##### 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 June 30, 2005                                                
|                                 
|OR                               
|                                 
|o                                 |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934
|                                 
|Commission file number: 001-13545

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


þ o










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AMB PROPERTY, L.P.


INDEX


|                                  |  |                                                                                                                |  |      |    | 
|--------------------------------- |  | -------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                  |  |                                                                                                                |  | Page |   
|                                  |  |                                                                                                                |  |      |   
|PART I. FINANCIAL
    INFORMATION
|Item 1.                           |  | Financial Statements (unaudited)                                                                               |  |      |    | 
|                                  |  | Consolidated Balance Sheets as of
    June 30, 2005 and December 31, 2004                                      |  |      | 1  | 
|                                  |  | Consolidated Statements of Operations for
    the three months and six months ended June 30, 2005 and
    2004 |  |      | 2  | 
|                                  |  | Consolidated Statement of Partners
    Capital for the six months ended June 30, 2005                         |  |      | 3  | 
|                                  |  | Consolidated Statements of Cash Flows for
    the six months ended June 30, 2005 and 2004                      |  |      | 4  | 
|                                  |  | Notes to Consolidated Financial
    Statements                                                                 |  |      | 5  | 
|Item 2.                           |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                      |  |      | 24 | 
|Item 3.                           |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                 |  |      | 49 | 
|Item 4.                           |  | Controls and Procedures                                                                                        |  |      | 51 | 
|                                 
|PART II. OTHER INFORMATION       
|Item 1.                           |  | Legal Proceedings                                                                                              |  |      | 52 | 
|Item 2.                           |  | Unregistered Sales of Equity Securities and
    Use of Proceeds                                                |  |      | 52 | 
|Item 3.                           |  | Defaults Upon Senior Securities                                                                                |  |      | 52 | 
|Item 4.                           |  | Submission of Matters to a Vote of Security
    Holders                                                        |  |      | 52 | 
|Item 5.                           |  | Other Information                                                                                              |  |      | 52 | 
|Item 6.                           |  | Exhibits                                                                                                       |  |      | 53 | 
|EXHIBIT 10.1                     
|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 June 30, 2005 and December 31, 2004


|                                                            |                                                                                                                                                                                                                                                                                                 |                                         |                                |           |              |           |         |           |           |           | 
|----------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------- | ------------------------------ | --------- | ------------ | --------- | ------- | --------- | --------- | --------- | 
|                                                            |                                                                                                                                                                                                                                                                                                 | June 30,                                |                                |           | December 31, |          
|                                                            |                                                                                                                                                                                                                                                                                                 | 2005                                    |                                |           | 2004         |          
|                                                            |                                                                                                                                                                                                                                                                                                 |                                         |                                |           |              |          
|                                                            |                                                                                                                                                                                                                                                                                                 | (Unaudited, dollars in                  |                               
|                                                            |                                                                                                                                                                                                                                                                                                 | thousands)                              |                               
|ASSETS                                                     
|Investments in real estate:                                 |                                                                                                                                                                                                                                                                                                 |                                         |                                |           |              |           |         |          
|                                                            | Land                                                                                                                                                                                                                                                                                            |                                         | $                              | 1,542,497 |              |           | $       | 1,509,145 |          
|                                                            | Buildings and improvements                                                                                                                                                                                                                                                                      |                                         |                                | 4,380,572 |              |           |         | 4,305,622 |          
|                                                            | Construction in progress                                                                                                                                                                                                                                                                        |                                         |                                | 757,363   |              |           |         | 711,377   |          
|                                                            |                                                                                                                                                                                                                                                                                                 |                                         |                                |           |              |          
|                                                            |                                                                                                                                                                                                                                                                                                 | Total investments in properties         |                                |           | 6,680,432    |           |         |           | 6,526,144 |          
|                                                            | Accumulated depreciation and amortization                                                                                                                                                                                                                                                       |                                         |                                | (683,679  | )            |           |         | (615,646  | )        
|                                                            |                                                                                                                                                                                                                                                                                                 |                                         |                                |           |              |          
|                                                            |                                                                                                                                                                                                                                                                                                 | Net investments in properties           |                                |           | 5,996,753    |           |         |           | 5,910,498 |          
|Investments in unconsolidated joint ventures                |                                                                                                                                                                                                                                                                                                 |                                         | 121,000                        |           |              |           | 55,166  |          
|Properties held for divestiture, net                        |                                                                                                                                                                                                                                                                                                 |                                         | 75,472                         |           |              |           | 87,340  |          
|                                                            |                                                                                                                                                                                                                                                                                                 |                                         |                                |           |              |          
|                                                            |                                                                                                                                                                                                                                                                                                 |                                         | Net investments in real estate |           |              | 6,193,225 |         |           |           | 6,053,004 | 
|Cash and cash equivalents                                   |                                                                                                                                                                                                                                                                                                 |                                         | 138,962                        |           |              |           | 109,392 |          
|Restricted cash                                             |                                                                                                                                                                                                                                                                                                 |                                         | 30,509                         |           |              |           | 37,201  |          
|Mortgage and loan receivables                               |                                                                                                                                                                                                                                                                                                 |                                         | 21,682                         |           |              |           | 13,738  |          
|Accounts receivable, net of allowance for doubtful accounts |                                                                                                                                                                                                                                                                                                 |                                         | 173,360                        |           |              |           | 109,028 |          
|Deferred financing costs, net                               |                                                                                                                                                                                                                                                                                                 |                                         | 24,732                         |           |              |           | 28,340  |          
|Other assets                                                |                                                                                                                                                                                                                                                                                                 |                                         | 41,901                         |           |              |           | 36,240  |          
|                                                            |                                                                                                                                                                                                                                                                                                 |                                         |                                |           |              |          
|                                                            |                                                                                                                                                                                                                                                                                                 | Total assets                            |                                | $         | 6,624,371    |           |         | $         | 6,386,943 |          
|                                                            |                                                                                                                                                                                                                                                                                                 |                                         |                                |           |              |          
|                                                           
|LIABILITIES AND PARTNERS CAPITAL                          
|Debt:                                                       |                                                                                                                                                                                                                                                                                                 |                                         |                                |           |              |           |         |          
|                                                            | Secured debt                                                                                                                                                                                                                                                                                    |                                         | $                              | 1,843,861 |              |           | $       | 1,892,524 |          
|                                                            | Unsecured senior debt securities                                                                                                                                                                                                                                                                |                                         |                                | 1,003,940 |              |           |         | 1,003,940 |          
|                                                            | Unsecured debt                                                                                                                                                                                                                                                                                  |                                         |                                | 8,710     |              |           |         | 9,028     |          
|                                                            | Unsecured credit facilities                                                                                                                                                                                                                                                                     |                                         |                                | 549,397   |              |           |         | 351,699   |          
|                                                            |                                                                                                                                                                                                                                                                                                 |                                         |                                |           |              |          
|                                                            |                                                                                                                                                                                                                                                                                                 | Total debt                              |                                |           | 3,405,908    |           |         |           | 3,257,191 |          
|Security deposits                                           |                                                                                                                                                                                                                                                                                                 |                                         | 39,671                         |           |              |           | 40,260  |          
|Distributions payable                                       |                                                                                                                                                                                                                                                                                                 |                                         | 42,799                         |           |              |           | 41,103  |          
|Accounts payable and other liabilities                      |                                                                                                                                                                                                                                                                                                 |                                         | 160,474                        |           |              |           | 180,923 |          
|                                                            |                                                                                                                                                                                                                                                                                                 |                                         |                                |           |              |          
|                                                            |                                                                                                                                                                                                                                                                                                 | Total liabilities                       |                                |           | 3,648,852    |           |         |           | 3,519,477 |          
|Commitments and contingencies (Note 12)                     |                                                                                                                                                                                                                                                                                                 |                                         |                                |           |              |           |         |          
|Minority interests:                                         |                                                                                                                                                                                                                                                                                                 |                                         |                                |           |              |           |         |          
|                                                            | Joint venture partners                                                                                                                                                                                                                                                                          |                                         |                                | 906,527   |              |           |         | 828,622   |          
|                                                            | Preferred unitholders                                                                                                                                                                                                                                                                           |                                         |                                | 203,325   |              |           |         | 203,302   |          
|                                                            |                                                                                                                                                                                                                                                                                                 |                                         |                                |           |              |          
|                                                            |                                                                                                                                                                                                                                                                                                 | Total minority interests                |                                |           | 1,109,852    |           |         |           | 1,031,924 |          
|Partners capital:                                          |                                                                                                                                                                                                                                                                                                 |                                         |                                |           |              |           |         |          
|                                                            | General partner, 83,985,626 and 83,019,229 units
    outstanding, respectively; 2,000,000 Series L preferred
    units issued and outstanding with a $50,000 liquidation
    preference and 2,300,000 Series M preferred units issued
    and outstanding with a $57,500 liquidation preference |                                         |                                | 1,701,013 |              |           |         | 1,671,140 |          
|                                                            | Limited partners, 4,574,275 and 4,600,556 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                                                                       |                                         |                                | 164,654   |              |           |         | 164,402   |          
|                                                            |                                                                                                                                                                                                                                                                                                 |                                         |                                |           |              |          
|                                                            |                                                                                                                                                                                                                                                                                                 | Total partners capital                 |                                |           | 1,865,667    |           |         |           | 1,835,542 |          
|                                                            |                                                                                                                                                                                                                                                                                                 |                                         |                                |           |              |          
|                                                            |                                                                                                                                                                                                                                                                                                 | Total liabilities and partners capital |                                | $         | 6,624,371    |           |         | $         | 6,386,943 |          
|                                                            |                                                                                                                                                                                                                                                                                                 |                                         |                                |           |              |          



1



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##### Table of Contents



AMB PROPERTY, L.P.





CONSOLIDATED STATEMENTS OF OPERATIONS


For the Three and Six Months Ended June 30, 2005 and
2004


|                                                        |                                                                               |                                                                                                   |                                                              |            |                    |         |        |            |         |         |        |            |          |         |        |            |          |         |  
|------------------------------------------------------- | ----------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------- | ------------------------------------------------------------ | ---------- | ------------------ | ------- | ------ | ---------- | ------- | ------- | ------ | ---------- | -------- | ------- | ------ | ---------- | -------- | ------- | -
|                                                        |                                                                               | For the Three Months                                                                              |                                                              |            | For the Six Months |        
|                                                        |                                                                               | Ended June 30,                                                                                    |                                                              |            | Ended June 30,     |        
|                                                        |                                                                               |                                                                                                   |                                                              |            |                    |        
|                                                        |                                                                               | 2005                                                                                              |                                                              |            | 2004               |         |        | 2005       |         |         | 2004   |           
|                                                        |                                                                               |                                                                                                   |                                                              |            |                    |         |        |            |         |         |        |           
|                                                        |                                                                               | (Unaudited, dollars in thousands, except unit                                                     |                                                             
|                                                        |                                                                               | and per unit amounts)                                                                             |                                                             
|REVENUES                                                |                                                                               |                                                                                                   |                                                              |            |                    |         |        |            |         |         |        |            |          |         |        |           
|                                                        | Rental revenues                                                               |                                                                                                   | $                                                            | 168,839    |                    |         | $      | 153,073    |         |         | $      | 336,211    |          |         | $      | 306,546    |         
|                                                        | Private capital income                                                        |                                                                                                   |                                                              | 3,438      |                    |         |        | 2,922      |         |         |        | 6,756      |          |         |        | 5,351      |         
|                                                        |                                                                               |                                                                                                   |                                                              |            |                    |         |        |            |         |         |        |           
|                                                        |                                                                               | Total revenues                                                                                    |                                                              |            | 172,277            |         |        |            | 155,995 |         |        |            | 342,967  |         |        |            | 311,897  |        
|COSTS AND EXPENSES                                      |                                                                               |                                                                                                   |                                                              |            |                    |         |        |            |         |         |        |            |          |         |        |           
|                                                        | Property operating expenses                                                   |                                                                                                   |                                                              | (23,386    | )                  |         |        | (21,423    | )       |         |        | (47,382    | )        |         |        | (43,577    | )       
|                                                        | Real estate taxes                                                             |                                                                                                   |                                                              | (20,494    | )                  |         |        | (18,346    | )       |         |        | (40,182    | )        |         |        | (36,441    | )       
|                                                        | Depreciation and amortization                                                 |                                                                                                   |                                                              | (44,503    | )                  |         |        | (37,740    | )       |         |        | (87,539    | )        |         |        | (74,580    | )       
|                                                        | General and administrative                                                    |                                                                                                   |                                                              | (18,629    | )                  |         |        | (14,731    | )       |         |        | (37,428    | )        |         |        | (29,298    | )       
|                                                        | Fund costs                                                                    |                                                                                                   |                                                              | (380       | )                  |         |        | (350       | )       |         |        | (744       | )        |         |        | (659       | )       
|                                                        |                                                                               |                                                                                                   |                                                              |            |                    |         |        |            |         |         |        |           
|                                                        |                                                                               | Total costs and expenses                                                                          |                                                              |            | (107,392           | )       |        |            | (92,590 | )       |        |            | (213,275 | )       |        |            | (184,555 | )      
|                                                        |                                                                               |                                                                                                   |                                                              |            |                    |         |        |            |         |         |        |           
|OTHER INCOME AND EXPENSES                               |                                                                               |                                                                                                   |                                                              |            |                    |         |        |            |         |         |        |            |          |         |        |           
|                                                        | Equity in earnings of unconsolidated joint ventures, net                      |                                                                                                   |                                                              | 7,188      |                    |         |        | 944        |         |         |        | 8,430      |          |         |        | 2,653      |         
|                                                        | Other income and expenses, net                                                |                                                                                                   |                                                              | 893        |                    |         |        | 486        |         |         |        | 327        |          |         |        | 1,966      |         
|                                                        | Gains from dispositions of real estate interests                              |                                                                                                   |                                                              | 17,622     |                    |         |        |           |         |         |        | 18,923     |          |         |        |           |         
|                                                        | Development profits, net of taxes                                             |                                                                                                   |                                                              | 1,975      |                    |         |        | 3,235      |         |         |        | 19,924     |          |         |        | 3,235      |         
|                                                        | Interest expense, including amortization                                      |                                                                                                   |                                                              | (40,971    | )                  |         |        | (40,192    | )       |         |        | (81,898    | )        |         |        | (79,363    | )       
|                                                        |                                                                               |                                                                                                   |                                                              |            |                    |         |        |            |         |         |        |           
|                                                        |                                                                               | Total other income and expenses, net                                                              |                                                              |            | (13,293            | )       |        |            | (35,527 | )       |        |            | (34,294  | )       |        |            | (71,509  | )      
|                                                        |                                                                               |                                                                                                   |                                                              |            |                    |         |        |            |         |         |        |           
|                                                        |                                                                               |                                                                                                   | Income before minority interests and discontinued operations |            |                    | 51,592  |        |            |         | 27,878  |        |            |          | 95,398  |        |            |          | 55,833  |  
|                                                        |                                                                               |                                                                                                   |                                                              |            |                    |         |        |            |         |         |        |           
|                                                        | Minority interests share of income:                                          |                                                                                                   |                                                              |            |                    |         |        |            |         |         |        |            |          |         |        |            |         
|                                                        |                                                                               | Joint venture partners share of income before minority
    interests and discontinued operations |                                                              |            | (10,860            | )       |        |            | (9,260  | )       |        |            | (22,144  | )       |        |            | (17,846  | )      
|                                                        |                                                                               | Joint venture partners share of development profits                                              |                                                              |            | (189               | )       |        |            | (606    | )       |        |            | (9,568   | )       |        |            | (606     | )      
|                                                        |                                                                               | Preferred unitholders                                                                             |                                                              |            | (3,811             | )       |        |            | (3,347  | )       |        |            | (7,600   | )       |        |            | (6,698   | )      
|                                                        |                                                                               |                                                                                                   |                                                              |            |                    |         |        |            |         |         |        |           
|                                                        |                                                                               |                                                                                                   | Total minority interests share of income                    |            |                    | (14,860 | )      |            |         | (13,213 | )      |            |          | (39,312 | )      |            |          | (25,150 | )
|                                                        |                                                                               |                                                                                                   |                                                              |            |                    |         |        |            |         |         |        |           
|Income from continuing operations                       |                                                                               |                                                                                                   | 36,732                                                       |            |                    |         | 14,665 |            |         |         | 56,086 |            |          |         | 30,683 |           
|                                                        |                                                                               |                                                                                                   |                                                              |            |                    |         |        |            |         |         |        |           
|Discontinued operations:                                |                                                                               |                                                                                                   |                                                              |            |                    |         |        |            |         |         |        |            |          |         |        |           
|                                                        | Income attributable to discontinued operations, net of minority
    interests |                                                                                                   |                                                              | 1,138      |                    |         |        | 4,505      |         |         |        | 3,073      |          |         |        | 7,785      |         
|                                                        | Gains from dispositions of real estate, net of minority interests             |                                                                                                   |                                                              | 6,665      |                    |         |        | 2,285      |         |         |        | 36,256     |          |         |        | 1,983      |         
|                                                        |                                                                               |                                                                                                   |                                                              |            |                    |         |        |            |         |         |        |           
|                                                        |                                                                               | Total discontinued operations                                                                     |                                                              |            | 7,803              |         |        |            | 6,790   |         |        |            | 39,329   |         |        |            | 9,768    |        
|                                                        |                                                                               |                                                                                                   |                                                              |            |                    |         |        |            |         |         |        |           
|                                                        | Net income                                                                    |                                                                                                   |                                                              | 44,535     |                    |         |        | 21,455     |         |         |        | 95,415     |          |         |        | 40,451     |         
|Series L and M preferred unit distributions             |                                                                               |                                                                                                   | (1,783                                                       | )          |                    |         | (1,783 | )          |         |         | (3,566 | )          |          |         | (3,566 | )         
|Series B, J and K preferred unit distributions          |                                                                               |                                                                                                   | (1,590                                                       | )          |                    |         | (1,590 | )          |         |         | (3,180 | )          |          |         | (3,180 | )         
|                                                        |                                                                               |                                                                                                   |                                                              |            |                    |         |        |            |         |         |        |           
|                                                        |                                                                               | Net income available to common unitholders                                                        |                                                              | $          | 41,162             |         |        | $          | 18,082  |         |        | $          | 88,669   |         |        | $          | 33,705   |        
|                                                        |                                                                               |                                                                                                   |                                                              |            |                    |         |        |            |         |         |        |           
|Income available to common unitholders attributable to: |                                                                               |                                                                                                   |                                                              |            |                    |         |        |            |         |         |        |            |          |         |        |           
|                                                        | General partner                                                               |                                                                                                   | $                                                            | 39,006     |                    |         | $      | 17,123     |         |         | $      | 83,990     |          |         | $      | 31,922     |         
|                                                        | Limited partners                                                              |                                                                                                   |                                                              | 2,156      |                    |         |        | 959        |         |         |        | 4,679      |          |         |        | 1,783      |         
|                                                        |                                                                               |                                                                                                   |                                                              |            |                    |         |        |            |         |         |        |           
|                                                        |                                                                               | Net income available to common unitholders                                                        |                                                              | $          | 41,162             |         |        | $          | 18,082  |         |        | $          | 88,669   |         |        | $          | 33,705   |        
|                                                        |                                                                               |                                                                                                   |                                                              |            |                    |         |        |            |         |         |        |           
|Basic income per common unit                            |                                                                               |                                                                                                   |                                                              |            |                    |         |        |            |         |         |        |            |          |         |        |           
|                                                        | Income from continuing operations (after preferred unit
    distributions)    |                                                                                                   | $                                                            | 0.38       |                    |         | $      | 0.13       |         |         | $      | 0.56       |          |         | $      | 0.28       |         
|                                                        | Discontinued operations                                                       |                                                                                                   |                                                              | 0.09       |                    |         |        | 0.08       |         |         |        | 0.45       |          |         |        | 0.11       |         
|                                                        |                                                                               |                                                                                                   |                                                              |            |                    |         |        |            |         |         |        |           
|                                                        |                                                                               | Net income available to common unitholders                                                        |                                                              | $          | 0.47               |         |        | $          | 0.21    |         |        | $          | 1.01     |         |        | $          | 0.39     |        
|                                                        |                                                                               |                                                                                                   |                                                              |            |                    |         |        |            |         |         |        |           
|Diluted income per common unit                          |                                                                               |                                                                                                   |                                                              |            |                    |         |        |            |         |         |        |            |          |         |        |           
|                                                        | Income from continuing operations (after preferred unit
    distributions)    |                                                                                                   | $                                                            | 0.36       |                    |         | $      | 0.12       |         |         | $      | 0.54       |          |         | $      | 0.27       |         
|                                                        | Discontinued operations                                                       |                                                                                                   |                                                              | 0.09       |                    |         |        | 0.08       |         |         |        | 0.43       |          |         |        | 0.11       |         
|                                                        |                                                                               |                                                                                                   |                                                              |            |                    |         |        |            |         |         |        |           
|                                                        |                                                                               | Net income available to common unitholders                                                        |                                                              | $          | 0.45               |         |        | $          | 0.20    |         |        | $          | 0.97     |         |        | $          | 0.38     |        
|                                                        |                                                                               |                                                                                                   |                                                              |            |                    |         |        |            |         |         |        |           
|WEIGHTED AVERAGE COMMON UNITS OUTSTANDING               |                                                                               |                                                                                                   |                                                              |            |                    |         |        |            |         |         |        |            |          |         |        |           
|                                                        | Basic                                                                         |                                                                                                   |                                                              | 88,241,361 |                    |         |        | 86,824,795 |         |         |        | 88,060,496 |          |         |        | 86,653,067 |         
|                                                        |                                                                               |                                                                                                   |                                                              |            |                    |         |        |            |         |         |        |           
|                                                        | Diluted                                                                       |                                                                                                   |                                                              | 91,795,834 |                    |         |        | 89,288,954 |         |         |        | 91,566,987 |          |         |        | 89,520,249 |         
|                                                        |                                                                               |                                                                                                   |                                                              |            |                    |         |        |            |         |         |        |           



