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SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549




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Form 10-Q



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|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                             
|þ          |  | QUARTERLY REPORT PURSUANT TO SECTION 13
    OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|          
|           |  | For the quarterly period ended
    September 30, 2003                                       
|          
|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)


Indicate by check mark whether the registrant:
(1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the
past
90 days.     Yes þ No o.

Indicate by check mark whether the registrant is
an accelerated filer (as defined in Exchange Act
Rule 12b-2).     Yes þ No o



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TABLE OF CONTENTS



|             |                                                                                                       |  |  |  |  |  |  | 
|------------ | ----------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I      
|             | Item 1. Financial Statements                                                                         
|             | CONSOLIDATED BALANCE SHEETS As of September 30, 2003 and December 31, 2002                           
|             | CONSOLIDATED STATEMENTS OF OPERATIONS For the three and nine months ended September 30, 2003 and 2002
|             | CONSOLIDATED STATEMENTS OF CASH FLOWS For the nine months ended September 30, 2003 and 2002          
|             | CONSOLIDATED STATEMENT OF PARTNERS CAPITAL For the nine months ended September 30, 2003             
|             | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 2003 (unaudited)                            
|             | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations        
|             | Item 3. Quantitative and Qualitative Disclosures About Market Risk                                   
|             | Item 4. Controls and Procedures                                                                      
|PART II     
|             | Item 1. Legal Proceedings                                                                            
|             | Item 2. Changes in Securities and Use of Proceeds                                                    
|             | Item 3. Defaults Upon Senior Securities                                                              
|             | Item 4. Submission of Matters to a Vote of Security Holders                                          
|             | Item 5. Other Information                                                                            
|             | Item 6. Exhibits and Reports on Form 8-K                                                             
|SIGNATURES  
|EXHIBIT 4.1 
|Exhibit 31.1
|Exhibit 32.1



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##### Table of Contents



AMB PROPERTY, L.P.

INDEX

|                                   |  |                                                                                                           |  |      |    | 
|---------------------------------- |  | --------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                   |  |                                                                                                           |  | Page
|                                   |  |                                                                                                           |  |     
|PART I.  FINANCIAL
    INFORMATION
|Item 1.                            |  | Financial Statements (unaudited)                                                                          |  |      |    | 
|                                   |  | Consolidated Balance Sheets as of
    September 30, 2003, and December 31, 2002                           |  |      | 2  | 
|                                   |  | Consolidated Statements of Operations for the
    three and nine months ended September 30, 2003 and 2002 |  |      | 3  | 
|                                   |  | Consolidated Statements of Cash Flows for the
    nine months ended September 30, 2003 and 2002           |  |      | 4  | 
|                                   |  | Consolidated Statement of Partners Capital
    for the nine months ended September 30, 2003              |  |      | 5  | 
|                                   |  | Notes to Consolidated Financial Statements                                                                |  |      | 6  | 
|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                                                                                   |  |      | 50 | 
|PART II.  OTHER
    INFORMATION   
|Item 1.                            |  | Legal Proceedings                                                                                         |  |      | 52 | 
|Item 2.                            |  | Changes in 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 and Reports on Form 8-K                                                                          |  |      | 61 | 

1



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##### Table of Contents






PART I






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

AMB PROPERTY, L.P.






CONSOLIDATED BALANCE SHEETS


As of September 30, 2003 and
December 31, 2002


|                                                                |                                                                                                                                                                                                                                                                                                                                                                                       |                                 |                                         |              |           |           |           |           |           |           |           | 
|--------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------- | --------------------------------------- | ------------ | --------- | --------- | --------- | --------- | --------- | --------- | --------- | 
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                       | September 30,                   |                                         | December 31,
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                       | 2003                            |                                         | 2002        
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                       |                                 |                                         |             
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                       |                                
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                       | (Unaudited, dollars in         
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                       | thousands)                     
|ASSETS                                                         
|Investments in real estate:                                     |                                                                                                                                                                                                                                                                                                                                                                                       |                                 |                                         |              |           |           |           |          
|                                                                | Land                                                                                                                                                                                                                                                                                                                                                                                  |                                 | $                                       | 1,272,532    |           |           | $         | 1,236,406 |          
|                                                                | Buildings and improvements                                                                                                                                                                                                                                                                                                                                                            |                                 |                                         | 3,613,012    |           |           |           | 3,557,086 |          
|                                                                | Construction in progress                                                                                                                                                                                                                                                                                                                                                              |                                 |                                         | 209,029      |           |           |           | 132,490   |          
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                       |                                 |                                         |              |           |           |           |          
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                       | Total investments in properties |                                         |              | 5,094,573 |           |           |           | 4,925,982 |          
|                                                                | Accumulated depreciation and amortization                                                                                                                                                                                                                                                                                                                                             |                                 |                                         | (442,755     | )         |           |           | (362,540  | )        
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                       |                                 |                                         |              |           |           |           |          
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                       | Net investments in properties   |                                         |              | 4,651,818 |           |           |           | 4,563,442 |          
|Investments in unconsolidated joint ventures                    |                                                                                                                                                                                                                                                                                                                                                                                       |                                 | 56,159                                  |              |           |           | 64,428    |          
|Properties held for divestiture, net                            |                                                                                                                                                                                                                                                                                                                                                                                       |                                 | 20,467                                  |              |           |           | 107,871   |          
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                       |                                 |                                         |              |           |           |           |          
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                       |                                 | Net investments in real estate          |              |           | 4,728,444 |           |           |           | 4,735,741 |          
|Cash and cash equivalents                                       |                                                                                                                                                                                                                                                                                                                                                                                       |                                 | 128,378                                 |              |           |           | 89,332    |          
|Restricted cash                                                 |                                                                                                                                                                                                                                                                                                                                                                                       |                                 | 24,054                                  |              |           |           | 27,882    |          
|Mortgage receivable                                             |                                                                                                                                                                                                                                                                                                                                                                                       |                                 | 13,066                                  |              |           |           | 13,133    |          
|Accounts receivable, net of allowance for
    doubtful accounts |                                                                                                                                                                                                                                                                                                                                                                                       |                                 | 80,927                                  |              |           |           | 74,207    |          
|Other assets                                                    |                                                                                                                                                                                                                                                                                                                                                                                       |                                 | 70,208                                  |              |           |           | 52,199    |          
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                       |                                 |                                         |              |           |           |           |          
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                       |                                 |                                         | Total assets |           | $         | 5,045,077 |           |           | $         | 4,992,494 | 
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                       |                                 |                                         |              |           |           |           |          
|LIABILITIES AND PARTNERS
    CAPITAL                          
|Debt:                                                           |                                                                                                                                                                                                                                                                                                                                                                                       |                                 |                                         |              |           |           |           |          
|                                                                | Secured debt                                                                                                                                                                                                                                                                                                                                                                          |                                 | $                                       | 1,312,105    |           |           | $         | 1,284,675 |          
|                                                                | Unsecured senior debt securities                                                                                                                                                                                                                                                                                                                                                      |                                 |                                         | 800,000      |           |           |           | 800,000   |          
|                                                                | Alliance Fund II credit facility                                                                                                                                                                                                                                                                                                                                                      |                                 |                                         |             |           |           |           | 45,500    |          
|                                                                | Unsecured debt                                                                                                                                                                                                                                                                                                                                                                        |                                 |                                         | 9,772        |           |           |           | 10,186    |          
|                                                                | Unsecured credit facility                                                                                                                                                                                                                                                                                                                                                             |                                 |                                         | 91,335       |           |           |           | 95,000    |          
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                       |                                 |                                         |              |           |           |           |          
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                       | Total debt                      |                                         |              | 2,213,212 |           |           |           | 2,235,361 |          
|Distributions payable                                           |                                                                                                                                                                                                                                                                                                                                                                                       |                                 | 46,251                                  |              |           |           | 41,213    |          
|Accounts payable and other liabilities                          |                                                                                                                                                                                                                                                                                                                                                                                       |                                 | 133,307                                 |              |           |           | 140,503   |          
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                       |                                 |                                         |              |           |           |           |          
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                       | Total liabilities               |                                         |              | 2,392,770 |           |           |           | 2,417,077 |          
|Commitments and contingencies (Notes 3 and
    12)              |                                                                                                                                                                                                                                                                                                                                                                                       |                                 |                                         |              |           |           |           |          
|Minority interests:                                             |                                                                                                                                                                                                                                                                                                                                                                                       |                                 |                                         |              |           |           |           |          
|                                                                | Joint venture partners                                                                                                                                                                                                                                                                                                                                                                |                                 |                                         | 644,413      |           |           |           | 488,524   |          
|                                                                | Preferred unitholders                                                                                                                                                                                                                                                                                                                                                                 |                                 |                                         | 164,093      |           |           |           | 167,266   |          
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                       |                                 |                                         |              |           |           |           |          
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                       | Total minority interests        |                                         |              | 808,506   |           |           |           | 655,790   |          
|Partners capital:                                              |                                                                                                                                                                                                                                                                                                                                                                                       |                                 |                                         |              |           |           |           |          
|                                                                | General partner, 81,452,162 and 81,800,038 units
    outstanding at September 30, 2003 and December 31,
    2002, respectively, 3,995,800 Series A preferred units
    outstanding with a $99,895 liquidation preference at
    December 31, 2002, and 2,000,000 Series L preferred
    units issued and outstanding at September 30, 2003, with a
    $50,000 liquidation preference |                                 |                                         | 1,614,144    |           |           |           | 1,684,150 |          
|                                                                | Limited partners, 4,618,242 units, 1,300,000
    Series B preferred units with a $65,000 liquidation
    preference, 800,000 Series J preferred units with a $40,000
    liquidation preference and 800,000 Series K preferred units
    with a $40,000 liquidation preference at September 30, 2003.                                                                                 |                                 |                                         | 229,657      |           |           |           | 235,477   |          
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                       |                                 |                                         |              |           |           |           |          
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                       | Total partners capital         |                                         |              | 1,843,801 |           |           |           | 1,919,627 |          
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                       |                                 |                                         |              |           |           |           |          
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                       |                                 | Total liabilities and partners capital |              | $         | 5,045,077 |           |           | $         | 4,992,494 |          
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                       |                                 |                                         |              |           |           |           |          

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

2



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##### Table of Contents



AMB PROPERTY, L.P.






CONSOLIDATED STATEMENTS OF
OPERATIONS


For the three and nine months ended
September 30, 2003 and 2002


|                                                            |                                                                                                                                           |                                                            |                                                                  |                           |        |         |        |            |        |         |         |            |         |          |         |            |         |          |  
|----------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------- | ---------------------------------------------------------------- | ------------------------- | ------ | ------- | ------ | ---------- | ------ | ------- | ------- | ---------- | ------- | -------- | ------- | ---------- | ------- | -------- | -
|                                                            |                                                                                                                                           |                                                            |                                                                  |                          
|                                                            |                                                                                                                                           | For the Three Months                                       |                                                                  | For the Nine Months Ended
|                                                            |                                                                                                                                           | Ended September 30,                                        |                                                                  | September 30,            
|                                                            |                                                                                                                                           |                                                            |                                                                  |                          
|                                                            |                                                                                                                                           | 2003                                                       |                                                                  | 2002                      |        | 2003    |        | 2002      
|                                                            |                                                                                                                                           |                                                            |                                                                  |                           |        |         |        |           
|                                                            |                                                                                                                                           |                                                           
|                                                            |                                                                                                                                           | (Unaudited, dollars in thousands, except per unit amounts)
|REVENUES                                                    |                                                                                                                                           |                                                            |                                                                  |                           |        |         |        |            |        |         |         |            |         |          |         |           
|                                                            | Rental revenues                                                                                                                           |                                                            | $                                                                | 148,239                   |        |         | $      | 146,926    |        |         | $       | 450,912    |         |          | $       | 425,915    |        
|                                                            | Private capital income                                                                                                                    |                                                            |                                                                  | 1,928                     |        |         |        | 2,766      |        |         |         | 7,844      |         |          |         | 8,468      |        
|                                                            |                                                                                                                                           |                                                            |                                                                  |                           |        |         |        |            |        |         |         |            |         |          |         |           
|                                                            |                                                                                                                                           |                                                            | Total revenues                                                   |                           |        | 150,167 |        |            |        | 149,692 |         |            |         | 458,756  |         |            |         | 434,383  |  
|COSTS AND EXPENSES                                          |                                                                                                                                           |                                                            |                                                                  |                           |        |         |        |            |        |         |         |            |         |          |         |           
|                                                            | Property operating expenses                                                                                                               |                                                            |                                                                  | (22,356                   | )      |         |        | (20,243    | )      |         |         | (65,013    | )       |          |         | (54,757    | )      
|                                                            | Real estate taxes                                                                                                                         |                                                            |                                                                  | (17,664                   | )      |         |        | (17,386    | )      |         |         | (53,215    | )       |          |         | (50,889    | )      
|                                                            | Depreciation and amortization                                                                                                             |                                                            |                                                                  | (32,584                   | )      |         |        | (31,446    | )      |         |         | (99,269    | )       |          |         | (88,650    | )      
|                                                            | Impairment losses                                                                                                                         |                                                            |                                                                  |                          |        |         |        |           |        |         |         | (5,251     | )       |          |         |           |        
|                                                            | General and administrative                                                                                                                |                                                            |                                                                  | (10,843                   | )      |         |        | (12,376    | )      |         |         | (35,187    | )       |          |         | (34,207    | )      
|                                                            |                                                                                                                                           |                                                            |                                                                  |                           |        |         |        |            |        |         |         |            |         |          |         |           
|                                                            |                                                                                                                                           |                                                            | Total costs and expenses                                         |                           |        | (83,447 | )      |            |        | (81,451 | )       |            |         | (257,935 | )       |            |         | (228,503 | )
|                                                            |                                                                                                                                           |                                                            | Operating income                                                 |                           |        | 66,720  |        |            |        | 68,241  |         |            |         | 200,821  |         |            |         | 205,880  |  
|OTHER INCOME AND EXPENSES                                   |                                                                                                                                           |                                                            |                                                                  |                           |        |         |        |            |        |         |         |            |         |          |         |           
|                                                            | Equity in earnings of unconsolidated joint
    ventures                                                                                   |                                                            |                                                                  | 1,365                     |        |         |        | 1,322      |        |         |         | 4,222      |         |          |         | 4,443      |        
|                                                            | Interest and other income                                                                                                                 |                                                            |                                                                  | 701                       |        |         |        | 2,609      |        |         |         | 3,643      |         |          |         | 9,921      |        
|                                                            | Gains from dispositions of real estate                                                                                                    |                                                            |                                                                  |                          |        |         |        |           |        |         |         | 7,429      |         |          |         | 2,480      |        
|                                                            | Merchant development profits, net                                                                                                         |                                                            |                                                                  | 2,181                     |        |         |        | 618        |        |         |         | 2,181      |         |          |         | 618        |        
|                                                            | Interest, including amortization                                                                                                          |                                                            |                                                                  | (35,867                   | )      |         |        | (37,501    | )      |         |         | (107,963   | )       |          |         | (109,133   | )      
|                                                            |                                                                                                                                           |                                                            |                                                                  |                           |        |         |        |            |        |         |         |            |         |          |         |           
|                                                            |                                                                                                                                           |                                                            | Total other income and expenses                                  |                           |        | (31,620 | )      |            |        | (32,952 | )       |            |         | (90,488  | )       |            |         | (91,671  | )
|                                                            |                                                                                                                                           |                                                            |                                                                  |                           |        |         |        |            |        |         |         |            |         |          |         |           
|                                                            |                                                                                                                                           |                                                            | Income before minority interests and discontinued
    operations |                           |        | 35,100  |        |            |        | 35,289  |         |            |         | 110,333  |         |            |         | 114,209  |  
|                                                            | Minority interests share of income:                                                                                                      |                                                            |                                                                  |                           |        |         |        |            |        |         |         |            |         |          |         |            |        
|                                                            |                                                                                                                                           | Joint venture partners                                     |                                                                  |                           | (9,809 | )       |        |            | (8,771 | )       |         |            | (26,410 | )        |         |            | (23,104 | )       
|                                                            |                                                                                                                                           | Preferred unitholders                                      |                                                                  |                           | (3,322 | )       |        |            | (3,411 | )       |         |            | (10,098 | )        |         |            | (10,485 | )       
|                                                            |                                                                                                                                           |                                                            |                                                                  |                           |        |         |        |            |        |         |         |            |         |          |         |           
|                                                            |                                                                                                                                           |                                                            | Total minority interests share of income                        |                           |        | (13,131 | )      |            |        | (12,182 | )       |            |         | (36,508  | )       |            |         | (33,589  | )
|                                                            |                                                                                                                                           |                                                            |                                                                  |                           |        |         |        |            |        |         |         |            |         |          |         |           
|Income from continuing operations                           |                                                                                                                                           |                                                            | 21,969                                                           |                           |        |         | 23,107 |            |        |         | 73,825  |            |         |          | 80,620  |           
|Discontinued operations:                                    |                                                                                                                                           |                                                            |                                                                  |                           |        |         |        |            |        |         |         |            |         |          |         |           
|                                                            | Income attributable to discontinued operations,
    net of minority interests                                                             |                                                            |                                                                  | 876                       |        |         |        | 4,409      |        |         |         | 3,334      |         |          |         | 14,582     |        
|                                                            | Gains from dispositions of real estate, net of
    minority interests                                                                     |                                                            |                                                                  | 8,338                     |        |         |        | 3,944      |        |         |         | 41,849     |         |          |         | 3,944      |        
|                                                            |                                                                                                                                           |                                                            |                                                                  |                           |        |         |        |            |        |         |         |            |         |          |         |           
|                                                            |                                                                                                                                           |                                                            | Total discontinued operations                                    |                           |        | 9,214   |        |            |        | 8,353   |         |            |         | 45,183   |         |            |         | 18,526   |  
|                                                            |                                                                                                                                           |                                                            |                                                                  |                           |        |         |        |            |        |         |         |            |         |          |         |           
|Net income                                                  |                                                                                                                                           |                                                            | 31,183                                                           |                           |        |         | 31,460 |            |        |         | 119,008 |            |         |          | 99,146  |           
|Preferred unit distributions                                |                                                                                                                                           |                                                            | (4,462                                                           | )                         |        |         | (5,115 | )          |        |         | (14,763 | )          |         |          | (14,658 | )         
|Preferred unit redemption discount/(issuance
    costs)     |                                                                                                                                           |                                                            | (3,671                                                           | )                         |        |         | 412    |            |        |         | (3,671  | )          |         |          | 412     |           
|                                                            |                                                                                                                                           |                                                            |                                                                  |                           |        |         |        |            |        |         |         |            |         |          |         |           
|                                                            |                                                                                                                                           |                                                            | Net income available to common unitholders                       |                           | $      | 23,050  |        |            | $      | 26,757  |         |            | $       | 100,574  |         |            | $       | 84,900   |  
|                                                            |                                                                                                                                           |                                                            |                                                                  |                           |        |         |        |            |        |         |         |            |         |          |         |           
|Income available to common unitholders
    attributable to: |                                                                                                                                           |                                                            |                                                                  |                           |        |         |        |            |        |         |         |            |         |          |         |           
|                                                            | General partner                                                                                                                           |                                                            | $                                                                | 21,812                    |        |         | $      | 25,363     |        |         | $       | 94,998     |         |          | $       | 80,266     |        
|                                                            | Limited partners                                                                                                                          |                                                            |                                                                  | 1,238                     |        |         |        | 1,394      |        |         |         | 5,576      |         |          |         | 4,634      |        
|                                                            |                                                                                                                                           |                                                            |                                                                  |                           |        |         |        |            |        |         |         |            |         |          |         |           
|                                                            |                                                                                                                                           |                                                            | Net income available to common unitholders                       |                           | $      | 23,050  |        |            | $      | 26,757  |         |            | $       | 100,574  |         |            | $       | 84,900   |  
|                                                            |                                                                                                                                           |                                                            |                                                                  |                           |        |         |        |            |        |         |         |            |         |          |         |           
|Basic income per common unit                                |                                                                                                                                           |                                                            |                                                                  |                           |        |         |        |            |        |         |         |            |         |          |         |           
|                                                            | Income from continuing operations (includes
    preferred unit distributions and preferred unit redemption
    discount/(issuance costs)) |                                                            | $                                                                | 0.16                      |        |         | $      | 0.21       |        |         | $       | 0.64       |         |          | $       | 0.75       |        
|                                                            | Discontinued operations                                                                                                                   |                                                            |                                                                  | 0.11                      |        |         |        | 0.09       |        |         |         | 0.53       |         |          |         | 0.21       |        
|                                                            |                                                                                                                                           |                                                            |                                                                  |                           |        |         |        |            |        |         |         |            |         |          |         |           
|                                                            |                                                                                                                                           |                                                            | Net income available to common unitholders                       |                           | $      | 0.27    |        |            | $      | 0.30    |         |            | $       | 1.17     |         |            | $       | 0.96     |  
|                                                            |                                                                                                                                           |                                                            |                                                                  |                           |        |         |        |            |        |         |         |            |         |          |         |           
|Diluted income per common unit                              |                                                                                                                                           |                                                            |                                                                  |                           |        |         |        |            |        |         |         |            |         |          |         |           
|                                                            | Income from continuing operations (includes
    preferred unit distributions and preferred unit redemption
    discount/(issuance costs)) |                                                            | $                                                                | 0.16                      |        |         | $      | 0.21       |        |         | $       | 0.63       |         |          | $       | 0.73       |        
|                                                            | Discontinued operations                                                                                                                   |                                                            |                                                                  | 0.10                      |        |         |        | 0.09       |        |         |         | 0.52       |         |          |         | 0.21       |        
|                                                            |                                                                                                                                           |                                                            |                                                                  |                           |        |         |        |            |        |         |         |            |         |          |         |           
|                                                            |                                                                                                                                           |                                                            | Net income available to common unitholders                       |                           | $      | 0.26    |        |            | $      | 0.30    |         |            | $       | 1.15     |         |            | $       | 0.94     |  
|                                                            |                                                                                                                                           |                                                            |                                                                  |                           |        |         |        |            |        |         |         |            |         |          |         |           
|WEIGHTED AVERAGE COMMON UNITS
    OUTSTANDING               |                                                                                                                                           |                                                            |                                                                  |                           |        |         |        |            |        |         |         |            |         |          |         |           
|                                                            | Basic                                                                                                                                     |                                                            |                                                                  | 85,776,251                |        |         |        | 88,575,091 |        |         |         | 85,874,579 |         |          |         | 88,634,134 |        
|                                                            |                                                                                                                                           |                                                            |                                                                  |                           |        |         |        |            |        |         |         |            |         |          |         |           
|                                                            | Diluted                                                                                                                                   |                                                            |                                                                  | 87,399,544                |        |         |        | 90,379,023 |        |         |         | 87,342,075 |         |          |         | 90,239,149 |        
|                                                            |                                                                                                                                           |                                                            |                                                                  |                           |        |         |        |            |        |         |         |            |         |          |         |           

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

3



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##### Table of Contents



AMB PROPERTY, L.P.






