |  
|Unvested at March 31, 2006  |  |            | 1,530  |   |                | $ | 42.62 | 
|                            |  |            |        |   |                |  

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AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|                            |  |              |      |                  |            |   |       | 
|--------------------------- |  | ------------ | ---- | ---------------- | ---------- | - | ----- | 
|                            |  |              |      | Weighted-Average |           
|                            |  |              |      | Grant-Date       |           
|Unvested Shares             |  | Shares (000) |      |                  | Fair Value |  
|                            |  |              |      |                  |            |  
|Unvested at January 1, 2006 |  |              | 548  |                  |            | $ | 34.41 | 
|Granted                     |  |              | 430  |                  |            | $ | 51.90 | 
|Vested                      |  |              | (186 | )                |            | $ | 31.99 | 
|Forfeited                   |  |              | (2   | )                |            | $ | 37.29 | 
|                            |  |              |      |                  |            |  
|Unvested at March 31, 2006  |  |              | 790  |                  |            | $ | 44.50 | 
|                            |  |              |      |                  |            |  





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

Some of the information included in this Quarterly Report on
Form 10-Q contains
forward-looking statements, which are made pursuant to the
safe-harbor provisions of Section 21E of the Securities
Exchange Act of 1934, as amended, and Section 27A of the
Securities Act of 1933, as amended. Because these
forward-looking statements involve risks and uncertainties,
there are important factors that could cause our actual results
to differ materially from those in the forward-looking
statements, and you should not rely on the forward-looking
statements as predictions of future events. The events or
circumstances reflected in forward-looking statements might not
occur. 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 should not be read as
guarantees of future performance or results, and will not
necessarily be accurate indicators of whether, or the time at
which, such performance or results will be achieved. There is no
assurance that the events or circumstances reflected in
forward-looking statements will occur or be achieved.
Forward-looking statements are necessarily dependent on
assumptions, data or methods that may be incorrect or imprecise
and we may not be able to realize them.


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




| |   |                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | changes in general economic conditions or in the real estate
    sector;                                                                                                                                                            
|
| |  | defaults on or non-renewal of leases by customers or renewal
    at lower than expected rent;                                                                                                                                       
|
| |  | difficulties in identifying properties to acquire and in
    effecting acquisitions on advantageous terms and the failure of
    acquisitions to perform as we expect;                                                              
|
| |  | risks and uncertainties affecting property development and
    renovation (including construction delays, cost overruns, our
    inability to obtain necessary permits and financing and public
    opposition to these activities);
|
| |  | risks of doing business internationally, including
    unfamiliarity with new markets and currency risks;                                                                                                                           
|
| |  | a downturn in the U.S., California or the global economy or
    real estate conditions;                                                                                                                                             
|
| |  | losses in excess of our insurance coverage;                                                                                                                                                                                         
|
| |  | our failure to divest of properties on advantageous terms or
    to timely reinvest proceeds from any such divestitures;                                                                                                            
|
| |  | unknown liabilities acquired in connection with acquired
    properties or otherwise;                                                                                                                                               
|
| |  | risks associated with using debt to fund acquisitions and
    development, including re-financing risks;                                                                                                                            
|
| |  | our failure to obtain necessary financing;                                                                                                                                                                                          
|
| |  | changes in local, state and federal regulatory
    requirements;                                                                                                                                                                    
|
| |  | increases in real property tax rates;                                                                                                                                                                                               
|
| |  | increases in interest rates and operating costs or greater
    than expected capital expenditures; and                                                                                                                              
|
| |  | environmental uncertainties.                                                                                                                                                                                                        

Our success also depends upon economic trends generally,
various market conditions and fluctuations and those other risk
factors discussed under the heading Risk Factors and
elsewhere in our Annual Report on
Form 10-K for the
year ended December 31, 2005. We caution you not to place
undue reliance on forward-looking statements, which reflect our
analysis only and speak as of the date of this report or as of
the dates indicated in the statements. All of our
forward-looking statements, including those set up in this
report, are qualified in their entirety by this statement. We
assume no obligation to update or supplement forward-looking
statements.


® ® ® ®


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GENERAL




Managements Overview








|                                                     |                                                      |                    |  |           |             |  |  |                |    |  |  |           |   
|---------------------------------------------------- | ---------------------------------------------------- | ------------------ |  | --------- | ----------- |  |  | -------------- | -- |  |  | --------- | --
|                                                     |                                                      | U.S. Hub and       |  |           | Total Other |  |  | Total/Weighted |   
|Property Data                                        |                                                      | Gateway Markets(1) |  |           | Markets     |  |  | Average        |   
|                                                     |                                                      |                    |  |           |             |  |  |                |   
|As of and for the three months ended March 31, 2006: |                                                      |                    |  |           |             |  |  |                |    |  |  |          
|                                                     | % of total rentable square feet                      |                    |  | 75.2      | %           |  |  | 24.8           | %  |  |  | 100.0     | % 
|                                                     | Occupancy percentage at period end                   |                    |  | 95.3      | %           |  |  | 92.9           | %  |  |  | 94.7      | % 
|                                                     | Same space square footage leased                     |                    |  | 3,424,059 |             |  |  | 1,138,524      |    |  |  | 4,562,583 |   
|                                                     | Rent increases (decreases) on renewals and rollovers |                    |  | (13.2     | )%          |  |  | (4.4           | )% |  |  | (11.5     | )%
|As of and for the three months ended March 31, 2005: |                                                      |                    |  |           |             |  |  |                |    |  |  |          
|                                                     | % of total rentable square feet                      |                    |  | 74.8      | %           |  |  | 25.2           | %  |  |  | 100.0     | % 
|                                                     | Occupancy percentage at period end                   |                    |  | 95.2      | %           |  |  | 94.6           | %  |  |  | 95.1      | % 
|                                                     | Same space square footage leased                     |                    |  | 3,574,340 |             |  |  | 542,155        |    |  |  | 4,116,495 |   
|                                                     | Rent increases (decreases) on renewals and rollovers |                    |  | (9.8      | )%          |  |  | 1.5            | %  |  |  | (8.6      | )%






|    |                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Our U.S. hub and gateway markets include on-tarmac and
    Atlanta, Chicago, Dallas/ Fort Worth, Los Angeles, Northern
    New Jersey/ New York City, the San Francisco Bay Area,
    Miami and Seattle.