2



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##### Table of Contents



AMB PROPERTY, L.P.





CONSOLIDATED STATEMENT OF PARTNERS CAPITAL


For the Six Months Ended June 30, 2005


|                                |                                                                                                                  |                                                        |           |   |                  |   |         |                 |   |  |              |         |  |       |           |         |        |  |           |       |  |   |        |        |   |       |           |         |   |   |        |        |   |   |           |         |        | 
|------------------------------- | ---------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------ | --------- | - | ---------------- | - | ------- | --------------- | - |  | ------------ | ------- |  | ----- | --------- | ------- | ------ |  | --------- | ----- |  | - | ------ | ------ | - | ----- | --------- | ------- | - | - | ------ | ------ | - | - | --------- | ------- | ------ | 
|                                |                                                                                                                  | 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, 2004 |                                                                                                                  |                                                        | 4,300,000 |   |                  | $ | 103,204 |                 |   |  | 83,019,229   |         |  | $     | 1,567,936 |         |        |  | 1,600,000 |       |  | $ | 77,815 |        |   |       | 4,600,556 |         |   | $ | 86,587 |        |   | $ | 1,835,542 |        
|Comprehensive income:           |                                                                                                                  |                                                        |           |   |                  |   |         |                 |   |  |              |         |  |       |           |         |        |  |           |       |  |   |        |        |   |       |           |         |   |   |        |        |   |   |           |        
|                                | Net income                                                                                                       |                                                        |           |  |                  |   |         | 3,566           |   |  |              |        |  |       |           | 83,990  |        |  |           |      |  |   |        | 3,180  |   |       |           |        |   |   |        | 4,679  |   |   |           |         |       
|                                | Unrealized loss on securities and derivatives                                                                    |                                                        |           |  |                  |   |         |                |   |  |              |        |  |       |           | (3,147  | )      |  |           |      |  |   |        |       |   |       |           |        |   |   |        |       |   |   |           |         |       
|                                | Currency translation adjustment                                                                                  |                                                        |           |  |                  |   |         |                |   |  |              |        |  |       |           | (259    | )      |  |           |      |  |   |        |       |   |       |           |        |   |   |        |       |   |   |           |         |       
|                                |                                                                                                                  | Total comprehensive income                             |           |   |                  |   |         |                 |   |  |              |         |  |       |           |         |        |  |           |       |  |   |        |        |   |       |           |         |   |   |        |        |   |   |           |         | 92,009 | 
|                                | Issuance of common limited partnership units in connection with
    the issuance of restricted stock and options |                                                        |           |  |                  |   |         |                |   |  |              | 212,161 |  |       |           | 13,461  |        |  |           |      |  |   |        |       |   |       |           |        |   |   |        |       |   |   |           | 13,461  |       
|                                | Issuance of common limited partnership units in connection with
    the exercise of stock options                |                                                        |           |  |                  |   |         |                |   |  |              | 727,955 |  |       |           | 16,255  |        |  |           |      |  |   |        |       |   |       |           |        |   |   |        |       |   |   |           | 16,255  |       
|                                | Conversion of operating partnership units to common stock                                                        |                                                        |           |  |                  |   |         |                |   |  |              | 26,281  |  |       |           | 1,019   |        |  |           |      |  |   |        |       |   |       |           | (26,281 | ) |   |        | (495   | ) |   |           | 524     |       
|                                | Forfeiture of common limited partnership units in connection
    with the forfeiture of restricted stock         |                                                        |           |  |                  |   |         |                |   |  |              |        |  |       |           | (1,446  | )      |  |           |      |  |   |        |       |   |       |           |        |   |   |        |       |   |   |           | (1,446  | )     
|                                | Deferred compensation                                                                                            |                                                        |           |  |                  |   |         |                |   |  |              |        |  |       |           | (13,461 | )      |  |           |      |  |   |        |       |   |       |           |        |   |   |        |       |   |   |           | (13,461 | )     
|                                | Deferred compensation amortization                                                                               |                                                        |           |  |                  |   |         |                |   |  |              |        |  |       |           | 6,944   |        |  |           |      |  |   |        |       |   |       |           |        |   |   |        |       |   |   |           | 6,944   |       
|                                | Reallocation of interests                                                                                        |                                                        |           |  |                  |   |         |                |   |  |              |        |  |       |           | 515     |        |  |           |      |  |   |        |       |   |       |           |        |   |   |        | 221    |   |   |           | 736     |       
|                                | Distributions                                                                                                    |                                                        |           |  |                  |   |         | (3,566          | ) |  |              |        |  |       |           | (73,998 | )      |  |           |      |  |   |        | (3,180 | ) |       |           |        |   |   |        | (4,153 | ) |   |           | (84,897 | )     
|                                |                                                                                                                  |                                                        |           |   |                  |   |         |                 |   |  |              |         |  |       |           |         |        |  |           |       |  |   |        |        |   |       |          
|Balance as of June 30, 2005     |                                                                                                                  |                                                        | 4,300,000 |   |                  | $ | 103,204 |                 |   |  | 83,985,626   |         |  | $     | 1,597,809 |         |        |  | 1,600,000 |       |  | $ | 77,815 |        |   |       | 4,574,275 |         |   | $ | 86,839 |        |   | $ | 1,865,667 |        
|                                |                                                                                                                  |                                                        |           |   |                  |   |         |                 |   |  |              |         |  |       |           |         |        |  |           |       |  |   |        |        |   |       |          



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##### Table of Contents



AMB PROPERTY, L.P.





CONSOLIDATED STATEMENTS OF CASH FLOWS


For the Six Months Ended June 30, 2005 and 2004


|                                                                                           |                                                                         |                                                                   |                                           |                                                      |         |          |          |          |        |          |         |  
|------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------- | ----------------------------------------------------------------- | ----------------------------------------- | ---------------------------------------------------- | ------- | -------- | -------- | -------- | ------ | -------- | ------- | -
|                                                                                           |                                                                         | 2005                                                              |                                           |                                                      | 2004    |         
|                                                                                           |                                                                         |                                                                   |                                           |                                                      |         |         
|                                                                                           |                                                                         | (Unaudited, dollars in                                            |                                          
|                                                                                           |                                                                         | thousands)                                                        |                                          
|CASH FLOWS FROM OPERATING ACTIVITIES                                                       |                                                                         |                                                                   |                                           |                                                      |         |          |          |         
|Net income                                                                                 |                                                                         | $                                                                 | 95,415                                    |                                                      |         | $        | 40,451   |         
|Adjustments to net income:                                                                 |                                                                         |                                                                   |                                           |                                                      |         |          |          |         
|                                                                                           | Straight-line rents and amortization of lease intangibles               |                                                                   |                                           | (9,361                                               | )       |          |          | (9,106   | )     
|                                                                                           | Depreciation and amortization                                           |                                                                   |                                           | 87,539                                               |         |          |          | 74,580   |       
|                                                                                           | Stock-based compensation amortization                                   |                                                                   |                                           | 6,944                                                |         |          |          | 5,476    |       
|                                                                                           | Equity in earnings of unconsolidated joint ventures                     |                                                                   |                                           | (8,430                                               | )       |          |          | (2,653   | )     
|                                                                                           | Operating distributions received from unconsolidated joint
    ventures |                                                                   |                                           | 663                                                  |         |          |          | 2,107    |       
|                                                                                           | Gains from dispositions of real estate interest                         |                                                                   |                                           | (18,923                                              | )       |          |          |         |       
|                                                                                           | Development profits, net of taxes                                       |                                                                   |                                           | (19,924                                              | )       |          |          | (3,235   | )     
|                                                                                           | Debt premiums, discounts and finance cost amortization, net             |                                                                   |                                           | 1,671                                                |         |          |          | (726     | )     
|                                                                                           | Total minority interests share of net income                           |                                                                   |                                           | 39,312                                               |         |          |          | 25,150   |       
|                                                                                           | Discontinued operations:                                                |                                                                   |                                           |                                                      |         |          |          |          |       
|                                                                                           |                                                                         | Depreciation and amortization                                     |                                           |                                                      | 1,513   |          |          |          | 5,527  |         
|                                                                                           |                                                                         | Joint venture partners share of net income                       |                                           |                                                      | 427     |          |          |          | 1,096  |         
|                                                                                           |                                                                         | Gains from dispositions of real estate, net of minority interests |                                           |                                                      | (36,256 | )        |          |          | (1,983 | )       
|                                                                                           | Changes in assets and liabilities:                                      |                                                                   |                                           |                                                      |         |          |          |          |       
|                                                                                           |                                                                         | Accounts receivable and other assets                              |                                           |                                                      | (40,086 | )        |          |          | (9,654 | )       
|                                                                                           |                                                                         | Accounts payable and other liabilities                            |                                           |                                                      | (18,991 | )        |          |          | (826   | )       
|                                                                                           |                                                                         |                                                                   |                                           |                                                      |         |         
|                                                                                           |                                                                         |                                                                   | Net cash provided by operating activities |                                                      |         | 81,513   |          |          |        | 126,204  |        
|                                                                                          
|CASH FLOWS FROM INVESTING ACTIVITIES                                                       |                                                                         |                                                                   |                                           |                                                      |         |          |          |         
|Change in restricted cash                                                                  |                                                                         |                                                                   | 4,046                                     |                                                      |         |          | 1,210    |         
|Cash paid for property acquisitions                                                        |                                                                         |                                                                   | (193,470                                  | )                                                    |         |          | (250,340 | )       
|Additions to land, buildings, development costs, building
    improvements and lease costs |                                                                         |                                                                   | (221,573                                  | )                                                    |         |          | (202,779 | )       
|Net proceeds from divestiture of real estate                                               |                                                                         |                                                                   | 237,649                                   |                                                      |         |          | 30,175   |         
|Additions to interests in unconsolidated joint ventures                                    |                                                                         |                                                                   | (54,805                                   | )                                                    |         |          | (884     | )       
|Capital distributions received from unconsolidated joint ventures                          |                                                                         |                                                                   |                                          |                                                      |         |          | 1,221    |         
|(Issuance) and repayment of mortgage and loan receivables                                  |                                                                         |                                                                   | (7,944                                    | )                                                    |         |          | 19,551   |         
|                                                                                           |                                                                         |                                                                   |                                           |                                                      |         |         
|                                                                                           |                                                                         |                                                                   | Net cash used in investing activities     |                                                      |         | (236,097 | )        |          |        | (401,846 | )      
|                                                                                          
|CASH FLOWS FROM FINANCING ACTIVITIES                                                       |                                                                         |                                                                   |                                           |                                                      |         |          |          |         
|Issuance of common units                                                                   |                                                                         |                                                                   | 16,255                                    |                                                      |         |          | 14,233   |         
|Borrowings on secured debt                                                                 |                                                                         |                                                                   | 65,892                                    |                                                      |         |          | 89,211   |         
|Payments on secured debt                                                                   |                                                                         |                                                                   | (52,607                                   | )                                                    |         |          | (28,359  | )       
|Payments on unsecured debt                                                                 |                                                                         |                                                                   | (318                                      | )                                                    |         |          | (294     | )       
|Borrowings on unsecured credit facilities                                                  |                                                                         |                                                                   | 501,024                                   |                                                      |         |          | 370,323  |         
|Payments on unsecured credit facilities                                                    |                                                                         |                                                                   | (279,026                                  | )                                                    |         |          | (216,389 | )       
|Payment of financing fees                                                                  |                                                                         |                                                                   | (3,315                                    | )                                                    |         |          | (5,586   | )       
|Net proceeds from issuances of senior debt securities                                      |                                                                         |                                                                   |                                          |                                                      |         |          | 99,183   |         
|Issuance costs on preferred units                                                          |                                                                         |                                                                   |                                          |                                                      |         |          | (169     | )       
|Contributions from co-investment partners                                                  |                                                                         |                                                                   | 99,377                                    |                                                      |         |          | 39,090   |         
|Distributions paid to partners                                                             |                                                                         |                                                                   | (79,048                                   | )                                                    |         |          | (75,309  | )       
|Distributions to minority interests, including preferred units                             |                                                                         |                                                                   | (80,056                                   | )                                                    |         |          | (25,240  | )       
|                                                                                           |                                                                         |                                                                   |                                           |                                                      |         |         
|                                                                                           |                                                                         |                                                                   | Net cash provided by financing activities |                                                      |         | 188,178  |          |          |        | 260,694  |        
|                                                                                           |                                                                         |                                                                   |                                           | Net effect of exchange rate changes on cash          |         |          | (4,024   | )        |        |          | 4,027   |  
|                                                                                           |                                                                         |                                                                   |                                           | Net increase (decrease) in cash and cash equivalents |         |          | 29,570   |          |        |          | (10,921 | )
|                                                                                           |                                                                         |                                                                   |                                           | Cash and cash equivalents at beginning of period     |         |          | 109,392  |          |        |          | 127,678 |  
|                                                                                           |                                                                         |                                                                   |                                           |                                                      |         |         
|                                                                                           |                                                                         |                                                                   |                                           | Cash and cash equivalents at end of period           |         | $        | 138,962  |          |        | $        | 116,757 |  
|                                                                                           |                                                                         |                                                                   |                                           |                                                      |         |         
|Supplemental Disclosures of Cash Flow Information                                          |                                                                         |                                                                   |                                           |                                                      |         |          |          |         
|Cash paid for interest, net of capitalized interest                                        |                                                                         | $                                                                 | 84,640                                    |                                                      |         | $        | 85,839   |         
|Non-cash transactions:                                                                     |                                                                         |                                                                   |                                           |                                                      |         |          |          |         
|                                                                                           | Acquisition of properties                                               |                                                                   | $                                         | 217,674                                              |         |          | $        | 439,249  |       
|                                                                                           | Assumption of secured debt                                              |                                                                   |                                           | (15,477                                              | )       |          |          | (130,588 | )     
|                                                                                           | Assumption of other assets and liabilities                              |                                                                   |                                           | (2,871                                               | )       |          |          | (51,597  | )     
|                                                                                           | Acquisition capital                                                     |                                                                   |                                           | (5,856                                               | )       |          |          | (4,889   | )     
|                                                                                           | Minority interests contributions                                       |                                                                   |                                           |                                                     |         |          |          | (1,835   | )     
|                                                                                           |                                                                         |                                                                   |                                           |                                                      |         |         
|                                                                                           |                                                                         |                                                                   | Net cash paid                             |                                                      | $       | 193,470  |          |          | $      | 250,340  |        
|                                                                                           |                                                                         |                                                                   |                                           |                                                      |         |         
|                                                                                           | Contribution of properties to unconsolidated joint ventures, net        |                                                                   | $                                         | 27,282                                               |         |          | $        |         |       



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AMB PROPERTY, L.P.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


June 30, 2005


(unaudited)




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













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AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






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







Investments in Real Estate.