CONSOLIDATED STATEMENTS OF CASH
FLOWS


For the nine months ended September 30,
2003 and 2002


|                                                                                            |                                                                 |                                                                       |                                                         |                                                  |         |          |          |         |         |          |        | 
|------------------------------------------------------------------------------------------- | --------------------------------------------------------------- | --------------------------------------------------------------------- | ------------------------------------------------------- | ------------------------------------------------ | ------- | -------- | -------- | ------- | ------- | -------- | ------ | 
|                                                                                            |                                                                 | 2003                                                                  |                                                         | 2002                                            
|                                                                                            |                                                                 |                                                                       |                                                         |                                                 
|                                                                                            |                                                                 |                                                                      
|                                                                                            |                                                                 | (Unaudited,                                                          
|                                                                                            |                                                                 | dollars in thousands)                                                
|CASH FLOWS FROM OPERATING ACTIVITIES                                                        |                                                                 |                                                                       |                                                         |                                                  |         |          |          |        
|Net income                                                                                  |                                                                 | $                                                                     | 119,008                                                 |                                                  |         | $        | 99,146   |        
|                                                                                            | Adjustments to net income:                                      |                                                                       |                                                         |                                                  |         |          |          |         |        
|                                                                                            | Straight-line rents                                             |                                                                       |                                                         | (6,832                                           | )       |          |          | (10,385 | )      
|                                                                                            | Depreciation and amortization                                   |                                                                       |                                                         | 99,269                                           |         |          |          | 88,650  |        
|                                                                                            | Impairment losses                                               |                                                                       |                                                         | 5,251                                            |         |          |          |        |        
|                                                                                            | Stock-based compensation amortization                           |                                                                       |                                                         | 6,000                                            |         |          |          | 3,950   |        
|                                                                                            | Equity in earnings of unconsolidated joint
    ventures         |                                                                       |                                                         | (4,222                                           | )       |          |          | (4,443  | )      
|                                                                                            | Gains from dispositions of real estate                          |                                                                       |                                                         | (7,429                                           | )       |          |          | (2,480  | )      
|                                                                                            | Merchant development profits, net of minority
    interests     |                                                                       |                                                         | (2,181                                           | )       |          |          | (618    | )      
|                                                                                            | Debt premiums, discounts and finance cost
    amortization, net |                                                                       |                                                         | 1,577                                            |         |          |          | 1,772   |        
|                                                                                            | Total minority interests share of net income                   |                                                                       |                                                         | 36,508                                           |         |          |          | 33,589  |        
|                                                                                            | Discontinued operations:                                        |                                                                       |                                                         |                                                  |         |          |          |         |        
|                                                                                            |                                                                 | Depreciation and amortization                                         |                                                         |                                                  | 1,910   |          |          |         | 6,821   |         
|                                                                                            |                                                                 | Joint venture partners share of net income                           |                                                         |                                                  | 913     |          |          |         | 1,760   |         
|                                                                                            |                                                                 | Gains from dispositions of real estate, net of
    minority interests |                                                         |                                                  | (41,849 | )        |          |         | (3,944  | )       
|                                                                                            | Changes in assets and liabilities:                              |                                                                       |                                                         |                                                  |         |          |          |         |        
|                                                                                            |                                                                 | Accounts receivable and other assets                                  |                                                         |                                                  | (27,697 | )        |          |         | (14,320 | )       
|                                                                                            |                                                                 | Accounts payable and other liabilities                                |                                                         |                                                  | (6,512  | )        |          |         | 13,284  |         
|                                                                                            |                                                                 |                                                                       |                                                         |                                                  |         |          |          |        
|                                                                                            |                                                                 |                                                                       | Net cash provided by operating activities               |                                                  |         | 173,714  |          |         |         | 212,782  |       
|CASH FLOWS FROM INVESTING ACTIVITIES                                                        |                                                                 |                                                                       |                                                         |                                                  |         |          |          |        
|Change in restricted cash                                                                   |                                                                 |                                                                       | 3,828                                                   |                                                  |         |          | (6,085   | )      
|Cash paid for property acquisitions                                                         |                                                                 |                                                                       | (176,498                                                | )                                                |         |          | (216,850 | )      
|Additions to land, buildings, development costs
    and other first generation improvements |                                                                 |                                                                       | (148,909                                                | )                                                |         |          | (110,583 | )      
|Additions to second generation building
    improvements and lease costs                    |                                                                 |                                                                       | (39,256                                                 | )                                                |         |          | (41,956  | )      
|Additions to interests in unconsolidated joint
    ventures                                 |                                                                 |                                                                       | (22,071                                                 | )                                                |         |          | -        |        
|Distributions received from unconsolidated joint
    ventures                               |                                                                 |                                                                       | 34,775                                                  |                                                  |         |          | 10,718   |        
|Net proceeds from divestiture of real estate                                                |                                                                 |                                                                       | 355,986                                                 |                                                  |         |          | 94,375   |        
|                                                                                            |                                                                 |                                                                       |                                                         |                                                  |         |          |          |        
|                                                                                            |                                                                 |                                                                       | Net cash used in investing activities                   |                                                  |         | 7,855    |          |         |         | (270,381 | )     
|CASH FLOWS FROM FINANCING ACTIVITIES                                                        |                                                                 |                                                                       |                                                         |                                                  |         |          |          |        
|Issuance of common stock, proceeds from stock
    option exercises                          |                                                                 |                                                                       | 4,774                                                   |                                                  |         |          | 14,674   |        
|Repurchase and retirement of common and preferred
    stock                                 |                                                                 |                                                                       | (121,239                                                | )                                                |         |          | (11,563  | )      
|Borrowings on secured debt                                                                  |                                                                 |                                                                       | 148,450                                                 |                                                  |         |          | 167,960  |        
|Payments on secured debt                                                                    |                                                                 |                                                                       | (126,972                                                | )                                                |         |          | (111,060 | )      
|Borrowings on unsecured credit facility                                                     |                                                                 |                                                                       | 314,843                                                 |                                                  |         |          | 12,000   |        
|Payments on unsecured credit facility                                                       |                                                                 |                                                                       | (321,000                                                | )                                                |         |          | (12,000  | )      
|Borrowings on Alliance Fund II credit
    facility                                          |                                                                 |                                                                       | 8,000                                                   |                                                  |         |          | 44,000   |        
|Payments on Alliance Fund II credit facility                                                |                                                                 |                                                                       | (53,500                                                 | )                                                |         |          | (95,000  | )      
|Payment of financing fees                                                                   |                                                                 |                                                                       | (2,625                                                  | )                                                |         |          | (2,611   | )      
|Repayment of mortgage receivable                                                            |                                                                 |                                                                       |                                                        |                                                  |         |          | 74,059   |        
|Net proceeds from issuances of senior debt
    securities                                   |                                                                 |                                                                       |                                                        |                                                  |         |          | 19,883   |        
|Net proceeds from issuances of preferred stock or
    units                                 |                                                                 |                                                                       | 48,221                                                  |                                                  |         |          | 38,934   |        
|Repurchase of preferred units                                                               |                                                                 |                                                                       | (3,172                                                  | )                                                |         |          | (7,088   | )      
|Contributions from co-investment partners                                                   |                                                                 |                                                                       | 158,718                                                 |                                                  |         |          | 63,712   |        
|Distributions paid to general partner and
    preferred unitholders                         |                                                                 |                                                                       | (122,717                                                | )                                                |         |          | (83,666  | )      
|Distributions to minority interests, including
    preferred units                          |                                                                 |                                                                       | (75,083                                                 | )                                                |         |          | (51,612  | )      
|                                                                                            |                                                                 |                                                                       |                                                         |                                                  |         |          |          |        
|                                                                                            |                                                                 |                                                                       | Net cash provided by/(used in) financing
    activities |                                                  |         | (143,302 | )        |         |         | 60,622   |       
|                                                                                            |                                                                 |                                                                       |                                                         |                                                  |         |          |          |        
|                                                                                            |                                                                 |                                                                       |                                                         | Effect of exchange rate changes on cash          |         |          | 779      |         |         |          |       | 
|                                                                                            |                                                                 |                                                                       |                                                         | Net increase in cash and cash equivalents        |         |          | 38,267   |         |         |          | 3,023  | 
|                                                                                            |                                                                 |                                                                       |                                                         | Cash and cash equivalents at beginning of period |         |          | 89,332   |         |         |          | 73,071 | 
|                                                                                            |                                                                 |                                                                       |                                                         |                                                  |         |          |          |        
|                                                                                            |                                                                 |                                                                       |                                                         | Cash and cash equivalents at end of period       |         | $        | 128,378  |         |         | $        | 76,094 | 
|                                                                                            |                                                                 |                                                                       |                                                         |                                                  |         |          |          |        
|Supplemental Disclosures of Cash Flow
    Information                                       |                                                                 |                                                                       |                                                         |                                                  |         |          |          |        
|Cash paid for interest, net of capitalized
    interest                                     |                                                                 | $                                                                     | 105,469                                                 |                                                  |         | $        | 114,856  |        
|Non-cash transactions:                                                                      |                                                                 |                                                                       |                                                         |                                                  |         |          |          |        
|                                                                                            | Acquisition of properties                                       |                                                                       | $                                                       | 188,384                                          |         |          | $        | 246,081 |        
|                                                                                            | Assumption of debt                                              |                                                                       |                                                         | (7,676                                           | )       |          |          | (22,187 | )      
|                                                                                            | Acquisition capital                                             |                                                                       |                                                         | (4,210                                           | )       |          |          | (7,044  | )      
|                                                                                            |                                                                 |                                                                       |                                                         |                                                  |         |          |          |        
|                                                                                            |                                                                 | Net cash paid                                                         |                                                         | $                                                | 176,498 |          |          | $       | 216,850 |         
|                                                                                            |                                                                 |                                                                       |                                                         |                                                  |         |          |          |        

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

4



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##### Table of Contents



AMB PROPERTY, L.P.






CONSOLIDATED STATEMENT OF PARTNERS
CAPITAL


For the nine months ended September 30,
2003


|                                                                                                                 |                            |                                   |            |                  |  |                 |         |              |  |       |            |        |  |       |           |        |  |       |           |  |  |   |         |   |  |  |           |   |  |   |        |   |  |   |           |         | 
|---------------------------------------------------------------------------------------------------------------- | -------------------------- | --------------------------------- | ---------- | ---------------- |  | --------------- | ------- | ------------ |  | ----- | ---------- | ------ |  | ----- | --------- | ------ |  | ----- | --------- |  |  | - | ------- | - |  |  | --------- | - |  | - | ------ | - |  | - | --------- | ------- | 
|                                                                                                                 |                            |                                   |            |                  |  |                
|                                                                                                                 |                            | 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) |            |                 
|Balance at December 31, 2002                                                                                     |                            |                                   | 3,995,800  |                  |  | $               | 95,994  |              |  |       | 81,800,038 |        |  | $     | 1,588,156 |        |  |       | 2,900,000 |  |  | $ | 141,103 |   |  |  | 4,846,387 |   |  | $ | 94,374 |   |  | $ | 1,919,627 |        
|Comprehensive income:                                                                                            |                            |                                   |            |                  |  |                 |         |              |  |       |            |        |  |       |           |        |  |       |           |  |  |   |         |   |  |  |           |   |  |   |        |   |  |   |           |        
|Net income                                                                                                       |                            |                                   |           |                  |  |                 | 5,788   |              |  |       |           |        |  |       | 94,998    |        |  |       |          |  |  |   | 8,975   |   |  |  |          |   |  |   | 5,576  |   |  |   |           |        
|Unrealized gain on securities                                                                                    |                            |                                   |           |                  |  |                 |        |              |  |       |           |        |  |       | 680       |        |  |       |          |  |  |   |        |   |  |  |          |   |  |   |       |   |  |   |           |        
|Currency translation adjustment                                                                                  |                            |                                   |           |                  |  |                 |        |              |  |       |           |        |  |       | 305       |        |  |       |          |  |  |   |        |   |  |  |          |   |  |   |       |   |  |   |           |        
|                                                                                                                 | Total comprehensive income |                                   |            |                 |  |                 |         |              |  |       |            |        |  |       |           |        |  |       |           |  |  |   |         |   |  |  |           |   |  |   |        |   |  |   |           | 116,322 | 
|Contributions                                                                                                    |                            |                                   | 2,000,000  |                  |  |                 | 48,221  |              |  |       |           |        |  |       |          |        |  |       |          |  |  |   |        |   |  |  |          |   |  |   |       |   |  |   | 48,221    |        
|Issuance of common limited partnership units in
    connection with the issuance of restricted stock and options |                            |                                   |           |                  |  |                 |        |              |  |       | 246,968    |        |  |       | 11,208    |        |  |       |          |  |  |   |        |   |  |  |          |   |  |   |       |   |  |   | 11,208    |        
|Issuance of common limited partnership units in
    connection with the exercise of stock options                |                            |                                   |           |                  |  |                 |        |              |  |       | 216,056    |        |  |       | 4,774     |        |  |       |          |  |  |   |        |   |  |  |          |   |  |   |       |   |  |   | 4,774     |        
|Conversion of operating partnership units to
    common stock                                                    |                            |                                   |           |                  |  |                 |        |              |  |       | 2,000      |        |  |       | 58        |        |  |       |          |  |  |   |        |   |  |  | (2,000    | ) |  |   | (38    | ) |  |   | 20        |        
|Conversion of operating partnership units to cash                                                                |                            |                                   |           |                  |  |                 |        |              |  |       |           |        |  |       |          |        |  |       |          |  |  |   |        |   |  |  | (226,145  | ) |  |   | (4,340 | ) |  |   | (4,340    | )      
|Retirement of units                                                                                              |                            |                                   | (3,995,800 | )                |  |                 | (95,994 | )            |  |       | (812,900   | )      |  |       | (21,239   | )      |  |       |          |  |  |   |        |   |  |  |          |   |  |   |       |   |  |   | (117,233  | )      
|Deferred compensation                                                                                            |                            |                                   |           |                  |  |                 |        |              |  |       |           |        |  |       | (11,205   | )      |  |       |          |  |  |   |        |   |  |  |          |   |  |   |       |   |  |   | (11,205   | )      
|Deferred compensation amortization                                                                               |                            |                                   |           |                  |  |                 |        |              |  |       |           |        |  |       | 6,000     |        |  |       |          |  |  |   |        |   |  |  |          |   |  |   |       |   |  |   | 6,000     |        
|Reallocation of interests                                                                                        |                            |                                   |           |                  |  |                 |        |              |  |       |           |        |  |       | (4,503    | )      |  |       |          |  |  |   |        |   |  |  |          |   |  |   | (1,085 | ) |  |   | (5,588    | )      
|Distributions                                                                                                    |                            |                                   |           |                  |  |                 | (5,788  | )            |  |       |           |        |  |       | (103,309  | )      |  |       |          |  |  |   | (8,975  | ) |  |  |          |   |  |   | (5,933 | ) |  |   | (124,005  | )      
|                                                                                                                 |                            |                                   |            |                  |  |                 |         |              |  |       |            |        |  |       |           |        |  |       |           |  |  |   |         |   |  |  |           |   |  |   |        |   |  |   |           |        
|Balance as of September 30,
    2003                                                                             |                            |                                   | 2,000,000  |                  |  | $               | 48,221  |              |  |       | 81,452,162 |        |  | $     | 1,565,923 |        |  |       | 2,900,000 |  |  | $ | 141,103 |   |  |  | 4,618,242 |   |  | $ | 88,554 |   |  | $ | 1,843,801 |        
|                                                                                                                 |                            |                                   |            |                  |  |                 |         |              |  |       |            |        |  |       |           |        |  |       |           |  |  |   |         |   |  |  |           |   |  |   |        |   |  |   |           |        

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

5



---



##### Table of Contents



AMB PROPERTY, L.P.






NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS


September 30, 2003


(unaudited)


1.     Organization
and Formation of the Operating Partnership

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

As of September 30, 2003, the Company owned
an approximate 94.6% general partnership interest in the
Operating Partnership, excluding preferred units. The remaining
5.4% limited partnership interests are owned by non-affiliated
investors and certain current and former directors and officers
of the Company. For local law purposes, certain properties are
owned through limited partnerships and limited liability
companies. The ownership of such properties through such
entities does not materially affect the Operating
Partnerships overall ownership interests in the
properties. As the sole general partner of the Operating
Partnership, the Company has full, exclusive and complete
responsibility and discretion in the day-to-day management and
control of the Operating Partnership. Net operating results of
the Operating Partnership are allocated after preferred unit
distributions based on the respective partners ownership
interests.

The Operating Partnership enters into
co-investment joint ventures with institutional investors. These
co-investment joint ventures provide the Operating Partnership
with an additional source of capital and income. As of
September 30, 2003, the Operating Partnership had
investments in five co-investment joint ventures, which are
consolidated for financial reporting purposes.

AMB Capital Partners, LLC, a Delaware limited
liability company (AMB Capital Partners), provides
real estate investment services to clients and co-investment
joint venture clients on a fee basis. Headlands Realty
Corporation, a Maryland corporation, conducts a variety of
businesses that include incremental income programs and
development projects available for sale to third parties. IMD
Holding Corporation, a Delaware corporation, also conducts a
variety of businesses that include development projects
available for sale to third parties. AMB Capital Partners,
Headlands Realty Corporation and IMD Holding Corporation are
wholly-owned subsidiaries of the Operating Partnership.

As of September 30, 2003, the Operating
Partnership owned 896 operating industrial buildings and seven
retail and other properties, located in 27 markets
throughout North America and France. The Operating
Partnerships strategy is to become a leading provider of
distribution properties in supply-constrained submarkets located
near key international passenger and cargo airports, highway
systems and seaports in major metropolitan areas of North
America, Europe and Asia. These markets are generally tied to
global trade. As of September 30, 2003, the industrial
buildings, principally warehouse distribution buildings,
encompassed approximately 83.3 million rentable square feet
and were 92.0% leased. As of September 30, 2003, the retail
centers, principally grocer-anchored community shopping centers,
encompassed approximately 0.5 million rentable square feet
and were 77.0% leased to 56 customers.

As of September 30, 2003, through AMB
Capital Partners, the Operating Partnership also managed, but
did not have an ownership interest in, industrial, retail and
other properties, totaling approximately 0.5 million
rentable square feet. In addition, the Operating Partnership had
investments in industrial operating properties,

6



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##### Table of Contents



AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

totaling approximately 7.9 million rentable
square feet, through unconsolidated joint ventures. As of
September 30, 2003, the Operating Partnership also had
investments in industrial development projects, some of which
were held for sale, totaling approximately 4.7 million
square feet.

2.     Interim
Financial Statements

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

In the opinion of management, the accompanying
unaudited consolidated financial statements contain all
adjustments, of a normal recurring nature, necessary for a fair
presentation of the Operating Partnerships consolidated
financial position and results of operations for the interim
periods. The interim results for the three and nine months ended
September 30, 2003, are not necessarily indicative of
future results. These financial statements should be read in
conjunction with the financial statements and the notes thereto
included in the Operating Partnerships Annual Report on
Form 10-K for the year ended December 31, 2002.

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

Investments in Real Estate.Investments in real estate and
leasehold interests are stated at cost unless circumstances
indicate that cost cannot be recovered, in which case, the
carrying value of the property is reduced to estimated fair
value. Carrying values for financial reporting purposes are
reviewed for impairment on a property-by-property basis whenever
events or changes in circumstances indicate that the carrying
value of a property may not be recoverable. Impairment is
recognized when estimated expected future cash flows
(undiscounted and without interest charges) are less than the
carrying value of the property. The estimation of expected
future net cash flows is inherently uncertain and relies on
assumptions regarding current and future economics and market
conditions and the availability of capital. If impairment
analysis assumptions change, then an adjustment to the carrying
value of the Operating Partnerships long-lived assets
could occur in the future period in which the assumptions
change. To the extent that a property is impaired, the excess of
the carrying amount of the property over its estimated fair
value is charged to earnings. As a result of recent leasing
activity and the current economic environment, the Operating
Partnership re-evaluated the carrying value of its investments
and recorded an impairment charge of $5.2 million during
the nine months ended September 30, 2003. The Operating
Partnership believes that there are no additional impairments of
the carrying values of its investments in real estate as of
September 30, 2003. Also during the nine months ended
September 30, 2003, the Operating Partnership recorded a
reduction of depreciation expense of $2.1 million to
reflect the recovery, through the settlement of a lawsuit, of
capital expenditures paid in prior years.

In June 2001, the Financial Accounting Standards
Board (FASB) issued Statement of Financial
Accounting Standard (SFAS) No. 141, Business
Combinations. SFAS No. 141 requires the Operating
Partnership to record at acquisition an intangible asset or
liability for the value attributable to above or below-market
leases, in-place leases and lease origination costs. The
requirements are applicable to all acquisitions subsequent to
July 1, 2001. The adoption of SFAS No. 141 did not
have a material impact on the Operating Partnerships
financial position or results of operations.

Reclassifications.Certain items in the consolidated
financial statements for prior periods have been reclassified to
conform to current classifications.

7



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##### Table of Contents



AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Comprehensive Income.The Operating Partnership reports
comprehensive income in its Statement of Partners Capital.
Comprehensive income was $28.3 million and
$31.4 million for the three months ended September 30,
2003 and 2002, respectively. Comprehensive income was
$116.3 million and $99.1 million for the nine months
ended September 30, 2003 and 2002, respectively.

Financial Instruments.The Operating Partnership adopted SFAS
No. 133, Accounting for Derivative Instruments and for
Hedging Activities, as amended, on January 1, 2001.
SFAS No. 133 provides comprehensive guidelines for the
recognition and measurement of derivatives and hedging
activities and, specifically, requires all derivatives to be
recorded on the balance sheet at fair value as an asset or
liability, with an offset to accumulated other comprehensive
income or income. For revenues or expenses denominated in
non-functional currencies, the Operating Partnership may use
derivative financial instruments to manage foreign currency
exchange rate risk. The Operating Partnerships derivative
financial instruments in effect at September 30, 2003 were
a forward contract hedging against adverse foreign exchange
fluctuations in the Mexican peso against the U.S. dollar and
stock warrants obtained from tenants.

Foreign Operations.The U.S. dollar is the functional
currency for the Operating Partnerships subsidiaries
operating in the United States and Mexico. The functional
currency for the Operating Partnerships subsidiaries
operating outside North America is generally the local currency
of the country in which the entity is located. The Operating
Partnerships subsidiaries whose functional currency is not
the U.S. dollar translate their financial statements into U.S.
dollars. Assets and liabilities are translated at the exchange
rate in effect as of the financial statement date. The Operating
Partnership translates income statement accounts using the
average exchange rate for the period and significant
nonrecurring transactions using the rate on the transaction
date. Gains and losses resulting from the translation are
included in accumulated other comprehensive income as a separate
component of partners capital.

The Operating Partnerships foreign
subsidiaries may have transactions denominated in currencies
other than their functional currency. In these instances,
non-monetary assets and liabilities are reflected at the
historical exchange rate, monetary assets and liabilities are
remeasured at the exchange rate in effect at the end of the
period and income statement accounts are remeasured at the
average exchange rate for the period. Gains and losses from
remeasurement are generally included in the Operating
Partnerships results of operations.

The Operating Partnership also records gains or
losses in the income statement when a transaction with a third
party, denominated in a currency other than the entitys
functional currency, is settled and the functional currency cash
flows realized are more or less than expected based upon the
exchange rate in effect when the transaction was initiated.

Stock-based compensation expense.In 2002, the Operating Partnership
adopted the expense recognition provisions of SFAS No. 123,
Accounting for Stock-Based Compensation. The Operating
Partnership values stock options using the Black-Scholes
option-pricing model and recognizes this value as an expense
over the period in which the options vest. Under this standard,
recognition of expense for stock options is applied to all
options granted after the beginning of the year of adoption.
Prior to 2002, the Operating Partnership followed the intrinsic
method set forth in APB Opinion 25, Accounting for Stock
Issued to Employees. The Company awards stock options to its
employees. In accordance with SFAS No. 123, the Operating
Partnership will recognize the associated expense over the three
to five-year vesting periods. Related stock-based compensation
expense was $0.6 million and $0.3 million for the
three months ended September 30, 2003 and 2002,
respectively, and $1.8 million and $0.7 million for
the nine months ended September 30, 2003 and 2002,
respectively. The expense is included in general and
administrative expenses in the accompanying consolidated
statements of operations. The adoption of SFAS No. 123 is
prospective and the 2002 expense relates only to stock options
granted in 2002.

8



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AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

New Accounting Pronouncements.In July 2003, the SEC announced that
it had revised it position relating to the application of
Emerging Issues Task Force Topic No. D-42, The Effect on
the Calculation of Earnings per Share for the Redemption or
Induced Conversion of Preferred Stock,
(Topic D-42). As a result of this announcement,
original issuance costs related to preferred equity are to be
reflected as a reduction of income available to common
stockholders in determining earnings per share for the period in
which the preferred equity is redeemed. The announcement
requires retroactive application of the revised position in
previously issued financial statements. As a result, the
Operating Partnerships financial statements for the year
ending December 31, 2001, to be included in its annual
report on Form 10-K for the year ending December 31,
2003, will be restated to reflect a reduction in income
available to common stockholders of $3.2 million,
representing the original issuance costs of AMB
Property II, L.P.s series C preferred units,
which were redeemed in December 2001. Restated diluted earnings
per share for the year ended December 31, 2001, will be
$1.43 compared to $1.47 as previously reported. The SECs
revised position on Topic D-42 does not require the
Operating Partnership to file amendments to previously filed
reports and will not impact any other previously reported
periods. On July 28, 2003, the Operating Partnership
redeemed all 3,995,800 shares of its 8.5% Series A
Cumulative Redeemable Preferred Units and recognized a reduction
of income available to common unitholders of $3.7 million
for the original issuance costs.

In November 2002, the FASB issued Interpretation
No. 45, Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others(FIN 45).
FIN 45 requires disclosure of off-balance sheet
transactions, arrangements, obligations, guarantees or other
relationships with unconsolidated entities or other persons that
have, or are reasonably likely to have, a material effect on its
financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources.

In January 2003, the FASB issued Interpretation
No. 46, Consolidation of Variable Interest Entities(FIN 46). FIN 46 requires a variable
interest entity to be consolidated by a company if that company
is subject to a majority of the risk of loss from the variable
interest entitys activities or entitled to receive a
majority of the entitys residual returns or both.
FIN 46 requires disclosures about variable interest
entities that a company is not required to consolidate, but in
which it has a significant variable interest. The consolidation
requirements apply to existing entities in the first fiscal year
or interim period ending after December 15, 2003. The
Operating Partnership will adopt the consolidation requirements
of FIN 46 in the fourth quarter of 2003 and does not
believe that any of its consolidated or unconsolidated joint
ventures are variable interest entities under the provisions of
FIN 46.

In April 2003, the FASB issued SFAS No. 149,
Amendment of Statement No. 133 on Derivative Instruments
and Hedging Activities(SFAS 149). This
Statement amends and clarifies financial accounting and
reporting for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively
referred to as derivatives) and for hedging activities under
FASB Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities. The Operating
Partnership adopted the requirements of SFAS 149 in the
third quarter of 2003, and it did not impact its financial
position, results of operations or cash flows.

In May 2003, the FASB issued SFAS No. 150,
Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and
Equity(SFAS 150). This Statement
establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both
liabilities and equity. It requires that an issuer classify a
financial instrument that is within its scope as a liability (or
an asset in some circumstances). The minority interests
associated with certain of the Operating Partnerships
consolidated joint ventures, those that have finite lives under
the terms of the partnership agreements, represent mandatorily
redeemable interests as defined in SFAS 150. As of
September 30, 2003, the aggregate book value of these
minority interests in the accompanying consolidated balance
sheet was $644.4 million and the Operating Partnership
believes that the aggregate settlement value of these interests
was approximately

9



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AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

$661.0 million. This amount is based on the
estimated liquidation values of the assets and liabilities and
the resulting proceeds that the Operating Partnership would
distribute to its joint venture partners upon dissolution, as
required under the terms of the respective partnership
agreements. Subsequent changes to the estimated fair values of
the assets and liabilities of the consolidated joint ventures
will affect the Operating Partnerships estimate of the
aggregate settlement value. The partnership agreements do not
limit the amount that the minority partners would be entitled to
in the event of liquidation of the assets and liabilities and
dissolution of the respective partnerships. SFAS 150 was
effective beginning in the third quarter of 2003, however the
FASB deferred the implementation of SFAS 150 as it applied
to certain minority interests in finite-lived entities. The
Operating Partnership adopted the requirements of SFAS 150
in the third quarter of 2003, and, considering the
aforementioned deferral, there was no impact on the Operating
Partnerships financial position, results of operations or
cash flows.

3.     Real Estate
Acquisition and Development Activity

During the three months ended September 30,
2003, the Operating Partnership invested $57.4 million in
13 industrial buildings, aggregating approximately
0.8 million square feet, of which the Operating Partnership
invested $27.3 million in six industrial buildings,
aggregating approximately 0.5 million square feet through
two of the Operating Partnerships co-investment joint
ventures. During the nine months ended September 30, 2003,
the Operating Partnership invested $188.4 million in
31 industrial buildings, aggregating approximately
3.2 million square feet, of which the Operating Partnership
invested $154.6 million in 23 industrial buildings,
aggregating approximately 2.8 million square feet through
two of the Operating Partnerships co-investment joint
ventures. During the quarter ended September 30, 2002, the
Operating Partnership invested $89.2 million in eight
industrial buildings, aggregating approximately 1.4 million
square feet. During the nine months ended September 30,
2002, the Operating Partnership invested $246.1 million in
33 industrial buildings, aggregating approximately
4.1 million square feet.