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Summary of Key Transactions






| |   |                                                                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Acquired 32 buildings in North America and Europe, aggregating
    approximately 2.1 million square feet, for
    $153.4 million;                                                                                                                                     
|
| |  | Committed to seven development projects in North America and
    Asia totaling 2.9 million square feet with an estimated
    total investment of approximately $218.8 million;                                                                                        
|
| |  | Acquired 211 acres of land for industrial warehouse
    development in North America for approximately
    $93.5 million;                                                                                                                                             
|
| |  | Sold one land parcel for an aggregate price of approximately
    $4.7 million; and                                                                                                                                                                                    
|
| |  | Divested ourselves of four industrial buildings aggregating
    approximately 0.3 million square feet, for an aggregate
    price of approximately $16.8 million, including one
    industrial building that was sold by one of our unconsolidated
    joint ventures.







| |   |                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Obtained long-term secured debt financings for our co-investment
    joint ventures of $28.3 million with a weighted average
    interest rate of 5.8%;                                                                                     
|
| |  | Obtained a $65.0 million floating rate unsecured revolving
    credit facility for one of our co-investment joint ventures;                                                                                                                 
|
| |  | Entered into a third amended and restated credit agreement for a
    $250.0 million unsecured multi-currency revolving credit
    facility which replaced an existing $100.0 million
    unsecured multi-currency revolving credit facility;
|
| |  | Repurchased our 8.125% Series H Cumulative Redeemable
    Preferred Units for an aggregate cost of $42.8 million,
    including accrued and unpaid distributions; and                                                                       
|
| |  | Repurchased our 5.0% Series N Cumulative Redeemable
    Preferred Units for an aggregate cost of $36.6 million,
    including accrued and unpaid distributions.                                                                             



Critical Accounting Policies


10-K


Stock-based Compensation Expense. Share Based Payment


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THE COMPANY


® ®








| |   |                                                                                                                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | on a consolidated basis, we owned or partially owned 907
    industrial buildings, principally warehouse distribution
    facilities, encompassing approximately 89.8 million
    rentable square feet that were 94.7% leased;                                                       
|
| |  | we managed, but did not have an ownership interest in,
    industrial and other properties, totaling approximately
    1.5 million rentable square feet;                                                                                                                             
|
| |  | through unconsolidated joint ventures, we had investments in 85
    industrial operating properties, totaling approximately
    12.8 million rentable square feet, and two industrial
    development projects, expected to total approximately
    0.3 million rentable square feet;
|
| |  | on a consolidated basis, we had investments in 45 industrial
    development projects which are expected to total approximately
    12.4 million rentable square feet upon completion; and                                                                                           
|
| |  | on a consolidated basis, we owned six development projects, with
    a total estimated investment of approximately
    $293.1 million and approximately 2.4 million rentable
    square feet, that was available for sale or contribution.                                           

day-to






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® ® ® point-to


®


www.amb.com 10-K, 10-Q, 8-K


Operating Strategy




build-to


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Growth Strategies




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





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







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



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| |                                
| | -------------------------------
| | Growth Through Global Expansion



® speed-to




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



RESULTS OF OPERATIONS




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| |                                                                              
| | -----------------------------------------------------------------------------
| | For the Three Months ended March 31, 2006 and 2005
    (dollars in millions):

|                       |                          |                       |                |      |       |       |     |          |       |       |          |      |      |      |      |       |         |      |  
|---------------------- | ------------------------ | --------------------- | -------------- | ---- | ----- | ----- | --- | -------- | ----- | ----- | -------- | ---- | ---- | ---- | ---- | ----- | ------- | ---- | -
|Revenues               |                          | 2006                  |                |      | 2005  |       |     | $ Change |       |       | % Change |     
|                       |                          |                       |                |      |       |       |     |          |       |       |          |     
|Rental revenues        |                          |                       |                |      |       |       |     |          |       |       |          |      |      |      |      |      
|                       | U.S. industrial:         |                       |                |      |       |       |     |          |       |       |          |      |      |      |      |       |        
|                       |                          | Same store            |                | $    | 144.9 |       |     | $        | 144.4 |       |          | $    | 0.5  |      |      |       | 0.3     | %   
|                       |                          | 2006 acquisitions     |                |      | 0.3   |       |     |          |      |       |          |      | 0.3  |      |      |       |        | %   
|                       |                          | 2005 acquisitions     |                |      | 8.5   |       |     |          | 0.7   |       |          |      | 7.8  |      |      |       | 1,114.3 | %   
|                       |                          | Development           |                |      | 2.1   |       |     |          | 1.2   |       |          |      | 0.9  |      |      |       | 75.0    | %   
|                       |                          | Other industrial      |                |      | 1.6   |       |     |          | 0.2   |       |          |      | 1.4  |      |      |       | 700.0   | %   
|                       | International industrial |                       |                | 19.0 |       |       |     | 6.9      |       |       |          | 12.1 |      |      |      | 175.4 | %      
|                       |                          |                       |                |      |       |       |     |          |       |       |          |     
|                       |                          | Total rental revenues |                |      | 176.4 |       |     |          | 153.4 |       |          |      | 23.0 |      |      |       | 15.0    | %   
|Private capital income |                          |                       | 5.1            |      |       |       | 3.3 |          |       |       | 1.8      |      |      |      | 54.5 | %    
|                       |                          |                       |                |      |       |       |     |          |       |       |          |     
|                       |                          |                       | Total revenues |      | $     | 181.5 |     |          | $     | 156.7 |          |      | $    | 24.8 |      |       |         | 15.8 | %
|                       |                          |                       |                |      |       |       |     |          |       |       |          |     

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quarter-to


|                              |                          |                                |      |      |       |  |      |          |      |  |          |     |      |   |       |       |         |   
|----------------------------- | ------------------------ | ------------------------------ | ---- | ---- | ----- |  | ---- | -------- | ---- |  | -------- | --- | ---- | - | ----- | ----- | ------- | --
|Costs and Expenses            |                          | 2006                           |      |      | 2005  |  |      | $ Change |      |  | % Change |    
|                              |                          |                                |      |      |       |  |      |          |      |  |          |    
|Property operating costs:     |                          |                                |      |      |       |  |      |          |      |  |          |     |      |   |       |      
|                              | Rental expenses          |                                | $    | 25.2 |       |  | $    | 21.8     |      |  | $        | 3.4 |      |   |       | 15.6  | %      
|                              | Real estate taxes        |                                |      | 20.5 |       |  |      | 18.0     |      |  |          | 2.5 |      |   |       | 13.9  | %      
|                              |                          |                                |      |      |       |  |      |          |      |  |          |    
|                              |                          | Total property operating costs |      | $    | 45.7  |  |      | $        | 39.8 |  |          | $   | 5.9  |   |       |       | 14.8    | % 
|                              |                          |                                |      |      |       |  |      |          |      |  |          |    
|Property operating costs      |                          |                                |      |      |       |  |      |          |      |  |          |     |      |   |       |      
|                              | U.S. industrial:         |                                |      |      |       |  |      |          |      |  |          |     |      |   |       |       |        
|                              |                          | Same store                     |      | $    | 39.1  |  |      | $        | 37.5 |  |          | $   | 1.6  |   |       |       | 4.3     | % 
|                              |                          | 2006 acquisitions              |      |      | 0.1   |  |      |          |     |  |          |     | 0.1  |   |       |       |        | % 
|                              |                          | 2005 acquisitions              |      |      | 2.2   |  |      |          | 0.1  |  |          |     | 2.1  |   |       |       | 2,100.0 | % 
|                              |                          | Development                    |      |      | 0.7   |  |      |          | 0.6  |  |          |     | 0.1  |   |       |       | 16.7    | % 
|                              |                          | Other industrial               |      |      | 0.2   |  |      |          | 0.3  |  |          |     | (0.1 | ) |       |       | (33.3   | )%
|                              | International industrial |                                |      | 3.4  |       |  |      | 1.3      |      |  |          | 2.1 |      |   |       | 161.5 | %      
|                              |                          |                                |      |      |       |  |      |          |      |  |          |    
|                              |                          | Total property operating costs |      |      | 45.7  |  |      |          | 39.8 |  |          |     | 5.9  |   |       |       | 14.8    | % 
|Depreciation and amortization |                          |                                | 43.4 |      |       |  | 39.5 |          |      |  | 3.9      |     |      |   | 9.9   | %    
|General and administrative    |                          |                                | 23.1 |      |       |  | 18.5 |          |      |  | 4.6      |     |      |   | 24.9  | %    
|Other expenses                |                          |                                | 0.5  |      |       |  | 0.9  |          |      |  | (0.4     | )   |      |   | (44.4 | )%   
|Fund costs                    |                          |                                | 0.6  |      |       |  | 0.4  |          |      |  | 0.2      |     |      |   | 50.0  | %    
|                              |                          |                                |      |      |       |  |      |          |      |  |          |    
|                              |                          | Total costs and expenses       |      | $    | 113.3 |  |      | $        | 99.1 |  |          | $   | 14.2 |   |       |       | 14.3    | % 
|                              |                          |                                |      |      |       |  |      |          |      |  |          |    