Reclassifications.


Comprehensive Income.


International Operations.


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AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








Stock-based Compensation Expense. Accounting for Stock-Based
Compensation. Accounting for Stock
Issued to Employees.




|                                                    |         |                      |        |      |                    |   |        |      |  |   |        |      |  |   |        |      | 
|--------------------------------------------------- | ------- | -------------------- | ------ | ---- | ------------------ | - | ------ | ---- |  | - | ------ | ---- |  | - | ------ | ---- | 
|                                                    |         | For the Three Months |        |      | For the Six Months |  
|                                                    |         | Ended June 30,       |        |      | Ended June 30,     |  
|                                                    |         |                      |        |      |                    |  
|                                                    |         | 2005                 |        |      | 2004               |   |        | 2005 |  |   | 2004   |     
|                                                    |         |                      |        |      |                    |   |        |      |  |   |        |     
|Reduction to net income                             |         | $                    | 56     |      |                    | $ | 262    |      |  | $ | 239    |      |  | $ | 610    |     
|Adjusted net income available to common unitholders |         | $                    | 41,106 |      |                    | $ | 17,820 |      |  | $ | 88,430 |      |  | $ | 33,095 |     
|Adjusted income per common unit:                    |         |                      |        |      |                    |   |        |      |  |   |        |      |  |   |        |     
|                                                    | Basic   |                      | $      | 0.47 |                    |   | $      | 0.21 |  |   | $      | 1.00 |  |   | $      | 0.38 | 
|                                                    | Diluted |                      | $      | 0.45 |                    |   | $      | 0.20 |  |   | $      | 0.97 |  |   | $      | 0.37 | 

New Accounting Pronouncements. Share-Based Payment Accounting for Stock-Based
Compensation.


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##### Table of Contents



AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




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


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AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Properties Held for Divestiture.




|                                                          |  |                      |       |   |                    |   |        |      |  |   |        |   |  |   |        |  
|--------------------------------------------------------- |  | -------------------- | ----- | - | ------------------ | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                          |  | For the Three Months |       |   | For the Six Months |  
|                                                          |  | Ended June 30,       |       |   | Ended June 30,     |  
|                                                          |  |                      |       |   |                    |  
|                                                          |  | 2005                 |       |   | 2004               |   |        | 2005 |  |   | 2004   |  
|                                                          |  |                      |       |   |                    |   |        |      |  |   |        |  
|Rental revenues                                           |  | $                    | 2,361 |   |                    | $ | 10,001 |      |  | $ | 8,048  |   |  | $ | 19,985 |  
|Straight-line rents and amortization of lease intangibles |  |                      | 20    |   |                    |   | 438    |      |  |   | 149    |   |  |   | 857    |  
|Property operating expenses                               |  |                      | (789  | ) |                    |   | (1,955 | )    |  |   | (2,125 | ) |  |   | (3,895 | )
|Real estate taxes                                         |  |                      | (205  | ) |                    |   | (1,379 | )    |  |   | (983   | ) |  |   | (2,791 | )
|Depreciation and amortization                             |  |                      | (427  | ) |                    |   | (2,719 | )    |  |   | (1,513 | ) |  |   | (5,527 | )
|Other income and expenses, net                            |  |                      | 59    |   |                    |   | 5      |      |  |   | 73     |   |  |   | 52     |  
|Interest, including amortization                          |  |                      | 227   |   |                    |   | 656    |      |  |   | (149   | ) |  |   | 200    |  
|Joint venture partners share of income                   |  |                      | (108  | ) |                    |   | (542   | )    |  |   | (427   | ) |  |   | (1,096 | )
|                                                          |  |                      |       |   |                    |   |        |      |  |   |        |  
|Income attributable to discontinued operations            |  | $                    | 1,138 |   |                    | $ | 4,505  |      |  | $ | 3,073  |   |  | $ | 7,785  |  
|                                                          |  |                      |       |   |                    |   |        |      |  |   |        |  



|                                       |  |          |       |  |              |   |       | 
|-------------------------------------- |  | -------- | ----- |  | ------------ | - | ----- | 
|                                       |  | June 30, |       |  | December 31, |  
|                                       |  | 2005     |       |  | 2004         |  
|                                       |  |          |       |  |              |  
|Accounts receivable, net               |  | $        | 964   |  |              | $ | 996   | 
|Other assets                           |  | $        | 87    |  |              | $ | 290   | 
|Accounts payable and other liabilities |  | $        | 1,203 |  |              | $ | 1,303 | 



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



|                                |                                     |                 |  |               |  |          |        |        |              |   |        |        |  |  |      |   | 
|------------------------------- | ----------------------------------- | --------------- |  | ------------- |  | -------- | ------ | ------ | ------------ | - | ------ | ------ |  |  | ---- | - | 
|                                |                                     |                 |  |               |  | June 30, |        |        | December 31, |   |        |       
|Mortgage and Loan Receivables   |                                     | Market          |  | Maturity      |  | 2005     |        |        | 2004         |   |        | Rate   | 
|                                |                                     |                 |  |               |  |          |        |        |              |   |        |        | 
|1. Pier 1                       |                                     | SF Bay Area     |  | May 2026      |  | $        | 12,882 |        |              | $ | 12,938 |        |  |  | 13.0 | %
|2. G.Accion                     |                                     | Mexico, Various |  | November 2006 |  |          | 8,800  |        |              |   |       |        |  |  | 12.0 | %
|3. Platinum Distribution Center |                                     | No. New Jersey  |  | N/A           |  |          |       |        |              |   | 800    |        |  |  | 12.0 | %
|                                |                                     |                 |  |               |  |          |        |        |              |   |        |        | 
|                                | Total Mortgage and Loan Receivables |                 |  |               |  |          | $      | 21,682 |              |   | $      | 13,738 |  |  |      |   | 
|                                |                                     |                 |  |               |  |          |        |        |              |   |        |        | 

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##### Table of Contents



AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




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



|                                                                                                                                                                                                                                          |                                        |                         |           |           |              |   |           |           |           | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------- | ----------------------- | --------- | --------- | ------------ | - | --------- | --------- | --------- | 
|                                                                                                                                                                                                                                          |                                        | June 30,                |           |           | December 31, |  
|                                                                                                                                                                                                                                          |                                        | 2005                    |           |           | 2004         |  
|                                                                                                                                                                                                                                          |                                        |                         |           |           |              |  
|Operating Partnership secured debt, varying interest rates from
    0.7% to 10.4%, due August 2005 to October 2017 (weighted average
    interest rate of 5.3% and 5.3% at June 30, 2005 and
    December 31, 2004, respectively)         |                                        | $                       | 418,101   |           |              | $ | 484,929   |          
|Consolidated joint venture secured debt, varying interest rates
    from 3.5% to 9.4%, due November 2005 to November 2022 (weighted
    average interest rates of 6.3% and 6.3% at June 30, 2005
    and December 31, 2004, respectively) |                                        |                         | 1,415,055 |           |              |   | 1,396,829 |          
|Unsecured senior debt securities, varying interest rates from
    3.5% to 8.0%, due December 2005 to June 2018 (weighted average
    interest rates of 6.6% and 6.6% at June 30, 2005 and
    December 31, 2004, respectively)            |                                        |                         | 1,003,940 |           |              |   | 1,003,940 |          
|Unsecured debt, due June 2013 and November 2015, interest rate
    of 7.5%                                                                                                                                                                |                                        |                         | 8,710     |           |              |   | 9,028     |          
|Unsecured credit facilities, variable interest rate, due June
    2007 to June 2008 (weighted average interest rates of 2.0% and
    1.9% at June 30, 2005 and December 31, 2004,
    respectively)                                       |                                        |                         | 549,397   |           |              |   | 351,699   |          
|                                                                                                                                                                                                                                          |                                        |                         |           |           |              |  
|                                                                                                                                                                                                                                          | Total debt before unamortized premiums |                         |           | 3,395,203 |              |   |           | 3,246,425 |          
|                                                                                                                                                                                                                                          | Unamortized premiums                   |                         |           | 10,705    |              |   |           | 10,766    |          
|                                                                                                                                                                                                                                          |                                        |                         |           |           |              |  
|                                                                                                                                                                                                                                          |                                        | Total consolidated debt |           | $         | 3,405,908    |   |           | $         | 3,257,191 | 
|                                                                                                                                                                                                                                          |                                        |                         |           |           |              |  







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AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








12



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AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|           |       |             |         |              |         |   |         |            |  |   |           |           |  |            |       |       |       |   |         |         |  |   |         |           | 
|---------- | ----- | ----------- | ------- | ------------ | ------- | - | ------- | ---------- |  | - | --------- | --------- |  | ---------- | ----- | ----- | ----- | - | ------- | ------- |  | - | ------- | --------- | 
|           |       |             |         | Consolidated |         |   |         |            |  |   |           |           | 
|           |       | Operating   |         |              | Joint   |   |         | Unsecured  |  |   |           |           |  |            |      
|           |       | Partnership |         |              | Venture |   |         | Senior     |  |   |           |           |  |            |      
|           |       | Secured     |         |              | Secured |   |         | Debt       |  |   | Unsecured |           |  | Credit     |       |       |      
|           |       | Debt        |         |              | Debt    |   |         | Securities |  |   | Debt      |           |  | Facilities |       |       | Total |  
|           |       |             |         |              |         |   |         |            |  |   |           |           |  |            |       |       |       |  
|2005       |       | $           | 20,267  |              |         | $ | 30,230  |            |  | $ | 150,000   |           |  | $          | 330   |       |       | $ |        |         |  | $ | 200,827 |          
|2006       |       |             | 80,648  |              |         |   | 76,319  |            |  |   | 75,000    |           |  |            | 698   |       |       |   |        |         |  |   | 232,665 |          
|2007       |       |             | 12,218  |              |         |   | 68,705  |            |  |   | 75,000    |           |  |            | 752   |       |       |   | 477,307 |         |  |   | 633,982 |          
|2008       |       |             | 40,424  |              |         |   | 190,582 |            |  |   | 175,000   |           |  |            | 810   |       |       |   | 72,090  |         |  |   | 478,906 |          
|2009       |       |             | 4,900   |              |         |   | 131,403 |            |  |   | 100,000   |           |  |            | 872   |       |       |   |        |         |  |   | 237,175 |          
|2010       |       |             | 70,717  |              |         |   | 150,448 |            |  |   | 75,000    |           |  |            | 941   |       |       |   |        |         |  |   | 297,106 |          
|2011       |       |             | 21,575  |              |         |   | 417,973 |            |  |   | 75,000    |           |  |            | 1,014 |       |       |   |        |         |  |   | 515,562 |          
|2012       |       |             | 146,796 |              |         |   | 178,427 |            |  |   |          |           |  |            | 1,093 |       |       |   |        |         |  |   | 326,316 |          
|2013       |       |             | 2,155   |              |         |   | 133,833 |            |  |   | 53,940    |           |  |            | 920   |       |       |   |        |         |  |   | 190,848 |          
|2014       |       |             | 12,051  |              |         |   | 3,777   |            |  |   |          |           |  |            | 616   |       |       |   |        |         |  |   | 16,444  |          
|Thereafter |       |             | 6,350   |              |         |   | 33,358  |            |  |   | 225,000   |           |  |            | 664   |       |       |   |        |         |  |   | 265,372 |          
|           |       |             |         |              |         |   |         |            |  |   |           |           |  |            |       |       |       |  
|           | Total |             | $       | 418,101      |         |   | $       | 1,415,055  |  |   | $         | 1,003,940 |  |            | $     | 8,710 |       |   | $       | 549,397 |  |   | $       | 3,395,203 | 
|           |       |             |         |              |         |   |         |            |  |   |           |           |  |            |       |       |       |  



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



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AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Consolidation of Variable
Interest Entities.






|                                          |       |                                              |  |               |    |                  |                   |   |         |                 |  |   |          |           |  |              |         |           |  |   |         |           | 
|----------------------------------------- | ----- | -------------------------------------------- |  | ------------- | -- | ---------------- | ----------------- | - | ------- | --------------- |  | - | -------- | --------- |  | ------------ | ------- | --------- |  | - | ------- | --------- | 
|                                          |       |                                              |  |               |    | Total Investment |                   |   |        
|                                          |       |                                              |  | Operating     |    |                  | in Real Estate(7) |   |         | Secured Debt(8) | 
|                                          |       |                                              |  | Partnerships |    |                  |                   |   |         |                 | 
|                                          |       |                                              |  | Ownership     |    |                  | June 30,          |   |         | December 31,    |  |   | June 30, |           |  | December 31, |        
|Co-investment Joint Venture               |       | Joint Venture Partner                        |  | Percentage    |    |                  | 2005              |   |         | 2004            |  |   | 2005     |           |  | 2004         |        
|                                          |       |                                              |  |               |    |                  |                   |   |         |                 |  |   |          |           |  |              |        
|AMB/ Erie, L.P.                           |       | Erie Insurance Company and affiliates        |  |               | 50 | %                |                   | $ | 98,670  |                 |  | $ | 149,244  |           |  | $            | 41,040  |           |  | $ | 50,338  |          
|AMB Institutional Alliance Fund I, L.P.   |       | AMB Institutional Alliance REIT I, Inc.(1)   |  |               | 21 | %                |                   |   | 419,503 |                 |  |   | 415,191  |           |  |              | 222,155 |           |  |   | 223,704 |          
|AMB Partners II, L.P.                     |       | City and County of San Francisco             |  |               | 20 | %                |                   |   | 533,410 |                 |  |   | 516,200  |           |  |              |         |           |  |   |         |          
|                                          |       | Employees Retirement System                 |  |               |    |                  |                   |   |         |                 |  |   |          |           |  |              | 280,888 |           |  |   | 264,315 |          
|AMB-SGP, L.P.                             |       | Industrial JV Pte Ltd(2)                     |  |               | 50 | %                |                   |   | 434,016 |                 |  |   | 418,129  |           |  |              | 242,251 |           |  |   | 245,454 |          
|AMB Institutional Alliance Fund II, L.P.  |       | AMB Institutional Alliance REIT II, Inc.(3)  |  |               | 20 | %                |                   |   | 502,140 |                 |  |   | 492,687  |           |  |              | 241,770 |           |  |   | 237,798 |          
|AMB-AMS, L.P.(4)                          |       | PMT, SPW and TNO(5)                          |  |               | 39 | %                |                   |   | 128,986 |                 |  |   | 100,043  |           |  |              | 59,008  |           |  |   | 44,406  |          
|AMB Institutional Alliance Fund III, L.P. |       | AMB Institutional Alliance REIT III, Inc.(6) |  |               | 20 | %                |                   |   | 588,022 |                 |  |   | 523,037  |           |  |              | 256,181 |           |  |   | 258,164 |          
|                                          |       |                                              |  |               |    |                  |                   |   |         |                 |  |   |          |           |  |              |        
|                                          | Total |                                              |  |               |    |                  |                   |   | $       | 2,704,747       |  |   | $        | 2,614,531 |  |              | $       | 1,343,293 |  |   | $       | 1,324,179 | 
|                                          |       |                                              |  |               |    |                  |                   |   |         |                 |  |   |          |           |  |              |        






|    |                                                                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Comprised of 16 institutional investors as stockholders as of
    June 30, 2005.                                                                                                                                 
|   
|(2) | A subsidiary of the real estate investment subsidiary of the
    Government of Singapore Investment Corporation.                                                                                                 
|   
|(3) | Comprised of 13 institutional investors as stockholders and one
    third-party limited partner as of June 30, 2005.                                                                                             
|   
|(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.                                                                        
|   
|(7) | The Operating Partnership also had other consolidated joint
    ventures with total investments in real estate of
    $357.0 million and $370.0 million at June 30,
    2005 and December 31, 2004, respectively.
|   
|(8) | The Operating Partnership also had other consolidated joint
    ventures with secured debt of $79.4 million and
    $79.9 million at June 30, 2005 and December 31,
    2004, respectively.                      