During the three months ended September 30,
2003, the Operating Partnership completed three industrial
building projects valued at $21.5 million, aggregating
approximately 0.4 million square feet. The Operating
Partnership also initiated two new industrial projects valued at
$67.5 million, aggregating approximately 1.6 million
square feet. As of September 30, 2003, the Operating
Partnership had in its development pipeline: (1) 15
industrial projects, which will total approximately
4.0 million square feet and will have an aggregate
estimated investment of $207.5 million upon completion and
(2) four development projects available for sale, which
will total approximately 0.6 million square feet and will
have an aggregate estimated investment of $41.6 million
upon completion. As of September 30, 2003, the Operating
Partnership and its Development Alliance Partners had funded an
aggregate of $119.5 million and needed to fund an estimated
additional $129.6 million in order to complete current and
planned projects. The Operating Partnerships development
pipeline includes projects expected to be completed through the
third quarter of 2005.



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

Gains from Dispositions of Real
Estate.On February 19, 2003, the
Operating Partnership contributed $94.0 million in
operating properties, consisting of 24 industrial buildings,
aggregating approximately 2.4 million square feet, to its
newly formed unconsolidated joint venture, Industrial
Fund I, LLC. The Operating Partnership recognized a gain of
$7.4 million on the contribution, representing the portion
of the contributed properties acquired by the third-party
investors. During the nine months ended September 30, 2002,
the Operating Partnership divested itself of two industrial
buildings and one retail center, aggregating approximately
0.8 million square feet, for an aggregate price of
$50.6 million, with a resulting loss of $0.8 million.
In June 2002, the Operating Partnership also contributed
$76.9 million in operating properties, consisting of 15
industrial buildings, aggregating approximately 1.9 million
square feet, to its consolidated co-

10



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AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

investment joint venture, AMB-SGP, LP. The
Operating Partnership recognized a gain of $3.3 million on
the contribution, representing the portion of the contributed
properties acquired by the third-party investors.

Merchant Development
Sales.During the three and nine
months ended September 30, 2003, the Operating Partnership
sold three development-for-sale projects, aggregating
approximately 0.2 million square feet, for an aggregate
price of $32.1 million, with a resulting net gain of
$2.2 million. During the three and nine months ended
September 30, 2002, the Operating Partnership sold five
development-for-sale projects, aggregating approximately
0.1 million square feet, for an aggregate price of
$11.1 million, with a resulting net gain of
$0.6 million.

Property Divestitures.During the three months ended
September 30, 2003, the Operating Partnership divested
itself of nine industrial buildings and one retail center,
aggregating approximately 0.8 million square feet, for an
aggregate price of $102.2 million, with a resulting net
gain of $7.9 million. During the nine months ended
September 30, 2003, the Operating Partnership divested
itself of 21 industrial buildings and one retail center,
aggregating approximately 2.6 million square feet, for an
aggregate price of $244.3 million, with a resulting net
gain of $39.5 million. During the three and nine months
ended September 30, 2002, the Operating Partnership
divested itself of five industrial buildings and one retail
center, aggregating approximately 0.6 million square feet,
for an aggregate price of $33.6 million, with a resulting
net gain of $3.7 million. The Operating Partnership
reported the divestitures as discontinued operations separately
as prescribed under the provisions of SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets. Beginning in 2002, SFAS No. 144 requires the
Operating Partnership to separately report as discontinued
operations the historical operating results attributable to
operating properties sold and the applicable gain or loss on the
disposition of the properties. Although the application of SFAS
No. 144 may affect the presentation of the Operating
Partnerships results of operations for the periods that it
has already reported in filings with the Securities and Exchange
Commission, there will be no effect on our previously reported
financial position, net income or cash flows.

Properties Held for Divestiture.As of September 30, 2003, the
Operating Partnership had decided to divest itself of three
industrial buildings and one retail center with a net book value
of $20.5 million. The properties either are not in the
Operating Partnerships core markets or do not meet its
current strategic objectives. The divestitures of the properties
are subject to negotiation of acceptable terms and other
customary conditions. Properties held for divestiture are stated
at the lower of cost or estimated fair value less costs to sell.
The following summarizes the condensed results of operations of
the properties held for divestiture and sold under SFAS
No. 144 for the three and nine months ended
September 30, (dollars in thousands):

|                                                     |                                                |                    |       |                   |  |      |        |       |  |   |        |       |  |   |        |        | 
|---------------------------------------------------- | ---------------------------------------------- | ------------------ | ----- | ----------------- |  | ---- | ------ | ----- |  | - | ------ | ----- |  | - | ------ | ------ | 
|                                                     |                                                |                    |       |                  
|                                                     |                                                | For the            |       | For the          
|                                                     |                                                | Three Months Ended |       | Nine Months Ended
|                                                     |                                                | September 30,      |       | September 30,    
|                                                     |                                                |                    |       |                  
|                                                     |                                                | 2003               |       | 2002              |  | 2003 |        | 2002 
|                                                     |                                                |                    |       |                   |  |      |        |      
|Rental revenues                                      |                                                | $                  | 2,973 |                   |  | $    | 11,231 |       |  | $ | 11,436 |       |  | $ | 34,285 |       
|Straight-line rents                                  |                                                |                    | 51    |                   |  |      | 645    |       |  |   | 122    |       |  |   | 1,661  |       
|Property operating expenses                          |                                                |                    | (456  | )                 |  |      | (1,586 | )     |  |   | (2,005 | )     |  |   | (4,309 | )     
|Real estate taxes                                    |                                                |                    | (347  | )                 |  |      | (1,557 | )     |  |   | (1,377 | )     |  |   | (5,059 | )     
|Interest, including amortization                     |                                                |                    | (171  | )                 |  |      | (1,248 | )     |  |   | (2,019 | )     |  |   | (3,415 | )     
|Depreciation and amortization                        |                                                |                    | (339  | )                 |  |      | (2,378 | )     |  |   | (1,910 | )     |  |   | (6,821 | )     
|Joint venture partners share of income              |                                                |                    | (835  | )                 |  |      | (698   | )     |  |   | (913   | )     |  |   | (1,760 | )     
|Limited partnership unitholders share of
    income |                                                |                    | (48   | )                 |  |      | (242   | )     |  |   | (183   | )     |  |   | (802   | )     
|                                                     |                                                |                    |       |                   |  |      |        |       |  |   |        |       |  |   |        |       
|                                                     | Income attributable to discontinued operations |                    | $     | 828               |  |      | $      | 4,167 |  |   | $      | 3,151 |  |   | $      | 13,780 | 
|                                                     |                                                |                    |       |                   |  |      |        |       |  |   |        |       |  |   |        |       

11



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AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

As of September 30, 2003 and
December 31, 2002, assets and liabilities of properties
held for divestiture under the provisions of SFAS No. 144
consisted of the following (dollars in thousands):

|                                       |  |               |     |              |  |   |       | 
|-------------------------------------- |  | ------------- | --- | ------------ |  | - | ----- | 
|                                       |  | September 30, |     | December 31,
|                                       |  | 2003          |     | 2002        
|                                       |  |               |     |             
|Accounts receivable, net               |  | $             | 397 |              |  | $ | 552   | 
|Other assets                           |  | $             | 10  |              |  | $ | 2     | 
|Secured debt                           |  | $             |    |              |  | $ |      | 
|Accounts payable and other liabilities |  | $             | 420 |              |  | $ | 1,034 | 

5.     Mortgage
Receivable

Through a wholly-owned subsidiary, the Operating
Partnership holds a mortgage loan receivable on AMB Pier One,
LLC, an unconsolidated joint venture. The note bears interest at
13.0% and matures in May 2026. As of September 30, 2003,
the outstanding balance on the note was $13.1 million.

6.     Debt

As of September 30, 2003, and
December 31, 2002, debt consisted of the following (dollars
in thousands):

|                                                                                                                                                                                                                                 |                                        |                         |         |              |           |   |         |           |           | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------- | ----------------------- | ------- | ------------ | --------- | - | ------- | --------- | --------- | 
|                                                                                                                                                                                                                                 |                                        | September 30,           |         | December 31,
|                                                                                                                                                                                                                                 |                                        | 2003                    |         | 2002        
|                                                                                                                                                                                                                                 |                                        |                         |         |             
|Operating Partnership secured debt, varying
    interest rates from 4.0% to 10.4%, due December 2003 to January
    2014 (weighted average interest rate of 8.1% at
    September 30, 2003 and December 31, 2002)                |                                        | $                       | 310,774 |              |           | $ | 381,764 |          
|Joint venture secured debt, varying interest
    rates from 2.6% to 12.0%, due July 2004 to June 2023 (weighted
    average interest rate of 6.7% and 7.0% at September 30,
    2003, and December 31, 2002, respectively)       |                                        |                         | 993,237 |              |           |   | 893,093 |          
|Unsecured senior debt securities, varying
    interest rates from 5.9% to 8.0%, (weighted average interest
    rate of 7.2% at September 30, 2003, and December 31,
    2002) due June 2005 to June 2018                         |                                        |                         | 800,000 |              |           |   | 800,000 |          
|Alliance Fund II credit facility                                                                                                                                                                                                 |                                        |                         |        |              |           |   | 45,500  |          
|Unsecured debt, interest rate of 7.5%, due June
    2013 and November 2015                                                                                                                                                       |                                        |                         | 9,772   |              |           |   | 10,186  |          
|Unsecured credit facility, variable interest at
    LIBOR or EURIBOR plus 60 basis points (weighted average interest
    rate of 2.2% and 2.0% at September 30, 2003 and
    December 31, 2002, respectively), due December 2005 |                                        |                         | 91,335  |              |           |   | 95,000  |          
|                                                                                                                                                                                                                                 |                                        |                         |         |              |           |   |         |          
|                                                                                                                                                                                                                                 | Total debt before unamortized premiums |                         |         | 2,205,118    |           |   |         | 2,225,543 |          
|                                                                                                                                                                                                                                 | Unamortized premiums                   |                         |         | 8,094        |           |   |         | 9,818     |          
|                                                                                                                                                                                                                                 |                                        |                         |         |              |           |   |         |          
|                                                                                                                                                                                                                                 |                                        | Total consolidated debt |         | $            | 2,213,212 |   |         | $         | 2,235,361 | 
|                                                                                                                                                                                                                                 |                                        |                         |         |              |           |   |         |          

Secured debt generally requires monthly principal
and interest payments. The secured debt is secured by deeds of
trust on certain properties and is generally non-recourse. As of
September 30, 2003 and December 31, 2002, the total
gross investment book value of those properties securing the
debt was $2.4 billion and $2.6 billion, respectively,
including $1.7 billion and $1.6 billion, respectively,
in consolidated joint ventures. All of the secured debt bears
interest at fixed rates, except for four loans with an aggregate
principal amount of

12



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##### Table of Contents



AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

$30.9 million as of September 30, 2003,
which bear interest at variable rates (weighted average interest
rate of 3.6% as of September 30, 2003). The secured debt
has various covenants. Management believes that the Operating
Partnership was in compliance with its financial covenants as of
September 30, 2003. As of September 30, 2003, the
Operating Partnership had 34 non-recourse secured loans, which
are cross-collateralized by 72 properties, totaling
$820.5 million (not including unamortized debt premiums).

In June 1998, the Operating Partnership issued
$400.0 million of unsecured senior debt securities.
Interest on the unsecured senior debt securities is payable
semi-annually. The 2015 notes are putable and callable in
September 2005. The senior debt securities are subject to
various covenants. Management believes that the Operating
Partnership was in compliance with its financial covenants as of
September 30, 2003. In August 2000, the Operating
Partnership commenced a medium-term note program and
subsequently issued $400.0 million of medium-term notes,
which are guaranteed by the Company. In May 2002, the Operating
Partnership commenced a new medium-term note program for the
issuance of up to $400.0 million in principal amount of
medium-term notes (unsecured senior debt securities), which will
be guaranteed by the Company. As of September 30, 2003, the
Operating Partnership had issued no medium-term notes under this
program.

In December 2002, the Operating Partnership
renewed its $500.0 million unsecured revolving line of
credit. The Company guarantees the Operating Partnerships
obligations under the credit facility. The credit facility
matures in December 2005, has a one-year extension option and
currently is subject to a 20 basis point annual facility fee.
Borrowings under the credit facility currently bear interest at
LIBOR plus 60 basis points. Euro borrowings under the credit
facility currently bear interest at EURIBOR plus 60 basis
points. Yen borrowings under the credit facility currently bear
interest at the Japan LIBOR fixing plus 60 basis points.
Both the facility fee and the interest rate are based on the
Operating Partnerships credit rating, which is currently
investment grade. The credit facility includes a multi-currency
component, which was amended effective July 10, 2003 to
increase from $150.0 million to $250.0 million the
amount that may be drawn in either British pounds sterling,
Euros or Yen (provided that such currency is readily available
and freely transferable and convertible to U.S. dollars,
the Reuters Monitor Money Rates Service reports LIBOR for such
currency in interest periods of 1, 2, 3 or 6 months and the
Operating Partnership has an investment grade credit rating).
The Operating Partnership has the ability to increase available
borrowings to $700.0 million by adding additional banks to
the facility or obtaining the agreement of existing banks to
increase their commitments. The Operating Partnership uses its
unsecured credit facility principally for acquisitions and for
general working capital requirements. Monthly debt service
payments on the credit facility are interest only. The total
amount available under the credit facility fluctuates based upon
the borrowing base, as defined in the agreement governing the
credit facility, generally the value of the Operating
Partnerships unencumbered properties. As of
September 30, 2003, the outstanding balance on the credit
facility was $91.3 million and the remaining amount
available was $371.5 million, net of outstanding letters of
credit (excluding the additional $200.0 million of
potential additional capacity). The outstanding balance included
borrowing denominated in Euros and Yen converted to
U.S. dollars at September 30, 2003. The credit
facility has various covenants. Management believes that the
Operating Partnership was in compliance with its financial
covenants at September 30, 2003.

In August 2001, AMB Institutional Alliance
Fund II, L.P. (Alliance Fund II) obtained
a $150.0 million credit facility secured by the unfunded
capital commitments of the investors in AMB Institutional
Alliance REIT II, Inc. (Alliance REIT II)
and the Alliance Fund II. In April 2003, the Alliance Fund
II repaid the credit facility with capital contributions and
secured debt financing proceeds and terminated the credit
facility.

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##### Table of Contents



AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

As of September 30, 2003, the scheduled
maturities of the Operating Partnerships total debt,
excluding unamortized debt premiums, were as follows (dollars in
thousands):

|           |       |             |        |         |  |            |         |           |  |            |         |         |  |   |       |       |  |   |        |        |  |   |         |           | 
|---------- | ----- | ----------- | ------ | ------- |  | ---------- | ------- | --------- |  | ---------- | ------- | ------- |  | - | ----- | ----- |  | - | ------ | ------ |  | - | ------- | --------- | 
|           |       | Operating   |        |         |  | Unsecured  |         |           |  |            |         |        
|           |       | Partnership |        | Joint   |  | Senior     |         |           |  |            |         |        
|           |       | Secured     |        | Venture |  | Debt       |         | Unsecured |  | Credit     |         |        
|           |       | Debt        |        | Debt    |  | Securities |         | Debt      |  | Facilities |         | Total  
|           |       |             |        |         |  |            |         |           |  |            |         |        
|2003       |       | $           | 18,587 |         |  | $          | 6,174   |           |  | $          |        |         |  | $ | 143   |       |  | $ |       |        |  | $ | 24,904  |          
|2004       |       |             | 62,516 |         |  |            | 37,920  |           |  |            |        |         |  |   | 601   |       |  |   |       |        |  |   | 101,037 |          
|2005       |       |             | 44,427 |         |  |            | 61,181  |           |  |            | 250,000 |         |  |   | 647   |       |  |   | 91,335 |        |  |   | 447,590 |          
|2006       |       |             | 82,693 |         |  |            | 60,570  |           |  |            | 25,000  |         |  |   | 698   |       |  |   |       |        |  |   | 168,961 |          
|2007       |       |             | 14,495 |         |  |            | 49,416  |           |  |            | 75,000  |         |  |   | 752   |       |  |   |       |        |  |   | 139,663 |          
|2008       |       |             | 31,665 |         |  |            | 161,350 |           |  |            | 175,000 |         |  |   | 810   |       |  |   |       |        |  |   | 368,825 |          
|2009       |       |             | 4,147  |         |  |            | 82,875  |           |  |            |        |         |  |   | 873   |       |  |   |       |        |  |   | 87,895  |          
|2010       |       |             | 50,948 |         |  |            | 123,571 |           |  |            | 75,000  |         |  |   | 941   |       |  |   |       |        |  |   | 250,460 |          
|2011       |       |             | 409    |         |  |            | 241,374 |           |  |            | 75,000  |         |  |   | 1,014 |       |  |   |       |        |  |   | 317,797 |          
|2012       |       |             | 407    |         |  |            | 146,542 |           |  |            |        |         |  |   | 1,093 |       |  |   |       |        |  |   | 148,042 |          
|Thereafter |       |             | 480    |         |  |            | 22,264  |           |  |            | 125,000 |         |  |   | 2,200 |       |  |   |       |        |  |   | 149,944 |          
|           |       |             |        |         |  |            |         |           |  |            |         |         |  |   |       |       |  |   |        |        |  |   |         |          
|           | Total |             | $      | 310,774 |  |            | $       | 993,237   |  |            | $       | 800,000 |  |   | $     | 9,772 |  |   | $      | 91,335 |  |   | $       | 2,205,118 | 
|           |       |             |        |         |  |            |         |           |  |            |         |         |  |   |       |       |  |   |        |        |  |   |         |          



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

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

The Operating Partnership enters into
co-investment joint ventures with institutional investors. The
Operating Partnerships five co-investment joint ventures
are engaged in the acquisition, ownership, operation, management
and, in some cases, the renovation, expansion and development,
of industrial buildings in target markets nationwide.

The Operating Partnerships co-investment
joint ventures at September 30, 2003 (dollars in thousands)
were:

|                                            |       |                                                                   |  |               |    |                   |  |   |         |           | 
|------------------------------------------- | ----- | ----------------------------------------------------------------- |  | ------------- | -- | ----------------- |  | - | ------- | --------- | 
|                                            |       |                                                                   |  | Operating     |    |                  
|                                            |       |                                                                   |  | Partnerships |    |                  
|                                            |       |                                                                   |  | Ownership     |    | Total            
|Co-investment Joint Venture                 |       | Joint Venture Partner                                             |  | Percentage    |    | Capitalization(1)
|                                            |       |                                                                   |  |               |    |                  
|AMB/Erie, L.P.                              |       | Erie Insurance Company and affiliates                             |  |               | 50 | %                 |  | $ | 151,639 |          
|AMB Institutional Alliance Fund I,
    L.P. |       | AMB Institutional Alliance REIT I, Inc.(2)                        |  |               | 21 | %                 |  |   | 396,685 |          
|AMB Partners II, L.P.                       |       | City and County of San Francisco Employees
    Retirement System |  |               | 20 | %                 |  |   | 376,802 |          
|AMB-SGP, L.P.                               |       | Industrial JV Pte Ltd.(3)                                         |  |               | 50 | %                 |  |   | 367,005 |          
|AMB Institutional Alliance Fund II, L.P.    |       | AMB Institutional Alliance REIT II, Inc.(4)                       |  |               | 20 | %                 |  |   | 444,111 |          
|AMB-AMS, L.P.(5)                            |       | BPMT and TNO                                                      |  |               | 39 | %                 |  |   |        |          
|                                            |       |                                                                   |  |               |    |                   |  |   |         |          
|                                            | Total |                                                                   |  |               |    |                   |  |   | $       | 1,736,242 | 
|                                            |       |                                                                   |  |               |    |                   |  |   |         |          

14



---



##### Table of Contents



AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



---



|    |                                                                                  
|--- | ---------------------------------------------------------------------------------
|(1) | Includes total equity and debt.                                                  
|   
|(2) | Included 15 institutional investors as
    stockholders as of September 30, 2003.



|    |                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------
|(3) | A subsidiary of the real estate investment
    subsidiary of the Government of Singapore Investment Corporation.



|    |                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------
|(4) | Included 13 institutional investors as
    stockholders and one third-party limited partner as of
    September 30, 2003.        
|   
|(5) | AMB-AMS, L.P. is a commitment to form a
    co-investment partnership with two Dutch pension funds advised
    by Mn Services NV.

On July 14, 2003, AMB Property II,
L.P., one of the Operating Partnerships subsidiaries,
repurchased 66,300 of its outstanding 7.95% Series F
Cumulative Redeemable Preferred Limited Partnership Units from a
single institutional investor. AMB Property II, L.P.
redeemed the units for an aggregate cost of $3.3 million,
including accrued and unpaid dividends.

The following table distinguishes the minority
interest liability as of September 30, 2003 and
December 31, 2002 (dollars in thousands):

|                                    |                                                                  |                          |         |              |         |   |         |        |         | 
|----------------------------------- | ---------------------------------------------------------------- | ------------------------ | ------- | ------------ | ------- | - | ------- | ------ | ------- | 
|                                    |                                                                  | September 30,            |         | December 31,
|                                    |                                                                  | 2003                     |         | 2002        
|                                    |                                                                  |                          |         |             
|Joint Venture Partners              |                                                                  | $                        | 644,413 |              |         | $ | 488,524 |       
|Held through AMB Property II, L.P.: |                                                                  |                          |         |              |         |   |         |       
|                                    | Series D preferred units (liquidation
    preference of $79,767) |                          |         | 77,684       |         |   |         | 77,684 |        
|                                    | Series E preferred units (liquidation
    preference of $11,022) |                          |         | 10,788       |         |   |         | 10,788 |        
|                                    | Series F preferred units (liquidation
    preference of $10,057) |                          |         | 9,909        |         |   |         | 13,082 |        
|                                    | Series H preferred units (liquidation
    preference of $42,000) |                          |         | 40,912       |         |   |         | 40,912 |        
|                                    | Series I preferred units (liquidation
    preference of $25,500) |                          |         | 24,800       |         |   |         | 24,800 |        
|                                    |                                                                  |                          |         |              |         |   |         |       
|                                    |                                                                  | Total minority interests |         | $            | 808,506 |   |         | $      | 655,790 | 
|                                    |                                                                  |                          |         |              |         |   |         |       

The following table distinguishes the minority
interests share of income, excluding minority interests
share of gains from dispositions of real estate (dollars in
thousands):

|                                    |                                                                  |                                               |       |                     |        |      |       |       |        |   |        |       |        |   |        |       |        | 
|----------------------------------- | ---------------------------------------------------------------- | --------------------------------------------- | ----- | ------------------- | ------ | ---- | ----- | ----- | ------ | - | ------ | ----- | ------ | - | ------ | ----- | ------ | 
|                                    |                                                                  |                                               |       |                    
|                                    |                                                                  | For the Three Months                          |       | For the Nine Months
|                                    |                                                                  | Ended September 30,                           |       | Ended September 30,
|                                    |                                                                  |                                               |       |                    
|                                    |                                                                  | 2003                                          |       | 2002                |        | 2003 |       | 2002 
|                                    |                                                                  |                                               |       |                     |        |      |       |      
|Joint Venture Partners              |                                                                  | $                                             | 9,809 |                     |        | $    | 8,771 |       |        | $ | 26,410 |       |        | $ | 23,104 |      
|Held through AMB Property II, L.P.: |                                                                  |                                               |       |                     |        |      |       |       |        |   |        |       |        |   |        |      
|                                    | Series D preferred units (liquidation
    preference of $79,767) |                                               |       | 1,545               |        |      |       | 1,545 |        |   |        | 4,636 |        |   |        | 4,636 |       
|                                    | Series E preferred units (liquidation
    preference of $11,022) |                                               |       | 214                 |        |      |       | 214   |        |   |        | 641   |        |   |        | 641   |       
|                                    | Series F preferred units (liquidation
    preference of $10,057) |                                               |       | 200                 | (1)    |      |       | 286   |        |   |        | 732   |        |   |        | 1,076 |       
|                                    | Series G preferred units (repurchased in
    July 2002)          |                                               |       |                    |        |      |       | 3     |        |   |        |      |        |   |        | 43    |       
|                                    | Series H preferred units (liquidation
    preference of $42,000) |                                               |       | 853                 |        |      |       | 853   |        |   |        | 2,559 |        |   |        | 2,559 |       
|                                    | Series I preferred units (liquidation
    preference of $25,500) |                                               |       | 510                 |        |      |       | 510   |        |   |        | 1,530 |        |   |        | 1,530 |       
|                                    |                                                                  |                                               |       |                     |        |      |       |       |        |   |        |       |        |   |        |      
|                                    |                                                                  | Total minority interests share of net income |       | $                   | 13,131 |      |       | $     | 12,182 |   |        | $     | 36,508 |   |        | $     | 33,589 | 
|                                    |                                                                  |                                               |       |                     |        |      |       |       |        |   |        |       |        |   |        |      



---



|    |                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | On July 14, 2003, AMB Property II,
    L.P., one of the Operating Partnerships subsidiaries,
    repurchased 66,300 of its outstanding 7.95% Series F
    preferred units.