quarter-to


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|                                                         |                                        |      |       |       |      |   |       |          |   |   |          |      |  |  |         |       |  
|-------------------------------------------------------- | -------------------------------------- | ---- | ----- | ----- | ---- | - | ----- | -------- | - | - | -------- | ---- |  |  | ------- | ----- | -
|Other Income and (Expenses)                              |                                        | 2006 |       |       | 2005 |   |       | $ Change |   |   | % Change |     
|                                                         |                                        |      |       |       |      |   |       |          |   |   |          |     
|Equity in earnings of unconsolidated joint ventures, net |                                        | $    | 2.1   |       |      | $ | 1.2   |          |   | $ | 0.9      |      |  |  | 75.0    | %    
|Other income                                             |                                        |      | 3.1   |       |      |   | 0.1   |          |   |   | 3.0      |      |  |  | 3,000.0 | %    
|Gains from disposition of real estate interests          |                                        |      |      |       |      |   | 1.3   |          |   |   | (1.3     | )    |  |  | (100.0  | )%   
|Development profits, net of taxes                        |                                        |      | 0.7   |       |      |   | 17.9  |          |   |   | (17.2    | )    |  |  | (96.1   | )%   
|Interest expense, including amortization                 |                                        |      | (39.8 | )     |      |   | (36.8 | )        |   |   | 3.0      |      |  |  | 8.2     | %    
|                                                         |                                        |      |       |       |      |   |       |          |   |   |          |     
|                                                         | Total other income and (expenses), net |      | $     | (33.9 | )    |   | $     | (16.3    | ) |   | $        | 17.6 |  |  |         | 108.0 | %
|                                                         |                                        |      |       |       |      |   |       |          |   |   |          |     



|                                                                              |                               |      |     |     |      |   |      |          |  |   |          |       |   |  |       |       |   
|----------------------------------------------------------------------------- | ----------------------------- | ---- | --- | --- | ---- | - | ---- | -------- |  | - | -------- | ----- | - |  | ----- | ----- | --
|Discontinued Operations                                                       |                               | 2006 |     |     | 2005 |   |      | $ Change |  |   | % Change |      
|                                                                              |                               |      |     |     |      |   |      |          |  |   |          |      
|Income attributable to discontinued operations, net of minority
    interests |                               | $    | 0.8 |     |      | $ | 2.5  |          |  | $ | (1.7     | )     |   |  | (68.0 | )%   
|Gains from dispositions of real estate, net of minority interests             |                               |      | 7.4 |     |      |   | 29.6 |          |  |   | (22.2    | )     |   |  | (75.0 | )%   
|                                                                              |                               |      |     |     |      |   |      |          |  |   |          |      
|                                                                              | Total discontinued operations |      | $   | 8.2 |      |   | $    | 32.1     |  |   | $        | (23.9 | ) |  |       | (74.5 | )%
|                                                                              |                               |      |     |     |      |   |      |          |  |   |          |      



|                                         |                       |      |      |      |      |   |      |          |   |   |          |     |  |  |      |      |  
|---------------------------------------- | --------------------- | ---- | ---- | ---- | ---- | - | ---- | -------- | - | - | -------- | --- |  |  | ---- | ---- | -
|Preferred Units                          |                       | 2006 |      |      | 2005 |   |      | $ Change |   |   | % Change |    
|                                         |                       |      |      |      |      |   |      |          |   |   |          |    
|Preferred unit distributions             |                       | $    | (4.7 | )    |      | $ | (3.4 | )        |   | $ | 1.3      |     |  |  | 38.2 | %   
|Preferred unit redemption issuance costs |                       |      | (1.1 | )    |      |   |     |          |   |   | 1.1      |     |  |  |     | %   
|                                         |                       |      |      |      |      |   |      |          |   |   |          |    
|                                         | Total preferred units |      | $    | (5.8 | )    |   | $    | (3.4     | ) |   | $        | 2.4 |  |  |      | 70.6 | %
|                                         |                       |      |      |      |      |   |      |          |   |   |          |    



LIQUIDITY AND CAPITAL RESOURCES


Balance Sheet Strategy.


38



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| |   |                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------
| |  | retained earnings and cash flow from operations;                                                                                        
|
| |  | borrowings under our unsecured credit facilities;                                                                                       
|
| |  | other forms of secured or unsecured financing;                                                                                          
|
| |  | proceeds from debt or limited partnership unit offerings
    (including issuances of limited partnership units by our
    subsidiaries);
|
| |  | net proceeds from divestitures of properties;                                                                                           
|
| |  | private capital from co-investment partners; and                                                                                        
|
| |  | net proceeds from contribution of properties and completed
    development projects to our co-investment joint ventures.                





| |   |                                                                                 
| | - | --------------------------------------------------------------------------------
| |  | working capital;                                                                
|
| |  | development, expansion and renovation of properties;                            
|
| |  | acquisitions, including our global expansion;                                   
|
| |  | debt service; and                                                               
|
| |  | distributions on outstanding common and preferred limited
    partnership units.

Cash flows.




Capital Resources


Dispositions of Real Estate Interests.


Property Divestitures.


39



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Development Sales and Contributions.


Properties Held for Contribution.


Properties Held for Divestiture.