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AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                    |                                                              |                          |         |        |              |   |         |                 |           |  |     |                               |  | 
|----------------------------------- | ------------------------------------------------------------ | ------------------------ | ------- | ------ | ------------ | - | ------- | --------------- | --------- |  | --- | ----------------------------- |  | 
|                                    |                                                              | June 30,                 |         |        | December 31, |   |         |                
|                                    |                                                              | 2005                     |         |        | 2004         |   |         | Redemption Date |          
|                                    |                                                              |                          |         |        |              |   |         |                 |          
|Joint Venture Partners              |                                                              | $                        | 906,527 |        |              | $ | 828,622 |                 |           |  | N/A |                              
|Held through AMB Property II, L.P.: |                                                              |                          |         |        |              |   |         |                 |           |  | N/A |                              
|                                    | Class B Limited Partners                                     |                          |         | 2,762  |              |   |         | 2,739           |           |  |     | 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 |              |   |         | 40,912          |           |  |     | September 2005                | 
|                                    | Series I preferred units (liquidation preference of $25,500) |                          |         | 24,800 |              |   |         | 24,800          |           |  |     | March 2006                    | 
|                                    | Series N preferred units (liquidation preference of $36,479) |                          |         | 36,479 |              |   |         | 36,479          |           |  |     | September 2006-September 2009 | 
|                                    |                                                              |                          |         |        |              |   |         |                 |          
|                                    |                                                              | Total minority interests |         | $      | 1,109,852    |   |         | $               | 1,031,924 |  |     |                               |  | 
|                                    |                                                              |                          |         |        |              |   |         |                 |          



|                                                     |                                                              |                                           |        |       |                    |   |       |       |        |   |        |       |        |   |        |       |        | 
|---------------------------------------------------- | ------------------------------------------------------------ | ----------------------------------------- | ------ | ----- | ------------------ | - | ----- | ----- | ------ | - | ------ | ----- | ------ | - | ------ | ----- | ------ | 
|                                                     |                                                              | For the Three Months                      |        |       | For the Six Months |  
|                                                     |                                                              | Ended June 30,                            |        |       | Ended June 30,     |  
|                                                     |                                                              |                                           |        |       |                    |  
|                                                     |                                                              | 2005                                      |        |       | 2004               |   |       | 2005  |        |   | 2004   |      
|                                                     |                                                              |                                           |        |       |                    |   |       |       |        |   |        |      
|Joint Venture Partners share of income              |                                                              | $                                         | 10,860 |       |                    | $ | 9,260 |       |        | $ | 22,144 |       |        | $ | 17,846 |      
|Joint Venture Partners share of development profits |                                                              |                                           | 189    |       |                    |   | 606   |       |        |   | 9,568  |       |        |   | 606    |      
|Held through AMB Property II, L.P.:                  |                                                              |                                           |        |       |                    |   |       |       |        |   |        |       |        |   |        |      
|                                                     | Class B common limited partnership units                     |                                           |        | 33    |                    |   |       | 25    |        |   |        | 44    |        |   |        | 54    |       
|                                                     | Series D preferred units (liquidation preference of $79,767) |                                           |        | 1,546 |                    |   |       | 1,546 |        |   |        | 3,091 |        |   |        | 3,091 |       
|                                                     | Series E preferred units (liquidation preference of $11,022) |                                           |        | 213   |                    |   |       | 213   |        |   |        | 427   |        |   |        | 427   |       
|                                                     | Series F preferred units (liquidation preference of $10,057) |                                           |        | 200   |                    |   |       | 200   |        |   |        | 400   |        |   |        | 400   |       
|                                                     | Series H preferred units (liquidation preference of $42,000) |                                           |        | 853   |                    |   |       | 853   |        |   |        | 1,706 |        |   |        | 1,706 |       
|                                                     | Series I preferred units (liquidation preference of $25,500) |                                           |        | 510   |                    |   |       | 510   |        |   |        | 1,020 |        |   |        | 1,020 |       
|                                                     | Series N preferred units (liquidation preference of $36,479) |                                           |        | 456   |                    |   |       |      |        |   |        | 912   |        |   |        |      |       
|                                                     |                                                              |                                           |        |       |                    |   |       |       |        |   |        |      
|                                                     |                                                              | Total minority interests share of income |        | $     | 14,860             |   |       | $     | 13,213 |   |        | $     | 39,312 |   |        | $     | 25,150 | 
|                                                     |                                                              |                                           |        |       |                    |   |       |       |        |   |        |      



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AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






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



|                                            |                                     |        |                 |        |           |            |          |  |        |              |  |  |            |        |  |  |    |    |  
|------------------------------------------- | ----------------------------------- | ------ | --------------- | ------ | --------- | ---------- | -------- |  | ------ | ------------ |  |  | ---------- | ------ |  |  | -- | -- | -
|                                            |                                     |        |                 |        |           |            |          |  |        | Companys    | 
|                                            |                                     |        |                 | Square |           |            | June 30, |  |        | December 31, |  |  | Ownership  |       
|Unconsolidated Joint Ventures               |                                     | Market |                 | Feet   |           |            | 2005     |  |        | 2004         |  |  | Percentage |       
|                                            |                                     |        |                 |        |           |            |          |  |        |              |  |  |            |       
|Co-Investment Joint Ventures                |                                     |        |                 |        |           |            |          |  |        |              |  |  |            |        |  |  |    |   
|                                            | AMB-SGP Mexico, LLC                 |        | Various, Mexico |        |           | 1,647,622  |          |  | $      | 15,808       |  |  | $          | 9,467  |  |  |    | 20 | %
|                                            | AMB Japan Fund I, L.P.              |        | Various, Japan  |        |           | 915,401    |          |  |        | 11,474       |  |  |            |       |  |  |    | 20 | %
|Other Industrial Operating Joint Ventures   |                                     |        |                 |        | 8,805,507 |            |          |  | 40,171 |              |  |  | 41,371     |        |  |  | 52 | % 
|Other Industrial Development Joint Ventures |                                     |        |                 |        | 1,209,267 |            |          |  | 7,120  |              |  |  | 4,328      |        |  |  | 49 | % 
|Other Investments  G.Accion                |                                     |        |                 |        | N/A       |            |          |  | 46,427 |              |  |  |           |        |  |  | 39 | % 
|                                            |                                     |        |                 |        |           |            |          |  |        |              |  |  |            |       
|                                            | Total Unconsolidated Joint Ventures |        |                 |        |           | 12,577,797 |          |  | $      | 121,000      |  |  | $          | 55,166 |  |  |    | 40 | %
|                                            |                                     |        |                 |        |           |            |          |  |        |              |  |  |            |       







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AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






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





|                      |  |                                          |  |                |       |  |                |   |       |      |  |   |       |  |  |   |       | 
|--------------------- |  | ---------------------------------------- |  | -------------- | ----- |  | -------------- | - | ----- | ---- |  | - | ----- |  |  | - | ----- | 
|                      |  |                                          |  | For the        |       |  | For the        |  
|                      |  |                                          |  | Three Months   |       |  | Six Months     |  
|                      |  |                                          |  | Ended June 30, |       |  | Ended June 30, |  
|                      |  |                                          |  |                |       |  |                |  
|Paying Entity         |  | Security                                 |  | 2005           |       |  | 2004           |   |       | 2005 |  |   | 2004  | 
|                      |  |                                          |  |                |       |  |                |   |       |      |  |   |       | 
|Operating Partnership |  | Common limited partnership units         |  | $              | 0.440 |  |                | $ | 0.425 |      |  | $ | 0.880 |  |  | $ | 0.850 | 
|Operating Partnership |  | Series J preferred units                 |  | $              | 0.994 |  |                | $ | 0.994 |      |  | $ | 1.988 |  |  | $ | 1.988 | 
|Operating Partnership |  | Series K preferred units                 |  | $              | 0.994 |  |                | $ | 0.994 |      |  | $ | 1.988 |  |  | $ | 1.988 | 
|AMB Property II, L.P. |  | Class B common limited partnership units |  | $              | 0.440 |  |                | $ | 0.425 |      |  | $ | 0.880 |  |  | $ | 0.850 | 
|AMB Property II, L.P. |  | Series D preferred units                 |  | $              | 0.969 |  |                | $ | 0.969 |      |  | $ | 1.938 |  |  | $ | 1.938 | 
|AMB Property II, L.P. |  | Series E preferred units                 |  | $              | 0.969 |  |                | $ | 0.969 |      |  | $ | 1.938 |  |  | $ | 1.938 | 
|AMB Property II, L.P. |  | Series F preferred units                 |  | $              | 0.994 |  |                | $ | 0.994 |      |  | $ | 1.988 |  |  | $ | 1.988 | 
|AMB Property II, L.P. |  | Series H preferred units                 |  | $              | 1.016 |  |                | $ | 1.016 |      |  | $ | 2.031 |  |  | $ | 2.031 | 
|AMB Property II, L.P. |  | Series I preferred units                 |  | $              | 1.000 |  |                | $ | 1.000 |      |  | $ | 2.000 |  |  | $ | 2.000 | 
|AMB Property II, L.P. |  | Series N preferred units                 |  | $              | 0.625 |  |                |   | n/a   |      |  | $ | 1.250 |  |  |   | n/a   | 

17



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AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




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



|                               |                                                                               |                                            |   |            |                    |  |   |            |        |  |      |            |        |  |   |            |        | 
|------------------------------ | ----------------------------------------------------------------------------- | ------------------------------------------ | - | ---------- | ------------------ |  | - | ---------- | ------ |  | ---- | ---------- | ------ |  | - | ---------- | ------ | 
|                               |                                                                               | For the Three Months                       |   |            | For the Six Months | 
|                               |                                                                               | Ended June 30,                             |   |            | Ended June 30,     | 
|                               |                                                                               |                                            |   |            |                    | 
|                               |                                                                               | 2005                                       |   |            | 2004               |  |   | 2005       |        |  | 2004 |           
|                               |                                                                               |                                            |   |            |                    |  |   |            |        |  |      |           
|Numerator                      |                                                                               |                                            |   |            |                    |  |   |            |        |  |      |            |        |  |   |           
|                               | Income from continuing operations                                             |                                            | $ | 36,732     |                    |  | $ | 14,665     |        |  | $    | 56,086     |        |  | $ | 30,683     |       
|                               | Preferred unit distributions                                                  |                                            |   | (3,373     | )                  |  |   | (3,373     | )      |  |      | (6,746     | )      |  |   | (6,746     | )     
|                               |                                                                               |                                            |   |            |                    |  |   |            |        |  |      |           
|                               | Income from continuing operations (after preferred unit
    distributions)    |                                            |   | 33,359     |                    |  |   | 11,292     |        |  |      | 49,340     |        |  |   | 23,937     |       
|                               | Income attributable to discontinued operations, net of minority
    interests |                                            |   | 1,138      |                    |  |   | 4,505      |        |  |      | 3,073      |        |  |   | 7,785      |       
|                               | Gains from dispositions of real estate, net of minority interests             |                                            |   | 6,665      |                    |  |   | 2,285      |        |  |      | 36,256     |        |  |   | 1,983      |       
|                               |                                                                               |                                            |   |            |                    |  |   |            |        |  |      |           
|                               |                                                                               | Net income available to common unitholders |   | $          | 41,162             |  |   | $          | 18,082 |  |      | $          | 88,669 |  |   | $          | 33,705 | 
|                               |                                                                               |                                            |   |            |                    |  |   |            |        |  |      |           
|Denominator                    |                                                                               |                                            |   |            |                    |  |   |            |        |  |      |            |        |  |   |           
|                               | Basic                                                                         |                                            |   | 88,241,361 |                    |  |   | 86,824,795 |        |  |      | 88,060,496 |        |  |   | 86,653,067 |       
|                               | Stock options and restricted stock dilution                                   |                                            |   | 3,554,473  |                    |  |   | 2,464,159  |        |  |      | 3,506,491  |        |  |   | 2,867,182  |       
|                               |                                                                               |                                            |   |            |                    |  |   |            |        |  |      |           
|                               | Diluted weighted average common units                                         |                                            |   | 91,795,834 |                    |  |   | 89,288,954 |        |  |      | 91,566,987 |        |  |   | 89,520,249 |       
|                               |                                                                               |                                            |   |            |                    |  |   |            |        |  |      |           
|Basic income per common unit   |                                                                               |                                            |   |            |                    |  |   |            |        |  |      |            |        |  |   |           
|                               | Income from continuing operations (after preferred unit
    distributions)    |                                            | $ | 0.38       |                    |  | $ | 0.13       |        |  | $    | 0.56       |        |  | $ | 0.28       |       
|                               | Discontinued operations                                                       |                                            |   | 0.09       |                    |  |   | 0.08       |        |  |      | 0.45       |        |  |   | 0.11       |       
|                               |                                                                               |                                            |   |            |                    |  |   |            |        |  |      |           
|                               |                                                                               | Net income available to common unitholders |   | $          | 0.47               |  |   | $          | 0.21   |  |      | $          | 1.01   |  |   | $          | 0.39   | 
|                               |                                                                               |                                            |   |            |                    |  |   |            |        |  |      |           
|Diluted income per common unit |                                                                               |                                            |   |            |                    |  |   |            |        |  |      |            |        |  |   |           
|                               | Income from continuing operations (after preferred unit
    distributions)    |                                            | $ | 0.36       |                    |  | $ | 0.12       |        |  | $    | 0.54       |        |  | $ | 0.27       |       
|                               | Discontinued operations                                                       |                                            |   | 0.09       |                    |  |   | 0.08       |        |  |      | 0.43       |        |  |   | 0.11       |       
|                               |                                                                               |                                            |   |            |                    |  |   |            |        |  |      |           
|                               |                                                                               | Net income available to common unitholders |   | $          | 0.45               |  |   | $          | 0.20   |  |      | $          | 0.97   |  |   | $          | 0.38   | 
|                               |                                                                               |                                            |   |            |                    |  |   |            |        |  |      |           



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



18



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##### Table of Contents



AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                                                          |                               |                                       |        |        |                      |  |         |        |         |  |        |        |         |  |        |        |         | 
|--------------------------------------------------------- | ----------------------------- | ------------------------------------- | ------ | ------ | -------------------- |  | ------- | ------ | ------- |  | ------ | ------ | ------- |  | ------ | ------ | ------- | 
|                                                          |                               | Rental Revenues                       |        |        | Property NOI(1)      | 
|                                                          |                              
|                                                          |                               | For the Three Months                  |        |        | For the Three Months | 
|                                                          |                               | Ended June 30,                        |        |        | Ended June 30,       | 
|                                                          |                               |                                       |        |        |                      | 
|Segments                                                  |                               | 2005                                  |        |        | 2004                 |  |         | 2005   |         |  | 2004   |       
|                                                          |                               |                                       |        |        |                      |  |         |        |         |  |        |       
|Industrial domestic hub and gateway markets:              |                               |                                       |        |        |                      |  |         |        |         |  |        |        |         |  |        |       
|                                                          | Atlanta                       |                                       | $      | 5,023  |                      |  | $       | 7,446  |         |  | $      | 3,903  |         |  | $      | 5,739  |        
|                                                          | Chicago                       |                                       |        | 12,740 |                      |  |         | 10,410 |         |  |        | 8,812  |         |  |        | 7,295  |        
|                                                          | Dallas/ Fort Worth            |                                       |        | 4,184  |                      |  |         | 3,737  |         |  |        | 2,981  |         |  |        | 2,354  |        
|                                                          | Los Angeles                   |                                       |        | 25,589 |                      |  |         | 25,535 |         |  |        | 20,087 |         |  |        | 19,855 |        
|                                                          | Northern New Jersey/ New York |                                       |        | 20,290 |                      |  |         | 14,298 |         |  |        | 14,553 |         |  |        | 9,995  |        
|                                                          | San Francisco Bay Area        |                                       |        | 21,001 |                      |  |         | 23,288 |         |  |        | 17,093 |         |  |        | 18,289 |        
|                                                          | Miami                         |                                       |        | 8,667  |                      |  |         | 8,283  |         |  |        | 5,838  |         |  |        | 5,691  |        
|                                                          | Seattle                       |                                       |        | 10,837 |                      |  |         | 10,021 |         |  |        | 8,483  |         |  |        | 7,789  |        
|                                                          | On-Tarmac                     |                                       |        | 14,071 |                      |  |         | 13,640 |         |  |        | 8,182  |         |  |        | 7,838  |        
|                                                          |                               |                                       |        |        |                      |  |         |        |         |  |        |       
|                                                          |                               | Total industrial domestic hub markets |        |        | 122,402              |  |         |        | 116,658 |  |        |        | 89,932  |  |        |        | 84,845  | 
|Other domestic target markets                             |                               |                                       | 25,060 |        |                      |  | 26,888  |        |         |  | 17,411 |        |         |  | 19,905 |       
|Other domestic non-target markets                         |                               |                                       | 9,104  |        |                      |  | 7,573   |        |         |  | 7,060  |        |         |  | 5,583  |       
|International target markets                              |                               |                                       | 8,720  |        |                      |  | 5,570   |        |         |  | 6,443  |        |         |  | 4,136  |       
|Straight-line rents and amortization of lease intangibles |                               |                                       | 4,864  |        |                      |  | 4,937   |        |         |  | 4,864  |        |         |  | 4,937  |       
|Total retail and other markets                            |                               |                                       | 1,070  |        |                      |  | 1,886   |        |         |  | 636    |        |         |  | 1,003  |       
|Discontinued operations                                   |                               |                                       | (2,381 | )      |                      |  | (10,439 | )      |         |  | (1,387 | )      |         |  | (7,105 | )     
|                                                          |                               |                                       |        |        |                      |  |         |        |         |  |        |       
|                                                          |                               | Total                                 |        | $      | 168,839              |  |         | $      | 153,073 |  |        | $      | 124,959 |  |        | $      | 113,304 | 
|                                                          |                               |                                       |        |        |                      |  |         |        |         |  |        |       






|    |                                                                                                                                                                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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.