15



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##### Table of Contents



AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



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

The Operating Partnerships unconsolidated
joint ventures at September 30, 2003 (dollars in thousands)
were:

|                                       |                                        |                                   |  |             |           |               |  |            |    |   |  |   |        |        | 
|-------------------------------------- | -------------------------------------- | --------------------------------- |  | ----------- | --------- | ------------- |  | ---------- | -- | - |  | - | ------ | ------ | 
|                                       |                                        |                                   |  |             |           | Operating     |  |           
|                                       |                                        |                                   |  |             |           | Partnerships |  | Net       
|                                       |                                        |                                   |  |             |           | Ownership     |  | Equity    
|Co-investment Joint Venture            |                                        | Joint Venture Partner             |  | Square Feet |           | Percentage    |  | Investment
|                                       |                                        |                                   |  |             |           |               |  |           
|Elk Grove Du Page                      |                                        | Hamilton Partners                 |  |             | 4,046,721 |               |  |            | 56 | % |  | $ | 31,986 |       
|Pico Rivera                            |                                        | Majestic Realty                   |  |             | 855,600   |               |  |            | 50 | % |  |   | 1,252  |       
|Monte Vista Spectrum                   |                                        | Majestic Realty                   |  |             | 576,852   |               |  |            | 50 | % |  |   | 603    |       
|Industrial Fund I, LLC                 |                                        | Citigroup Alternative Investments |  |             | 2,446,334 |               |  |            | 15 | % |  |   | 4,218  |       
|Sterling Distribution Center(1)        |                                        | Majestic Realty                   |  |             | 1,000,000 |               |  |            | 50 | % |  |   | 16,110 |       
|Airport Logistics Park of Singapore(1) |                                        | Boustead Projects                 |  |             | 233,773   |               |  |            | 50 | % |  |   | 1,990  |       
|                                       |                                        |                                   |  |             |           |               |  |            |    |   |  |   |        |       
|                                       | Total investment in unconsolidated JVs |                                   |  |             |           | 9,159,280     |  |            |    |   |  |   | $      | 56,159 | 
|                                       |                                        |                                   |  |             |           |               |  |            |    |   |  |   |        |       



---



|    |                                             
|--- | --------------------------------------------
|(1) | This is a development alliance joint venture

On February 19, 2003, the Operating
Partnership formed Industrial Fund I, LLC, a joint venture
with Citigroup Global Investments Real Estate LP, LLC, a
Delaware limited liability company, and certain of its private
investor clients. The Operating Partnership contributed
$94.0 million in operating properties, consisting of
24 industrial buildings, aggregating approximately
2.4 million square feet, to Industrial Fund I, LLC in
which it retained a 15% interest. The Operating Partnership
recognized a gain of $7.4 million on the contribution,
representing the gain on the contributed properties acquired by
the third-party investors.

Under the agreements governing the joint
ventures, the Operating Partnership and the other parties to the
joint venture may be required to make additional capital
contributions and, subject to certain limitations, the joint
ventures may incur additional debt. As of September 30,
2003, the Operating Partnerships share of unconsolidated
joint venture debt was $66.0 million.

The Operating Partnership also has a 0.1%
unconsolidated equity interest (with an approximate 33% economic
interest) in AMB Pier One, LLC, a joint venture to
redevelop the Operating Partnerships office space in San
Francisco. The investment is not consolidated because the
Operating Partnership does not own a majority interest and does
not exercise significant control over major operating decisions
such as approval of budgets, selection of property managers,
investment activity and changes in financing. The Operating
Partnership has an option to purchase the remaining equity
interest beginning January 1, 2007, and expiring
December 31, 2009, based on the fair market value as
stipulated in the operating agreement.



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

Holders of common limited partnership units of
the Operating Partnership have the right, commencing generally
on or after the first anniversary of the holder becoming a
limited partner of the Operating Partnership (or such other date
agreed to by the Operating Partnership and the applicable unit
holders), to require the Operating Partnership to redeem part or
all of their common units for cash (based upon the fair market
value, as defined in the partnership agreement, of an equivalent
number of shares of common stock at the time of redemption) or
the Operating Partnership may, in its sole and absolute
discretion (subject to the limits on ownership and transfer of
common stock set forth in the Companys charter), elect to
have the Company exchange those common units for shares of the
Companys common stock on a one-for-one basis, subject to
adjustment in the event of stock splits, stock dividends,
issuance of certain rights, certain

16



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##### Table of Contents



AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

extraordinary distributions and similar events.
With each redemption or exchange, the Companys percentage
ownership in the Operating Partnership will increase. Common
limited partners may exercise this redemption right from time to
time, in whole or in part, subject to the limitations that
limited partners may not exercise this right if such exercise
would result in any person actually or constructively owning
shares of common stock in excess of the ownership limit or any
other amount specified by the Companys board of directors,
assuming common stock was issued in the exchange. On
April 16, 2003, the Operating Partnership redeemed 11,524
of its common limited partnership units for cash. On
July 25, 2003, the Operating Partnership redeemed 214,621
of its common limited partnership units for cash. On
September 10, 2003, the Operating Partnership redeemed
2,000 of its common limited partnership units for shares of the
Companys common stock.

In December 2001, the Companys board of
directors approved a new stock repurchase program for the
repurchase of up to $100.0 million worth of common and
preferred stock. In December 2002, the Companys board of
directors increased the repurchase program to
$200.0 million. The new stock repurchase program expires in
December 2003 and, as of September 30, 2003,
$109.3 million of repurchase capacity remained under the
Companys stock repurchase program. In January 2003, the
Company repurchased and retired 787,800 shares of its
common stock for an aggregate purchase price of
$20.6 million, including commissions, and the Operating
Partnership retired the same number of common general
partnership units. In July 2003, the Company repurchased and
retired 25,100 shares of its common stock for an aggregate
purchase price of $0.7 million, including commissions, and
the Operating Partnership retired the same number of common
general partnership units.

On June 23, 2003, the Company issued and
sold 2,000,000 shares of 6.5% Series L Cumulative
Redeemable Preferred Stock at a price of $25.00 per share.
Dividends are cumulative from the date of issuance and payable
quarterly in arrears at a rate per share equal to $1.625 per
annum. The series L preferred stock is redeemable by the
Company on or after June 23, 2008, subject to certain
conditions, for cash at a redemption price equal to $25.00 per
share, plus accumulated and unpaid dividends thereon, if any, to
the redemption date. The Company contributed the net proceeds of
$48.4 million to the Operating Partnership, and in
exchange, the Operating Partnership issued to the Company
2,000,000 6.5% Series L Cumulative Redeemable Preferred
Units. The Operating Partnership used the proceeds, in addition
to proceeds previously contributed to the Operating Partnership
from other equity issuances, to redeem all 3,995,800 shares
of its 8.5% Series A Cumulative Redeemable Preferred Units
from the Company on July 28, 2003. The Company, in turn,
used those proceeds to redeem all 3,995,800 shares of its
8.5% Series A Cumulative Redeemable Preferred Stock for
$100.2 million, including accumulated and unpaid dividends
through the redemption date. During the three months ended
September 30, 2003, the Company recognized a reduction of
income available to common stockholders of $3.7 million for
the original preferred stock issuance costs.

As of September 30, 2003, the Operating
Partnership had outstanding 81,452,162 common general
partnership units, 4,618,242 common limited partnership units,
1,300,000 8 5/8% Series B Cumulative Redeemable
Partnership Units, 800,000 7.95% Series J Cumulative
Redeemable Partnership Units, and

17



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##### Table of Contents



AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

800,000 7.95% Series K Cumulative Redeemable
Partnership Units and 2,000,000 6.5% Series L Cumulative
Redeemable Partnership Units. The following table sets forth the
distributions paid per unit:

|                      |  |                                  |  |                      |       |                     |  |      |       |      |  |   |       |  |  |   |       | 
|--------------------- |  | -------------------------------- |  | -------------------- | ----- | ------------------- |  | ---- | ----- | ---- |  | - | ----- |  |  | - | ----- | 
|                      |  |                                  |  |                      |       |                    
|                      |  |                                  |  | For the Three Months |       | For the Nine Months
|                      |  |                                  |  | Ended September 30,  |       | Ended September 30,
|                      |  |                                  |  |                      |       |                    
|Paying Entity         |  | Security                         |  | 2003                 |       | 2002                |  | 2003 |       | 2002
|                      |  |                                  |  |                      |       |                     |  |      |       |     
|Operating Partnership |  | Common limited partnership units |  | $                    | 0.415 |                     |  | $    | 0.410 |      |  | $ | 1.245 |  |  | $ | 1.230 | 
|Operating Partnership |  | Series A preferred units         |  | $                    | 0.083 |                     |  | $    | 0.531 |      |  | $ | 1.145 |  |  | $ | 1.593 | 
|Operating Partnership |  | Series B preferred units         |  | $                    | 1.078 |                     |  | $    | 1.078 |      |  | $ | 3.234 |  |  | $ | 3.234 | 
|Operating Partnership |  | Series J preferred units         |  | $                    | 0.994 |                     |  | $    | 0.994 |      |  | $ | 2.981 |  |  | $ | 2.981 | 
|Operating Partnership |  | Series K preferred units         |  | $                    | 0.994 |                     |  | $    | 0.994 |      |  | $ | 2.981 |  |  | $ | 1.966 | 
|Operating Partnership |  | Series L preferred units         |  | $                    | 0.406 |                     |  | $    | 0.000 |      |  | $ | 0.442 |  |  | $ | 0.000 | 
|AMB Property II, L.P. |  | Series D preferred units         |  | $                    | 0.969 |                     |  | $    | 0.969 |      |  | $ | 2.906 |  |  | $ | 2.906 | 
|AMB Property II, L.P. |  | Series E preferred units         |  | $                    | 0.969 |                     |  | $    | 0.969 |      |  | $ | 2.906 |  |  | $ | 2.906 | 
|AMB Property II, L.P. |  | Series F preferred units         |  | $                    | 0.747 | (1)                 |  | $    | 0.994 |      |  | $ | 2.735 |  |  | $ | 2.707 | 
|AMB Property II, L.P. |  | Series G preferred units         |  | $                    | 0.000 |                     |  | $    | 0.155 |      |  | $ | 0.000 |  |  | $ | 2.142 | 
|AMB Property II, L.P. |  | Series H preferred units         |  | $                    | 1.016 |                     |  | $    | 1.016 |      |  | $ | 3.047 |  |  | $ | 3.047 | 
|AMB Property II, L.P. |  | Series I preferred units         |  | $                    | 1.000 |                     |  | $    | 1.000 |      |  | $ | 3.000 |  |  | $ | 3.000 | 



---



|    |                                                                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | On July 14, 2003, AMB Property II,
    L.P., one of the Companys subsidiaries, repurchased 66,300
    of its 7.95% Series F Cumulative Redeemable Preferred
    Limited Partnership Units from a single institutional investor.



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

When the Company issues stock options or
restricted stock, the Operating Partnership issues corresponding
units. The Operating Partnerships only dilutive securities
outstanding for the three and nine months ended
September 30, 2003 and 2002, were stock options and
restricted stock granted under the Companys stock
incentive plans. The effect on income per unit was to increase
weighted average units outstanding. Such dilution was computed
using the treasury stock method.

|                              |                                       |                      |  |                     |  |      |  |            |  |  |  |            |  |  |   |            | 
|----------------------------- | ------------------------------------- | -------------------- |  | ------------------- |  | ---- |  | ---------- |  |  |  | ---------- |  |  | - | ---------- | 
|                              |                                       |                      |  |                    
|                              |                                       | For the Three Months |  | For the Nine Months
|                              |                                       | Ended September 30,  |  | Ended September 30,
|                              |                                       |                      |  |                    
|                              |                                       | 2003                 |  | 2002                |  | 2003 |  | 2002      
|                              |                                       |                      |  |                     |  |      |  |           
|WEIGHTED AVERAGE COMMON UNITS |                                       |                      |  |                     |  |      |  |            |  |  |  |            |  |  |   |           
|                              | Basic                                 |                      |  | 85,776,251          |  |      |  | 88,575,091 |  |  |  | 85,874,579 |  |  |   | 88,634,134 | 
|                              | Stock options and restricted stock    |                      |  | 1,623,293           |  |      |  | 1,803,932  |  |  |  | 1,467,496  |  |  | $ | 1,605,015  | 
|                              |                                       |                      |  |                     |  |      |  |            |  |  |  |            |  |  |   |           
|                              | Diluted weighted average common units |                      |  | 87,399,544          |  |      |  | 90,379,023 |  |  |  | 87,342,075 |  |  |   | 90,239,149 | 
|                              |                                       |                      |  |                     |  |      |  |            |  |  |  |            |  |  |   |           



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

The Operating Partnership operates industrial and
retail properties in North America and France and manages its
business both by property type and by market. Industrial
properties represent more than 98% of the Operating
Partnerships portfolio by rentable square feet and consist
primarily of warehouse distribution facilities suitable for
single or multiple customers and are typically comprised of
multiple buildings that are leased to customers engaged in
various types of businesses. The Operating Partnerships
geographic markets for industrial properties are managed
separately because each market requires different operating,
pricing and leasing strategies. As of September 30, 2003,
the Operating Partnership operated retail properties in Southeast

18



---



##### Table of Contents



AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Florida, Atlanta, Chicago, the San Francisco Bay
Area, Boston and Baltimore. The Operating Partnership does not
separately manage its retail operations by market. Retail
properties are generally leased to one or more anchor customers,
such as grocery and drug stores, and various retail businesses.
The accounting policies of the segments are the same as those
described in the summary of significant accounting policies. The
Operating Partnership evaluates performance based upon property
net operating income of the combined properties in each segment.

The industrial domestic target markets category
includes Austin, Baltimore/ Washington D.C. and Boston. The
industrial domestic non-target markets category captures all of
the Operating Partnerships other U.S. markets, except
for those markets listed individually in the table. Summary
information for the reportable segments is as follows (dollars
in thousands):

|                                             |                               |                                       |        |                      |         |      |         |        |         |  |        |        |         |  |        |        |         | 
|-------------------------------------------- | ----------------------------- | ------------------------------------- | ------ | -------------------- | ------- | ---- | ------- | ------ | ------- |  | ------ | ------ | ------- |  | ------ | ------ | ------- | 
|                                             |                               |                                       |        |                     
|                                             |                               | Rental Revenues                       |        | Property NOI(1)     
|                                             |                               |                                       |        |                     
|                                             |                               |                                       |        |                     
|                                             |                               | For the Three Months                  |        | For the Three Months
|                                             |                               | Ended September 30,                   |        | Ended September 30, 
|                                             |                               |                                       |        |                     
|Segments                                     |                               | 2003                                  |        | 2002                 |         | 2003 |         | 2002  
|                                             |                               |                                       |        |                      |         |      |         |       
|Industrial domestic hub and gateway markets: |                               |                                       |        |                      |         |      |         |        |         |  |        |        |         |  |        |       
|                                             | Atlanta                       |                                       | $      | 7,490                |         |      | $       | 7,983  |         |  | $      | 6,132  |         |  | $      | 6,345  |        
|                                             | Chicago                       |                                       |        | 10,825               |         |      |         | 11,326 |         |  |        | 7,162  |         |  |        | 7,782  |        
|                                             | Dallas/ Fort Worth            |                                       |        | 4,335                |         |      |         | 6,748  |         |  |        | 2,772  |         |  |        | 4,713  |        
|                                             | Los Angeles                   |                                       |        | 23,260               |         |      |         | 19,656 |         |  |        | 18,536 |         |  |        | 15,454 |        
|                                             | Northern New Jersey/ New York |                                       |        | 12,589               |         |      |         | 12,399 |         |  |        | 8,103  |         |  |        | 8,218  |        
|                                             | San Francisco Bay Area        |                                       |        | 24,448               |         |      |         | 30,406 |         |  |        | 19,135 |         |  |        | 24,950 |        
|                                             | Miami                         |                                       |        | 8,069                |         |      |         | 8,362  |         |  |        | 5,930  |         |  |        | 6,074  |        
|                                             | Seattle                       |                                       |        | 8,721                |         |      |         | 6,636  |         |  |        | 6,718  |         |  |        | 5,266  |        
|                                             | On-Tarmac                     |                                       |        | 12,360               |         |      |         | 9,437  |         |  |        | 6,819  |         |  |        | 5,564  |        
|                                             |                               |                                       |        |                      |         |      |         |        |         |  |        |        |         |  |        |       
|                                             |                               | Total industrial domestic hub markets |        |                      | 112,097 |      |         |        | 112,953 |  |        |        | 81,307  |  |        |        | 84,366  | 
|Total industrial domestic target markets     |                               |                                       | 25,250 |                      |         |      | 26,576  |        |         |  | 18,209 |        |         |  | 19,258 |       
|Total industrial domestic non-target markets |                               |                                       | 7,046  |                      |         |      | 11,267  |        |         |  | 5,119  |        |         |  | 8,037  |       
|International target markets                 |                               |                                       | 1,704  |                      |         |      | 122     |        |         |  | 1,764  |        |         |  | 90     |       
|Straight-line rents                          |                               |                                       | 2,579  |                      |         |      | 3,638   |        |         |  | 2,579  |        |         |  | 3,638  |       
|Total retail markets                         |                               |                                       | 2,587  |                      |         |      | 4,246   |        |         |  | 1,462  |        |         |  | 2,641  |       
|Discontinued operations                      |                               |                                       | (3,024 | )                    |         |      | (11,876 | )      |         |  | (2,221 | )      |         |  | (8,733 | )     
|                                             |                               |                                       |        |                      |         |      |         |        |         |  |        |        |         |  |        |       
|                                             |                               | Total                                 |        | $                    | 148,239 |      |         | $      | 146,926 |  |        | $      | 108,219 |  |        | $      | 109,297 | 
|                                             |                               |                                       |        |                      |         |      |         |        |         |  |        |        |         |  |        |       



---



|    |                                                                                                                                                                                                                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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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##### Table of Contents



AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                             |                                              |                                       |   |                     |         |      |   |         |         |  |   |        |         |  |   |         |         | 
|-------------------------------------------- | -------------------------------------------- | ------------------------------------- | - | ------------------- | ------- | ---- | - | ------- | ------- |  | - | ------ | ------- |  | - | ------- | ------- | 
|                                             |                                              |                                       |   |                    
|                                             |                                              | Rental Revenues                       |   | Property NOI(1)    
|                                             |                                              |                                       |   |                    
|                                             |                                              |                                       |   |                    
|                                             |                                              | For the Nine Months                   |   | For the Nine Months
|                                             |                                              | Ended September 30,                   |   | Ended September 30,
|                                             |                                              |                                       |   |                    
|Segments                                     |                                              | 2003                                  |   | 2002                |         | 2003 |   | 2002   
|                                             |                                              |                                       |   |                     |         |      |   |        
|Industrial domestic hub and gateway markets: |                                              |                                       |   |                     |         |      |   |         |         |  |   |        |         |  |   |        
|                                             | Atlanta                                      |                                       | $ | 21,759              |         |      | $ | 22,712  |         |  | $ | 17,436 |         |  | $ | 17,971  |        
|                                             | Chicago                                      |                                       |   | 32,938              |         |      |   | 34,275  |         |  |   | 22,422 |         |  |   | 23,670  |        
|                                             | Dallas/ Fort Worth                           |                                       |   | 12,599              |         |      |   | 19,994  |         |  |   | 8,229  |         |  |   | 14,195  |        
|                                             | Los Angeles                                  |                                       |   | 69,385              |         |      |   | 57,177  |         |  |   | 55,498 |         |  |   | 44,959  |        
|                                             | Northern New Jersey/ New York                |                                       |   | 39,440              |         |      |   | 34,407  |         |  |   | 25,980 |         |  |   | 22,858  |        
|                                             | San Francisco Bay Area                       |                                       |   | 85,066              |         |      |   | 91,828  |         |  |   | 70,343 |         |  |   | 76,511  |        
|                                             | Miami                                        |                                       |   | 24,114              |         |      |   | 25,604  |         |  |   | 17,178 |         |  |   | 18,698  |        
|                                             | Seattle                                      |                                       |   | 22,268              |         |      |   | 18,667  |         |  |   | 17,427 |         |  |   | 14,893  |        
|                                             | On-Tarmac                                    |                                       |   | 35,521              |         |      |   | 19,300  |         |  |   | 19,400 |         |  |   | 11,142  |        
|                                             |                                              |                                       |   |                     |         |      |   |         |         |  |   |        |         |  |   |        
|                                             |                                              | Total industrial domestic hub markets |   |                     | 343,090 |      |   |         | 323,964 |  |   |        | 253,913 |  |   |         | 244,897 | 
|                                             | Total industrial domestic target markets     |                                       |   | 76,999              |         |      |   | 77,928  |         |  |   | 55,353 |         |  |   | 56,472  |        
|                                             | Total industrial domestic non-target markets |                                       |   | 21,031              |         |      |   | 35,852  |         |  |   | 14,675 |         |  |   | 26,495  |        
|                                             | International target markets                 |                                       |   | 4,097               |         |      |   | 122     |         |  |   | 3,608  |         |  |   | 90      |        
|                                             | Straight-line rents                          |                                       |   | 6,832               |         |      |   | 10,385  |         |  |   | 6,832  |         |  |   | 10,385  |        
|                                             | Total retail markets                         |                                       |   | 10,421              |         |      |   | 13,610  |         |  |   | 6,479  |         |  |   | 8,508   |        
|                                             | Discontinued operations                      |                                       |   | (11,558             | )       |      |   | (35,946 | )       |  |   | (8,176 | )       |  |   | (26,578 | )      
|                                             |                                              |                                       |   |                     |         |      |   |         |         |  |   |        |         |  |   |        
|                                             |                                              | Total                                 |   | $                   | 450,912 |      |   | $       | 425,915 |  |   | $      | 332,684 |  |   | $       | 320,269 | 
|                                             |                                              |                                       |   |                     |         |      |   |         |         |  |   |        |         |  |   |        



---



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

The Operating Partnership considers NOI to be an
appropriate supplemental performance measure because NOI
reflects the operating performance of the Operating
Partnerships real estate portfolio on a segment basis and
the Operating Partnership uses NOI to make decisions about
resource allocations and to assess regional property level
performance. However, NOI should not be viewed as an alternative
measure of the Operating Partnerships financial
performance since it does not reflect general and administrative
expenses, interest expense, depreciation and amortization costs,
capital expenditures and leasing costs, or trends in development
and construction activities that could materially impact the
Operating Partnerships results from operations. Further,
the Operating Partnerships NOI may not be comparable to
that of other

20



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##### Table of Contents



AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

operating partnerships of real estate investment
trusts, as they may use different methodologies for calculating
NOI. The following table is a reconciliation from NOI to
reported net income:

|                                                                      |            |                      |         |                     |  |      |         |        |  |   |          |         |  |   |          |        | 
|--------------------------------------------------------------------- | ---------- | -------------------- | ------- | ------------------- |  | ---- | ------- | ------ |  | - | -------- | ------- |  | - | -------- | ------ | 
|                                                                      |            |                      |         |                    
|                                                                      |            | For the Three Months |         | For the Nine Months
|                                                                      |            | Ended September 30,  |         | Ended September 30,
|                                                                      |            |                      |         |                    
|                                                                      |            | 2003                 |         | 2002                |  | 2003 |         | 2002  
|                                                                      |            |                      |         |                     |  |      |         |       
|Property NOI                                                          |            | $                    | 108,219 |                     |  | $    | 109,297 |        |  | $ | 332,684  |         |  | $ | 320,269  |       
|Private capital income                                                |            |                      | 1,928   |                     |  |      | 2,766   |        |  |   | 7,844    |         |  |   | 8,468    |       
|Depreciation and amortization                                         |            |                      | (32,584 | )                   |  |      | (31,446 | )      |  |   | (99,269  | )       |  |   | (88,650  | )     
|Impairment losses                                                     |            |                      |        |                     |  |      |        |        |  |   | (5,251   | )       |  |   |         |       
|General and administrative                                            |            |                      | (10,843 | )                   |  |      | (12,376 | )      |  |   | (35,187  | )       |  |   | (34,207  | )     
|Equity in earnings of unconsolidated joint
    ventures               |            |                      | 1,365   |                     |  |      | 1,322   |        |  |   | 4,222    |         |  |   | 4,443    |       
|Interest and other income                                             |            |                      | 701     |                     |  |      | 2,609   |        |  |   | 3,643    |         |  |   | 9,921    |       
|Gains from dispositions of real estate                                |            |                      |        |                     |  |      |        |        |  |   | 7,429    |         |  |   | 2,480    |       
|Merchant development profits, net of minority
    interests and taxes |            |                      | 2,181   |                     |  |      | 618     |        |  |   | 2,181    |         |  |   | 618      |       
|Interest, including amortization                                      |            |                      | (35,867 | )                   |  |      | (37,501 | )      |  |   | (107,963 | )       |  |   | (109,133 | )     
|Total minority interests share of income                             |            |                      | (13,131 | )                   |  |      | (12,182 | )      |  |   | (36,508  | )       |  |   | (33,589  | )     
|Total discontinued operations                                         |            |                      | 9,214   |                     |  |      | 8,353   |        |  |   | 45,183   |         |  |   | 18,526   |       
|                                                                      |            |                      |         |                     |  |      |         |        |  |   |          |         |  |   |          |       
|                                                                      | Net income |                      | $       | 31,183              |  |      | $       | 31,460 |  |   | $        | 119,008 |  |   | $        | 99,146 | 
|                                                                      |            |                      |         |                     |  |      |         |        |  |   |          |         |  |   |          |       

|                                             |                               |                                       |         |                   |           |  |         |         |           | 
|-------------------------------------------- | ----------------------------- | ------------------------------------- | ------- | ----------------- | --------- |  | ------- | ------- | --------- | 
|                                             |                               |                                      
|                                             |                               | Total Gross Investment as of         
|                                             |                               |                                      
|                                             |                               | September 30, 2003                    |         | December 31, 2002
|                                             |                               |                                       |         |                  
|Industrial domestic hub and gateway markets: |                               |                                       |         |                   |           |  |         |        
|                                             | Atlanta                       |                                       | $       | 267,070           |           |  | $       | 280,006 |          
|                                             | Chicago                       |                                       |         | 370,080           |           |  |         | 356,985 |          
|                                             | Dallas/Fort Worth             |                                       |         | 151,146           |           |  |         | 126,472 |          
|                                             | Los Angeles                   |                                       |         | 745,690           |           |  |         | 741,601 |          
|                                             | Northern New Jersey/ New York |                                       |         | 476,078           |           |  |         | 486,644 |          
|                                             | San Francisco Bay Area        |                                       |         | 852,262           |           |  |         | 797,692 |          
|                                             | Miami                         |                                       |         | 326,164           |           |  |         | 302,691 |          
|                                             | Seattle                       |                                       |         | 328,118           |           |  |         | 249,500 |          
|                                             | On-Tarmac                     |                                       |         | 249,769           |           |  |         | 216,357 |          
|                                             |                               |                                       |         |                   |           |  |         |        
|                                             |                               | Total industrial domestic hub markets |         |                   | 3,766,377 |  |         |         | 3,557,948 | 
|Total industrial domestic target markets     |                               |                                       | 756,304 |                   |           |  | 777,541 |        
|Total industrial domestic non-target markets |                               |                                       | 265,304 |                   |           |  | 323,431 |        
|International target markets                 |                               |                                       | 49,956  |                   |           |  | 73,728  |        
|Total retail markets                         |                               |                                       | 47,603  |                   |           |  | 60,844  |        
|Construction in progress                     |                               |                                       | 209,029 |                   |           |  | 132,490 |        
|                                             |                               |                                       |         |                   |           |  |         |        
|                                             |                               | Total investments in properties       |         | $                 | 5,094,573 |  |         | $       | 4,925,982 | 
|                                             |                               |                                       |         |                   |           |  |         |        

21



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##### Table of Contents



AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

12.     Commitments
and Contingencies



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

Lease Commitments.The Operating Partnership holds:
operating ground leases on land parcels at its on-tarmac
facilities; leases on office spaces for corporate use; and a
leasehold interest that it holds for investment purposes. The
remaining lease terms are from one to 38 years.