Co-investment Joint Ventures.




|                                             |  |                                                                   |  |             |     |  |                   |   |         | 
|-------------------------------------------- |  | ----------------------------------------------------------------- |  | ----------- | --- |  | ----------------- | - | ------- | 
|                                             |  |                                                                   |  | Our         |     |  |                  
|                                             |  |                                                                   |  | Approximate |     |  |                  
|                                             |  |                                                                   |  | Ownership   |     |  | Original Planned  |  
|Consolidated co-investment Joint Venture     |  | Joint Venture Partner                                             |  | Percentage  |     |  | Capitalization(1) |  
|                                             |  |                                                                   |  |             |     |  |                   |  
|AMB/ Erie, L.P.                              |  | Erie Insurance Company and affiliates                             |  |             | 50% |  |                   | $ | 200,000 | 
|AMB Partners II, L.P.                        |  | City and County of San Francisco Employees Retirement
    System |  |             | 20% |  |                   | $ | 580,000 | 
|AMB-SGP, L.P.                                |  | Industrial JV Pte Ltd(2)                                          |  |             | 50% |  |                   | $ | 425,000 | 
|AMB Institutional Alliance Fund II, L.P.     |  | AMB Institutional Alliance REIT II, Inc.(3)                       |  |             | 20% |  |                   | $ | 489,000 | 
|AMB-AMS, L.P.(4)                             |  | PMT, SPW and TNO(5)                                               |  |             | 39% |  |                   | $ | 200,000 | 
|AMB Institutional Alliance Fund III, L.P.(6) |  | AMB Institutional Alliance REIT III, Inc.                         |  |             | 20% |  |                   |   | N/A     | 






|    |                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Planned capitalization includes anticipated debt and both
    partners expected equity contributions.                                                                                                    
|   
|(2) | A real estate investment subsidiary of the Government of
    Singapore Investment Corporation.                                                                                                            
|   
|(3) | Comprised of 14 institutional investors as stockholders as of
    March 31, 2006.                                                                                                                         
|   
|(4) | AMB-AMS, L.P. is a co-investment partnership with three Dutch
    pension funds advised by Mn Services NV.                                                                                                
|   
|(5) | PMT is Stichting Pensioenfonds Metaal en Techniek, SPW is
    Stichting Pensioenfonds voor de Woningcorporaties and TNO is
    Stichting Pensioenfonds TNO.                                               
|   
|(6) | AMB Institutional Alliance Fund III, L.P. is an open-ended
    co-investment partnership formed in 2004 with institutional
    investors, which invest through a private real estate investment
    trust.

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|                                           |  |                                   |  |             |     |  |                   |   |           |    
|------------------------------------------ |  | --------------------------------- |  | ----------- | --- |  | ----------------- | - | --------- | ---
|                                           |  |                                   |  | Our         |     |  |                  
|                                           |  |                                   |  | Approximate |     |  |                  
|                                           |  |                                   |  | Ownership   |     |  | Original Planned  |  
|Unconsolidated co-investment Joint Venture |  | Joint Venture Partner             |  | Percentage  |     |  | Capitalization(1) |  
|                                           |  |                                   |  |             |     |  |                   |  
|AMB-SGP Mexico, LLC                        |  | Industrial (Mexico) JV Pte Ltd(2) |  |             | 20% |  |                   | $ | 715,000   |    
|AMB Japan Fund I, L.P.                     |  | Institutional investors(3)        |  |             | 20% |  |                   | $ | 2,100,000 | (4)






|    |                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------
|(1) | Planned capitalization includes anticipated debt and both
    partners expected equity contributions.
|   
|(2) | A real estate investment subsidiary of the Government of
    Singapore Investment Corporation.        
|   
|(3) | Comprised of 13 institutional investors as of March 31,
    2006.                                     
|   
|(4) | Using the exchange rate at March 31, 2006.                                                            





Partners Capital.


Debt. debt-to debt-to loan-to




41



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Credit Facilities.




42



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43



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|                                                                     |                                  |                         |         |         |         |   |          |             |           |   |               |         |         |       |         |         |            |   |         |        |        |   |          |           |           | 
|-------------------------------------------------------------------- | -------------------------------- | ----------------------- | ------- | ------- | ------- | - | -------- | ----------- | --------- | - | ------------- | ------- | ------- | ----- | ------- | ------- | ---------- | - | ------- | ------ | ------ | - | -------- | --------- | --------- | 
|Debt                                                                 |                                 
|                                                                     |                                 
|                                                                     |                                  | Our                     |         |         | Joint   |   |          | Unsecured   |           |   |              
|                                                                     |                                  | Secured                 |         |         | Venture |   |          | Senior Debt |           |   | Credit        |         |         | Other |         |         |           
|                                                                     |                                  | Debt(4)                 |         |         | Debt    |   |          | Securities  |           |   | Facilities(1) |         |         | Debt  |         |         | Total Debt |  
|                                                                     |                                  |                         |         |         |         |   |          |             |           |   |               |         |         |       |         |         |            |  
|2006                                                                 |                                  | $                       | 48,607  |         |         | $ | 70,806   |             |           | $ | 50,000        |         |         | $     |        |         |            | $ | 15,860  |        |        | $ | 185,273  |          
|2007                                                                 |                                  |                         | 12,744  |         |         |   | 58,139   |             |           |   | 75,000        |         |         |       | 610,160 |         |            |   | 752     |        |        |   | 756,795  |          
|2008                                                                 |                                  |                         | 40,958  |         |         |   | 179,144  |             |           |   | 175,000       |         |         |       |        |         |            |   | 810     |        |        |   | 395,912  |          
|2009                                                                 |                                  |                         | 5,326   |         |         |   | 121,367  |             |           |   | 100,000       |         |         |       |        |         |            |   | 873     |        |        |   | 227,566  |          
|2010                                                                 |                                  |                         | 71,143  |         |         |   | 117,716  |             |           |   | 250,000       |         |         |       | 123,950 |         |            |   | 40,941  |        |        |   | 603,750  |          
|2011                                                                 |                                  |                         | 22,015  |         |         |   | 357,699  |             |           |   | 75,000        |         |         |       |        |         |            |   | 1,014   |        |        |   | 455,728  |          
|2012                                                                 |                                  |                         | 255,109 |         |         |   | 171,891  |             |           |   |              |         |         |       |        |         |            |   | 1,093   |        |        |   | 428,093  |          
|2013                                                                 |                                  |                         | 15,108  |         |         |   | 197,427  |             |           |   |              |         |         |       |        |         |            |   | 920     |        |        |   | 213,455  |          
|2014                                                                 |                                  |                         | 15,408  |         |         |   | 5,197    |             |           |   |              |         |         |       |        |         |            |   | 616     |        |        |   | 21,221   |          
|2015                                                                 |                                  |                         | 1,996   |         |         |   | 86,860   |             |           |   | 112,491       |         |         |       |        |         |            |   | 664     |        |        |   | 202,011  |          
|Thereafter                                                           |                                  |                         | 19,436  |         |         |   | 32,544   |             |           |   | 125,000       |         |         |       |        |         |            |   |        |        |        |   | 176,980  |          
|                                                                     |                                  |                         |         |         |         |   |          |             |           |   |               |         |         |       |         |         |            |  
|                                                                     | Subtotal                         |                         |         | 507,850 |         |   |          | 1,398,790   |           |   |               | 962,491 |         |       |         | 734,110 |            |   |         | 63,543 |        |   |          | 3,666,784 |          
|                                                                     | Unamortized premiums/(discounts) |                         |         | 2,321   |         |   |          | 8,844       |           |   |               | (11,554 | )       |       |         |        |            |   |         |       |        |   |          | (389      | )        
|                                                                     |                                  |                         |         |         |         |   |          |             |           |   |               |         |         |       |         |         |            |  
|                                                                     |                                  | Total consolidated debt |         |         | 510,171 |   |          |             | 1,407,634 |   |               |         | 950,937 |       |         |         | 734,110    |   |         |        | 63,543 |   |          |           | 3,666,395 | 
|Our share of unconsolidated joint venture debt(2)                    |                                  |                         |        |         |         |   | 159,772  |             |           |   |              |         |         |       |        |         |            |   |        |        |        |   | 159,772  |          
|                                                                     |                                  |                         |         |         |         |   |          |             |           |   |               |         |         |       |         |         |            |  
|                                                                     |                                  | Total debt              |         |         | 510,171 |   |          |             | 1,567,406 |   |               |         | 950,937 |       |         |         | 734,110    |   |         |        | 63,543 |   |          |           | 3,826,167 | 
|Joint venture partners share of consolidated joint venture
    debt |                                  |                         |        |         |         |   | (963,917 | )           |           |   |              |         |         |       |        |         |            |   | (32,000 | )      |        |   | (995,917 | )        
|                                                                     |                                  |                         |         |         |         |   |          |             |           |   |               |         |         |       |         |         |            |  
|                                                                     | Our share of total debt(3)       |                         | $       | 510,171 |         |   | $        | 603,489     |           |   | $             | 950,937 |         |       | $       | 734,110 |            |   | $       | 31,543 |        |   | $        | 2,830,250 |          
|                                                                     |                                  |                         |         |         |         |   |          |             |           |   |               |         |         |       |         |         |            |  
|Weighed average interest rate                                        |                                  |                         | 4.0     | %       |         |   | 6.3      | %           |           |   | 6.3           | %       |         |       | 3.2     | %       |            |   | 7.3     | %      |        |   | 5.3      | %        
|Weighed average maturity (in years)                                  |                                  |                         | 5.8     |         |         |   | 5.5      |             |           |   | 5.0           |         |         |       | 1.7     |         |            |   | 3.8     |        |        |   | 4.6      |          