19



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AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                                                          |                               |                                       |        |        |                    |  |         |        |         |  |        |        |         |  |         |        |         | 
|--------------------------------------------------------- | ----------------------------- | ------------------------------------- | ------ | ------ | ------------------ |  | ------- | ------ | ------- |  | ------ | ------ | ------- |  | ------- | ------ | ------- | 
|                                                          |                               | Rental Revenues                       |        |        | Property NOI(1)    | 
|                                                          |                              
|                                                          |                               | For the Six Months                    |        |        | For the Six Months | 
|                                                          |                               | Ended June 30,                        |        |        | Ended June 30,     | 
|                                                          |                               |                                       |        |        |                    | 
|Segments                                                  |                               | 2005                                  |        |        | 2004               |  |         | 2005   |         |  | 2004   |       
|                                                          |                               |                                       |        |        |                    |  |         |        |         |  |        |       
|Industrial domestic hub and gateway markets:              |                               |                                       |        |        |                    |  |         |        |         |  |        |        |         |  |         |       
|                                                          | Atlanta                       |                                       | $      | 10,479 |                    |  | $       | 15,141 |         |  | $      | 8,140  |         |  | $       | 11,882 |        
|                                                          | Chicago                       |                                       |        | 26,393 |                    |  |         | 21,469 |         |  |        | 18,018 |         |  |         | 14,657 |        
|                                                          | Dallas/ Fort Worth            |                                       |        | 8,265  |                    |  |         | 7,601  |         |  |        | 5,789  |         |  |         | 4,953  |        
|                                                          | Los Angeles                   |                                       |        | 51,069 |                    |  |         | 50,399 |         |  |        | 40,244 |         |  |         | 39,802 |        
|                                                          | Northern New Jersey/ New York |                                       |        | 39,832 |                    |  |         | 28,084 |         |  |        | 28,191 |         |  |         | 18,988 |        
|                                                          | San Francisco Bay Area        |                                       |        | 42,922 |                    |  |         | 46,602 |         |  |        | 34,529 |         |  |         | 36,925 |        
|                                                          | Miami                         |                                       |        | 17,034 |                    |  |         | 16,598 |         |  |        | 11,602 |         |  |         | 11,609 |        
|                                                          | Seattle                       |                                       |        | 21,675 |                    |  |         | 20,399 |         |  |        | 16,970 |         |  |         | 15,945 |        
|                                                          | On-Tarmac                     |                                       |        | 27,864 |                    |  |         | 27,901 |         |  |        | 16,153 |         |  |         | 15,702 |        
|                                                          |                               |                                       |        |        |                    |  |         |        |         |  |        |       
|                                                          |                               | Total industrial domestic hub markets |        |        | 245,533            |  |         |        | 234,194 |  |        |        | 179,636 |  |         |        | 170,463 | 
|Other domestic target markets                             |                               |                                       | 53,396 |        |                    |  | 53,826  |        |         |  | 37,399 |        |         |  | 39,557  |       
|Other domestic non-target markets                         |                               |                                       | 18,414 |        |                    |  | 15,117  |        |         |  | 13,917 |        |         |  | 10,482  |       
|International target markets                              |                               |                                       | 15,649 |        |                    |  | 11,521  |        |         |  | 11,997 |        |         |  | 8,857   |       
|Straight-line rents and amortization of lease intangibles |                               |                                       | 9,361  |        |                    |  | 9,105   |        |         |  | 9,361  |        |         |  | 9,105   |       
|Total retail and other markets                            |                               |                                       | 2,055  |        |                    |  | 3,625   |        |         |  | 1,426  |        |         |  | 2,220   |       
|Discontinued operations                                   |                               |                                       | (8,197 | )      |                    |  | (20,842 | )      |         |  | (5,089 | )      |         |  | (14,156 | )     
|                                                          |                               |                                       |        |        |                    |  |         |        |         |  |        |       
|                                                          |                               | Total                                 |        | $      | 336,211            |  |         | $      | 306,546 |  |        | $      | 248,647 |  |         | $      | 226,528 | 
|                                                          |                               |                                       |        |        |                    |  |         |        |         |  |        |       






|    |                                                                                                                                                                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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.



20



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AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                    |            |                      |         |        |                    |   |         |        |  |   |         |        |  |   |         |        | 
|--------------------------------------------------- | ---------- | -------------------- | ------- | ------ | ------------------ | - | ------- | ------ |  | - | ------- | ------ |  | - | ------- | ------ | 
|                                                    |            | For the Three Months |         |        | For the Six Months |  
|                                                    |            | Ended June 30,       |         |        | Ended June 30,     |  
|                                                    |            |                      |         |        |                    |  
|                                                    |            | 2005                 |         |        | 2004               |   |         | 2005   |  |   | 2004    |       
|                                                    |            |                      |         |        |                    |   |         |        |  |   |         |       
|Property NOI                                        |            | $                    | 124,959 |        |                    | $ | 113,304 |        |  | $ | 248,647 |        |  | $ | 226,528 |       
|Private capital income                              |            |                      | 3,438   |        |                    |   | 2,922   |        |  |   | 6,756   |        |  |   | 5,351   |       
|Depreciation and amortization                       |            |                      | (44,503 | )      |                    |   | (37,740 | )      |  |   | (87,539 | )      |  |   | (74,580 | )     
|General and administrative                          |            |                      | (18,629 | )      |                    |   | (14,731 | )      |  |   | (37,428 | )      |  |   | (29,298 | )     
|Fund costs                                          |            |                      | (380    | )      |                    |   | (350    | )      |  |   | (744    | )      |  |   | (659    | )     
|Equity in earnings of unconsolidated joint ventures |            |                      | 7,188   |        |                    |   | 944     |        |  |   | 8,430   |        |  |   | 2,653   |       
|Other income and expenses, net                      |            |                      | 893     |        |                    |   | 486     |        |  |   | 327     |        |  |   | 1,966   |       
|Gains from dispositions of real estate              |            |                      | 17,622  |        |                    |   |        |        |  |   | 18,923  |        |  |   |        |       
|Development profits, net of taxes                   |            |                      | 1,975   |        |                    |   | 3,235   |        |  |   | 19,924  |        |  |   | 3,235   |       
|Interest, including amortization                    |            |                      | (40,971 | )      |                    |   | (40,192 | )      |  |   | (81,898 | )      |  |   | (79,363 | )     
|Total minority interests share of income           |            |                      | (14,860 | )      |                    |   | (13,213 | )      |  |   | (39,312 | )      |  |   | (25,150 | )     
|Total discontinued operations                       |            |                      | 7,803   |        |                    |   | 6,790   |        |  |   | 39,329  |        |  |   | 9,768   |       
|                                                    |            |                      |         |        |                    |   |         |        |  |   |         |       
|                                                    | Net income |                      | $       | 44,535 |                    |   | $       | 21,455 |  |   | $       | 95,415 |  |   | $       | 40,451 | 
|                                                    |            |                      |         |        |                    |   |         |        |  |   |         |       



|                                             |                               |                                       |         |         |                   |  |         |         |           | 
|-------------------------------------------- | ----------------------------- | ------------------------------------- | ------- | ------- | ----------------- |  | ------- | ------- | --------- | 
|                                             |                               | Total Assets as of                    |        
|                                             |                               |                                       |        
|                                             |                               | June 30, 2005                         |         |         | December 31, 2004 | 
|                                             |                               |                                       |         |         |                   | 
|Industrial domestic hub and gateway markets: |                               |                                       |         |         |                   |  |         |        
|                                             | Atlanta                       |                                       | $       | 220,162 |                   |  | $       | 204,554 |          
|                                             | Chicago                       |                                       |         | 507,242 |                   |  |         | 479,919 |          
|                                             | Dallas/ Fort Worth            |                                       |         | 144,911 |                   |  |         | 143,953 |          
|                                             | Los Angeles                   |                                       |         | 938,124 |                   |  |         | 922,401 |          
|                                             | Northern New Jersey/ New York |                                       |         | 812,597 |                   |  |         | 775,784 |          
|                                             | San Francisco Bay Area        |                                       |         | 773,930 |                   |  |         | 788,120 |          
|                                             | Miami                         |                                       |         | 370,918 |                   |  |         | 363,694 |          
|                                             | Seattle                       |                                       |         | 395,515 |                   |  |         | 377,142 |          
|                                             | On-Tarmac                     |                                       |         | 254,732 |                   |  |         | 239,377 |          
|                                             |                               |                                       |         |         |                   | 
|                                             |                               | Total industrial domestic hub markets |         |         | 4,418,131         |  |         |         | 4,294,944 | 
|Other domestic target markets                |                               |                                       | 753,531 |         |                   |  | 825,930 |        
|Other non-target markets and other           |                               |                                       | 335,846 |         |                   |  | 308,428 |        
|International target markets                 |                               |                                       | 680,468 |         |                   |  | 684,184 |        
|Total retail and other markets               |                               |                                       | 8,589   |         |                   |  | 15,915  |        
|Investments in unconsolidated joint ventures |                               |                                       | 121,000 |         |                   |  | 55,166  |        
|Non-segment assets(1)                        |                               |                                       | 306,806 |         |                   |  | 202,376 |        
|                                             |                               |                                       |         |         |                   | 
|                                             |                               | Total assets                          |         | $       | 6,624,371         |  |         | $       | 6,386,943 | 
|                                             |                               |                                       |         |         |                   | 






|    |                                                                                            
|--- | -------------------------------------------------------------------------------------------
|(1) | Non-segment assets consist of corporate assets including cash
    and mortgages receivable.

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AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




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



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

Lease Commitments.


Standby Letters of Credit.


Guarantees. $


Performance and Surety Bonds.


Promoted Interests and Other Contractual Obligations.




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

Litigation.


Environmental Matters.


22



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AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


General Uninsured Losses.


Captive Insurance Company.




|    |                  
|--- | -----------------
|13. | Subsequent Events



23



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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 involve numerous risks
and uncertainties and you should not rely upon them as
predictions of future events. There is no assurance that the
events or circumstances reflected in forward-looking statements
will occur or be achieved. Forward-looking statements are
necessarily dependent on assumptions, data or methods that may
be incorrect or imprecise and we may not be able to realize
them.


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




| |   |                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | changes in general economic conditions or in the real estate
    sector;                                                                                                              
|
| |  | 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);
|
| |  | risks of doing business internationally, including
    unfamiliarity with new markets and currency risks;                                                                             
|
| |  | a downturn in Californias 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;
    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 Managements
Discussion and Analysis of Financial Condition and Results of
Operations  Business Risks and elsewhere in our
Annual Report on Form 10-K for the year ended
December 31, 2004. 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. We assume no obligation
to update or supplement forward-looking statements.




24



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##### Table of Contents



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 June 30, 2005: |                                                      |                    |  |           |             |  |  |                |    |  |  |          
|                                                    | % of total rentable square feet                      |                    |  | 75.1      | %           |  |  | 24.9           | %  |  |  | 100.0     | % 
|                                                    | Occupancy percentage at period end                   |                    |  | 94.9      | %           |  |  | 93.3           | %  |  |  | 94.5      | % 
|                                                    | Same space square footage leased                     |                    |  | 2,090,748 |             |  |  | 733,412        |    |  |  | 2,824,160 |   
|                                                    | Rent increases (decreases) on renewals and rollovers |                    |  | (15.9     | )%          |  |  | (9.3           | )% |  |  | (14.6     | )%
|As of and for the three months ended June 30, 2004: |                                                      |                    |  |           |             |  |  |                |    |  |  |          
|                                                    | % of total rentable square feet                      |                    |  | 74.4      | %           |  |  | 25.6           | %  |  |  | 100.0     | % 
|                                                    | Occupancy percentage at period end                   |                    |  | 93.8      | %           |  |  | 93.1           | %  |  |  | 93.6      | % 
|                                                    | Same space square footage leased                     |                    |  | 3,806,876 |             |  |  | 673,895        |    |  |  | 4,480,771 |   
|                                                    | Rent increases (decreases) on renewals and rollovers |                    |  | (15.3     | )%          |  |  | (4.0           | )% |  |  | (13.7     | )%
|As of and for the six months ended June 30, 2005:   |                                                      |                    |  |           |             |  |  |                |    |  |  |          
|                                                    | % of total rentable square feet                      |                    |  | 75.1      | %           |  |  | 24.9           | %  |  |  | 100.0     | % 
|                                                    | Occupancy percentage at period end                   |                    |  | 94.9      | %           |  |  | 93.3           | %  |  |  | 94.5      | % 
|                                                    | Same space square footage leased                     |                    |  | 5,753,382 |             |  |  | 1,275,567      |    |  |  | 7,028,949 |   
|                                                    | Rent increases (decreases) on renewals and rollovers |                    |  | (12.7     | )%          |  |  | (5.4           | )% |  |  | (11.5     | )%
|As of and for the six months ended June 30, 2004:   |                                                      |                    |  |           |             |  |  |                |    |  |  |          
|                                                    | % of total rentable square feet                      |                    |  | 74.4      | %           |  |  | 25.6           | %  |  |  | 100.0     | % 
|                                                    | Occupancy percentage at period end                   |                    |  | 93.8      | %           |  |  | 93.1           | %  |  |  | 93.6      | % 
|                                                    | Same space square footage leased                     |                    |  | 7,747,455 |             |  |  | 1,294,171      |    |  |  | 9,041,626 |   
|                                                    | Rent increases (decreases) on renewals and rollovers |                    |  | (15.0     | )%          |  |  | (5.6           | )% |  |  | (13.8     | )%






|    |                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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.