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

Litigation.In the
normal course of business, from time to time, the Operating
Partnership may be involved in legal actions relating to the
ownership and operations of its properties. Management does not
expect that the liabilities, if any, that may ultimately result
from such legal actions will have a material adverse effect on
the consolidated financial position, results of operations or
cash flows of the Operating Partnership.

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

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

Captive Insurance Company.The Operating Partnership has
responded to increasing costs and decreasing coverage
availability in the insurance markets by obtaining
higher-deductible property insurance from third-party insurers
and by forming a wholly-owned captive insurance company, Arcata
National Insurance Ltd. (Arcata) in December 2001.
Arcata provides insurance coverage for all or a portion of
losses below the increased deductible under the Operating
Partnerships third-party policies. The Operating
Partnership capitalized Arcata in accordance with the applicable
regulatory requirements. Arcata established annual premiums
based on projections derived from the past loss experience at
the Operating Partnerships properties. Annually, the
Operating Partnership engages an independent third party to
perform an actuarial estimate of future projected claims,
related deductibles and projected expenses necessary to fund
associated risk management programs. Premiums paid to Arcata may
be adjusted based on this estimate. Premiums paid to Arcata have
a retrospective component, so that if expenses, including losses
and deductibles, are less than premiums collected, the excess
may be returned to the property owners (and, in turn, as
appropriate, to the customers) and conversely, subject to
certain limitations, if expenses, including losses, are greater
than premiums collected, an additional premium will be charged.
As with all recoverable expenses, differences between estimated
and actual insurance premiums will be recognized in the
subsequent year. Through this structure, the Operating
Partnership believes that it has more comprehensive insurance
coverage at an overall lower cost than would otherwise be
available in the market.

22



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##### Table of Contents



AMB PROPERTY, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

13.     Subsequent
Events

On October 6, 2003, the Operating
Partnership entered into an Agreement of Sale with
privately-held International Airport Centers L.L.C. and certain
of its affiliated entities, pursuant to which, if fully
consummated, it will acquire a 3.4 million square foot
portfolio consisting of 37 airfreight buildings located
adjacent to seven international airports in the U.S. for
approximately $481.0 million, including $119.0 million
of assumed debt. Pursuant to the Agreement of Sale, the
Operating Partnership will acquire the buildings in separate
tranches, as construction and certain other customary closing
conditions, including acquiring the necessary consents, are met.
On October 9, 2003, the Operating Partnership closed on the
first tranche, comprised of 25 industrial buildings located
in Los Angeles, Seattle, Miami and Charlotte, aggregating
approximately 1.6 million square feet, for approximately
$167.0 million. The Operating Partnership currently expects
the balance of the portfolio to close in additional tranches
totaling approximately $130.0 million by year-end 2003 and
$184.0 million by the third quarter of 2004. A portion of
the properties may be allocated to one or more of the Operating
Partnerships co-investment joint ventures.

On October 27, 2003, the Operating
Partnership gave irrevocable notice that it will redeem all
1,300,000 of its outstanding 8 5/8% Series B
Cumulative Redeemable Preferred Partnership Units on
November 26, 2003, for an aggregate redemption price of
$65.6 million.

On November 10, 2003, the Operating
Partnership issued and sold $75.0 million of senior
unsecured notes under its medium-term notes program to Teachers
Insurance and Annuity Association of America. The Company
guaranteed the notes, which mature on November 1, 2013, and
bear interest at 5.53% per annum. The Operating Partnership
intends to use the net proceeds for general purposes.

On November 6, 2003, the Company priced
2,000,000 shares of 6.75% Series M Cumulative Redeemable
Preferred Stock at $25.00 per share. The Company also granted
the underwriters an option to purchase up to
300,000 additional shares of series M preferred stock
at $25.00 per share, which the underwriters exercised in
full on November 12, 2003. The Company expects to issue and
sell the 2,300,000 shares of series M preferred stock
on November 25, 2003. Dividends will be cumulative from the
date of issuance and payable quarterly in arrears at a rate per
share equal to $1.6875 per annum. The Company will contribute
the net proceeds to the Operating Partnership, and in exchange,
the Operating Partnership will issue to the Company 2,300,000
6.75% Series M Cumulative Redeemable Preferred Units.

23



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##### Table of Contents








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

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

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



| |   |                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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);
|
| |  | 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 from our
    predecessors or in connection with acquired
    properties;                                                                                     
|
| |  | risks of doing business internationally,
    including unfamiliarity with new markets and currency
    risks;                                                                             
|
| |  | risks associated with using debt to fund
    acquisitions and development, including re-financing
    risks;                                                                              
|
| |  | our failure to obtain necessary outside
    financing;                                                                                                                                    
|
| |  | changes in local, state and federal regulatory
    requirements; and                                                                                                                      
|
| |  | environmental uncertainties.                                                                                                                                                              

Our success also depends upon economic trends
generally, various market conditions and fluctuation and those
other risk factors discussed in the section entitled
Business Risks in this report. We caution you not to
place undue reliance on forward-looking statements, which
reflect our analysis only and speak as of the date of this
report or as of the dates indicated in the statements. We assume
no obligation to update or supplement forward-looking
statements.

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

24



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##### Table of Contents



GENERAL

We commenced operations shortly before the
consummation of AMB Property Corporations initial public
offering on November 26, 1997.

We generate revenue primarily from rent received
from customers under long-term (generally three to ten years)
operating leases at our properties, including reimbursements
from customers for certain operating costs, and our private
capital business. In addition, our growth is dependent on our
ability to increase occupancy rates or increase rental rates at
our properties and our ability to continue to acquire and
develop additional properties. Our income would be adversely
affected if a significant number of customers were unable to pay
rent or if we were unable to rent our industrial space on
favorable terms. Certain significant expenditures associated
with an investment in real estate (such as mortgage payments,
real estate taxes and maintenance costs) generally do not
decline when circumstances cause a reduction in income from the
property. Although the weak economy has decreased customer
demand for new space and has limited or in some cases lowered
rent growth, many types of investors are acquiring industrial
real estate. We have capitalized on this opportunity by
accelerating the repositioning of our portfolio through the
disposition of properties. While property dispositions result in
reinvestment capacity and trigger gain/loss recognition, they
also create near-term earnings dilution. However, we believe
that, in the long-term, the repositioning of our portfolio will
benefit our unitholders.

As the general partner of our co-investment joint
ventures, we generally will be liable for all of the joint
ventures unsatisfied obligations other than non-recourse
obligations. Any such liabilities could adversely affect our
financial condition, results of operations, cash flow and
ability to make distributions to our unitholders and payments to
our noteholders.

Critical Accounting Policies

Our discussion and analysis of financial
condition and results of operations is based on our consolidated
financial statements, which have been prepared in accordance
with accounting principles generally accepted in the United
States of America (GAAP). The preparation of these
financial statements requires us to make estimates and judgments
that affect the reported amounts of assets, liabilities and
contingencies as of the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
periods. We evaluate our assumptions and estimates on an
on-going basis. We base our estimates on historical experience
and on various other assumptions that we believe to be
reasonable under the circumstances, the results of which form
the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under
different assumptions or conditions. We believe the following
critical accounting policies affect our more significant
judgments and estimates used in the preparation of our
consolidated financial statements.

Investments in Real Estate.Investments in real estate are stated
at cost unless circumstances indicate that cost cannot be
recovered, in which case, the carrying value of the property is
reduced to estimated fair value. We also record at acquisition
an intangible asset or liability for the value attributable to
above or below-market leases, in-place leases and lease
origination costs for all acquisitions subsequent to
July 1, 2001. Carrying values for financial reporting
purposes are reviewed for impairment on a property-by-property
basis whenever events or changes in circumstances indicate that
the carrying value of a property may not be recoverable.
Impairment is recognized when estimated expected future cash
flows (undiscounted and without interest charges) are less than
the carrying amount of the property. The estimation of expected
future net cash flows is inherently uncertain and relies on
assumptions regarding current and future market conditions and
the availability of capital. If impairment analysis assumptions
change, then an adjustment to the carrying amount of our
long-lived assets could occur in the future period in which the
assumptions change. To the extent that a property is impaired,
the excess of the carrying amount of the property over its
estimated fair value is charged to earnings.

Rental Revenues.We
record rental revenue from operating leases on a straight-line
basis over the term of the leases and maintain an allowance for
estimated losses that may result from the inability of our
customers to make required payments. If customers fail to make
contractual lease payments that are greater

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than our bad-debt reserves, security deposits and
letters of credit, then we may have to recognize additional bad
debt charges in future periods. Each period we review our
outstanding accounts receivable, including straight-line rents,
for doubtful accounts and provide allowances as needed.
Historically, our bad debt expense has been between 50 and 150
basis points of total revenues. We also record lease termination
fees when a customer terminates its lease, vacates the premises,
and the termination fee is due and billable.


Consolidated Joint Ventures.Minority interests represent the
limited partnership interests in the operating partnership and
interests held by certain third parties in several real estate
joint ventures, aggregating approximately 36.5 million
square feet, which are consolidated for financial reporting
purposes. Such investments are consolidated because we own a
majority interest or we exercise significant control over major
operating decisions such as approval of budgets, selection of
property managers, asset management, investment activity and
changes in financing. When we contribute properties to our joint
ventures, we recognize a gain on the contributed properties
acquired by the third-party co-investors.

Investments in Unconsolidated Joint Ventures.We have non-controlling limited
partnership interests in five separate unconsolidated joint
ventures. These investments are not consolidated because we do
not exercise significant control over major operating decisions
such as approval of budgets, selection of property managers,
asset management, investment activity and changes in financing.
We account for the joint ventures using the equity method of
accounting. When we contribute properties to our joint ventures,
we recognize a gain representing the portion of the contributed
properties acquired by the third-party investors.

Stock-based Compensation Expense.In 2002, we adopted the expense
recognition provisions of Statement of Financial Accounting
Standard (SFAS) No. 123, Accounting for
Stock-Based Compensation. We value stock options issued by
AMB Property Corporation, our general partner, using the
Black-Scholes option-pricing model and recognize this value as
an expense over the period in which the options vest. Under this
standard, recognition of expense for stock options is applied to
all options granted after the beginning of the year of adoption.
Prior to 2002, we followed the intrinsic method set forth in APB
Opinion 25, Accounting for Stock Issued to
Employees. The expense is included in general and
administrative expenses in the accompanying consolidated
statements of operations. The adoption of SFAS No. 123 is
prospective and the 2002 expense relates only to stock options
granted in 2002.

THE COMPANY

AMB Property, L.P., a Delaware limited
partnership, acquires, owns and operates, manages, renovates,
expands and develops primarily industrial properties in key
distribution markets throughout North America, Europe and Asia.
We commenced operations as a fully integrated real estate
company effective with the completion of AMB Property
Corporations initial public offering on November 26,
1997. Increasingly, our properties are designed for customers
who value the efficient movement of goods in the worlds
busiest distribution markets: large, supply-constrained
locations with close proximity to airports, seaports and major
freeway systems. As of September 30, 2003, we served 2,534
customers in a portfolio (owned, managed or under development)
totaling 1,004 buildings, encompassing approximately
96.9 million square feet (9.0 million square meters),
in 32 global markets.

We are engaged in the acquisition, ownership,
operation, management, renovation, expansion and development of
primarily industrial properties in key distribution markets
throughout North America, Europe and Asia. As of
September 30, 2003, AMB Property Corporation owned an
approximate 94.6% general partnership interest in us, excluding
preferred units. As our sole general partner, AMB Property
Corporation has the full, exclusive and complete responsibility
and discretion in our day-to-day management and control.

Our investment strategy targets customers whose
businesses are tied to global trade, which, according to the
World Trade Organization, has grown at approximately 2.5 times
the world gross domestic product (GDP) growth rate during the
last 10 years. To serve the facilities needs of these
customers, we invest in major markets: transportation hubs and
gateways in the U.S., and targeted distribution and airport
markets internationally. Our target markets are characterized by
large population densities and typically offer substantial
consumer bases, proximity to large clusters of
distribution-facility users and significant labor pools.

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When measured by annual base rents, 68.6% of our
assets are concentrated in eight domestic hub distribution
markets: Atlanta, Chicago, Dallas/ Fort Worth, Los Angeles,
Northern New Jersey/ New York City, San Francisco Bay Area,
Miami and Seattle.


By focusing on an investment strategy that
benefits from high customer demand and limited competition from
new supply, we believe that over time our net operating income
(rental revenues less property operating expenses and real
estate taxes) will grow and our property values will increase.
We work to implement this strategy by investing in locations
that have geographic or regulatory supply constraints, high
barriers to entry and close proximity to large population
centers, and invest in buildings with customer-preferred
characteristics.

Much of our portfolio is comprised of
strategically located industrial buildings in in-fill
submarkets; in-fill locations are characterized by supply
constraints on the availability of land for competing projects
as well as physical, political or economic barriers to new
development. A majority of our owned or managed buildings
function as High Throughput Distribution®, or HTD®
facilities; buildings designed to quickly distribute our
customers products, rather than store them. Our investment
focus on HTD assets is based on the global trend toward lower
inventory levels and expedited supply chains.

HTD facilities generally have a variety of
characteristics that allow the rapid transport of goods from
point-to-point; examples of these characteristics include
numerous dock doors, shallower building depths, fewer columns,
large truck courts and more space for trailer parking. These
facilities function best when located in convenient proximity to
transportation infrastructure such as major airports and
seaports. We believe that these building characteristics
represent an important success factor for time-sensitive tenants
such as air express, logistics and freight forwarding companies.

As of September 30, 2003, we owned and
operated (exclusive of properties that we managed for third
parties) 896 industrial buildings and seven retail and other
properties, totaling approximately 83.8 million rentable
square feet, located in 27 markets throughout North America and
in France. As of September 30, 2003, our industrial and
retail properties were 92.0% and 77.0% leased, respectively. As
of September 30, 2003, through our subsidiary, AMB Capital
Partners, LLC, we also managed, but did not have an ownership
interest in, industrial buildings and retail centers, totaling
approximately 0.5 million rentable square feet. In
addition, as of September 30, 2003, we had investments in
operating industrial buildings, totaling approximately
7.9 million rentable square feet, through unconsolidated
joint ventures. As of September 30, 2003, we also had
investments in industrial development projects, some of which
are held for sale, totaling approximately 4.7 million
square feet.

As of September 30, 2003, we had one retail
center and three industrial buildings held for divestiture. Over
the next few years, as market conditions allow, we intend to
dispose of non-strategic assets and redeploy the resulting
capital into industrial properties in supply-constrained markets
in the U.S. and internationally that better fit our current
investment focus.

Our principal executive office is located at
Pier 1, Bay 1, San Francisco, California 94111; our
telephone number is (415) 394-9000. We also maintain
regional offices in Boston, Massachusetts, Chicago, Illinois,
New York, New York and Amsterdam, the Netherlands. Our Chicago
office opened in July 2003. As of September 30, 2003, we
employed 170 individuals, 125 at our San Francisco headquarters,
41 in our Boston office, two in our Amsterdam office, one in our
Chicago office and one in our New York office. Our website
address is www.amb.com. Our annual report on
Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K and any amendments to those reports
filed or furnished pursuant to Section 13(a) or 15(d) of
the Exchange Act are available on our website free of charge as
soon as reasonably practicable after we electronically file such
material with, or furnish it to, the Securities and Exchange
Commission. We have adopted a code of business conduct that
applies to our principal executive officers, principal financial
officer, principal accounting officer or controller, and persons
performing similar functions, which is available free of charge
on our website. We will promptly disclose on our website any
amendments to, and waivers from, our code of business conduct
relating to any of these specified officers. Information
contained on our website is not and should not be deemed a part
of this quarterly report.

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Co-investment Joint Ventures

We enter into co-investment joint ventures with
institutional investors. These co-investment joint ventures
provide us with an additional source of capital to fund certain
acquisitions, development projects and renovation projects, as
well as private capital income, which enhances our returns. As
of September 30, 2003, we had investments in five
co-investment joint ventures with a gross book value of
$1.7 billion, which are consolidated for financial
reporting purposes.

Acquisition, Development and Disposition
Activity

During the three months ended September 30,
2003, we invested $57.4 million in 13 operating properties,
aggregating approximately 0.8 million square feet, of which
we invested $27.3 million in six operating properties,
aggregating approximately 0.5 million square feet through
two of our co-investment joint ventures. During the nine months
ended September 30, 2003, we invested $188.4 million
in 31 operating properties, aggregating approximately
3.2 million square feet, of which we invested
$154.6 million in 23 operating properties, aggregating
approximately 2.8 million square feet, through two of our
co-investment joint ventures.

During the three months ended September 30,
2003, we stabilized three industrial buildings valued at
$21.5 million, aggregating approximately 0.4 million
square feet. We also initiated two new industrial development
projects valued at $67.5 million, aggregating approximately
1.6 million square feet. During the nine months ended
September 30, 2003, we stabilized seven industrial
buildings valued at $49.4 million, aggregating
approximately 0.8 million square feet. We also initiated
ten new industrial development projects valued at
$146.0 million, aggregating approximately 3.1 million
square feet. During the first quarter, we acquired 438 acres of
land for development in Miamis Airport West submarket for
$29.7 million. The master planned park, called Beacon
Lakes, is entitled for 6.8 million square feet of
properties for lease or sale. We began development of the first
two buildings at Beacon Lakes, which will aggregate
approximately 0.4 million square feet and have an estimated
investment of $19.2 million. New development projects
during the nine months ended September 30, 2003, included
the two Beacon Lakes buildings as well as eight additional
projects.

As of September 30, 2003, we had in our
development pipeline 15 industrial projects, which will total
approximately 4.0 million square feet and have an aggregate
estimated investment of $207.5 million upon completion and
four development-for-sale projects, which will total
approximately 0.6 million square feet and have an aggregate
estimated investment of $41.6 million upon completion. As
of September 30, 2003, we and our partners had funded an
aggregate of $119.5 million and needed to fund an estimated
additional $129.6 million in order to complete current and
planned projects.

On February 19, 2003, we contributed
$94.0 million in operating properties, consisting of 24
industrial buildings aggregating approximately 2.4 million
square feet, to our newly formed co-investment joint venture
with Citigroup Global Investments Real Estate LP, LLC,
Industrial Fund I, LLC, in which we retained an unconsolidated
15% ownership interest. During the three and nine months ended
September 30, 2003, we also sold three development-for-sale
projects, aggregating approximately 0.2 million rentable
square feet, for an aggregate price of $32.1 million.
During the three months ended September 30, 2003, we also
disposed of nine industrial buildings and one retail center,
aggregating approximately 0.8 million rentable square feet,
for an aggregate price of $102.2 million. During the nine
months ended September 30, 2003, we disposed of 21 industrial
buildings and one retail center, aggregating approximately
2.6 million rentable square feet, for an aggregate price of
$244.3 million.

Operating Strategy

We base our operating strategy on extensive
operational and service offerings, including in-house
acquisitions, development, redevelopment, asset management,
leasing, finance, accounting and market research. We leverage
our expertise across a large customer base and have
long-standing relationships with entrepreneurial real estate
management and development firms in our target markets, which we
refer to as our Strategic Alliance Partners®.

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We believe that real estate is fundamentally a
local business and best operated by forging alliances with
service providers in each target market. We believe that this
strategy results in a mutually beneficial relationship as these
alliance partners provide us with high-quality, local market
expertise and intelligence. We, in turn, contribute value to the
alliance relationship through national and global customer
relationship development, industry knowledge, perspective and
financial strength.

While our alliance relationships give us local
market benefits, we retain flexibility to focus on our core
competencies: developing and executing our strategic approach to
real estate investment and management and raising private
capital to finance growth and enhance returns.

Growth Strategies



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

We seek to generate internal growth through rent
increases on existing space and renewals on rollover space. We
do this by seeking to maintain a high occupancy rate at our
properties and by seeking to control expenses by capitalizing on
the economies of owning, operating and growing a large global
portfolio. As of September 30, 2003, our industrial
properties and retail centers were 92.0% leased and 77.0%
leased, respectively. During the three and nine months ended
September 30, 2003, average industrial base rental rates
decreased by 15.1% and 7.4%, respectively, from the expiring
rent for that space, on leases entered into or renewed during
the period. This amount excludes expense reimbursements, rental
abatements, percentage rents and straight-line rents. During the
three months ended September 30, 2003, same-store net
operating income decreased by 8.2% on our industrial properties.
During the nine months ended September 30, 2003, cash-basis
same-store net operating income (rental revenues less property
operating expenses and real estate taxes) decreased by 3.1% on
our industrial properties. Since AMB Property Corporations
initial public offering in November 1997, we have experienced
average annual increases in industrial base rental rates of
10.9%. While we believe that it is important to view real estate
as a long-term investment, past results are not necessarily an
indication of future performance.



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

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

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



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

We believe that renovation and expansion of
properties and development of well-located, high-quality
industrial properties should continue to provide us with
attractive opportunities for increased cash flow and a higher
rate of return than we may obtain from the purchase of
fully-leased, renovated properties. Value-added

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properties are typically characterized as
properties with available space or near-term leasing exposure,
undeveloped land acquired in connection with another property
that provides an opportunity for development or properties that
are well-located but require redevelopment or renovation.
Value-added properties require significant management attention
and capital investment to maximize their return. We believe that
we have developed the in-house expertise to create value through
acquiring and managing value-added properties and believe that
our global market presence and expertise will enable us to
continue to generate and capitalize on these opportunities. In
addition to our in-house development staff, we have established
strategic alliances with global and regional developers to
enhance our development capabilities.


The multidisciplinary backgrounds of our
employees should provide us with the skills and experience to
capitalize on strategic renovation, expansion and development
opportunities. Several of our general partners officers
have specific experience in real estate development, both with
us and with national development firms. We generally pursue
development projects in joint ventures with our Development
Alliance Partners®; however, if a Development Alliance
Partner® is not available for a project, then we will
pursue the opportunity with our in-house development staff. This
way, we leverage the development skill, access to opportunities
and capital of such developers, and we eliminate the need and
expense of an extensive in-house development staff. Under a
typical joint venture agreement with a Development Alliance
Partner, we would fund 95% of the construction costs and our
partner would fund 5%; however, in certain cases we may own as
little as 50% or as much as 98% of the joint venture. Upon
completion, we generally would purchase our partners
interest in the joint venture. We may also structure
developments where we would own 100% of the asset with an
incentive development fee to be paid upon completion to our
development partner. As of September 30, 2003, we had in
our development pipeline 15 industrial projects, which will
total approximately 4.0 million square feet and have an
aggregate estimated investment of $207.5 million upon
completion.



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

We co-invest with third-party partners (some of
whom may be clients of AMB Capital Partners, LLC, to the extent
such partners commit new investment capital) through
partnerships, limited liability companies or joint ventures. We
currently use a co-investment formula with each third party
whereby we will own at least a 20% interest in all ventures. In
general, we control all significant operating and investment
decisions of our co-investment entities. We believe that our
co-investment program will continue to serve as a source of
capital for acquisitions and developments; however, there can be
no assurance that it will continue to do so.



| |                                         
| | ----------------------------------------
| | Growth Through Developments for
    Sale

Through our taxable REIT subsidiaries, we conduct
a variety of businesses that include incremental income
programs, such as our development projects available for sale to
third parties. Such development properties include value-added
conversion projects and build-to-sell projects. As of
September 30, 2003, we were developing four projects for
sale to third parties, which will total approximately
0.6 million square feet and have an aggregate estimated
investment of $41.6 million upon completion.



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

Over the next five years, we expect to have from
12% to 15% of our assets (based on consolidated annualized base
rent) invested in international markets. Our Mexican target
markets currently include Mexico City, Guadalajara and
Monterrey. Our European target markets currently include Paris,
Amsterdam, Frankfurt, Madrid and London. Our Asian target
markets currently include Singapore, Hong Kong and Tokyo. As of
September 30, 2003, our Guadalajara and Paris properties
comprised 1.0% of our total annualized based rent. In January
2003, we also sold a property in Mexico City and recognized a
gain on the disposition. There are many factors that could cause
our entry into target markets and future capital allocation to
differ from our current expectations, which are discussed under
the subheading Our International Growth is Subject to
Special Political and Monetary Risks and elsewhere under
the heading Business Risks in this report.

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We believe that expansion into target
international markets represents a natural extension of our
well-established strategy to invest in industrial markets with
high population densities, close proximity to large customer
clusters and available labor pools, and major distribution
centers serving the global supply chain. Our expansion strategy
mirrors our domestic focus on supply-constrained submarkets with
political, economic or physical constraints to new development.
Our international investments will extend our offering of High
Throughput Distribution facilities for customers who value
speed-to-market over storage. Specifically, we are focused on
customers whose business is derived from global trade, which is
expected to grow significantly faster than world GDP growth. In
addition, our investments target major consumer distribution
markets and customers.

We believe that our established customer
relationships, our contacts in the air cargo and logistics
industries, diligent underwriting of markets and investment
considerations and our strategic alliance partnerships with
knowledgeable developers and managers will assist us in
competing internationally.

RESULTS OF OPERATIONS

The analysis below includes changes attributable
to same store growth, acquisitions, development activity and
divestitures. Same store properties are those that we owned
during both the current and prior year reporting periods,
excluding development properties prior to being stabilized
(generally defined as 90% leased or 12 months after we
receive a certificate of occupancy for the building). For the
comparison between the three and nine months ended
September 30, 2003 and 2002, same store industrial
properties consisted of properties aggregating approximately
72.4 million square feet. The properties acquired during
the nine months ended September 30, 2003, consisted of
31 buildings, aggregating approximately 3.2 million
square feet. The properties acquired during 2002 consisted of
43 buildings, aggregating approximately 5.4 million
square feet. During the nine months ended September 30,
2003, property divestitures and contributions consisted of 46
industrial buildings, aggregating approximately 5.1 million
square feet. In 2002, property divestitures consisted of
58 industrial and two retail buildings, aggregating
approximately 5.7 million square feet. Our future financial
condition and results of operations, including rental revenues,
may be impacted by the acquisition of additional properties and
dispositions. Our future revenues and expenses may vary
materially from historical results.