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes $233.9 million, $257.4 million and
    $82.8 million in Euro, Yen and Canadian dollar based
    borrowings, respectively, translated to U.S. dollars using
    the functional exchange rates in effect on March 31, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(2) | The weighted average interest and maturity for the
    unconsolidated joint venture debt were 5.5% and 4.5 years,
    respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(3) | Our share of total debt is the pro rata portion of the total
    debt based on our percentage of equity interest in each of the
    consolidated or unconsolidated joint ventures holding the debt.
    We believe that our share of total debt is a meaningful
    supplemental measure, which enables both management and
    investors to analyze our leverage and to compare our leverage to
    that of other companies. In addition, it allows for a more
    meaningful comparison of our debt to that of other companies
    that do not consolidate their joint ventures. Our share of total
    debt is not intended to reflect our actual liability should
    there be a default under any or all of such loans or a
    liquidation of the joint ventures. The above table reconciles
    our share of total debt to total consolidated debt, a GAAP
    financial measure.

44



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|    |                                                                                                                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4) | Our secured debt and joint venture debt include debt related to
    international assets in the amount of $385.6 million. Of
    this, $250.5 million is associated with assets located in
    Asia and the remaining $135.1 million is related to assets
    located in Europe.

|                                    |       |             |            |            |          |   |       |          |  |   |           |           | 
|----------------------------------- | ----- | ----------- | ---------- | ---------- | -------- | - | ----- | -------- |  | - | --------- | --------- | 
|Market Capital                      |      
|                                    |      
|                                    |       | Units       |            |            | Market   |   |       | Market   | 
|Security                            |       | Outstanding |            |            | Price(1) |   |       | Value(1) | 
|                                    |       |             |            |            |          |   |       |          | 
|Common general partnership units    |       |             | 87,717,934 |            |          | $ | 54.27 |          |  | $ | 4,760,452 |          
|Common limited partnership units(2) |       |             | 4,385,207  |            |          | $ | 54.27 |          |  |   | 237,985   |          
|                                    |       |             |            |            |          |   |       |          | 
|                                    | Total |             |            | 92,103,141 |          |   |       |          |  |   | $         | 4,998,437 | 
|                                    |       |             |            |            |          |   |       |          | 



| | 
| | 
| | 



| |     |                                                                                                                                                                                     
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Assumes that our general partnership units are exchanged for AMB
    Property Corporations common stock on a one-for-one basis
    because there is no public market for our units.



| |     |                                                                                                                
| | --- | ---------------------------------------------------------------------------------------------------------------
| | (2) | Includes 145,548 class B common limited partnership units
    issued by AMB Property II, L.P. in November 2003.

|                         |                        |              |       |       |             |   |        |                                |  |                | 
|------------------------ | ---------------------- | ------------ | ----- | ----- | ----------- | - | ------ | ------------------------------ |  | -------------- | 
|Preferred Units         
|                        
|                         |                        | Distribution |       |       | Liquidation |   |        |                               
|Security                 |                        | Rate         |       |       | Preference  |   |        | Redemption/Callable Provisions
|                         |                        |              |       |       |             |   |        |                               
|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% |       |             |   | 10,057 |                                |  | March 2005    
|Series I preferred units |                        |              | 8.00% |       |             |   | 25,500 |                                |  | March 2006    
|Series J preferred units |                        |              | 7.95% |       |             |   | 40,000 |                                |  | September 2006
|Series K preferred units |                        |              | 7.95% |       |             |   | 40,000 |                                |  | April 2007    
|Series L preferred units |                        |              | 6.50% |       |             |   | 50,000 |                                |  | June 2008     
|Series M preferred units |                        |              | 6.75% |       |             |   | 57,500 |                                |  | November 2008 
|Series O preferred units |                        |              | 7.00% |       |             |   | 75,000 |                                |  | December 2010 
|                         |                        |              |       |       |             |   |        |                               
|                         | Weighted average/total |              |       | 7.36% |             |   | $      | 388,846                        |  |                | 
|                         |                        |              |       |       |             |   |        |                               

|                                                                                          |  |  |       | 
|----------------------------------------------------------------------------------------- |  |  | ----- | 
|Capitalization Ratios as of March 31, 2006                                                | 
|                                                                                          | 
|Total debt-to-total market capitalization(1)                                              |  |  | 41.5% | 
|Our share of total debt-to-our share of total market
    capitalization(1)                |  |  | 34.4% | 
|Total debt plus preferred-to-total market capitalization(1)                               |  |  | 45.7% | 
|Our share of total debt plus preferred-to-our share of total
    market capitalization(1) |  |  | 39.2% | 
|Our share of total debt-to-our share of total book
    capitalization(1)                  |  |  | 55.9% | 