25



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26



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##### Table of Contents











Summary of Key Transactions






| |   |                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Acquired twelve buildings in the United States, the Netherlands
    and France, aggregating approximately 2.1 million square
    feet, for $139.9 million, of which 7 buildings were
    acquired through one of our co-investment joint ventures;
|
| |  | Commenced six development projects in North America, totaling
    1.7 million square feet with an estimated total investment
    of approximately $82.1 million (using exchange rates in
    effect at June 30, 2005);                            
|
| |  | Sold one development project available for sale, aggregating
    approximately 19,000 square feet, for an aggregate price of
    $2.1 million; and                                                                                                
|
| |  | Divested ourselves of four industrial buildings, aggregating
    approximately 0.3 million square feet, for an aggregate
    price of $33.2 million.                                                                                              





| |   |                                                                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Acquired 18 buildings in the United States, Netherlands and
    France, aggregating approximately 2.9 million square feet,
    for $217.7 million, through three of our co-investment
    joint ventures;
|
| |  | Acquired an approximate 43% unconsolidated equity interest in
    G.Accion, one of Mexicos largest real estate companies for
    $46.1 million;                                                         

27



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| |   |                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Commenced thirteen development projects in North America and
    Amsterdam, totaling 2.6 million square feet with an
    estimated total investment of approximately $172.1 million
    (using exchange rates in effect at June 30, 2005);
|
| |  | Sold two land parcels and two development projects available for
    sale, aggregating approximately 43,000 square feet, for an
    aggregate price of $45.0 million; and                                                                 
|
| |  | Divested ourselves of 28 industrial buildings, aggregating
    approximately 1.9 million square feet, for an aggregate
    price of $175.3 million.                                                                                       







| |   |                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Assumed $25.0 million of debt for our co-investment joint
    ventures at a weighted average interest rate of 4.9%;                                                                                                            
|
| |  | Formed an unconsolidated co-investment joint venture, AMB Japan
    Fund I, L.P., with planned investment of capacity of
    approximately $2.2 billion. We contributed
    $106.9 million of operating properties to the fund.
|
| |  | Contributed an industrial property for $23.6 million to
    AMB-SGP Mexico, LLC, an unconsolidated co-investment joint
    venture.                                                                                            





| |   |                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Assumed $39.3 million of debt for our co-investment joint
    ventures at a weighted average interest rate of 5.9%;                                                                                                            
|
| |  | Obtained $13.6 million of debt (using exchange rates at
    June 30, 2005) with a weighted average interest rate of
    4.7% for international acquisitions.                                                                   
|
| |  | Formed an unconsolidated co-investment joint venture, AMB Japan
    Fund I, L.P., with planned investment of capacity of
    approximately $2.2 billion. We contributed
    $106.9 million of operating properties to the fund.
|
| |  | Contributed an industrial property for $23.6 million to
    AMB-SGP Mexico, LLC, an unconsolidated co-investment joint
    venture.                                                                                            



Critical Accounting Policies




THE COMPANY




28



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29



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www.amb.com


Operating Strategy






Growth Strategies




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



30



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







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







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





31



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



RESULTS OF OPERATIONS








32



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##### Table of Contents



For the Three Months ended
June 30, 2005 and 2004 (dollars in millions):


|                       |                          |                       |                |     |       |       |     |          |       |       |          |     |      |      |      |      |       |      |  
|---------------------- | ------------------------ | --------------------- | -------------- | --- | ----- | ----- | --- | -------- | ----- | ----- | -------- | --- | ---- | ---- | ---- | ---- | ----- | ---- | -
|Revenues               |                          | 2005                  |                |     | 2004  |       |     | $ Change |       |       | % Change |    
|                       |                          |                       |                |     |       |       |     |          |       |       |          |    
|Rental revenues        |                          |                       |                |     |       |       |     |          |       |       |          |     |      |      |      |     
|                       | U.S. industrial:         |                       |                |     |       |       |     |          |       |       |          |     |      |      |      |      |      
|                       |                          | Same store            |                | $   | 139.2 |       |     | $        | 139.3 |       |          | $   | (0.1 | )    |      |      | (0.1  | )%  
|                       |                          | 2004 acquisitions     |                |     | 14.9  |       |     |          | 4.1   |       |          |     | 10.8 |      |      |      | 263.4 | %   
|                       |                          | 2005 acquisitions     |                |     | 2.2   |       |     |          |      |       |          |     | 2.2  |      |      |      |      | %   
|                       |                          | Development           |                |     | 0.5   |       |     |          | 2.3   |       |          |     | (1.8 | )    |      |      | (78.3 | )%  
|                       |                          | Other industrial      |                |     | 2.4   |       |     |          | 0.9   |       |          |     | 1.5  |      |      |      | 166.7 | %   
|                       | International industrial |                       |                | 8.7 |       |       |     | 5.6      |       |       |          | 3.1 |      |      |      | 55.4 | %    
|                       | Retail                   |                       |                | 0.9 |       |       |     | 0.9      |       |       |          |    |      |      |      |     | %    
|                       |                          |                       |                |     |       |       |     |          |       |       |          |    
|                       |                          | Total rental revenues |                |     | 168.8 |       |     |          | 153.1 |       |          |     | 15.7 |      |      |      | 10.3  | %   
|Private capital income |                          |                       | 3.5            |     |       |       | 2.9 |          |       |       | 0.6      |     |      |      | 20.7 | %   
|                       |                          |                       |                |     |       |       |     |          |       |       |          |    
|                       |                          |                       | Total revenues |     | $     | 172.3 |     |          | $     | 156.0 |          |     | $    | 16.3 |      |      |       | 10.4 | %
|                       |                          |                       |                |     |       |       |     |          |       |       |          |    



|                              |                          |                                |                          |      |      |       |      |          |      |      |          |     |      |      |      |      |       |      |  
|----------------------------- | ------------------------ | ------------------------------ | ------------------------ | ---- | ---- | ----- | ---- | -------- | ---- | ---- | -------- | --- | ---- | ---- | ---- | ---- | ----- | ---- | -
|Costs and Expenses            |                          | 2005                           |                          |      | 2004 |       |      | $ Change |      |      | % Change |    
|                              |                          |                                |                          |      |      |       |      |          |      |      |          |    
|Property operating costs:     |                          |                                |                          |      |      |       |      |          |      |      |          |     |      |      |      |     
|                              | Rental expenses          |                                | $                        | 23.4 |      |       | $    | 21.4     |      |      | $        | 2.0 |      |      |      | 9.3  | %    
|                              | Real estate taxes        |                                |                          | 20.5 |      |       |      | 18.4     |      |      |          | 2.1 |      |      |      | 11.4 | %    
|                              |                          |                                |                          |      |      |       |      |          |      |      |          |    
|                              |                          | Total property operating costs |                          | $    | 43.9 |       |      | $        | 39.8 |      |          | $   | 4.1  |      |      |      | 10.3  | %   
|                              |                          |                                |                          |      |      |       |      |          |      |      |          |    
|Property operating costs      |                          |                                |                          |      |      |       |      |          |      |      |          |     |      |      |      |     
|                              | U.S. industrial:         |                                |                          |      |      |       |      |          |      |      |          |     |      |      |      |      |      
|                              |                          | Same store                     |                          | $    | 36.0 |       |      | $        | 36.3 |      |          | $   | (0.3 | )    |      |      | (0.8  | )%  
|                              |                          | 2004 acquisitions              |                          |      | 4.4  |       |      |          | 1.3  |      |          |     | 3.1  |      |      |      | 238.5 | %   
|                              |                          | 2005 acquisitions              |                          |      | 0.4  |       |      |          |     |      |          |     | 0.4  |      |      |      |      | %   
|                              |                          | Development                    |                          |      | 0.2  |       |      |          | 0.4  |      |          |     | (0.2 | )    |      |      | (50.0 | )%  
|                              |                          | Other industrial               |                          |      | 0.3  |       |      |          | 0.1  |      |          |     | 0.2  |      |      |      | 200.0 | %   
|                              | International industrial |                                |                          | 2.3  |      |       |      | 1.4      |      |      |          | 0.9 |      |      |      | 64.3 | %    
|                              | Retail                   |                                |                          | 0.3  |      |       |      | 0.3      |      |      |          |    |      |      |      |     | %    
|                              |                          |                                |                          |      |      |       |      |          |      |      |          |    
|                              |                          | Total property operating costs |                          |      | 43.9 |       |      |          | 39.8 |      |          |     | 4.1  |      |      |      | 10.3  | %   
|Depreciation and amortization |                          |                                | 44.5                     |      |      |       | 37.7 |          |      |      | 6.8      |     |      |      | 18.0 | %   
|General and administrative    |                          |                                | 18.6                     |      |      |       | 14.7 |          |      |      | 3.9      |     |      |      | 26.5 | %   
|Fund costs                    |                          |                                | 0.4                      |      |      |       | 0.4  |          |      |      |         |     |      |      |     | %   
|                              |                          |                                |                          |      |      |       |      |          |      |      |          |    
|                              |                          |                                | Total costs and expenses |      | $    | 107.4 |      |          | $    | 92.6 |          |     | $    | 14.8 |      |      |       | 16.0 | %
|                              |                          |                                |                          |      |      |       |      |          |      |      |          |    

33



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|                                                         |                                        |      |       |       |      |   |       |          |   |   |          |       |   |  |       |       |   
|-------------------------------------------------------- | -------------------------------------- | ---- | ----- | ----- | ---- | - | ----- | -------- | - | - | -------- | ----- | - |  | ----- | ----- | --
|Other Income and (Expenses)                              |                                        | 2005 |       |       | 2004 |   |       | $ Change |   |   | % Change |      
|                                                         |                                        |      |       |       |      |   |       |          |   |   |          |      
|Equity in earnings of unconsolidated joint ventures, net |                                        | $    | 7.2   |       |      | $ | 1.0   |          |   | $ | 6.2      |       |   |  | 620.0 | %    
|Other income and expenses, net                           |                                        |      | 0.9   |       |      |   | 0.5   |          |   |   | 0.4      |       |   |  | 80.0  | %    
|Gains from dispositions of real estate interests         |                                        |      | 17.6  |       |      |   |      |          |   |   | 17.6     |       |   |  |      | %    
|Development profits, net of taxes                        |                                        |      | 2.0   |       |      |   | 3.2   |          |   |   | (1.2     | )     |   |  | (37.5 | )%   
|Interest expense, including amortization                 |                                        |      | (41.0 | )     |      |   | (40.2 | )        |   |   | 0.8      |       |   |  | 2.0   | %    
|                                                         |                                        |      |       |       |      |   |       |          |   |   |          |      
|                                                         | Total other income and (expenses), net |      | $     | (13.3 | )    |   | $     | (35.5    | ) |   | $        | (22.2 | ) |  |       | (62.5 | )%
|                                                         |                                        |      |       |       |      |   |       |          |   |   |          |      



|                                                                              |                               |      |     |     |      |   |     |          |  |   |          |     |  |  |       |      |  
|----------------------------------------------------------------------------- | ----------------------------- | ---- | --- | --- | ---- | - | --- | -------- |  | - | -------- | --- |  |  | ----- | ---- | -
|Discontinued Operations                                                       |                               | 2005 |     |     | 2004 |   |     | $ Change |  |   | % Change |    
|                                                                              |                               |      |     |     |      |   |     |          |  |   |          |    
|Income attributable to discontinued operations, net of minority
    interests |                               | $    | 1.1 |     |      | $ | 4.5 |          |  | $ | (3.4     | )   |  |  | (75.6 | )%  
|Gains from dispositions of real estate, net of minority interests             |                               |      | 6.7 |     |      |   | 2.3 |          |  |   | 4.4      |     |  |  | 191.3 | %   
|                                                                              |                               |      |     |     |      |   |     |          |  |   |          |    
|                                                                              | Total discontinued operations |      | $   | 7.8 |      |   | $   | 6.8      |  |   | $        | 1.0 |  |  |       | 14.7 | %
|                                                                              |                               |      |     |     |      |   |     |          |  |   |          |    



|                             |  |      |      |   |      |   |      |          |  |          |   |  |  |  |   |  
|---------------------------- |  | ---- | ---- | - | ---- | - | ---- | -------- |  | -------- | - |  |  |  | - | -
|Preferred Units              |  | 2005 |      |   | 2004 |   |      | $ Change |  | % Change |  
|                             |  |      |      |   |      |   |      |          |  |          |  
|Preferred unit distributions |  | $    | (3.4 | ) |      | $ | (3.4 | )        |  | $        |  |  |  |  |  | %

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For the Six Months ended
June 30, 2005 and 2004 (dollars in millions):


|                       |                          |                       |                |      |       |       |     |          |       |       |          |     |      |      |      |      |       |      |  
|---------------------- | ------------------------ | --------------------- | -------------- | ---- | ----- | ----- | --- | -------- | ----- | ----- | -------- | --- | ---- | ---- | ---- | ---- | ----- | ---- | -
|Revenues               |                          | 2005                  |                |      | 2004  |       |     | $ Change |       |       | % Change |    
|                       |                          |                       |                |      |       |       |     |          |       |       |          |    
|Rental revenues        |                          |                       |                |      |       |       |     |          |       |       |          |     |      |      |      |     
|                       | U.S. industrial:         |                       |                |      |       |       |     |          |       |       |          |     |      |      |      |      |      
|                       |                          | Same store            |                | $    | 279.5 |       |     | $        | 281.4 |       |          | $   | (1.9 | )    |      |      | (0.7  | )%  
|                       |                          | 2004 acquisitions     |                |      | 28.7  |       |     |          | 5.6   |       |          |     | 23.1 |      |      |      | 412.5 | %   
|                       |                          | 2005 acquisitions     |                |      | 2.9   |       |     |          |      |       |          |     | 2.9  |      |      |      |      | %   
|                       |                          | Development           |                |      | 0.9   |       |     |          | 4.7   |       |          |     | (3.8 | )    |      |      | (80.9 | )%  
|                       |                          | Other industrial      |                |      | 6.8   |       |     |          | 1.5   |       |          |     | 5.3  |      |      |      | 353.3 | %   
|                       | International industrial |                       |                | 15.6 |       |       |     | 11.5     |       |       |          | 4.1 |      |      |      | 35.7 | %    
|                       | Retail                   |                       |                | 1.8  |       |       |     | 1.8      |       |       |          |    |      |      |      |     | %    
|                       |                          |                       |                |      |       |       |     |          |       |       |          |    
|                       |                          | Total rental revenues |                |      | 336.2 |       |     |          | 306.5 |       |          |     | 29.7 |      |      |      | 9.7   | %   
|Private capital income |                          |                       | 6.8            |      |       |       | 5.4 |          |       |       | 1.4      |     |      |      | 25.9 | %   
|                       |                          |                       |                |      |       |       |     |          |       |       |          |    
|                       |                          |                       | Total revenues |      | $     | 343.0 |     |          | $     | 311.9 |          |     | $    | 31.1 |      |      |       | 10.0 | %
|                       |                          |                       |                |      |       |       |     |          |       |       |          |    



|                              |                          |                                |                          |      |      |       |      |          |      |       |          |      |      |      |      |       |       |      |  
|----------------------------- | ------------------------ | ------------------------------ | ------------------------ | ---- | ---- | ----- | ---- | -------- | ---- | ----- | -------- | ---- | ---- | ---- | ---- | ----- | ----- | ---- | -
|Costs and Expenses            |                          | 2005                           |                          |      | 2004 |       |      | $ Change |      |       | % Change |     
|                              |                          |                                |                          |      |      |       |      |          |      |       |          |     
|Property operating costs:     |                          |                                |                          |      |      |       |      |          |      |       |          |      |      |      |      |      
|                              | Rental expenses          |                                | $                        | 47.4 |      |       | $    | 43.6     |      |       | $        | 3.8  |      |      |      | 8.7   | %    
|                              | Real estate taxes        |                                |                          | 40.2 |      |       |      | 36.4     |      |       |          | 3.8  |      |      |      | 10.4  | %    
|                              |                          |                                |                          |      |      |       |      |          |      |       |          |     
|                              |                          | Total property operating costs |                          | $    | 87.6 |       |      | $        | 80.0 |       |          | $    | 7.6  |      |      |       | 9.5   | %   
|                              |                          |                                |                          |      |      |       |      |          |      |       |          |     
|Property operating costs      |                          |                                |                          |      |      |       |      |          |      |       |          |      |      |      |      |      
|                              | U.S. industrial:         |                                |                          |      |      |       |      |          |      |       |          |      |      |      |      |       |      
|                              |                          | Same store                     |                          | $    | 73.7 |       |      | $        | 73.6 |       |          | $    | 0.1  |      |      |       | 0.1   | %   
|                              |                          | 2004 acquisitions              |                          |      | 7.9  |       |      |          | 1.8  |       |          |      | 6.1  |      |      |       | 338.9 | %   
|                              |                          | 2005 acquisitions              |                          |      | 0.6  |       |      |          |     |       |          |      | 0.6  |      |      |       |      | %   
|                              |                          | Development                    |                          |      | 0.6  |       |      |          | 1.2  |       |          |      | (0.6 | )    |      |       | (50.0 | )%  
|                              |                          | Other industrial               |                          |      | 0.6  |       |      |          | 0.1  |       |          |      | 0.5  |      |      |       | 500.0 | %   
|                              | International industrial |                                |                          | 3.7  |      |       |      | 2.7      |      |       |          | 1.0  |      |      |      | 37.0  | %    
|                              | Retail                   |                                |                          | 0.5  |      |       |      | 0.6      |      |       |          | (0.1 | )    |      |      | (16.7 | )%   
|                              |                          |                                |                          |      |      |       |      |          |      |       |          |     
|                              |                          | Total property operating costs |                          |      | 87.6 |       |      |          | 80.0 |       |          |      | 7.6  |      |      |       | 9.5   | %   
|Depreciation and amortization |                          |                                | 87.5                     |      |      |       | 74.6 |          |      |       | 12.9     |      |      |      | 17.3 | %    
|General and administrative    |                          |                                | 37.4                     |      |      |       | 29.3 |          |      |       | 8.1      |      |      |      | 27.6 | %    
|Fund costs                    |                          |                                | 0.8                      |      |      |       | 0.7  |          |      |       | 0.1      |      |      |      | 14.3 | %    
|                              |                          |                                |                          |      |      |       |      |          |      |       |          |     
|                              |                          |                                | Total costs and expenses |      | $    | 213.3 |      |          | $    | 184.6 |          |      | $    | 28.7 |      |       |       | 15.5 | %
|                              |                          |                                |                          |      |      |       |      |          |      |       |          |     

35



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|                                                         |                                        |      |       |       |      |   |       |          |   |   |          |       |   |  |       |       |   
|-------------------------------------------------------- | -------------------------------------- | ---- | ----- | ----- | ---- | - | ----- | -------- | - | - | -------- | ----- | - |  | ----- | ----- | --
|Other Income and (Expenses)                              |                                        | 2005 |       |       | 2004 |   |       | $ Change |   |   | % Change |      
|                                                         |                                        |      |       |       |      |   |       |          |   |   |          |      
|Equity in earnings of unconsolidated joint ventures, net |                                        | $    | 8.4   |       |      | $ | 2.7   |          |   | $ | 5.7      |       |   |  | 211.1 | %    
|Other income and expenses, net                           |                                        |      | 0.3   |       |      |   | 2.0   |          |   |   | (1.7     | )     |   |  | (85.0 | )%   
|Gains from dispositions of real estate interests         |                                        |      | 18.9  |       |      |   |      |          |   |   | 18.9     |       |   |  |      | %    
|Development profits, net of taxes                        |                                        |      | 19.9  |       |      |   | 3.2   |          |   |   | 16.7     |       |   |  | 521.9 | %    
|Interest expense, including amortization                 |                                        |      | (81.8 | )     |      |   | (79.4 | )        |   |   | 2.4      |       |   |  | 3.0   | %    
|                                                         |                                        |      |       |       |      |   |       |          |   |   |          |      
|                                                         | Total other income and (expenses), net |      | $     | (34.3 | )    |   | $     | (71.5    | ) |   | $        | (37.2 | ) |  |       | (52.0 | )%
|                                                         |                                        |      |       |       |      |   |       |          |   |   |          |      



|                                                                              |                               |      |      |      |      |   |     |          |  |   |          |      |  |  |         |       |  
|----------------------------------------------------------------------------- | ----------------------------- | ---- | ---- | ---- | ---- | - | --- | -------- |  | - | -------- | ---- |  |  | ------- | ----- | -
|Discontinued Operations                                                       |                               | 2005 |      |      | 2004 |   |     | $ Change |  |   | % Change |     
|                                                                              |                               |      |      |      |      |   |     |          |  |   |          |     
|Income attributable to discontinued operations, net of minority
    interests |                               | $    | 3.1  |      |      | $ | 7.8 |          |  | $ | (4.7     | )    |  |  | (60.3   | )%   
|Gains from dispositions of real estate, net of minority interests             |                               |      | 36.2 |      |      |   | 2.0 |          |  |   | 34.2     |      |  |  | 1,710.0 | %    
|                                                                              |                               |      |      |      |      |   |     |          |  |   |          |     
|                                                                              | Total discontinued operations |      | $    | 39.3 |      |   | $   | 9.8      |  |   | $        | 29.5 |  |  |         | 301.0 | %
|                                                                              |                               |      |      |      |      |   |     |          |  |   |          |     



|                             |  |      |      |   |      |   |      |          |  |          |   |  |  |  |   |  
|---------------------------- |  | ---- | ---- | - | ---- | - | ---- | -------- |  | -------- | - |  |  |  | - | -
|Preferred Units              |  | 2005 |      |   | 2004 |   |      | $ Change |  | % Change |  
|                             |  |      |      |   |      |   |      |          |  |          |  
|Preferred unit distributions |  | $    | (6.7 | ) |      | $ | (6.7 | )        |  | $        |  |  |  |  |  | %

LIQUIDITY AND CAPITAL RESOURCES


Balance Sheet Strategy.