Occupancy levels in our industrial portfolio and
rents on lease renewals and rollovers were lower in the first
nine months of 2003 as the general contraction in business
activity nationwide reduced demand for industrial warehouse
facilities. According to Torto Wheaton Research, the overall
industrial market deteriorated rapidly from its peak levels at
the end of 2000, when availability was 6.6%, through the second
quarter of 2002, when availability reached 10.8%. Subsequently,
national industrial availability has deteriorated at a more
modest rate, declining an average of 20 basis points per
quarter to reach 11.6% at September 30, 2003. As a result
of the increase in availability, market rents for industrial
properties in most markets decreased over 10%, with some markets
experiencing decreases of over 25%. Over the same period, our
portfolio vacancy increased from 3.6% at December 31, 2000
to 8.0% at September 30, 2003, consistent with market
trends. While the level of rental rate reduction varied by
market, we strove to maintain high occupancy by pricing lease
renewals and new leases with sensitivity to local market
conditions. In periods of decreasing rental rates, we strive to
sign leases with shorter terms to prevent locking-in lower rent
levels for long periods and to be prepared to sign new,
longer-term leases during periods of growing rental rates. When
we sign leases of shorter duration, we strive to limit overall
leasing costs and capital expenditures by offering modest tenant
improvement packages, consistent with the lease term. We
generally followed this practice during the nine months ended
September 30, 2003. Occupancy in our operating industrial
portfolio was 92.0% at September 30, 2003, 370 basis points
greater than the overall industrial market and up 50 basis
points from June 30, 2003. The impact of declining
occupancy was further evidenced by decreases in rents as leases
were renewed or rolled over to new customers at lower rates.
Rents on industrial renewals and rollovers decreased 1.0% during
2002 and 7.4% for the nine months ended September 30, 2003.

During the last four quarters, our dispositions
and contributions have totaled $498.1 million, including
assets in markets that no longer fit our investment strategy and
properties at valuations that we considered to

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be at premium levels. Although these sales and
contributions have diluted our near-term operating results, we
believe they help position the company for long-term growth and
higher return on invested capital by increasing the strategic
fit of our portfolio with our investment and private capital
models. Further, proceeds from these sales, along with our
balance sheet and private capital sources, create significant
capacity for future deployment. While we will continue to sell
assets on an opportunistic basis, we have substantially achieved
our near-term strategic disposition goals. Therefore, in the
coming quarters, we expect that our net investment activity will
begin to reflect the acquisition and development opportunities
that we are seeing in our targeted global distribution markets.




| |                                                                                     
| | ------------------------------------------------------------------------------------
| | For the Three Months Ended
    September 30, 2003 and 2002 (dollars in
    millions)

|                       |                          |                       |     |      |       |          |     |          |       |  |      |      |      |   |       |         |      |   
|---------------------- | ------------------------ | --------------------- | --- | ---- | ----- | -------- | --- | -------- | ----- |  | ---- | ---- | ---- | - | ----- | ------- | ---- | --
|Revenues               |                          | 2003                  |     | 2002 |       | $ Change |     | % Change
|                       |                          |                       |     |      |       |          |     |         
|Rental revenues        |                          |                       |     |      |       |          |     |          |       |  |      |      |      |   |       |        
|                       | Domestic industrial:     |                       |     |      |       |          |     |          |       |  |      |      |      |   |       |         |     
|                       |                          | Same store            |     | $    | 123.8 |          |     | $        | 131.9 |  |      | $    | (8.1 | ) |       |         | (6.1 | )%
|                       |                          | 2002 acquisitions     |     |      | 13.6  |          |     |          | 8.5   |  |      |      | 5.1  |   |       |         | 60.0 | % 
|                       |                          | 2003 acquisitions     |     |      | 4.5   |          |     |          |      |  |      |      | 4.5  |   |       |         |     | % 
|                       | International industrial |                       |     | 1.7  |       |          |     | 0.1      |       |  |      | 1.6  |      |   |       | 1,600.0 | %   
|                       | Retail and other         |                       |     | 4.6  |       |          |     | 6.4      |       |  |      | (1.8 | )    |   |       | (28.1   | )%  
|                       |                          |                       |     |      |       |          |     |          |       |  |      |      |      |   |       |        
|                       |                          | Total rental revenues |     |      | 148.2 |          |     |          | 146.9 |  |      |      | 1.3  |   |       |         | 0.9  | % 
|Private capital income |                          |                       | 1.9 |      |       |          | 2.8 |          |       |  | (0.9 | )    |      |   | (32.1 | )%     
|                       |                          |                       |     |      |       |          |     |          |       |  |      |      |      |   |       |        
|                       |                          | Total revenues        |     | $    | 150.1 |          |     | $        | 149.7 |  |      | $    | 0.4  |   |       |         | 0.3  | % 
|                       |                          |                       |     |      |       |          |     |          |       |  |      |      |      |   |       |        

The decrease in domestic industrial same store
rental revenues resulted primarily from lower average
occupancies and increased bad debt expense, partially offset by
fixed rent increases on existing leases. Industrial same store
occupancy was 91.7% at September 30, 2003, and 94.7% at
September 30, 2002. For the three months ended
September 30, 2003, rents in the same store portfolio
decreased 16.3% on industrial renewals and rollovers (cash
basis) on 4.3 million square feet leased. The 2002
acquisitions consisted of 43 buildings, aggregating
approximately 5.4 million square feet. The 2003
acquisitions consist of 31 buildings, aggregating
approximately 3.2 million square feet. In 2002, we acquired
properties in Mexico and France, resulting in increased
international industrial revenues. The decrease in private
capital income was due to lower acquisition fees and our
discontinuation of the management of two portfolios, which we
had managed for third parties and in which we had no ownership
interest, during the current quarter.

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|                              |                      |                                |       |       |       |          |       |          |       |   |      |      |     |  |       |       |      |  
|----------------------------- | -------------------- | ------------------------------ | ----- | ----- | ----- | -------- | ----- | -------- | ----- | - | ---- | ---- | --- |  | ----- | ----- | ---- | -
|Costs and Expenses            |                      | 2003                           |       | 2002  |       | $ Change |       | % Change
|                              |                      |                                |       |       |       |          |       |         
|Property operating costs:     |                      |                                |       |       |       |          |       |          |       |   |      |      |     |  |       |      
|                              | Rental expenses      |                                | $     | (22.3 | )     |          | $     | (20.2    | )     |   | $    | 2.1  |     |  |       | 10.4  | %   
|                              | Real estate taxes    |                                |       | (17.7 | )     |          |       | (17.4    | )     |   |      | 0.3  |     |  |       | 1.7   | %   
|                              |                      |                                |       |       |       |          |       |          |       |   |      |      |     |  |       |      
|                              |                      | Total property operating costs |       | $     | (40.0 | )        |       | $        | (37.6 | ) |      | $    | 2.4 |  |       |       | 6.4  | %
|                              |                      |                                |       |       |       |          |       |          |       |   |      |      |     |  |       |      
|Property operating costs      |                      |                                |       |       |       |          |       |          |       |   |      |      |     |  |       |      
|                              | Domestic industrial: |                                |       |       |       |          |       |          |       |   |      |      |     |  |       |       |     
|                              |                      | Same store                     |       | $     | (32.3 | )        |       | $        | (32.2 | ) |      | $    | 0.1 |  |       |       | 0.3  | %
|                              |                      | 2002 acquisitions              |       |       | (4.3  | )        |       |          | (2.5  | ) |      |      | 1.8 |  |       |       | 72.0 | %
|                              |                      | 2003 acquisitions              |       |       | (1.1  | )        |       |          | -     |   |      |      | 1.1 |  |       |       |     | %
|                              | Retail and other     |                                |       | (2.3  | )     |          |       | (2.9     | )     |   |      | (0.6 | )   |  |       | (20.7 | )%  
|                              |                      |                                |       |       |       |          |       |          |       |   |      |      |     |  |       |      
|                              |                      | Total property operating costs |       |       | (40.0 | )        |       |          | (37.6 | ) |      |      | 2.4 |  |       |       | 6.4  | %
|Depreciation and amortization |                      |                                | (32.6 | )     |       |          | (31.4 | )        |       |   | 1.2  |      |     |  | 3.8   | %    
|General and administrative    |                      |                                | (10.8 | )     |       |          | (12.4 | )        |       |   | (1.6 | )    |     |  | (12.9 | )%   
|                              |                      |                                |       |       |       |          |       |          |       |   |      |      |     |  |       |      
|                              |                      | Total costs and expenses       |       | $     | (83.4 | )        |       | $        | (81.4 | ) |      | $    | 2.0 |  |       |       | 2.5  | %
|                              |                      |                                |       |       |       |          |       |          |       |   |      |      |     |  |       |      

The $0.1 million increase in same store
properties operating expenses was primarily due to
increases in common area maintenance expense of
$0.4 million, non-reimbursable expense of $0.3 million
and ground rent expense of $0.2 million, offset by
decreases in insurance expense of $0.4 million and in real
estate taxes of $0.4 million. The 2002 acquisitions
consisted of 43 buildings, aggregating approximately
5.4 million square feet. The 2003 acquisitions consist of
31 buildings, aggregating approximately 3.2 million square
feet. The increase in depreciation and amortization expense was
due to the increase in our net investment in real estate. The
decrease in general and administrative expenses was due to
decreased personnel costs and lower taxes for our taxable
subsidiaries.

|                                                        |                                 |      |       |       |   |          |       |          |   |   |      |      |   |  |       |      |   
|------------------------------------------------------- | ------------------------------- | ---- | ----- | ----- | - | -------- | ----- | -------- | - | - | ---- | ---- | - |  | ----- | ---- | --
|Other Income and Expenses                               |                                 | 2003 |       | 2002  |   | $ Change |       | % Change
|                                                        |                                 |      |       |       |   |          |       |         
|Equity in earnings of unconsolidated joint
    ventures |                                 | $    | 1.4   |       |   | $        | 1.3   |          |   | $ | 0.1  |      |   |  | 7.7   | %   
|Interest and other income                               |                                 |      | 0.7   |       |   |          | 2.6   |          |   |   | (1.9 | )    |   |  | (73.1 | )%  
|Merchant development profits, net                       |                                 |      | 2.2   |       |   |          | 0.6   |          |   |   | 1.6  |      |   |  | 266.7 | %   
|Interest, including amortization                        |                                 |      | (35.9 | )     |   |          | (37.5 | )        |   |   | (1.6 | )    |   |  | (4.3  | )%  
|                                                        |                                 |      |       |       |   |          |       |          |   |   |      |      |   |  |       |     
|                                                        | Total other income and expenses |      | $     | (31.6 | ) |          | $     | (33.0    | ) |   | $    | (1.4 | ) |  |       | (4.2 | )%
|                                                        |                                 |      |       |       |   |          |       |          |   |   |      |      |   |  |       |     

The decrease in interest and other income was
primarily due to decreased income from our investment in AMB
Pier One, LLC. The increase in merchant development profits,
net, primarily resulted from the sale of Novato Fair Shopping
Center in Northern California for a net gain of
$1.2 million. The decrease in interest, including
amortization, was due to lower overall interest rates on our
outstanding debt, partially offset by write-offs of deferred
financing costs on refinanced secured debt.

Preferred stock and unit redemption
discount/(issuance costs).On
July 28, 2003, we redeemed all 3,995,800 shares of our 8.5%
Series A Cumulative Redeemable Preferred Units and
recognized a reduction of income available to common unitholders
of $3.7 million for the original issuance costs. In July
2003, the SEC announced that it had revised its position
relating to the application of Emerging issues Task Force Topic
No. D-42, The Effect on the Calculation of Earnings per
Share for the Redemption or Induced Conversion of Preferred
Stock, (Topic D-42). As a result of this
announcement, original issuance costs related to preferred
equity are to be reflected as a reduction of income available to
common stockholders in determining earnings per share for the
period in which the preferred equity is redeemed. The
announcement requires retroactive application of the revised
position in previously issued financial statements. As a result,
our financial statements for the year ending December 31,
2001, to be included in our annual report on Form 10-K for
the year ending December 31, 2003, will be restated to
reflect a reduction in income available to common

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stockholders of $3.2 million, representing
the original issuance costs of AMB Property II, L.P.s
series C preferred units, which were redeemed in December
2001. Restated diluted earnings per share for the year ended
December 31, 2001, will be $1.43 compared to $1.47 as
previously reported. In addition, diluted funds from operations
per share will be restated to conform with the revised SEC
position, as required under the National Association of Real
Estate Investment Trusts definition, to $2.33 for the year ended
December 31, 2001, compared to $2.37 as previously
reported. The SECs revised position on Topic D-42 does not
require us to file amendments to previously filed reports and
will not impact any other previously reported periods.




| |                                                                                    
| | -----------------------------------------------------------------------------------
| | For the Nine Months Ended
    September 30, 2003 and 2002 (dollars in
    millions)

|                       |                          |                       |     |      |       |          |     |          |       |  |      |      |      |   |      |         |       |   
|---------------------- | ------------------------ | --------------------- | --- | ---- | ----- | -------- | --- | -------- | ----- |  | ---- | ---- | ---- | - | ---- | ------- | ----- | --
|Revenues               |                          | 2003                  |     | 2002 |       | $ Change |     | % Change
|                       |                          |                       |     |      |       |          |     |         
|Rental revenues        |                          |                       |     |      |       |          |     |          |       |  |      |      |      |   |      |        
|                       | Domestic industrial:     |                       |     |      |       |          |     |          |       |  |      |      |      |   |      |         |      
|                       |                          | Same store            |     | $    | 386.1 |          |     | $        | 393.1 |  |      | $    | (7.0 | ) |      |         | (1.8  | )%
|                       |                          | 2002 acquisitions     |     |      | 41.2  |          |     |          | 11.1  |  |      |      | 30.1 |   |      |         | 271.2 | % 
|                       |                          | 2003 acquisitions     |     |      | 5.0   |          |     |          |      |  |      |      | 5.0  |   |      |         |      | % 
|                       | International industrial |                       |     | 4.1  |       |          |     | 0.1      |       |  |      | 4.0  |      |   |      | 4,000.0 | %    
|                       | Retail and other         |                       |     | 14.5 |       |          |     | 21.6     |       |  |      | (7.1 | )    |   |      | (32.9   | )%   
|                       |                          |                       |     |      |       |          |     |          |       |  |      |      |      |   |      |        
|                       |                          | Total rental revenues |     |      | 450.9 |          |     |          | 425.9 |  |      |      | 25.0 |   |      |         | 5.9   | % 
|Private capital income |                          |                       | 7.9 |      |       |          | 8.5 |          |       |  | (0.6 | )    |      |   | (7.1 | )%     
|                       |                          |                       |     |      |       |          |     |          |       |  |      |      |      |   |      |        
|                       |                          | Total revenues        |     | $    | 458.8 |          |     | $        | 434.4 |  |      | $    | 24.4 |   |      |         | 5.6   | % 
|                       |                          |                       |     |      |       |          |     |          |       |  |      |      |      |   |      |        

The decrease in domestic industrial same store
rental revenues resulted primarily from lower average
occupancies and increased bad debt expense, partially offset by
an increase in lease termination fees and fixed rent increases
on existing leases. Industrial same store occupancy was 91.7% at
September 30, 2003, and 94.7% at September 30, 2002.
For the nine months ended September 30, 2003, rents in the
same store portfolio decreased 8.0% on industrial renewals and
rollovers (cash basis) on 12.7 million square feet leased.
The 2002 acquisitions consisted of 43 buildings, aggregating
approximately 5.4 million square feet. The 2003
acquisitions consist of 31 buildings, aggregating
approximately 3.2 million square feet. In 2002, we acquired
properties in Mexico and France, resulting in increased
international industrial revenues. The decrease in private
capital income was primarily due to lower acquisition fees.

|                              |                                |                                |       |        |        |          |       |          |        |   |      |      |      |  |      |       |       |  
|----------------------------- | ------------------------------ | ------------------------------ | ----- | ------ | ------ | -------- | ----- | -------- | ------ | - | ---- | ---- | ---- |  | ---- | ----- | ----- | -
|Costs and Expenses            |                                | 2003                           |       | 2002   |        | $ Change |       | % Change
|                              |                                |                                |       |        |        |          |       |         
|Property operating costs:     |                                |                                |       |        |        |          |       |          |        |   |      |      |      |  |      |      
|Rental expenses               |                                | $                              | (65.0 | )      |        | $        | (54.7 | )        |        | $ | 10.3 |      |      |  | 18.8 | %    
|Real estate taxes             |                                |                                | (53.2 | )      |        |          | (50.9 | )        |        |   | 2.3  |      |      |  | 4.5  | %    
|                              |                                |                                |       |        |        |          |       |          |        |   |      |      |      |  |      |      
|                              | Total property operating costs |                                | $     | (118.2 | )      |          | $     | (105.6   | )      |   | $    | 12.6 |      |  |      | 11.9  | %    
|                              |                                |                                |       |        |        |          |       |          |        |   |      |      |      |  |      |      
|Property operating costs:     |                                |                                |       |        |        |          |       |          |        |   |      |      |      |  |      |      
|                              | Domestic industrial:           |                                |       |        |        |          |       |          |        |   |      |      |      |  |      |       |      
|                              |                                | Same store                     |       | $      | (96.0  | )        |       | $        | (93.5  | ) |      | $    | 2.5  |  |      |       | 2.7   | %
|                              |                                | 2002 acquisitions              |       |        | (13.5  | )        |       |          | (2.9   | ) |      |      | 10.6 |  |      |       | 365.5 | %
|                              |                                | 2003 acquisitions              |       |        | (1.3   | )        |       |          |       |   |      |      | 1.3  |  |      |       |      | %
|                              | International industrial       |                                |       | (0.5   | )      |          |       |         |        |   |      | 0.5  |      |  |      |      | %    
|                              | Retail and other               |                                |       | (6.9   | )      |          |       | (9.2     | )      |   |      | (2.3 | )    |  |      | (25.0 | )%   
|                              |                                |                                |       |        |        |          |       |          |        |   |      |      |      |  |      |      
|                              |                                | Total property operating costs |       |        | (118.2 | )        |       |          | (105.6 | ) |      |      | 12.6 |  |      |       | 11.9  | %
|Depreciation and amortization |                                |                                | (99.3 | )      |        |          | (88.7 | )        |        |   | 10.6 |      |      |  | 12.0 | %    
|Impairment losses             |                                |                                | (5.2  | )      |        |          |      |          |        |   | 5.2  |      |      |  |     | %    
|General and administrative    |                                |                                | (35.2 | )      |        |          | (34.2 | )        |        |   | 1.0  |      |      |  | 2.9  | %    
|                              |                                |                                |       |        |        |          |       |          |        |   |      |      |      |  |      |      
|                              |                                | Total costs and expenses       |       | $      | (257.9 | )        |       | $        | (228.5 | ) |      | $    | 29.4 |  |      |       | 12.9  | %
|                              |                                |                                |       |        |        |          |       |          |        |   |      |      |      |  |      |      

The $2.5 million increase in same store
properties operating expenses was primarily due to
increases in common area maintenance expenses, including snow
removal, of $2.4 million and real estate taxes of

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$0.6 million, partially offset by a decrease
in insurance expenses of $0.9 million. The 2002
acquisitions consisted of 43 buildings, aggregating
approximately 5.4 million square feet. The 2003
acquisitions consist of 31 buildings, aggregating approximately
3.2 million square feet. The increase in depreciation and
amortization expense was due to the increase in our net
investment in real estate, partially offset by a reduction of
$2.1 million for the recovery, through the settlement of a
lawsuit, of capital expenditures paid in prior years. The
impairment loss was on investments in real estate and leasehold
interests that continue to be held for long-term investment. The
increase in general and administrative expenses was primarily
due to increased stock-based compensation expense resulting from
the issuance of additional restricted stock.


|                                                        |                                 |      |        |       |   |          |        |          |   |   |      |      |   |  |       |      |   
|------------------------------------------------------- | ------------------------------- | ---- | ------ | ----- | - | -------- | ------ | -------- | - | - | ---- | ---- | - |  | ----- | ---- | --
|Other Income and Expenses                               |                                 | 2003 |        | 2002  |   | $ Change |        | % Change
|                                                        |                                 |      |        |       |   |          |        |         
|Equity in earnings of unconsolidated joint
    ventures |                                 | $    | 4.2    |       |   | $        | 4.4    |          |   | $ | (0.2 | )    |   |  | (4.5  | )%  
|Interest and other income                               |                                 |      | 3.7    |       |   |          | 9.9    |          |   |   | (6.2 | )    |   |  | (62.6 | )%  
|Gains from dispositions of real estate                  |                                 |      | 7.4    |       |   |          | 2.5    |          |   |   | 4.9  |      |   |  | 196.0 | %   
|Merchant development profits, net                       |                                 |      | 2.2    |       |   |          | 0.6    |          |   |   | 1.6  |      |   |  | 266.7 | %   
|Interest, including amortization                        |                                 |      | (108.0 | )     |   |          | (109.1 | )        |   |   | (1.1 | )    |   |  | (1.0  | )%  
|                                                        |                                 |      |        |       |   |          |        |          |   |   |      |      |   |  |       |     
|                                                        | Total other income and expenses |      | $      | (90.5 | ) |          | $      | (91.7    | ) |   | $    | (1.2 | ) |  |       | (1.3 | )%
|                                                        |                                 |      |        |       |   |          |        |          |   |   |      |      |   |  |       |     

The decrease in interest and other income was
primarily due to the repayment of a $74.0 million mortgage
note in July 2002. We carried the 9.5% mortgage note secured by
a retail center that we sold in September 2000 in the principal
amount of $74.0 million. The increase in gains from
dispositions of real estate (not included in discontinued
operations) resulted from our contribution of $94.0 million
in operating properties to our newly formed co-investment joint
venture, Industrial Fund I, LLC, in February 2003. We
recognized a gain of $7.4 million on the contribution,
representing the portion of the contributed properties acquired
by the third-party investors. During the nine months ended
September 30, 2002, we sold two industrial buildings and
one retail center, aggregating approximately 0.8 million
square feet, for an aggregate price of $50.6 million, with
a resulting loss of $0.8 million. In June 2002, we also
contributed $76.9 million in operating properties to our
consolidated co-investment joint venture, AMB-SGP, LP. We
recognized a gain of $3.3 million on the contribution,
representing the portion of the contributed properties acquired
by the third-party investors. The property contributions and
2002 sales of properties held for disposition at
December 31, 2001, were not classified as discontinued
operations under the provisions of SFAS No. 144. The
increase in merchant development profits, net, primarily
resulted from the sale of Novato Fair Shopping Center in
Northern California for a net gain of $1.2 million.

Preferred stock and unit redemption
discount/(issuance costs).On
July 28, 2003, we redeemed all 3,995,800 shares of our
8.5% Series A Cumulative Redeemable Preferred Units and
recognized a reduction of income available to common unitholders
of $3.7 million for the original issuance costs.

LIQUIDITY AND CAPITAL RESOURCES

We currently expect that our principal sources of
working capital and funding for acquisitions, development,
expansion and renovation of properties will include:



| |   |                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------
| |  | cash flow from operations;                                                                                                              
|
| |  | borrowings under our unsecured credit facility;                                                                                         
|
| |  | other forms of secured or unsecured financing;                                                                                          
|
| |  | proceeds from debt or limited partnership unit
    offerings (including issuances of limited partnership units by
    our subsidiaries);
|
| |  | net proceeds from divestitures of properties; and                                                                                       
|
| |  | private capital from co-investment partners.                                                                                            

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We believe that our sources of working capital,
specifically our cash flow from operations, borrowings available
under our unsecured credit facility and our ability to access
private and public debt and equity capital, are adequate for us
to meet our liquidity requirements for the foreseeable future.

Capital Resources

Property Contributions.On February 19, 2003, we
contributed $94.0 million in operating properties,
consisting of 24 industrial buildings, aggregating approximately
2.4 million square feet, to our newly formed unconsolidated
joint venture, Industrial Fund I, LLC, with Citigroup
Global Investments Real Estate LP, LLC, a Delaware limited
liability company, and recognized a gain of $7.4 million on
the contribution.

Developments-for-Sale.During the three and nine months ended
September 30, 2003, we sold three development-for-sale
projects, for an aggregate price of $32.1 million, with a
resulting net cash gain of $2.2 million.

Property Divestitures.During the three months ended
September 30, 2003, we divested ourselves of nine
industrial buildings and one retail center, for an aggregate
price of $102.2 million, with a resulting net gain of
$7.9 million. During the nine months ended
September 30, 2003, we divested ourselves of 21 industrial
buildings and one retail center, for an aggregate price of
$244.3 million, with a resulting net gain of
$39.5 million.

Properties Held for Divestiture.We have decided to divest ourselves of
one retail center and three industrial buildings, which are not
in our core markets or which do not meet our current strategic
objectives. The divestitures of the properties are subject to
negotiation of acceptable terms and other customary conditions.
As of September 30, 2003, the net carrying value of the
properties held for divestiture was $20.5 million.

Co-investment Joint Ventures.We consolidate the financial position,
results of operations and cash flows of our five co-investment
joint ventures. Our five co-investment joint ventures are
engaged in the acquisition, ownership, operation, management
and, in some cases, the renovation, expansion and development of
industrial buildings in target markets nationwide. We
consolidate these joint ventures for financial reporting
purposes because we are the sole managing general partner and,
as a result, control all major operating decisions.

Third-party equity interests in the joint
ventures are reflected as minority interests in the consolidated
financial statements. As of September 30, 2003, we owned
approximately 31.3 million square feet of our properties
through these five co-investment joint ventures and
5.2 million square feet of our properties through our other
consolidated joint ventures. We may make additional investments
through these joint ventures or new joint ventures in the future
and presently plan to do so.