| | 
| | 
| | 



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Our definition of total market capitalization is
    total debt plus preferred equity liquidation preferences plus
    market equity. Our definition of our share of total market
    capitalization is our share of total debt plus preferred
    equity liquidation preferences plus market equity. Our
    definition of market equity is the total number of
    outstanding shares of our general partners common stock
    and our common limited partnership units multiplied by the
    closing price per share of our general partners common
    stock as of March 31, 2006. Our definition of
    preferred is preferred equity liquidation
    preferences. Our share of total book capitalization is defined
    as our share of total debt plus minority interests to preferred
    unitholders and limited partnership unitholders plus
    partners capital. Our share of total debt is the pro rata
    portion of the total debt based on our percentage of equity
    interest in each of the consolidated or unconsolidated ventures
    holding the debt. We believe that our share of total debt is a
    meaningful supplemental measure, which enables both management
    and investors to analyze our leverage and to compare our
    leverage to that of other companies. In addition, it allows for
    a more meaningful comparison of our debt to that of other
    companies that do not consolidate their joint ventures. Our
    share of total debt is not intended to reflect our actual

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| |  |                                                                                                                                                                                                                                                                                                   
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | liability should there be a default under any or all of such
    loans or a liquidation of the joint ventures. For a
    reconciliation of our share of total debt to total consolidated
    debt, a GAAP financial measure, please see the table of debt
    maturities and capitalization above.

Liquidity






|                      |  |                                          |  |                      |       |  |      |   |       | 
|--------------------- |  | ---------------------------------------- |  | -------------------- | ----- |  | ---- | - | ----- | 
|                      |  |                                          |  | For the Three Months |      
|                      |  |                                          |  | Ended March 31,      |      
|                      |  |                                          |  |                      |      
|Paying Entity         |  | Security                                 |  | 2006                 |       |  | 2005 |  
|                      |  |                                          |  |                      |       |  |      |  
|Operating Partnership |  | Common limited partnership units         |  | $                    | 0.460 |  |      | $ | 0.440 | 
|Operating Partnership |  | Series J preferred units                 |  | $                    | 0.994 |  |      | $ | 0.994 | 
|Operating Partnership |  | Series K preferred units                 |  | $                    | 0.994 |  |      | $ | 0.994 | 
|AMB Property II, L.P. |  | Class B common limited partnership units |  | $                    | 0.460 |  |      | $ | 0.440 | 
|AMB Property II, L.P. |  | Series D preferred units                 |  | $                    | 0.969 |  |      | $ | 0.969 | 
|AMB Property II, L.P. |  | Series E preferred units                 |  | $                    | 0.969 |  |      | $ | 0.969 | 
|AMB Property II, L.P. |  | Series F preferred units                 |  | $                    | 0.994 |  |      | $ | 0.994 | 
|AMB Property II, L.P. |  | Series H preferred units(1)              |  | $                    | 0.970 |  |      | $ | 1.016 | 
|AMB Property II, L.P. |  | Series I preferred units                 |  | $                    | 1.000 |  |      | $ | 1.000 | 
|AMB Property II, L.P. |  | Series N preferred units(2)              |  | $                    | 0.215 |  |      | $ | 0.625 | 






|    |                                                                                                                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In March 2006, AMB Property II, L.P. repurchased all of its
    series H preferred units.                                                                                                                          
|   
|(2) | The holder of the series N preferred units exercised its
    put option in January 2006 and sold all of its series N
    preferred units to us and AMB Property II, L.P. repurchased
    all of such units from us.



Capital Commitments


Developments.


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Acquisitions.


Lease Commitments.


Co-investment Joint Ventures.


Captive Insurance Company.


47



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##### Table of Contents



Potential Unknown Liabilities.




| |   |                                                                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | liabilities for
    clean-up or remediation
    of undisclosed environmental conditions;                                                                                                                                 
|
| |  | claims of customers, vendors or other persons dealing with our
    predecessors prior to our formation or acquisition transactions
    that had not been asserted prior to our formation or acquisition
    transactions;
|
| |  | accrued but unpaid liabilities incurred in the ordinary course
    of business;                                                                                                                                          
|
| |  | tax liabilities; and                                                                                                                                                                                                     
|
| |  | claims for indemnification by the officers and directors of our
    general partners predecessors and others indemnified by
    these entities.                                                                         

OFF-BALANCE SHEET ARRANGEMENTS


Standby Letters of Credit.


Guarantees. ,


Performance and Surety Bonds.


Promoted Interests and Other Contractual Obligations.


SUPPLEMENTAL EARNINGS MEASURES


FFO.


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|                                                                            |                                                                               |                            |        |         |            |   |         |         |            | 
|--------------------------------------------------------------------------- | ----------------------------------------------------------------------------- | -------------------------- | ------ | ------- | ---------- | - | ------- | ------- | ---------- | 
|                                                                            |                                                                               | For the Three Months Ended |       
|                                                                            |                                                                               | March 31,                  |       
|                                                                            |                                                                               |                            |       
|                                                                            |                                                                               | 2006                       |        |         | 2005       |  
|                                                                            |                                                                               |                            |        |         |            |  
|Net income(1)                                                               |                                                                               | $                          | 30,369 |         |            | $ | 50,880  |        
|Income available to common unitholders attributable to limited
    partners |                                                                               |                            | (1,202 | )       |            |   | (2,523  | )      
|Gains from dispositions of real estate, net of minority interests           |                                                                               |                            | (7,013 | )       |            |   | (29,243 | )      
|Depreciation and amortization:                                              |                                                                               |                            |        |         |            |   |         |        
|                                                                            | Total depreciation and amortization                                           |                            |        | 43,360  |            |   |         | 39,532  |           
|                                                                            | Discontinued operations depreciation                                         |                            |        | (92     | )          |   |         | 4,591   |           
|                                                                            | Non-real estate depreciation                                                  |                            |        | (1,000  | )          |   |         | (745    | )         
|Adjustments to derive FFO from consolidated joint ventures:                 |                                                                               |                            |        |         |            |   |         |        
|                                                                            | Joint venture partners minority interests (Net income)                       |                            |        | 8,825   |            |   |         | 9,349   |           
|                                                                            | Limited partnership unitholders minority interests (Net
    income)          |                            |        | 805     |            |   |         | 295     |           
|                                                                            | Limited partnership unitholders minority interests
    (Development profits) |                            |        | 32      |            |   |         | 458     |           
|                                                                            | Discontinued operations minority interests (Net income)                      |                            |        | (248    | )          |   |         | 2,386   |           
|                                                                            | FFO attributable to minority interests                                        |                            |        | (20,435 | )          |   |         | (23,587 | )         
|Adjustments to derive FFO from unconsolidated joint ventures:               |                                                                               |                            |        |         |            |   |         |        
|                                                                            | Our share of net income                                                       |                            |        | (2,088  | )          |   |         | (1,242  | )         
|                                                                            | Our share of FFO                                                              |                            |        | 3,209   |            |   |         | 2,747   |           
|Preferred unit distributions                                                |                                                                               |                            | (4,686 | )       |            |   | (3,373  | )      
|Preferred unit redemption issuance costs                                    |                                                                               |                            | (1,097 | )       |            |   |        |        
|                                                                            |                                                                               |                            |        |         |            |  
|                                                                            |                                                                               | Funds from operations      |        | $       | 48,739     |   |         | $       | 49,525     | 
|                                                                            |                                                                               |                            |        |         |            |  
|Basic FFO per common unit                                                   |                                                                               | $                          | 0.54   |         |            | $ | 0.56    |        
|                                                                            |                                                                               |                            |        |         |            |  
|Diluted FFO per common unit                                                 |                                                                               | $                          | 0.52   |         |            | $ | 0.54    |        
|                                                                            |                                                                               |                            |        |         |            |  
|Weighted average common units:                                              |                                                                               |                            |        |         |            |   |         |        
|                                                                            |                                                                               | Basic                      |        |         | 90,821,246 |   |         |         | 87,857,933 | 
|                                                                            |                                                                               |                            |        |         |            |  
|                                                                            |                                                                               | Diluted                    |        |         | 94,567,680 |   |         |         | 91,240,898 | 
|                                                                            |                                                                               |                            |        |         |            |  