36



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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                                                                                        
|
| |  | 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.



Capital Resources


Property Divestitures.


Dispositions of Real Estate Interests.




37



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##### Table of Contents



Development Sales.


Properties Held for Divestiture.


Mortgage and Loan Receivables.


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 Institutional Alliance Fund I, L.P.      |  | AMB Institutional Alliance REIT I, Inc.(2)                        |  |             | 21 | % |                   | $ | 420,000 | 
|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(3)                                          |  |             | 50 | % |                   | $ | 425,000 | 
|AMB Institutional Alliance Fund II, L.P.     |  | AMB Institutional Alliance REIT II, Inc.(4)                       |  |             | 20 | % |                   | $ | 489,000 | 
|AMB-AMS, L.P.(5)                             |  | PMT, SPW and TNO(6)                                               |  |             | 39 | % |                   | $ | 200,000 | 
|AMB Institutional Alliance Fund III, L.P.(7) |  | AMB Institutional Alliance REIT III, Inc.                         |  |             | 20 | % |                   |   | N/A     | 






|    |                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------
|(1) | Planned capitalization includes anticipated debt and both
    partners expected equity contributions.          
|   
|(2) | Comprised of 16 institutional investors as unitholders as of
    June 30, 2005.                                 
|   
|(3) | A subsidiary of the real estate investment subsidiary of the
    Government of Singapore Investment Corporation.

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|    |                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4) | Comprised of 13 institutional investors as unitholders and one
    third-party limited partner as of June 30, 2005.                                                                                       
|   
|(5) | AMB-AMS, L.P. is a co-investment partnership with three Dutch
    pension funds advised by Mn Services NV.                                                                                                
|   
|(6) | PMT is Stichting Pensioenfonds Metaal en Techniek, SPW is
    Stichting Pensioenfonds voor de Woningcorporaties and TNO is
    Stichting Pensioenfonds TNO.                                               
|   
|(7) | 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.

|                                           |  |                       |                                   |             |            |  |                  |                   |  |   |           | 
|------------------------------------------ |  | --------------------- | --------------------------------- | ----------- | ---------- |  | ---------------- | ----------------- |  | - | --------- | 
|                                           |  |                       |                                   | 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               | %                 |  | $ | 2,230,000 | 






|    |                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------
|(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 June 30, 2005.                                          

Partners Capital.




Debt.






39



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Credit Facilities.






40



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|                                                                     |                      |                            |                         |         |         |         |          |             |         |           |           |           |           |               |       |       |            |       |         |         |         |         |          |           |           |           | 
|-------------------------------------------------------------------- | -------------------- | -------------------------- | ----------------------- | ------- | ------- | ------- | -------- | ----------- | ------- | --------- | --------- | --------- | --------- | ------------- | ----- | ----- | ---------- | ----- | ------- | ------- | ------- | ------- | -------- | --------- | --------- | --------- | 
|Debt                                                                 |                     
|                                                                     |                     
|                                                                     |                      | Our                        |                         |         | Joint   |         |          | Unsecured   |         |           |          
|                                                                     |                      | Secured                    |                         |         | Venture |         |          | Senior Debt |         |           | Unsecured |           |           | Credit        |       |       |           
|                                                                     |                      | Debt(4)                    |                         |         | Debt    |         |          | Securities  |         |           | Debt      |           |           | Facilities(1) |       |       | Total Debt |      
|                                                                     |                      |                            |                         |         |         |         |          |             |         |           |           |           |           |               |       |       |            |      
|2005                                                                 |                      | $                          | 20,267                  |         |         | $       | 30,230   |             |         | $         | 150,000   |           |           | $             | 330   |       |            | $     |        |         |         | $       | 200,827  |          
|2006                                                                 |                      |                            | 80,648                  |         |         |         | 76,319   |             |         |           | 75,000    |           |           |               | 698   |       |            |       |        |         |         |         | 232,665  |          
|2007                                                                 |                      |                            | 12,218                  |         |         |         | 68,705   |             |         |           | 75,000    |           |           |               | 752   |       |            |       | 477,307 |         |         |         | 633,982  |          
|2008                                                                 |                      |                            | 40,424                  |         |         |         | 190,582  |             |         |           | 175,000   |           |           |               | 810   |       |            |       | 72,090  |         |         |         | 478,906  |          
|2009                                                                 |                      |                            | 4,900                   |         |         |         | 131,403  |             |         |           | 100,000   |           |           |               | 872   |       |            |       |        |         |         |         | 237,175  |          
|2010                                                                 |                      |                            | 70,717                  |         |         |         | 150,448  |             |         |           | 75,000    |           |           |               | 941   |       |            |       |        |         |         |         | 297,106  |          
|2011                                                                 |                      |                            | 21,575                  |         |         |         | 417,973  |             |         |           | 75,000    |           |           |               | 1,014 |       |            |       |        |         |         |         | 515,562  |          
|2012                                                                 |                      |                            | 146,796                 |         |         |         | 178,427  |             |         |           |          |           |           |               | 1,093 |       |            |       |        |         |         |         | 326,316  |          
|2013                                                                 |                      |                            | 2,155                   |         |         |         | 133,833  |             |         |           | 53,940    |           |           |               | 920   |       |            |       |        |         |         |         | 190,848  |          
|2014                                                                 |                      |                            | 12,051                  |         |         |         | 3,777    |             |         |           |          |           |           |               | 616   |       |            |       |        |         |         |         | 16,444   |          
|Thereafter                                                           |                      |                            | 6,350                   |         |         |         | 33,358   |             |         |           | 225,000   |           |           |               | 664   |       |            |       |        |         |         |         | 265,372  |          
|                                                                     |                      |                            |                         |         |         |         |          |             |         |           |           |           |           |               |       |       |            |      
|                                                                     | Subtotal             |                            |                         | 418,101 |         |         |          | 1,415,055   |         |           |           | 1,003,940 |           |               |       | 8,710 |            |       |         | 549,397 |         |         |          | 3,395,203 |          
|                                                                     | Unamortized premiums |                            |                         | 3,084   |         |         |          | 7,621       |         |           |           |          |           |               |       |      |            |       |         |        |         |         |          | 10,705    |          
|                                                                     |                      |                            |                         |         |         |         |          |             |         |           |           |           |           |               |       |       |            |      
|                                                                     |                      |                            | Total consolidated debt |         |         | 421,185 |          |             |         | 1,422,676 |           |           |           | 1,003,940     |       |       |            | 8,710 |         |         |         | 549,397 |          |           |           | 3,405,908 | 
|Our share of unconsolidated joint venture debt(2)                    |                      |                            |                        |         |         |         | 154,574  |             |         |           |          |           |           |               |      |       |            |       |        |         |         |         | 154,574  |          
|                                                                     |                      |                            |                         |         |         |         |          |             |         |           |           |           |           |               |       |       |            |      
|                                                                     |                      |                            | Total debt              |         |         | 421,185 |          |             |         | 1,577,250 |           |           |           | 1,003,940     |       |       |            | 8,710 |         |         |         | 549,397 |          |           |           | 3,560,482 | 
|Joint venture partners share of consolidated joint venture
    debt |                      |                            |                        |         |         |         | (987,442 | )           |         |           |          |           |           |               |      |       |            |       |        |         |         |         | (987,442 | )        
|                                                                     |                      |                            |                         |         |         |         |          |             |         |           |           |           |           |               |       |       |            |      
|                                                                     |                      | Our share of total debt(3) |                         | $       | 421,185 |         |          | $           | 589,808 |           |           | $         | 1,003,940 |               |       | $     | 8,710      |       |         | $       | 549,397 |         |          | $         | 2,573,040 |          
|                                                                     |                      |                            |                         |         |         |         |          |             |         |           |           |           |           |               |       |       |            |      
|Weighed average interest rate                                        |                      |                            | 5.3                     | %       |         |         | 6.3      | %           |         |           | 6.6       | %         |           |               | 7.5   | %     |            |       | 2.5     | %       |         |         | 5.6      | %        
|Weighed average maturity (in years)                                  |                      |                            | 5.2                     |         |         |         | 5.6      |             |         |           | 5.1       |           |           |               | 9.3   |       |            |       | 2.1     |         |         |         | 4.9      |          

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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes $126.0 million, $214.5 million,
    $38.8 million and $6.7 million in Euro, Yen, Canadian
    dollar and Singapore dollar-based borrowings, respectively,
    translated to U.S. dollars using the functional exchange
    rates in effect on June 30, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|(2) | The weighted average interest and maturity for the
    unconsolidated joint venture debt were 5.0% and 4.6 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 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.
|   
|(4) | Our secured debt and joint venture debt include debt related to
    international assets in the amount of $226.8 million. Of
    this, $148.8 million is associated with assets located in
    Asia and the remaining $78.0 million is related to assets
    located in Europe.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

|                                    |       |             |            |            |          |   |       |          |  |   |           |           | 
|----------------------------------- | ----- | ----------- | ---------- | ---------- | -------- | - | ----- | -------- |  | - | --------- | --------- | 
|Market Capital                      |      
|                                    |      
|                                    |       | Units       |            |            | Market   |   |       | Market   | 
|Security                            |       | Outstanding |            |            | Price(1) |   |       | Value(1) | 
|                                    |       |             |            |            |          |   |       |          | 
|Common units                        |       |             | 83,985,626 |            |          | $ | 43.43 |          |  | $ | 3,647,496 |          
|Common limited partnership units(2) |       |             | 4,719,823  |            |          | $ | 43.43 |          |  |   | 204,982   |          
|                                    |       |             |            |            |          |   |       |          | 
|                                    | Total |             |            | 88,705,449 |          |   |       |          |  |   | $         | 3,852,478 | 
|                                    |       |             |            |            |          |   |       |          | 






| |     |                                                                                                                                                                                     
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (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 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 H preferred units |                        |              | 8.13 | %    |             |   | 42,000 |                       |  |  | September 2005                | 
|Series I preferred units |                        |              | 8.00 | %    |             |   | 25,500 |                       |  |  | March 2006                    | 
|Series J preferred units |                        |              | 7.95 | %    |             |   | 40,000 |                       |  |  | September 2006                | 
|Series K preferred units |                        |              | 7.95 | %    |             |   | 40,000 |                       |  |  | April 2007                    | 
|Series N preferred units |                        |              | 5.00 | %    |             |   | 36,479 |                       |  |  | September 2006-September 2009 | 
|Series L preferred units |                        |              | 6.50 | %    |             |   | 50,000 |                       |  |  | June 2008                     | 
|Series M preferred units |                        |              | 6.75 | %    |             |   | 57,500 |                       |  |  | November 2008                 | 
|                         |                        |              |      |      |             |   |        |                       | 
|                         | Weighted average/total |              |      | 7.29 | %           |   | $      | 392,325               |  |  |                               |  | 
|                         |                        |              |      |      |             |   |        |                       | 

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|                                                                                          |  |      
|----------------------------------------------------------------------------------------- |  | -----
|Capitalization Ratios as of June 30, 2005                                                
|                                                                                         
|Total debt-to-total market capitalization(1)                                              |  | 45.6%
|Our share of total debt-to-our share of total market
    capitalization(1)                |  | 37.7%
|Total debt plus preferred-to-total market capitalization(1)                               |  | 50.6%
|Our share of total debt plus preferred-to-our share of total
    market capitalization(1) |  | 43.5%
|Our share of total debt-to-our share of total book
    capitalization(1)                  |  | 55.4%






| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (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s 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 June 30, 2005. 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
    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






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|                      |  |          |                                          |                |      |   |                |      |  |   |       |  |  |      |       |  |  |   |       | 
|--------------------- |  | -------- | ---------------------------------------- | -------------- | ---- | - | -------------- | ---- |  | - | ----- |  |  | ---- | ----- |  |  | - | ----- | 
|                      |  |          |                                          | For the        |      |   | For the        |     
|                      |  |          |                                          | three months   |      |   | six months     |     
|                      |  |          |                                          | ended June 30, |      |   | ended June 30, |     
|                      |  |          |                                          |                |      |   |                |     
|Paying Entity         |  | Security |                                          |                | 2005 |   |                | 2004 |  |   | 2005  |  |  | 2004 |      
|                      |  |          |                                          |                |      |   |                |      |  |   |       |  |  |      |      
|Operating Partnership |  |          | Common limited partnership units         |                |      | $ | 0.440          |      |  | $ | 0.425 |  |  | $    | 0.880 |  |  | $ | 0.850 | 
|Operating Partnership |  |          | Series J preferred units                 |                |      | $ | 0.994          |      |  | $ | 0.994 |  |  | $    | 1.988 |  |  | $ | 1.988 | 
|Operating Partnership |  |          | Series K preferred units                 |                |      | $ | 0.994          |      |  | $ | 0.994 |  |  | $    | 1.988 |  |  | $ | 1.988 | 
|AMB Property II, L.P. |  |          | Class B common limited partnership units |                |      | $ | 0.440          |      |  | $ | 0.425 |  |  | $    | 0.880 |  |  | $ | 0.850 | 
|AMB Property II, L.P. |  |          | Series D preferred units                 |                |      | $ | 0.969          |      |  | $ | 0.969 |  |  | $    | 1.938 |  |  | $ | 1.938 | 
|AMB Property II, L.P. |  |          | Series E preferred units                 |                |      | $ | 0.969          |      |  | $ | 0.969 |  |  | $    | 1.938 |  |  | $ | 1.938 | 
|AMB Property II, L.P. |  |          | Series F preferred units                 |                |      | $ | 0.994          |      |  | $ | 0.994 |  |  | $    | 1.988 |  |  | $ | 1.988 | 
|AMB Property II, L.P. |  |          | Series H preferred units                 |                |      | $ | 1.016          |      |  | $ | 1.016 |  |  | $    | 2.031 |  |  | $ | 2.031 | 
|AMB Property II, L.P. |  |          | Series I preferred units                 |                |      | $ | 1.000          |      |  | $ | 1.000 |  |  | $    | 2.000 |  |  | $ | 2.000 | 
|AMB Property II, L.P. |  |          | Series N preferred units                 |                |      | $ | 0.625          |      |  |   | n/a   |  |  | $    | 1.250 |  |  |   | n/a   | 



Capital Commitments


Developments.


Acquisitions.


44



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##### Table of Contents



Lease Commitments.


Co-investment Joint Ventures.


Captive Insurance Company.


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 transactions that had not
    been asserted prior to our formation transactions;
|
| |  | accrued but unpaid liabilities incurred in the ordinary course
    of business;                                                                                                        
|
| |  | tax liabilities; and                                                                                                                                                                   
|
| |  | claims for indemnification by the officers and directors of our
    general partners predecessors and others indemnified by
    these entities.                                       

OFF-BALANCE SHEET ARRANGEMENTS


Standby Letters of Credit.


Guarantees.


45



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$


Performance and Surety Bonds.


Promoted Interests and Other Contractual Obligations.


SUPPLEMENTAL EARNINGS MEASURES


FFO.