Our co-investment joint ventures at
September 30, 2003 (dollars in thousands):

|                                         |  |                                                                   |  |             |     |                   |  |   |         | 
|---------------------------------------- |  | ----------------------------------------------------------------- |  | ----------- | --- | ----------------- |  | - | ------- | 
|                                         |  |                                                                   |  | Our         |     |                  
|                                         |  |                                                                   |  | Approximate |     |                  
|                                         |  |                                                                   |  | Ownership   |     | Original Planned 
|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% |                   |  | $ | 500,000 | 
|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)                         |  | BPMT and TNO                                                      |  |             | 39% |                   |  | $ | 200,000 | 

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---



|    |                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------
|(1) | Planned capitalization is based on anticipated
    debt and both partners expected equity contributions.                        
|   
|(2) | Included 15 institutional investors as
    stockholders as of September 30, 2003.                                                
|   
|(3) | A subsidiary of the real estate investment
    subsidiary of the Government of Singapore Investment Corporation.                 
|   
|(4) | Included 13 institutional investors as
    stockholders and one third-party limited partner as of
    September 30, 2003.        
|   
|(5) | AMB-AMS, L.P. is a commitment to form a
    co-investment partnership with two Dutch pension funds advised
    by Mn Services NV.

Partners Capital.As of September 30, 2003, we had
outstanding 81,452,162 common general partnership units,
4,618,242 common limited partnership units, 1,300,000
8 5/8% Series B Cumulative Redeemable Partnership
Units, 800,000 7.95% Series J Cumulative Redeemable
Partnership Units, 800,000 7.95% Series K Cumulative
Redeemable Partnership Units and 2,000,000 6.5% Series L
Cumulative Redeemable Partnership Units.

On July 14, 2003, AMB Property II, L.P.
repurchased, from an unrelated third party, 66,300 of its
series F preferred units for $3.3 million, including
accrued and unpaid dividends.

On October 27, 2003, we gave irrevocable
notice that we will redeem all 1,300,000 of our outstanding
8 5/8% Series B Cumulative Redeemable Preferred
Partnership Units on November 26, 2003, for an aggregate
redemption price of $65.6 million.

On June 23, 2003, AMB Property Corporation
issued and sold 2,000,000 shares of 6.5% Series L
Cumulative Redeemable Preferred Stock at a price of $25.00 per
share. Dividends are cumulative from the date of issuance and
payable quarterly in arrears at a rate per share equal to $1.625
per annum. The series L preferred stock is redeemable by
AMB Property Corporation on or after June 23, 2008, subject
to certain conditions, for cash at a redemption price equal to
$25.00 per share, plus accumulated and unpaid dividends thereon,
if any, to the redemption date. AMB Property Corporation
contributed the net proceeds of $48.4 million to us, and in
exchange, we issued to AMB Property Corporation 2,000,000 6.5%
Series L Cumulative Redeemable Preferred Units. We used the
proceeds, in addition to proceeds previously contributed to us
from other equity issuances, to redeem all 3,995,800 of our 8.5%
Series A Cumulative Redeemable Preferred Units from AMB
Property Corporation on July 28, 2003. AMB Property
Corporation, in turn, used those proceeds to redeem all
3,995,800 of its 8.5% Series A Cumulative Redeemable
Preferred Stock for $100.2 million, including all
accumulated and unpaid dividends thereon, to the redemption date.

On November 6, 2003, AMB Property
Corporation priced 2,000,000 shares of 6.75% Series M
Cumulative Redeemable Preferred Stock at $25.00 per share.
AMB Property Corporation also granted the underwriters an
option to purchase up to 300,000 additional shares of
series M preferred stock at $25.00 per share, which
the underwriters exercised in full on November 12, 2003.
AMB Property Corporation expects to issue and sell the
2,300,000 shares of series M preferred stock on
November 25, 2003. Dividends will be cumulative from the
date of issuance and payable quarterly in arrears at a rate per
share equal to $1.6875 per annum. AMB Property Corporation will
contribute the net proceeds to us, and in exchange, we will
issue to AMB Property Corporation 2,300,000 6.75% Series M
Cumulative Redeemable Preferred Units.

In December 2001, AMB Property Corporations
board of directors approved a new stock repurchase program for
the repurchase of up to $100.0 million worth of its common
and preferred stock. In December 2002, AMB Property
Corporations board of directors increased the repurchase
program to $200.0 million. The current stock repurchase
program expires in December 2003 and, as of September 30,
2003, $109.3 million of repurchase capacity remained under
the program. Year to date 2003, AMB Property Corporation
repurchased 812,900 shares of its common stock for
$21.2 million, including commissions, and we retired the
same number of common general partnership units.

Debt.In order to
maintain financial flexibility and facilitate the deployment of
capital through market cycles, we presently intend to operate
with a debt-to-total market capitalization ratio (our share) of
approximately 45% or less. As of September 30, 2003, our
share of total debt-to-total market capitalization

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ratio was 35.2%. Additionally, we currently
intend to manage our capitalization in order to maintain an
investment grade rating on our senior unsecured debt. Regardless
of these policies, our organizational documents do not limit the
amount of indebtedness that we may incur. Accordingly, our
general partners management could alter or eliminate these
policies without unitholder or noteholder approval or
circumstances could arise that could render us unable to comply
with these policies.


As of September 30, 2003, the aggregate
principal amount of our secured debt was $1.3 billion,
excluding unamortized debt premiums of $8.1 million. Of the
$1.3 billion of secured debt, $1.0 billion is secured
by properties in our joint ventures. The secured debt is
generally non-recourse and bears interest at rates varying from
2.6% to 12.0% per annum (with a weighted average rate of 7.0%)
and final maturity dates ranging from December 2003 to June
2023. All of the secured debt bears interest at fixed rates,
except for four loans with an aggregate principal amount of
$30.9 million as of September 30, 2003, which bear
interest at variable rates (with a weighted average interest
rate of 3.6% as of September 30, 2003). Over time, we
intend to repay the secured debt on our wholly-owned assets; we
may prepay, if market conditions warrant, using proceeds from
unsecured bond issuances, proceeds from property sales or other
sources. We typically finance our co-investment joint ventures
with secured debt at a loan-to-value of 50-65%.

In June 1998, we issued $400.0 million of
unsecured senior debt securities. Interest on the unsecured
senior debt securities is payable semi-annually. The 2015 notes
are putable and callable in September 2005. In August 2000, we
commenced a medium-term note program and subsequently issued
$400.0 million of medium-term notes with an average
interest rate of 7.3%. These notes are guaranteed by AMB
Property Corporation. In May 2002, we commenced a new
medium-term note program for the issuance of up to
$400.0 million in principal amount of medium-term notes,
which will be guaranteed by AMB Property Corporation. As of
September 30, 2003, we had issued no medium-term notes
under this program.

On November 10, 2003, we issued
$75.0 million aggregate principal amount of senior
unsecured notes under our May 2002 medium-term note program to
Teachers Insurance and Annuity Association of America. AMB
Property Corporation guaranteed the principal amount and
interest on the notes, which mature on November 1, 2013,
and bear interest at 5.53% per annum. Teachers has agreed
that until November 10, 2005, we can require Teachers to
return the notes to us for cancellation for an obligation of
equal dollar amount under a first mortgage loan to be secured by
properties determined by us, except that in the event the
ratings on our senior unsecured debt are downgraded by two
ratings agencies to BBB- or lower (or Baa3 or lower in the case
of Moodys Investors Service, Inc.), we will only have ten
days after the last of these downgrades to exercise this right.
During the period when we can exercise our cancellation right
and until any mortgage loans close, Teachers has agreed not to
sell, contract to sell, pledge, transfer or otherwise dispose
of, any portion of the notes. After the settlement of the
medium-term note issuance to Teachers, we had
$325.0 million principal amount of medium-term notes
available for issuance under the program. We intend to issue
medium-term notes, guaranteed by AMB Property Corporation, under
the program from time to time as market conditions permit. We
currently anticipate the issuance of additional medium-term
notes under the program prior to the end of the year.

If we are unable to refinance or extend principal
payments due at maturity or pay them with proceeds from other
capital transactions, then our cash flow may be insufficient to
pay distributions to our unitholders in all years, to make
payments to our noteholders and to repay debt upon maturity.
Furthermore, if prevailing interest rates or other factors at
the time of refinancing (such as the reluctance of lenders to
make commercial real estate loans) result in higher interest
rates upon refinancing, then the interest expense relating to
that refinanced indebtedness would increase. This increased
interest expense would adversely affect our financial condition,
results of operations, cash flow and ability to make
distributions to our unitholders and payments to our noteholders.

Credit Facilities.In December 2002, we renewed our
$500.0 million unsecured revolving line of credit. AMB
Property Corporation guarantees our obligations under the credit
facility. The credit facility matures in December 2005, has a
one-year extension option and currently is subject to a 20 basis
point annual facility fee. Borrowings under our credit facility
currently bear interest at LIBOR plus 60 basis points. Euro
borrowings under the credit facility currently bear interest at
EURIBOR plus 60 basis points. Yen borrowings under the

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credit facility currently bear interest at the
Japan LIBOR fixing plus 60 basis points. Both the facility fee
and the interest rate are based on our credit rating, which is
currently investment grade. However, if our credit rating falls
below investment grade, then our facility fee and interest rate
may increase. The credit facility includes a multi-currency
component, which was amended effective July 10, 2003 to
increase from $150.0 million to $250.0 million the
amount that may be drawn in either British pounds sterling,
Euros or Yen (provided that such currency is readily available
and freely transferable and convertible to U.S. dollars,
the Reuters Monitor Money Rates Service reports LIBOR for such
currency in interest periods of 1, 2, 3 or 6 months and we
have an investment grade credit rating). We have the ability to
increase available borrowings to $700.0 million by adding
additional banks to the facility or obtaining the agreement of
existing banks to increase their commitments. We use our
unsecured credit facility principally for acquisitions and for
general working capital requirements. Monthly debt service
payments on our credit facility are interest only. The total
amount available under our credit facility fluctuates based upon
the borrowing base, as defined in the agreement governing the
credit facility, generally the value of our unencumbered
properties. As of September 30, 2003, the outstanding
balance on our unsecured credit facility was $91.3 million
and the remaining amount available was $371.5 million, net
of outstanding letters of credit (excluding the
$200.0 million of potential additional capacity). The
outstanding balance included borrowings of $41.3 million
denominated in Euros and Yen and converted to U.S. dollars at
September 30, 2003.


In August 2001, AMB Institutional Alliance
Fund II, L.P. obtained a $150.0 million credit
facility secured by the unfunded capital commitments of the
investors in AMB Institutional Alliance REIT II, Inc. and
AMB Institutional Alliance Fund II, L.P. We repaid the credit
facility in April 2003 with capital contributions and secured
debt financing proceeds.

Mortgage Receivable.Through a wholly-owned subsidiary, we
hold a mortgage loan receivable on AMB Pier One, LLC, an
unconsolidated joint venture. The note bears interest at 13.0%
and matures in May 2026. As of September 30, 2003, the
outstanding balance on the note was $13.1 million.

39



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##### Table of Contents



The tables below summarize our debt maturities
and capitalization as of September 30, 2003 (dollars in
thousands):

Debt

|                                                                     |                      |                         |                         |         |         |             |          |           |         |            |         |         |         |         |       |       |       |       |        |        |        |        |          |           |           |           | 
|-------------------------------------------------------------------- | -------------------- | ----------------------- | ----------------------- | ------- | ------- | ----------- | -------- | --------- | ------- | ---------- | ------- | ------- | ------- | ------- | ----- | ----- | ----- | ----- | ------ | ------ | ------ | ------ | -------- | --------- | --------- | --------- | 
|                                                                     |                      | Our                     |                         | Joint   |         | Unsecured   |          |           |         |            |         |        
|                                                                     |                      | Secured                 |                         | Venture |         | Senior Debt |          | Unsecured |         | Credit     |         | Total  
|                                                                     |                      | Debt                    |                         | Debt    |         | Securities  |          | Debt      |         | Facilities |         | Debt   
|                                                                     |                      |                         |                         |         |         |             |          |           |         |            |         |        
|2003                                                                 |                      | $                       | 18,587                  |         |         | $           | 6,174    |           |         | $          |        |         |         | $       | 143   |       |       | $     |       |        |        | $      | 24,904   |          
|2004                                                                 |                      |                         | 62,516                  |         |         |             | 37,920   |           |         |            |        |         |         |         | 601   |       |       |       |       |        |        |        | 101,037  |          
|2005                                                                 |                      |                         | 44,427                  |         |         |             | 61,181   |           |         |            | 250,000 |         |         |         | 647   |       |       |       | 91,335 |        |        |        | 447,590  |          
|2006                                                                 |                      |                         | 82,693                  |         |         |             | 60,570   |           |         |            | 25,000  |         |         |         | 698   |       |       |       |       |        |        |        | 168,961  |          
|2007                                                                 |                      |                         | 14,495                  |         |         |             | 49,416   |           |         |            | 75,000  |         |         |         | 752   |       |       |       |       |        |        |        | 139,663  |          
|2008                                                                 |                      |                         | 31,665                  |         |         |             | 161,350  |           |         |            | 175,000 |         |         |         | 810   |       |       |       |       |        |        |        | 368,825  |          
|2009                                                                 |                      |                         | 4,147                   |         |         |             | 82,875   |           |         |            |        |         |         |         | 873   |       |       |       |       |        |        |        | 87,895   |          
|2010                                                                 |                      |                         | 50,948                  |         |         |             | 123,571  |           |         |            | 75,000  |         |         |         | 941   |       |       |       |       |        |        |        | 250,460  |          
|2011                                                                 |                      |                         | 409                     |         |         |             | 241,374  |           |         |            | 75,000  |         |         |         | 1,014 |       |       |       |       |        |        |        | 317,797  |          
|2012                                                                 |                      |                         | 407                     |         |         |             | 146,542  |           |         |            |        |         |         |         | 1,093 |       |       |       |       |        |        |        | 148,042  |          
|Thereafter                                                           |                      |                         | 480                     |         |         |             | 22,264   |           |         |            | 125,000 |         |         |         | 2,200 |       |       |       |       |        |        |        | 149,944  |          
|                                                                     |                      |                         |                         |         |         |             |          |           |         |            |         |         |         |         |       |       |       |       |        |        |        |        |          |          
|                                                                     | Subtotal             |                         |                         | 310,774 |         |             |          | 993,237   |         |            |         | 800,000 |         |         |       | 9,772 |       |       |        | 91,335 |        |        |          | 2,205,118 |          
|                                                                     | Unamortized premiums |                         |                         | 7,320   |         |             |          | 774       |         |            |         |        |         |         |       |      |       |       |        |       |        |        |          | 8,094     |          
|                                                                     |                      |                         |                         |         |         |             |          |           |         |            |         |         |         |         |       |       |       |       |        |        |        |        |          |          
|                                                                     |                      |                         | Total consolidated debt |         |         | 318,094     |          |           |         | 994,011    |         |         |         | 800,000 |       |       |       | 9,772 |        |        |        | 91,335 |          |           |           | 2,213,212 | 
|Our share of unconsolidated joint venture debt(1)                    |                      |                         |                        |         |         |             | 65,950   |           |         |            |        |         |         |         |      |       |       |       |       |        |        |        | 65,950   |          
|                                                                     |                      |                         |                         |         |         |             |          |           |         |            |         |         |         |         |       |       |       |       |        |        |        |        |          |          
|                                                                     |                      |                         | Total debt              |         |         | 318,094     |          |           |         | 1,059,961  |         |         |         | 800,000 |       |       |       | 9,772 |        |        |        | 91,335 |          |           |           | 2,279,162 | 
|Joint venture partners share of
    consolidated joint venture debt |                      |                         |                        |         |         |             | (640,562 | )         |         |            |        |         |         |         |      |       |       |       |       |        |        |        | (640,562 | )        
|                                                                     |                      |                         |                         |         |         |             |          |           |         |            |         |         |         |         |       |       |       |       |        |        |        |        |          |          
|                                                                     |                      | Our share of total debt |                         | $       | 318,094 |             |          | $         | 419,399 |            |         | $       | 800,000 |         |       | $     | 9,772 |       |        | $      | 91,335 |        |          | $         | 1,638,600 |          
|                                                                     |                      |                         |                         |         |         |             |          |           |         |            |         |         |         |         |       |       |       |       |        |        |        |        |          |          
|Weighed average interest rate                                        |                      |                         | 8.1                     | %       |         |             | 6.7      | %         |         |            | 7.2     | %       |         |         | 7.5   | %     |       |       | 2.2    | %      |        |        | 6.9      | %        
|Weighed average maturity (in years)                                  |                      |                         | 3.4                     |         |         |             | 6.8      |           |         |            | 5.7     |         |         |         | 11    |       |       |       | 2.2    |        |        |        | 5.7      |          



---



|    |                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------
|(1) | The weighted average interest and maturity for
    the unconsolidated joint venture debt were 6.0% and
    6.0 years, respectively.

Market Capital

|                                 |       |             |            |            |  |          |       |  |  |   |           |           | 
|-------------------------------- | ----- | ----------- | ---------- | ---------- |  | -------- | ----- |  |  | - | --------- | --------- | 
|                                 |       | Units       |            | Market     |  | Market  
|Security                         |       | Outstanding |            | Price(1)   |  | Value(1)
|                                 |       |             |            |            |  |         
|Common units                     |       |             | 81,452,162 |            |  | $        | 30.81 |  |  | $ | 2,509,541 |          
|Common limited partnership units |       |             | 4,618,242  |            |  | $        | 30.81 |  |  |   | 142,288   |          
|                                 |       |             |            |            |  |          |       |  |  |   |           |          
|                                 | Total |             |            | 86,070,404 |  |          |       |  |  |   | $         | 2,651,829 | 
|                                 |       |             |            |            |  |          |       |  |  |   |           |          



---



|    |                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Assumes that the general partnership units are
    exchanged for AMB Property Corporations common stock
    because there in no public market for the units.

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##### Table of Contents



Preferred Units

|                         |                        |              |       |             |  |            |        |         |  |                | 
|------------------------ | ---------------------- | ------------ | ----- | ----------- |  | ---------- | ------ | ------- |  | -------------- | 
|                         |                        | Distribution |       | Liquidation |  | Redemption
|Security                 |                        | Rate         |       | Preference  |  | Provisions
|                         |                        |              |       |             |  |           
|Series B preferred units |                        |              | 8.63% |             |  | $          | 65,000 |         |  | November 2003 
|Series D preferred units |                        |              | 7.75% |             |  |            | 79,767 |         |  | May 2004      
|Series E preferred units |                        |              | 7.75% |             |  |            | 11,022 |         |  | August 2004   
|Series F preferred units |                        |              | 7.95% |             |  |            | 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 L preferred units |                        |              | 6.50% |             |  |            | 50,000 |         |  | June 2008     
|                         |                        |              |       |             |  |            |        |         |  |               
|                         | Weighted average/total |              |       | 7.85%       |  |            | $      | 363,346 |  |                | 
|                         |                        |              |       |             |  |            |        |         |  |               

Capitalization Ratios

|                                                                          |  |  |       | 
|------------------------------------------------------------------------- |  |  | ----- | 
|Total debt-to-total market capitalization                                 |  |  | 43.0% | 
|Our share of total debt-to-total market
    capitalization                |  |  | 35.2% | 
|Total debt plus preferred-to-total market
    capitalization              |  |  | 49.8% | 
|Our share of total debt plus preferred-to-total
    market capitalization |  |  | 43.0% | 
|Our share of total debt-to-total book
    capitalization                  |  |  | 44.9% | 



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

As of September 30, 2003, we had
$152.4 million in cash (of which $97.6 million was
held by our co-investment joint ventures), restricted cash and
cash equivalents, and $371.5 million of additional
available borrowings under our credit facility. To fund
acquisitions, development activities and capital expenditures,
and to provide for general working capital requirements, we
intend to use:



| |   |                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------
| |  | cash flow from operations;                                                                                                                         
|
| |  | borrowings under our unsecured credit facility;                                                                                                    
|
| |  | other forms of secured and unsecured financing;                                                                                                    
|
| |  | proceeds from any future debt or limited
    partnership unit offerings (including issuances of limited
    partnership units by our subsidiaries);
|
| |  | net proceeds from divestitures of properties; and                                                                                                  
|
| |  | private capital from our co-investment partners.                                                                                                   

The unavailability of capital would adversely
affect our financial condition, results of operations, cash flow
and ability to make distributions to our unitholders and
payments to our noteholders.

41



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##### Table of Contents



We declared a regular cash distribution for the
quarter ended September 30, 2003, of $0.415 per common
unit. The distributions were payable on October 15, 2003,
to common unitholders of record on October 3, 2003. The
Series B, E, F, J, K and L preferred unit
distributions were payable on October 15, 2003, to
unitholders of record on October 3, 2003. The
Series D, H and I preferred unit distributions were
payable on September 25, 2003. The following table sets
forth the distributions paid or payable per unit for the three
and nine months ended September 30, 2003 and 2002:

|                      |  |                                  |  |               |  |               |  |        |  |       
|--------------------- |  | -------------------------------- |  | ------------- |  | ------------- |  | ------ |  | ------
|                      |  |                                  |  |               |  |              
|                      |  |                                  |  | For the Three |  | For the Nine 
|                      |  |                                  |  | Months Ended  |  | Months Ended 
|                      |  |                                  |  | September 30, |  | September 30,
|                      |  |                                  |  |               |  |              
|Paying Entity         |  | Security                         |  | 2003          |  | 2002          |  | 2003   |  | 2002  
|                      |  |                                  |  |               |  |               |  |        |  |       
|AMB Property, L.P.    |  | Common limited partnership units |  | $0.415        |  | $0.410        |  | $1.245 |  | $1.230
|AMB Property, L.P.    |  | Series A preferred units         |  | $0.083        |  | $0.531        |  | $1.145 |  | $1.593
|AMB Property, L.P.    |  | Series B preferred units         |  | $1.078        |  | $1.078        |  | $3.234 |  | $3.234
|AMB Property, L.P.    |  | Series J preferred units         |  | $0.994        |  | $0.994        |  | $2.981 |  | $2.981
|AMB Property, L.P.    |  | Series K preferred units         |  | $0.994        |  | $0.994        |  | $2.981 |  | $1.966
|AMB Property, L.P.    |  | Series L preferred units         |  | $0.406        |  | $0.000        |  | $0.442 |  | $0.000
|AMB Property II, L.P. |  | Series D preferred units         |  | $0.969        |  | $0.969        |  | $2.906 |  | $2.906
|AMB Property II, L.P. |  | Series E preferred units         |  | $0.969        |  | $0.969        |  | $2.906 |  | $2.906
|AMB Property II, L.P. |  | Series F preferred units         |  | $0.747        |  | $0.994        |  | $2.735 |  | $2.707
|AMB Property II, L.P. |  | Series G preferred units         |  | $0.000        |  | $0.155        |  | $0.000 |  | $2.142
|AMB Property II, L.P. |  | Series H preferred units         |  | $1.016        |  | $1.016        |  | $3.047 |  | $3.047
|AMB Property II, L.P. |  | Series I preferred units         |  | $1.000        |  | $1.000        |  | $3.000 |  | $3.000

The anticipated size of our distributions, using
only cash from operations, will not allow us to retire all of
our debt as it comes due. Therefore, we intend to also repay
maturing debt with net proceeds from future debt or limited
partnership unit offerings, as well as property divestitures.
However, we may not be able to obtain future financings on
favorable terms or at all. Our inability to obtain future
financings on favorable terms or at all would adversely affect
our financial condition, results of operations, cash flow and
ability to make distributions to our unitholders and payments to
our noteholders.

On July 14, 2003, AMB Property II, L.P.
repurchased, from an unrelated third party, 66,300 of its
series F preferred units for $3.3 million, including
accrued and unpaid dividends. On July 28, 2003, we redeemed
from AMB Property Corporation all 3,995,800 of our
series A preferred units held by AMB Property
Corporation for $100.2 million, including accrued and
unpaid dividends, and AMB Property Corporation, in turn,
used the proceeds to redeem all 3,995,800 shares of its
outstanding 8.5% series A preferred stock for
$100.2 million, including accrued and unpaid dividends.

On October 27, 2003, we gave irrevocable
notice that we will redeem all 1,300,000 of our outstanding
8 5/8% Series B Cumulative Redeemable Preferred
Partnership Units on November 26, 2003, for an aggregate
redemption price of $65.6 million.



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

Developments.In
addition to recurring capital expenditures, which consist of
building improvements and leasing costs incurred to renew or
re-tenant space, as of September 30, 2003, we are
developing 15 projects representing a total estimated
investment of $207.5 million upon completion and three
development projects available for sale representing a total
estimated investment of $41.6 million upon completion. Of
this total, $119.5 million had been funded as of
September 30, 2003, and an estimated $129.6 million is
required to complete current and planned projects. We expect to
fund these expenditures with cash from operations, borrowings
under our credit facility, debt or limited partnership unit
issuances, net proceeds from property divestitures, and private
capital from co-investment partners, which could have an adverse
effect on our cash flow.

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##### Table of Contents



Acquisitions.During
the three months ended September 30, 2003, we invested
$57.4 million in 13 operating industrial buildings,
aggregating approximately 0.8 million rentable square feet.
During the nine months ended September 30, 2003, we
invested $188.4 million in 31 operating industrial
buildings, aggregating approximately 3.2 million rentable
square feet. We generally fund our acquisitions and development
and renovation projects through private capital contributions,
borrowings under our credit facility, cash, debt issuances and
net proceeds from property divestitures. In addition, on
October 6, 2003, we entered into an Agreement of Sale with
privately-held International Airport Centers L.L.C. and certain
of its affiliated entities, pursuant to which, if fully
consummated, we will acquire a 3.4 million square foot
portfolio consisting of 37 airfreight buildings located
adjacent to seven international airports in the U.S. for
approximately $481.0 million, including $119.0 million
of assumed debt. Pursuant to the Agreement of Sale, we will
acquire the buildings in separate tranches, as construction and
certain other customary closing conditions, including acquiring
the necessary consents, are met. On October 9, 2003, we
closed on the first tranche, comprised of 25 industrial
buildings located in Los Angeles, Seattle, Miami and Charlotte,
aggregating approximately 1.6 million square feet, for
approximately $167.0 million. We currently expect the balance of
the portfolio to close in additional tranches totaling
approximately $130.0 million by year-end 2003 and
$184.0 million by the third quarter of 2004. A portion of
the properties may be allocated to one or more of our
co-investment joint ventures. We financed the first tranche, and
expect to finance the remainder of the purchase price, through
additional financings and proceeds from property dispositions.

Co-investment Joint
Ventures.We enter into co-investment
joint ventures with institutional investors. These co-investment
joint ventures provide us with an additional source of capital
to fund certain acquisitions, development projects and
renovation projects, as well as private capital income, which
enhances our returns. As of September 30, 2003, we may make
additional capital contributions to current and planned
co-investment joint ventures of up to $30.9 million. We
expect to fund these contributions with cash from operations,
borrowings under our credit facility, debt or equity issuances
or net proceeds from property divestitures, which could have an
adverse effect on our cash flow.