|    |                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes gains from undepreciated land sales of
    $0.7 million and $8.4 million for the three months
    ended March 31, 2006 and 2005, respectively.

SS NOI.




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OPERATING AND LEASING STATISTICS SUMMARY




|                                       |                                                          |             |                  |           |      |      | 
|-------------------------------------- | -------------------------------------------------------- | ----------- | ---------------- | --------- | ---- | ---- | 
|Operating Portfolio(1)                 |                                                          | Quarter     |                 
|                                       |                                                          |             |                 
|Square feet owned at March 31, 2006(2) |                                                          |             | 89,845,311       |          
|Occupancy percentage at March 31, 2006 |                                                          |             | 94.7             | %        
|Weighted average lease terms:          |                                                          |             |                  |          
|                                       | Original                                                 |             |                  | 6.1 years |     
|                                       | Remaining                                                |             |                  | 3.4 years |     
|Tenant retention                       |                                                          |             | 66.7             | %        
|Same Space Leasing Activity(3):        |                                                          |             |                  |          
|                                       | Rent decreases on renewals and rollovers                 |             |                  | (11.5     | )%  
|                                       | Same space square footage commencing (millions)          |             |                  | 4.6       |     
|Second Generation Leasing Activity(4): |                                                          |             |                  |          
|                                       | Tenant improvements and leasing commissions per sq. ft.: |             |                  |           |     
|                                       |                                                          | Renewals    |                  | $         | 1.27 |     
|                                       |                                                          | Re-tenanted |                  |           | 2.88 |     
|                                       |                                                          |             |                 
|                                       |                                                          |             | Weighted average |           | $    | 2.02 | 
|                                       |                                                          |             |                 
|                                       | Square footage commencing (millions)                     |             |                  | 4.9       |     






| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Includes all consolidated industrial operating properties and
    excludes industrial development and renovation projects.                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| | (2) | In addition to owned square feet as of March 31, 2006, we
    managed, but did not have an ownership interest in,
    approximately 0.3 million additional square feet of
    industrial properties. One of our subsidiaries also manages
    approximately 1.1 million square feet of properties
    representing the IAT portfolio on behalf of the IAT Air Cargo
    Facilities Income Fund. We also have investments in
    approximately 12.7 million square feet of industrial
    operating properties through our investments in unconsolidated
    joint ventures.
|
| | (3) | Consists of second generation leases renewing or re-tenanting
    with current and prior lease terms greater than one year.                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| | (4) | Second generation tenant improvements and leasing commissions
    per square foot are the total cost of tenant improvements,
    leasing commissions and other leasing costs incurred during
    leasing of second generation space divided by the total square
    feet leased. Costs incurred prior to leasing available space are
    not included until such space is leased. Second generation space
    excludes newly-developed square footage or square footage vacant
    at acquisition.                                                                         

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|                                                    |                                                     |         |            |           |  
|--------------------------------------------------- | --------------------------------------------------- | ------- | ---------- | --------- | -
|                                                    |                                                     | Quarter |           
|                                                    |                                                     |         |           
|Square feet in same store pool at March 31, 2006(1) |                                                     |         | 79,661,500 |          
|                                                    | % of total industrial square feet                   |         |            | 88.7      | %
|Occupancy percentage at period end:                 |                                                     |         |            |          
|                                                    | March 31, 2006                                      |         |            | 94.9      | %
|                                                    | March 31, 2005                                      |         |            | 95.0      | %
|Weighted average lease terms:                       |                                                     |         |            |          
|                                                    | Original                                            |         |            | 6.0 years |  
|                                                    | Remaining                                           |         |            | 3.2 years |  
|Tenant retention                                    |                                                     |         | 67.3       | %        
|Rent decreases on renewals and rollovers            |                                                     |         | (11.8      | )%       
|                                                    | Same space square footage commencing (millions)     |         |            | 4.3       |  
|Cash basis NOI growth % increase (decrease):        |                                                     |         |            |          
|                                                    | Revenues                                            |         |            | 1.4       | %
|                                                    | Expenses                                            |         |            | 4.4       | %
|                                                    | Net operating income                                |         |            | 0.3       | %
|                                                    | Net operating income without lease termination fees |         |            | 1.5       | %






|    |                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Same store properties are those properties that we owned during
    both the current and prior year reporting periods, excluding
    development properties prior to being stabilized (generally
    defined as properties that are 90% leased or properties for
    which we have held a certificate of occupancy or building has
    been substantially complete for at least 12 months).






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





|                      |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |            |   |         |       |  |   |           |   |  |   |           |  
|--------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------- | - | ---------- | - | ------- | ----- |  | - | --------- | - |  | - | --------- | -
|                      |  | 2006 |         |   | 2007 |   |         | 2008 |  |   | 2009    |   |  | 2010 |         |   | Thereafter |   |         | Total | 
|                      |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |            |   |         |       | 
|Fixed rate debt(1)    |  | $    | 114,071 |   |      | $ | 129,317 |      |  | $ | 374,877 |   |  | $    | 191,090 |   |            | $ | 463,797 |       |  | $ | 1,300,902 |   |  | $ | 2,574,054 |  
|Average interest rate |  |      | 7.2     | % |      |   | 7.1     | %    |  |   | 7.1     | % |  |      | 5.1     | % |            |   | 6.4     | %     |  |   | 5.8       | % |  |   | 6.2       | %
|Variable rate debt(2) |  | $    | 71,202  |   |      | $ | 627,478 |      |  | $ | 21,035  |   |  | $    | 36,476  |   |            | $ | 139,953 |       |  | $ | 196,586   |   |  | $ | 1,092,730 |  
|Average interest rate |  |      | 5.4     | % |      |   | 3.1     | %    |  |   | 6.7     | % |  |      | 5.4     | % |            |   | 4.6     | %     |  |   | 2.0       | % |  |   | 3.3       | %
|Interest Payments     |  | $    | 12,058  |   |      | $ | 28,633  |      |  | $ | 28,026  |   |  | $    | 11,715  |   |            | $ | 36,121  |       |  | $ | 79,384    |   |  | $ | 195,937   |  






|    |                                          
|--- | -----------------------------------------
|(1) | Represents 70.2% of all outstanding debt.
|   
|(2) | Represents 29.8% of all outstanding debt.