46



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|                                                                            |                                                                               |                            |         |         |                          |   |        |         |            |   |         |         |            |   |        |         |            | 
|--------------------------------------------------------------------------- | ----------------------------------------------------------------------------- | -------------------------- | ------- | ------- | ------------------------ | - | ------ | ------- | ---------- | - | ------- | ------- | ---------- | - | ------ | ------- | ---------- | 
|                                                                            |                                                                               | For the Three Months Ended |         |         | For the Six Months Ended |  
|                                                                            |                                                                               | June 30,                   |         |         | June 30,                 |  
|                                                                            |                                                                               |                            |         |         |                          |  
|                                                                            |                                                                               | 2004                       |         |         | 2003                     |   |        | 2004    |            |   | 2003    |        
|                                                                            |                                                                               |                            |         |         |                          |   |        |         |            |   |         |        
|Net income                                                                  |                                                                               | $                          | 44,535  |         |                          | $ | 21,455 |         |            | $ | 95,415  |         |            | $ | 40,451 |        
|Income available to common unitholders attributable to limited
    partners |                                                                               |                            | (2,156  | )       |                          |   | (959   | )       |            |   | (4,679  | )       |            |   | (1,783 | )      
|Gains from dispositions of real estate, net of minority interests           |                                                                               |                            | (22,992 | )       |                          |   | (2,161 | )       |            |   | (52,238 | )       |            |   | (1,875 | )      
|Depreciation and amortization:                                              |                                                                               |                            |         |         |                          |   |        |         |            |   |         |         |            |   |        |        
|                                                                            | Total depreciation and amortization                                           |                            |         | 44,503  |                          |   |        | 37,740  |            |   |         | 87,539  |            |   |        | 74,580  |           
|                                                                            | Discontinued operations depreciation                                         |                            |         | 427     |                          |   |        | 2,719   |            |   |         | 1,513   |            |   |        | 5,527   |           
|                                                                            | Non-real estate depreciation                                                  |                            |         | (802    | )                        |   |        | (161    | )          |   |         | (1,547  | )          |   |        | (336    | )         
|Adjustments to derive FFO from consolidated joint ventures:                 |                                                                               |                            |         |         |                          |   |        |         |            |   |         |         |            |   |        |        
|                                                                            | Joint venture partners minority interests (Net income                        |                            |         | 10,860  |                          |   |        | 9,260   |            |   |         | 22,144  |            |   |        | 17,846  |           
|                                                                            | Limited partnership unitholders minority interests (Net
    income)          |                            |         | 739     |                          |   |        | 471     |            |   |         | 1,066   |            |   |        | 1,161   |           
|                                                                            | Limited partnership unitholders minority interests
    (Development profits) |                            |         | 94      |                          |   |        | 143     |            |   |         | 552     |            |   |        | 143     |           
|                                                                            | Discontinued operations minority interests (Net income)                      |                            |         | 168     |                          |   |        | 788     |            |   |         | 591     |            |   |        | 1,521   |           
|                                                                            | FFO attributable to minority interests                                        |                            |         | (24,103 | )                        |   |        | (18,118 | )          |   |         | (47,690 | )          |   |        | (35,979 | )         
|Adjustments to derive FFO from unconsolidated joint ventures:               |                                                                               |                            |         |         |                          |   |        |         |            |   |         |         |            |   |        |        
|                                                                            | Our share of net income                                                       |                            |         | (7,188  | )                        |   |        | (944    | )          |   |         | (8,430  | )          |   |        | (2,653  | )         
|                                                                            | Our share of FFO                                                              |                            |         | 4,469   |                          |   |        | 1,935   |            |   |         | 7,216   |            |   |        | 4,428   |           
|                                                                            | Our share of development profits                                              |                            |         | 5,441   |                          |   |        |        |            |   |         | 5,441   |            |   |        |        |           
|Preferred unit distributions                                                |                                                                               |                            | (3,373  | )       |                          |   | (3,373 | )       |            |   | (6,746  | )       |            |   | (6,746 | )      
|                                                                            |                                                                               |                            |         |         |                          |   |        |         |            |   |         |        
|                                                                            |                                                                               | Funds from operations      |         | $       | 50,622                   |   |        | $       | 48,795     |   |         | $       | 100,147    |   |        | $       | 96,285     | 
|                                                                            |                                                                               |                            |         |         |                          |   |        |         |            |   |         |        
|Basic FFO per common unit                                                   |                                                                               | $                          | 0.57    |         |                          | $ | 0.56   |         |            | $ | 1.14    |         |            | $ | 1.11   |        
|                                                                            |                                                                               |                            |         |         |                          |   |        |         |            |   |         |        
|Diluted FFO per common unit                                                 |                                                                               | $                          | 0.55    |         |                          | $ | 0.55   |         |            | $ | 1.09    |         |            | $ | 1.08   |        
|                                                                            |                                                                               |                            |         |         |                          |   |        |         |            |   |         |        
|Weighted average common units:                                              |                                                                               |                            |         |         |                          |   |        |         |            |   |         |         |            |   |        |        
|                                                                            |                                                                               | Basic                      |         |         | 88,241,361               |   |        |         | 86,824,795 |   |         |         | 88,060,496 |   |        |         | 86,653,067 | 
|                                                                            |                                                                               |                            |         |         |                          |   |        |         |            |   |         |        
|                                                                            |                                                                               | Diluted                    |         |         | 91,795,834               |   |        |         | 89,288,954 |   |         |         | 91,566,987 |   |        |         | 89,520,249 | 
|                                                                            |                                                                               |                            |         |         |                          |   |        |         |            |   |         |        

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OPERATING AND LEASING STATISTICS SUMMARY




|                                       |                                                          |               |                  |           |               |      |            |           |      |      | 
|-------------------------------------- | -------------------------------------------------------- | ------------- | ---------------- | --------- | ------------- | ---- | ---------- | --------- | ---- | ---- | 
|                                       |                                                          | Three Months  |                  |           | Six Months    |     
|                                       |                                                          | Ended         |                  |           | Ended         |     
|Operating Portfolio(1)                 |                                                          | June 30, 2005 |                  |           | June 30, 2005 |     
|                                       |                                                          |               |                  |           |               |     
|Square feet owned at June 30, 2005(2)  |                                                          |               | 90,989,071       |           |               |      | 90,989,071 |          
|Occupancy percentage at June 30, 2005  |                                                          |               | 94.5             | %         |               |      | 94.5       | %        
|Weighted average lease terms:          |                                                          |               |                  |           |               |      |            |          
|                                       | Original                                                 |               |                  | 6.2 years |               |      |            | 6.2 years |     
|                                       | Remaining                                                |               |                  | 3.4 years |               |      |            | 3.4 years |     
|Tenant retention                       |                                                          |               | 56.0             | %         |               |      | 64.1       | %        
|Same Space Leasing Activity(3):        |                                                          |               |                  |           |               |      |            |          
|                                       | Rent decreases on renewals and rollovers                 |               |                  | (14.6     | )%            |      |            | (11.5     | )%  
|                                       | Same space square footage commencing (millions)          |               |                  | 2.8       |               |      |            | 7.0       |     
|Second Generation Leasing Activity(4): |                                                          |               |                  |           |               |      |            |          
|                                       | Tenant improvements and leasing commissions per sq. ft.: |               |                  |           |               |      |            |           |     
|                                       |                                                          | Renewals      |                  | $         | 1.85          |      |            | $         | 1.72 |     
|                                       |                                                          | Re-tenanted   |                  |           | 3.32          |      |            |           | 2.98 |     
|                                       |                                                          |               |                  |           |               |     
|                                       |                                                          |               | Weighted average |           | $             | 2.68 |            |           | $    | 2.34 | 
|                                       |                                                          |               |                  |           |               |     
|                                       | Square footage commencing (millions)                     |               |                  | 3.6       |               |      |            | 8.8       |     






| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Includes all consolidated industrial operating properties and
    excludes industrial development and renovation projects.
    Excludes retail and other properties square feet of
    474,368 with occupancy of 71.4% and annualized base rent of
    $3.8 million.                                                                                                                                                                                                                             
|
| | (2) | In addition to owned square feet as of June 30, 2005, we
    managed, through our subsidiary, AMB Capital Partners, LLC,
    approximately 0.4 million additional square feet of
    industrial and other properties. We also have investments in
    approximately 11.4 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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|                                                   |                                                     |               |            |      |               |  |            |      |   
|-------------------------------------------------- | --------------------------------------------------- | ------------- | ---------- | ---- | ------------- |  | ---------- | ---- | --
|                                                   |                                                     | Three Months  |            |      | Six Months    | 
|                                                   |                                                     | Ended         |            |      | Ended         | 
|                                                   |                                                     | June 30, 2005 |            |      | June 30, 2005 | 
|                                                   |                                                     |               |            |      |               | 
|Square feet in same store pool at June 30, 2005(1) |                                                     |               | 79,276,779 |      |               |  | 79,276,779 |     
|                                                   | % of total industrial square feet                   |               |            | 87.1 | %             |  |            | 87.1 | % 
|Occupancy percentage at period end:                |                                                     |               |            |      |               |  |            |     
|                                                   | June 30, 2005                                       |               |            | 94.4 | %             |  |            | 94.4 | % 
|                                                   | June 30, 2004                                       |               |            | 93.7 | %             |  |            | 93.7 | % 
|Tenant retention                                   |                                                     |               | 55.8       | %    |               |  | 64.0       | %   
|Rent decreases on renewals and rollovers           |                                                     |               | (15.3      | )%   |               |  | (11.4      | )%  
|                                                   | Same space square footage commencing (millions)     |               |            | 2.8  |               |  |            | 7.0  |   
|Cash basis NOI growth % increase (decrease):       |                                                     |               |            |      |               |  |            |     
|                                                   | Revenues                                            |               |            | 0.6  | %             |  |            | 0.3  | % 
|                                                   | Expenses                                            |               |            | (1.4 | )%            |  |            | (0.2 | )%
|                                                   | Net operating income                                |               |            | 1.3  | %             |  |            | 0.5  | % 
|                                                   | Net operating income without lease termination fees |               |            | 1.5  | %             |  |            | 0.4  | % 






|    |                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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





|                      |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |            |   |         |       |  |   |           |   |  |   |           |  
|--------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------- | - | ---------- | - | ------- | ----- |  | - | --------- | - |  | - | --------- | -
|                      |  | 2005 |         |   | 2006 |   |         | 2007 |  |   | 2008    |   |  | 2009 |         |   | Thereafter |   |         | Total | 
|                      |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |            |   |         |       | 
|Fixed rate debt(1)    |  | $    | 200,227 |   |      | $ | 172,473 |      |  | $ | 139,184 |   |  | $    | 385,557 |   |            | $ | 201,220 |       |  | $ | 1,548,661 |   |  | $ | 2,647,322 |  
|Average interest rate |  |      | 7.1     | % |      |   | 6.8     | %    |  |   | 7.1     | % |  |      | 6.9     | % |            |   | 5.1     | %     |  |   | 7.0       | % |  |   | 6.8       | %
|Variable rate debt(2) |  | $    | 544     |   |      | $ | 60,191  |      |  | $ | 494,853 |   |  | $    | 93,349  |   |            | $ | 35,957  |       |  | $ | 62,987    |   |  | $ | 747,881   |  
|Average interest rate |  |      | 4.0     | % |      |   | 2.9     | %    |  |   | 2.5     | % |  |      | 2.4     | % |            |   | 2.1     | %     |  |   | 1.5       | % |  |   | 2.4       | %
|Interest Payments     |  | $    | 14,238  |   |      | $ | 13,474  |      |  | $ | 22,253  |   |  | $    | 28,844  |   |            | $ | 11,017  |       |  | $ | 109,351   |   |  | $ | 199,177   |  






|    |                                          
|--- | -----------------------------------------
|(1) | Represents 78.0% of all outstanding debt.
|   
|(2) | Represents 22.0% of all outstanding debt.

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Financial Instruments.


|                                   |       |                  |            |   |                  |   |          |        |  |   |            |         |  |   |        |        |  
|---------------------------------- | ----- | ---------------- | ---------- | - | ---------------- | - | -------- | ------ |  | - | ---------- | ------- |  | - | ------ | ------ | -
|                                   |       | Maturity Dates   |            |   |                  |   |         
|                                   |       |                  |            |   | Notional         |   |          |       
|Related Derivatives (in thousands) |       | December 8, 2005 |            |   | October 29, 2012 |   |          | Amount |  |   | Fair Value |        
|                                   |       |                  |            |   |                  |   |          |        |  |   |            |        
|Interest Rate Swaps:               |       |                  |            |   |                  |   |          |        |  |   |            |         |  |   |        |       
|Plain Interest Rate Swap, Japan    |       |                  |            |   |                  |   |          |        |  |   |            |         |  |   |        |       
|Notional Amount (U.S. Dollars)     |       |                  |            |   |                  | $ | 117,202  |        |  | $ | 117,202    |         |  |   |        |       
|Receive Floating(%)                |       |                  |            |   |                  |   | 3M TIBOR |        |  |   |            |         |  |   |        |       
|Pay Fixed Rate(%)                  |       |                  |            |   |                  |   | 1.32     | %      |  |   |            |         |  |   |        |       
|Fair Market Value                  |       |                  |            |   |                  | $ | (4,025   | )      |  |   |            |         |  | $ | (4,025 | )     
|Plain Interest Rate Swap, Europe   |       |                  |            |   |                  |   |          |        |  |   |            |         |  |   |        |       
|Notional Amount (U.S. Dollars)     |       | $                | 9,323      |   |                  |   |          |        |  |   | 9,323      |         |  |   |        |       
|Receive Floating(%)                |       |                  | 3M EURIBOR |   |                  |   |          |        |  |   |            |         |  |   |        |       
|Pay Fixed Rate(%)                  |       |                  | 3.72       | % |                  |   |          |        |  |   |            |         |  |   |        |       
|Fair Market Value                  |       | $                | (432       | ) |                  |   |          |        |  |   |            |         |  |   | (432   | )     
|                                   |       |                  |            |   |                  |   |          |        |  |   |            |        
|                                   | Total |                  |            |   |                  |   |          |        |  |   | $          | 126,525 |  |   | $      | (4,457 | )
|                                   |       |                  |            |   |                  |   |          |        |  |   |            |        

International Operations.






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##### Table of Contents










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







51



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##### Table of Contents






PART II







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








|        |                                                                
|------- | ---------------------------------------------------------------
|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



|                          |  |     |            |  |          |  |           | 
|------------------------- |  | --- | ---------- |  | -------- |  | --------- | 
|                          |  | For |            |  | Withheld | 
|                          |  |     |            |  |          | 
|Hamid R. Moghadam         |  |     | 71,434,313 |  |          |  | 870,901   | 
|W. Blake Baird            |  |     | 72,186,807 |  |          |  | 118,407   | 
|T. Robert Burke           |  |     | 72,210,837 |  |          |  | 94,377    | 
|David A. Cole             |  |     | 72,190,621 |  |          |  | 114,592   | 
|Lydia H. Kennard          |  |     | 72,206,090 |  |          |  | 99,124    | 
|J. Michael Losh           |  |     | 68,049,989 |  |          |  | 4,255,224 | 
|Frederick W. Reid         |  |     | 72,208,906 |  |          |  | 96,307    | 
|Jeffrey L. Skelton, Ph.D. |  |     | 68,973,049 |  |          |  | 3,332,165 | 
|Thomas W. Tusher          |  |     | 72,174,176 |  |          |  | 131,037   | 



|                                           |  |     |            |  |         |  |           |            |  |  |                  |  |  |  |   | 
|------------------------------------------ |  | --- | ---------- |  | ------- |  | --------- | ---------- |  |  | ---------------- |  |  |  | - | 
|                                           |  | For |            |  | Against |  |           | Absentions |  |  | Broker Non-votes | 
|                                           |  |     |            |  |         |  |           |            |  |  |                  | 
|Ratification of PricewaterhouseCoopers LLP |  |     | 69,781,983 |  |         |  | 2,503,975 |            |  |  | 19,254           |  |  |  | 0 | 






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



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##### Table of Contents








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

Exhibits:


|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|------- | -- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 10 | .1          |  | Amendment No. 1, dated May 12, 2005, to Second Amended
    and Restated Credit Agreement by and among AMB Property
    Corporation, AMB Property, L.P., the banks listed on the
    signature pages thereof, JPMorgan Chase Bank, N.A., as
    administrative agent, J.P. Morgan Europe Limited, as
    administrative agent, Bank of America, N.A., as syndication
    agent, J.P. Morgan Securities Inc. and Banc of America
    Securities LLC as joint lead arrangers and joint bookrunners,
    Commerzbank Aktiengesellschaft New York and Grand Cayman
    Branches, PNC Bank, National Association, and Wachovia Bank,
    N.A., as documentation agents, Keybank National Association, the
    Bank of Nova Scotia, acting through its San Francisco
    agency, and Wells Fargo Bank, N.A., as managing agents, and ING
    Real Estate Finance (USA) LLC, Southtrust Bank and Union
    Bank of California, N.A., as co-agents.
|       
|        | 31 | .1          |  | Rule 13a-14(a)/15d-14(a) Certifications dated August
    9, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       
|        | 32 | .1          |  | 18 U.S.C.§ 1350 Certifications dated August 9,
    2005. 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)     



54