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Financial Instruments.


|                                   |       |                |            |   |         |   |          |             |  |   |          |   |  |       |         |         |  |   |       |       | 
|---------------------------------- | ----- | -------------- | ---------- | - | ------- | - | -------- | ----------- |  | - | -------- | - |  | ----- | ------- | ------- |  | - | ----- | ----- | 
|                                   |       | Maturity Dates |            |   |         |   |         
|                                   |       |                |            |   |         |   |         
|                                   |       | December 8,    |            |   | June 8, |   |          | October 29, |  |   | Notional |   |  | Fair  |        
|Related Derivatives (in thousands) |       | 2008           |            |   | 2010    |   |          | 2012        |  |   | Amount   |   |  | Value |        
|                                   |       |                |            |   |         |   |          |             |  |   |          |   |  |       |        
|Interest Rate Swaps:               |       |                |            |   |         |   |          |             |  |   |          |   |  |       |         |         |  |   |       |      
|Plain Interest Rate Swap, Japan    |       |                |            |   |         |   |          |             |  |   |          |   |  |       |         |         |  |   |       |      
|Notional Amount (U.S. Dollars)     |       |                |            |   |         |   |          |             |  | $ | 110,375  |   |  | $     | 110,375 |         |  |   |       |      
|Receive Floating(%)                |       |                |            |   |         |   |          |             |  |   | 3M TIBOR |   |  |       |         |         |  |   |       |      
|Pay Fixed Rate(%)                  |       |                |            |   |         |   |          |             |  |   | 1.32     | % |  |       |         |         |  |   |       |      
|Fair Market Value                  |       |                |            |   |         |   |          |             |  |   |          |   |  |       |         |         |  | $ | 2,320 |      
|Plain Interest Rate Swap, USD      |       |                |            |   |         |   |          |             |  |   |          |   |  |       |         |         |  |   |       |      
|Notional Amount (U.S. Dollars)     |       |                |            |   |         | $ | 25,000   |             |  |   |          |   |  |       | 25,000  |         |  |   |       |      
|Receive Floating(%)                |       |                |            |   |         |   | 3M LIBOR |             |  |   |          |   |  |       |         |         |  |   |       |      
|Pay Fixed Rate(%)                  |       |                |            |   |         |   | 5.17     | %           |  |   |          |   |  |       |         |         |  |   |       |      
|Fair Market Value                  |       |                |            |   |         |   |          |             |  |   |          |   |  |       |         |         |  |   | 26    |      
|Plain Interest Rate Swap, Europe   |       |                |            |   |         |   |          |             |  |   |          |   |  |       |         |         |  |   |       |      
|Notional Amount (U.S. Dollars)     |       | $              | 9,331      |   |         |   |          |             |  |   |          |   |  |       | 9,331   |         |  |   |       |      
|Receive Floating(%)                |       |                | 3M EURIBOR |   |         |   |          |             |  |   |          |   |  |       |         |         |  |   |       |      
|Pay Fixed Rate(%)                  |       |                | 3.72       | % |         |   |          |             |  |   |          |   |  |       |         |         |  |   |       |      
|Fair Market Value                  |       |                |            |   |         |   |          |             |  |   |          |   |  |       |         |         |  |   | (53   | )    
|                                   |       |                |            |   |         |   |          |             |  |   |          |   |  |       |        
|                                   | Total |                |            |   |         |   |          |             |  |   |          |   |  |       | $       | 144,706 |  |   | $     | 2,293 | 
|                                   |       |                |            |   |         |   |          |             |  |   |          |   |  |       |        

International Operations.




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



13a-15(b)




54



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PART II







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






Item 1A. Risk Factors


10-K







|        |                                                                
|------- | ---------------------------------------------------------------
|Item 2. | Unregistered Sales of Equity Securities and Use of
    Proceeds








|        |                                
|------- | -------------------------------
|Item 3. | Defaults Upon Senior Securities








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








|        |                  
|------- | -----------------
|Item 5. | Other Information








|        |         
|------- | --------
|Item 6. | Exhibits



|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------- | -- | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 10 | .1          |  | Third Amended and Restated Revolving Credit Agreement, dated as
    of February 16, 2006, by and among the qualified borrowers
    listed on the signature pages thereto, AMB Property, L.P. as a
    qualified borrower and guarantor, AMB Property Corporation, as
    guarantor, the banks listed on the signature pages thereto, Bank
    of America, N.A., as administrative agent, The Bank of Nova
    Scotia, as syndication agent, Société
    Générale, as documentation agent, Banc of America
    Securities Asia Limited, as Hong Kong dollars agent, Bank of
    America, N.A., acting by its Canada branch, as reference bank,
    Bank of America, Singapore branch, as Singapore dollars agent,
    and each of the other lending institutions that becomes a lender
    thereunder (incorporated herein by reference to
    Exhibit 10.1 of AMB Property, L.P.s Current Report on
    Form 8-K filed on February 22, 2006).
|       
|        | 31 | .1          |  | Rule 13a-14(a)/15d-14(a) Certifications dated
    May 10, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       
|        | 32 | .1          |  | 18 U.S.C.§ 1350 Certifications dated May 10,
    2006. The certifications in this exhibit are being furnished
    solely to accompany this report pursuant to 18 U.S.C. sec.
    1350, and are not being filed for purposes of Section 18 of
    the Securities Exchange Act of 1934, as amended, and are not to
    be incorporated by reference into any of our filings, whether
    made before or after the date hereof, regardless of any general
    incorporation language in such filing.                                                                                                                                                                                                                                                                                                                                                                                                                                             

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SIGNATURES






| |                                                  
| | -------------------------------------------------
| | AMB Property, L.P.                               
|
| | Registrant                                       
|
| | By: AMB Property Corporation, its General Partner



| |     |                      
| | --- | ---------------------
| | By: | /s/ Hamid R. Moghadam

| |                             
| | ----------------------------
| |                             
| | Hamid R. Moghadam           
| | Chairman and CEO            
| | (Duly Authorized Officer and
| | Principal Executive Officer)



| |     |                   
| | --- | ------------------
| | By: | /s/ W. Blake Baird

| |                          
| | -------------------------
| |                          
| | W. Blake Baird           
| | President and Director   
| | (Duly Authorized Officer)



| |     |                    
| | --- | -------------------
| | By: | /s/ Michael A. Coke

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



56