Captive Insurance
Company.We have responded to
increasing costs and decreasing coverage availability in the
insurance markets by obtaining higher-deductible property
insurance from third-party insurers and by forming a
wholly-owned captive insurance company, Arcata National
Insurance Ltd., in December 2001. Arcata National Insurance Ltd.
provides insurance coverage for all or a portion of losses below
the increased deductible under our third-party policies. We
capitalized Arcata National Insurance Ltd. in accordance with
the applicable regulatory requirements. Arcata National
Insurance Ltd. established annual premiums based on projections
derived from the past loss experience of our properties.
Annually, we engage an independent third party to perform an
actuarial estimate of future projected claims, related
deductibles and projected expenses necessary to fund associated
risk management programs. Premiums paid to Arcata National
Insurance Ltd. may be adjusted based on this estimate. Premiums
paid to Arcata National Insurance Ltd. have a retrospective
component, so that if expenses, including losses and
deductibles, are less than premiums collected, the excess may be
returned to the property owners (and, in turn, as appropriate,
to the customers) and conversely, subject to certain
limitations, if expenses, including losses, are greater than
premiums collected, an additional premium will be charged. As
with all recoverable expenses, differences between estimated and
actual insurance premiums will be recognized in the subsequent
year. Through this structure, we believe that we have more
comprehensive insurance coverage at an overall lower cost than
would otherwise be available in the market.

Potential Unknown
Liabilities.Unknown liabilities may
include the following:



| |   |                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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                                                                                                                                                                       

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| |   |                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------
| |  | claims for indemnification by the officers and
    directors of our general partners predecessors and others
    indemnified by these entities.

OFF-BALANCE SHEET ARRANGEMENTS

We have no off-balance sheet transactions,
arrangements, obligations, guarantees or other relationships
with unconsolidated entities or other persons that have, or are
reasonably likely to have, a material effect on our financial
condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that are
not recorded or disclosed.

SUPPLEMENTAL EARNING MEASURES

We believe that net income, as defined by
U.S. GAAP, is the most appropriate earnings measure.
However, we consider funds from operations, or FFO, as defined
by the National Association of Real Estate Investment Trusts
(NAREIT), to be a useful supplemental measure of our
operating performance. FFO is defined as net income, calculated
in accordance with U.S. GAAP, less gains (or losses) from
dispositions of real estate held for investment purposes and
real estate-related depreciation, and adjustments to derive our
pro rata share of FFO of consolidated and unconsolidated joint
ventures. In accordance with the NAREIT White Paper on FFO, we
include in FFO the effects of straight-line rents. Further, we
do not adjust FFO to eliminate the effects of non-recurring
charges. We believe that FFO, as defined by NAREIT, is a
meaningful supplemental measure of our operating performance
because historical cost accounting for real estate assets in
accordance with U.S. GAAP implicitly assumes that the value
of real estate assets diminishes predictably over time, as
reflected through depreciation and amortization expenses.
However, since real estate values have historically risen or
fallen with market and other conditions, many industry investors
and analysts have considered presentation of operating results
for real estate companies that use historical cost accounting to
be insufficient. Thus, NAREIT created FFO as a supplemental
measure of operating performance for real estate investment
trusts, such as AMB Property Corporation, our general partner,
that excludes historical cost depreciation and amortization,
among other items, from net income, as defined by
U.S. GAAP. We believe that the use of FFO, combined with
the required U.S. GAAP presentations, has been beneficial
in improving the understanding of operating results of real
estate investment trusts among the investing public and making
comparisons of operating results among such companies more
meaningful. We consider FFO to be a useful measure for reviewing
our comparative operating and financial performance because, by
excluding gains or losses related to sales of previously
depreciated operating real estate assets and real estate
depreciation and amortization, FFO can help the investing public
compare the operating performance of a companys real
estate between periods or as compared to other companies.

While FFO is a relevant and widely used measure
of operating performance of real estate investment trusts, it
does not represent cash flow from operations or net income as
defined by U.S. GAAP and should not be considered as an
alternative to those measures in evaluating our liquidity or
operating performance. FFO also does not consider the costs
associated with capital expenditures related to our real estate
assets nor is FFO necessarily indicative of cash available to
fund our future cash requirements. Further, our computation of
FFO may not be comparable to FFO reported by other real estate
investment trusts that do not define the term in accordance with
the current NAREIT definition or that interpret the current
NAREIT definition differently than we do.

44



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The following table reflects the calculation of
FFO for the three and nine months ended September 30,
(dollars in thousands) reconciled to net income, a comparable
U.S. GAAP financial measure:

|                                                                            |                                                              |                       |        |                     |        |         |        |            |        |   |         |            |         |   |         |            |         | 
|--------------------------------------------------------------------------- | ------------------------------------------------------------ | --------------------- | ------ | ------------------- | ------ | ------- | ------ | ---------- | ------ | - | ------- | ---------- | ------- | - | ------- | ---------- | ------- | 
|                                                                            |                                                              |                       |        |                    
|                                                                            |                                                              | For the Three Months  |        | For the Nine Months
|                                                                            |                                                              | Ended September 30,   |        | Ended September 30,
|                                                                            |                                                              |                       |        |                    
|                                                                            |                                                              |                       |        | 2002(2)             |        |         |        | 2002(2)   
|                                                                            |                                                              | 2003(1)               |        | (Restated)          |        | 2003(1) |        | (Restated)
|                                                                            |                                                              |                       |        |                     |        |         |        |           
|Net income                                                                  |                                                              | $                     | 31,183 |                     |        | $       | 31,460 |            |        | $ | 119,008 |            |         | $ | 99,146  |           
|Income available to common unitholders
    attributable to limited partners |                                                              |                       | (1,238 | )                   |        |         | (1,394 | )          |        |   | (5,576  | )          |         |   | (4,634  | )         
|Gains from dispositions of real estate                                      |                                                              |                       | (7,888 | )                   |        |         | (3,734 | )          |        |   | (46,978 | )          |         |   | (6,214  | )         
|Real estate related depreciation and amortization:                          |                                                              |                       |        |                     |        |         |        |            |        |   |         |            |         |   |         |           
|                                                                            | Total depreciation and amortization                          |                       |        | 32,584              |        |         |        | 31,446     |        |   |         | 99,269     |         |   |         | 88,650     |        
|                                                                            | Discontinued operations depreciation                        |                       |        | 339                 |        |         |        | 2,378      |        |   |         | 1,910      |         |   |         | 6,821      |        
|                                                                            | Furniture, fixtures and equipment depreciation               |                       |        | (170                | )      |         |        | (179       | )      |   |         | (548       | )       |   |         | (526       | )      
|                                                                            | Ground lease amortization(3)                                 |                       |        |                    |        |         |        | (781       | )      |   |         |           |         |   |         | (1,471     | )      
|Adjustments to derive FFO from consolidated joint
    ventures:             |                                                              |                       |        |                     |        |         |        |            |        |   |         |            |         |   |         |           
|                                                                            | Joint venture partners minority interests
    (NI)          |                       |        | 9,809               |        |         |        | 8,771      |        |   |         | 26,410     |         |   |         | 23,104     |        
|                                                                            | Limited partnership unitholders minority
    interests (NI) |                       |        | 740                 |        |         |        | 942        |        |   |         | 3,093      |         |   |         | 3,622      |        
|                                                                            | Discontinued operations minority interests
    (NI)         |                       |        | 883                 |        |         |        | 940        |        |   |         | 1,096      |         |   |         | 2,562      |        
|                                                                            | FFO attributable to minority interests                       |                       |        | (17,345             | )      |         |        | (13,635    | )      |   |         | (47,847    | )       |   |         | (37,753    | )      
|Adjustments to derive FFO from unconsolidated
    joint ventures:           |                                                              |                       |        |                     |        |         |        |            |        |   |         |            |         |   |         |           
|                                                                            | Our share of net income                                      |                       |        | (1,365              | )      |         |        | (1,322     | )      |   |         | (4,222     | )       |   |         | (4,443     | )      
|                                                                            | Our share of FFO                                             |                       |        | 2,345               |        |         |        | 2,193      |        |   |         | 7,620      |         |   |         | 6,866      |        
|Preferred unit distributions                                                |                                                              |                       | (4,462 | )                   |        |         | (5,115 | )          |        |   | (14,763 | )          |         |   | (14,658 | )         
|Preferred unit redemption discount/(issuance
    costs)                     |                                                              |                       | (3,671 | )                   |        |         | 412    |            |        |   | (3,671  | )          |         |   | 412     |           
|                                                                            |                                                              |                       |        |                     |        |         |        |            |        |   |         |            |         |   |         |           
|                                                                            |                                                              | Funds from operations |        | $                   | 41,744 |         |        | $          | 52,382 |   |         | $          | 134,801 |   |         | $          | 161,484 | 
|                                                                            |                                                              |                       |        |                     |        |         |        |            |        |   |         |            |         |   |         |           
|Basic FFO per common unit                                                   |                                                              | $                     | 0.49   |                     |        | $       | 0.59   |            |        | $ | 1.57    |            |         | $ | 1.82    |           
|                                                                            |                                                              |                       |        |                     |        |         |        |            |        |   |         |            |         |   |         |           
|Diluted FFO per common unit                                                 |                                                              | $                     | 0.48   |                     |        | $       | 0.58   |            |        | $ | 1.54    |            |         | $ | 1.79    |           
|                                                                            |                                                              |                       |        |                     |        |         |        |            |        |   |         |            |         |   |         |           
|Weighted average common units:                                              |                                                              |                       |        |                     |        |         |        |            |        |   |         |            |         |   |         |           
|                                                                            | Basic                                                        |                       |        | 85,776,251          |        |         |        | 88,575,091 |        |   |         | 85,874,579 |         |   |         | 88,634,134 |        
|                                                                            |                                                              |                       |        |                     |        |         |        |            |        |   |         |            |         |   |         |           
|                                                                            | Diluted                                                      |                       |        | 87,399,544          |        |         |        | 90,379,023 |        |   |         | 87,342,075 |         |   |         | 90,239,149 |        
|                                                                            |                                                              |                       |        |                     |        |         |        |            |        |   |         |            |         |   |         |           



---



|    |                                                                                                                                                                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In the quarter ended September 30, 2003, and
    effective January 1, 2003, we no longer add back impairment
    losses when computing FFO in accordance with NAREITs FFO
    definition. As a result, FFO for the nine months ended
    September 30, 2003, includes an adjustment of
    $5.3 million to reflect the change.

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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | FFO for the quarter and nine months ended
    September 30, 2002, was adjusted for the retroactive
    adoption of SFAS No. 145 for the treatment of extraordinary
    items, resulting in a reduction of $0.1 million and $0.4
    million, respectively, from previously reported FFO. In
    addition, in the quarter ended September 30, 2003, and
    effective January 1, 2002, we adopted EITF D-42 and began
    including preferred stock and unit redemption discounts and
    issuance cost write-offs in FFO. As a result, FFO for the three
    and nine months ended September 30, 2002, includes an
    adjustment (increase) of $0.4 million to reflect the
    change.                                                                                  
|   
|(3) | In the quarter ended June 30, 2003, and
    effective January 1, 2003, we discontinued our practice of
    deducting amortization of investments in leasehold interests
    from FFO as such an adjustment is not provided for in
    NAREITs FFO definition. As a result, FFO for the nine
    months ended September 30, 2003, includes an adjustment of
    $0.9 million to reflect the change. Had we not made the
    change, reported FFO per share for the quarter and nine months
    ended September 30, 2003, would have been $0.47 and $1.51,
    respectively. Had we made the change effective January 1,
    2002, reported FFO per share for the quarter and nine months
    ended September 30, 2002, would have been $0.59 and $1.81,
    respectively.

We use earnings before interest, tax,
depreciation and amortization, or EBITDA, to measure both our
operating performance and our liquidity. We consider EBITDA to
provide investors relevant and useful information because it
permits fixed income investors to view income from our
operations on an unleveraged basis before the effects of
non-cash depreciation and amortization expense. By excluding
interest expense, EBITDA allows investors to measure our
operating performance independent of our capital structure and
indebtedness and, therefore, allows for a more meaningful
comparison of our operating performance between quarters as well
as annual periods and to compare our operating performance to
that of other companies, both in the real estate industry and in
other industries. We consider EBITDA to be a useful supplemental
measure for reviewing our comparative performance with other
companies because, by excluding non-cash depreciation expense,
EBITDA can help the investing public compare the performance of
a real estate company to that of companies in other industries.
As a liquidity measure, we believe that EBITDA helps fixed
income and equity investors to analyze our ability to meet our
debt service obligations and to make our quarterly preferred
share and unit distributions. Management uses EBITDA in the same
manner as we expect investors to, specifically when assessing
our performance, when evaluating our coverage ratios and when
comparing our performance to that of other companies, both in
the real estate industry and in other industries. We believe
investors should consider EBITDA, in conjunction with net income
(the primary measure of our performance) and the other required
U.S. GAAP measures of our performance and liquidity, to
improve their understanding of our operating results and
liquidity, and to make more meaningful comparisons of the
performance of our assets between periods and as against other
companies.

By excluding interest, taxes, depreciation and
amortization when assessing our financial performance, an
investor is assessing the earnings generated by our operations,
but not taking into account the eliminated expenses incurred in
connection with such operations. As a result, EBITDA has
limitations as an analytical tool and should be used in
conjunction with our required U.S. GAAP presentations.
EBITDA does not reflect our historical cash expenditures or our
future cash requirements for working capital, capital
expenditures or contractual commitments. EBITDA also does not
reflect the cash required to make interest and principal
payments on our outstanding debt. While EBITDA is a relevant and
widely used measure of operating performance and liquidity, it
does not represent net income or cash flow from operations as
defined by U.S. GAAP and it should not be considered as an
alternative to those indicators in evaluating operating
performance or liquidity. Further, our computation of EBITDA may
not be comparable to EBITDA reported by other companies.

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The following table reflects the calculation of
EBITDA for the three and nine months ended September 30,
(dollars in thousands) reconciled to net income, a
U.S. GAAP financial measure:

|                                                                     |                               |                      |        |                     |   |      |        |         |   |   |         |         |   |   |         |         |  
|-------------------------------------------------------------------- | ----------------------------- | -------------------- | ------ | ------------------- | - | ---- | ------ | ------- | - | - | ------- | ------- | - | - | ------- | ------- | -
|                                                                     |                               |                      |        |                    
|                                                                     |                               | For the Three Months |        | For the Nine Months
|                                                                     |                               | Ended September 30,  |        | Ended September 30,
|                                                                     |                               |                      |        |                    
|                                                                     |                               | 2003                 |        | 2002                |   | 2003 |        | 2002   
|                                                                     |                               |                      |        |                     |   |      |        |        
|Net income                                                           |                               | $                    | 31,183 |                     |   | $    | 31,460 |         |   | $ | 119,008 |         |   | $ | 99,146  |        
|Depreciation and amortization                                        |                               |                      | 32,584 |                     |   |      | 31,446 |         |   |   | 99,269  |         |   |   | 88,650  |        
|Impairment losses                                                    |                               |                      |       |                     |   |      |       |         |   |   | 5,251   |         |   |   |        |        
|Stock-based compensation amortization                                |                               |                      | 2,021  |                     |   |      | 1,988  |         |   |   | 6,000   |         |   |   | 3,950   |        
|Adjustments to derive EBITDA from unconsolidated
    joint ventures: |                               |                      |        |                     |   |      |        |         |   |   |         |         |   |   |         |        
|                                                                     | Our share of net income       |                      |        | (1,365              | ) |      |        | (1,322  | ) |   |         | (4,222  | ) |   |         | (4,443  | )
|                                                                     | Our share of FFO              |                      |        | 2,345               |   |      |        | 2,193   |   |   |         | 7,620   |   |   |         | 6,866   |  
|                                                                     | Our share of interest expense |                      |        | 808                 |   |      |        | 567     |   |   |         | 2,082   |   |   |         | 1,730   |  
|Gains from dispositions of real estate                               |                               |                      |       |                     |   |      |       |         |   |   | (7,429  | )       |   |   | (2,480  | )      
|Interest, including amortization                                     |                               |                      | 35,867 |                     |   |      | 37,501 |         |   |   | 107,963 |         |   |   | 109,133 |        
|Total minority interests share of income                            |                               |                      | 13,131 |                     |   |      | 12,182 |         |   |   | 36,508  |         |   |   | 33,589  |        
|Total discontinued operations                                        |                               |                      | (9,214 | )                   |   |      | (8,353 | )       |   |   | (45,183 | )       |   |   | (18,526 | )      
|Discontinued operations EBITDA                                      |                               |                      | 2,221  |                     |   |      | 8,733  |         |   |   | 8,176   |         |   |   | 26,578  |        
|                                                                     |                               |                      |        |                     |   |      |        |         |   |   |         |         |   |   |         |        
|                                                                     | EBITDA                        |                      | $      | 109,581             |   |      | $      | 116,395 |   |   | $       | 335,043 |   |   | $       | 344,193 |  
|                                                                     |                               |                      |        |                     |   |      |        |         |   |   |         |         |   |   |         |        

The following table reflects the calculation of
EBITDA for the three and nine months ended September 30,
(dollars in thousands) reconciled to net cash provided by
operating activities, a U.S. GAAP financial measure:

|                                                                     |                                        |                      |        |                     |         |      |        |         |         |   |         |        |         |   |         |         |         | 
|-------------------------------------------------------------------- | -------------------------------------- | -------------------- | ------ | ------------------- | ------- | ---- | ------ | ------- | ------- | - | ------- | ------ | ------- | - | ------- | ------- | ------- | 
|                                                                     |                                        |                      |        |                    
|                                                                     |                                        | For the Three Months |        | For the Nine Months
|                                                                     |                                        | Ended September 30,  |        | Ended September 30,
|                                                                     |                                        |                      |        |                    
|                                                                     |                                        | 2003                 |        | 2002                |         | 2003 |        | 2002   
|                                                                     |                                        |                      |        |                     |         |      |        |        
|Net cash provided by operating activities                            |                                        | $                    | 48,553 |                     |         | $    | 88,710 |         |         | $ | 173,714 |        |         | $ | 212,782 |        
|Straight-line rents                                                  |                                        |                      | 2,579  |                     |         |      | 3,638  |         |         |   | 6,832   |        |         |   | 10,385  |        
|Adjustments to derive EBITDA from unconsolidated
    joint ventures: |                                        |                      |        |                     |         |      |        |         |         |   |         |        |         |   |         |        
|                                                                     | Our share of FFO                       |                      |        | 2,345               |         |      |        | 2,193   |         |   |         | 7,620  |         |   |         | 6,866   |        
|                                                                     | Our share of interest expense          |                      |        | 808                 |         |      |        | 567     |         |   |         | 2,082  |         |   |         | 1,730   |        
|Merchant development profits, net                                    |                                        |                      | 2,181  |                     |         |      | 618    |         |         |   | 2,181   |        |         |   | 618     |        
|Interest, including amortization                                     |                                        |                      | 35,867 |                     |         |      | 37,501 |         |         |   | 107,963 |        |         |   | 109,133 |        
|Debt premiums, discounts and finance cost
    amortization, net      |                                        |                      | (849   | )                   |         |      | (2,726 | )       |         |   | (1,577  | )      |         |   | (1,772  | )      
|Discontinued operations interest, including
    amortization        |                                        |                      | 171    |                     |         |      | 1,248  |         |         |   | 2,019   |        |         |   | 3,415   |        
|Changes in assets and liabilities:                                   |                                        |                      |        |                     |         |      |        |         |         |   |         |        |         |   |         |        
|                                                                     | Accounts receivable and other assets   |                      |        | 25,988              |         |      |        | 11,231  |         |   |         | 27,697 |         |   |         | 14,320  |        
|                                                                     | Accounts payable and other liabilities |                      |        | (8,062              | )       |      |        | (26,585 | )       |   |         | 6,512  |         |   |         | (13,284 | )      
|                                                                     |                                        |                      |        |                     |         |      |        |         |         |   |         |        |         |   |         |        
|                                                                     |                                        | EBITDA               |        | $                   | 109,581 |      |        | $       | 116,395 |   |         | $      | 335,043 |   |         | $       | 344,193 | 
|                                                                     |                                        |                      |        |                     |         |      |        |         |         |   |         |        |         |   |         |        

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OPERATING AND LEASING STATISTICS
SUMMARY

The following table summarizes key operating and
leasing statistics for all of our industrial properties as of
and for the three and nine months ended September 30, 2003
(dollars in thousands):

|                                    |                                                              |             |                  |              |      |      |            |           |      |      | 
|----------------------------------- | ------------------------------------------------------------ | ----------- | ---------------- | ------------ | ---- | ---- | ---------- | --------- | ---- | ---- | 
|                                    |                                                              | Quarter     |                  | Year-to-date
|                                    |                                                              |             |                  |             
|Square feet owned(1)(2)             |                                                              |             | 83,301,317       |              |      |      | 83,301,317 |          
|Occupancy percentage(1)             |                                                              |             | 92               | %            |      |      | 92         | %        
|Weighted average lease terms:       |                                                              |             |                  |              |      |      |            |          
|                                    | Original                                                     |             |                  | 6.1 years    |      |      |            | 6.1 years |     
|                                    | Remaining                                                    |             |                  | 3.2 years    |      |      |            | 3.2 years |     
|Tenant retention                    |                                                              |             | 63.5             | %            |      |      | 64.3       | %        
|Same Space Leasing Activity(3):     |                                                              |             |                  |              |      |      |            |          
|                                    | Rent decreases on renewals and rollovers                     |             |                  | (15.1        | )%   |      |            | (7.4      | )%  
|                                    | Same space square footage commencing (millions)              |             |                  | 4.5          |      |      |            | 13.3      |     
|Second Generation Leasing Activity: |                                                              |             |                  |              |      |      |            |          
|                                    | Tenant improvements and leasing commissions per
    sq. ft.: |             |                  |              |      |      |            |           |     
|                                    |                                                              | Renewals    |                  | $            | 1.38 |      |            | $         | 1.22 |     
|                                    |                                                              | Re-tenanted |                  |              | 1.62 |      |            |           | 1.86 |     
|                                    |                                                              |             |                  |              |      |      |            |          
|                                    |                                                              |             | Weighted average |              | $    | 1.53 |            |           | $    | 1.55 | 
|                                    |                                                              |             |                  |              |      |      |            |          
|                                    | Square footage commencing (millions)                         |             |                  | 5.7          |      |      |            | 17.1      |     



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes all consolidated industrial operating
    properties and excludes industrial development and renovation
    projects. Excludes retail and other properties square feet
    of 548,243 with occupancy of 77.0%, and annualized base rent of
    $6.5 million.                                                                                                                                       
|   
|(2) | In addition to owned square feet as of
    September 30, 2003, we managed, through our subsidiary, AMB
    Capital Partners, LLC, approximately 0.5 million additional
    square feet of industrial, retail and other properties. We also
    have investments in approximately 7.9 million square feet
    of industrial operating properties through our investments in
    unconsolidated joint ventures.
|   
|(3) | Consists of all second-generation leases renewing
    or re-tenanting with current and prior lease terms greater than
    one year.                                                                                                                                                                                                                                                                          

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The following summarizes key same store
properties operating statistics for our industrial
properties as of and for the three and nine months ended
September 30, 2003:

|                                                                  |                                   |                      |            |              |      |    |            |      |      |   
|----------------------------------------------------------------- | --------------------------------- | -------------------- | ---------- | ------------ | ---- | -- | ---------- | ---- | ---- | --
|                                                                  |                                   | Quarter              |            | Year-to-date
|                                                                  |                                   |                      |            |             
|Square feet in same store pool(1)                                 |                                   |                      | 72,358,944 |              |      |    | 72,358,944 |     
|                                                                  | % of total industrial square feet |                      |            | 86.9         | %    |    |            | 86.9 | %   
|Occupancy percentage at period end:                               |                                   |                      |            |              |      |    |            |     
|                                                                  | September 30, 2003                |                      |            | 91.7         | %    |    |            | 91.7 | %   
|                                                                  | September 30, 2002                |                      |            | 94.7         | %    |    |            | 94.7 | %   
|Tenant retention                                                  |                                   |                      | 63.6       |              |      |    | 63.5       |     
|Rent decreases on renewals and rollovers                          |                                   |                      | (16.3      | )%           |      |    | (8.0       | )%  
|                                                                  | Square feet leased (millions)     |                      |            | 4.3          |      |    |            | 12.7 |     
|Growth % increase/(decrease) (excluding
    straight-line rents): |                                   |                      |            |              |      |    |            |     
|                                                                  |                                   | Revenues             |            |              | (5.7 | )% |            |      | (1.0 | )%
|                                                                  |                                   | Expenses             |            |              | 0.2  | %  |            |      | 2.7  | % 
|                                                                  |                                   | Net operating income |            |              | (7.7 | )% |            |      | (2.2 | )%
|Growth % increase/(decrease) (including
    straight-line rents): |                                   |                      |            |              |      |    |            |     
|                                                                  |                                   | Revenues             |            |              | (6.1 | )% |            |      | (1.8 | )%
|                                                                  |                                   | Expenses             |            |              | 0.2  | %  |            |      | 2.7  | % 
|                                                                  |                                   | Net operating income |            |              | (8.2 | )% |            |      | (3.1 | )%



---



|    |                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------
|(1) | The same store pool excludes properties purchased
    and developments stabilized after December 31, 2001.






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

Market risk is the risk of loss from adverse
changes in market prices, interest rates and foreign exchange
rates. Our future earnings and cash flows are dependent upon
prevailing market rates. Accordingly, we manage our market risk
by matching projected cash inflows from operating, investing and
financing activities with projected cash outflows for debt
service, acquisitions, capital expenditures, distributions to
unitholders and payments to noteholders, and other cash
requirements. The majority of our outstanding debt has fixed
interest rates, which minimizes the risk of fluctuating interest
rates. Our exposure to market risk includes interest rate
fluctuations in connection with our credit facilities and other
variable rate borrowings and our ability to incur more debt
without unitholder or noteholder approval, thereby increasing
our debt service obligations, which could adversely affect our
cash flows. As of September 30, 2003, we had no interest
rate caps or swaps. See Item 2: Managements
Discussion and Analysis of Financial Condition and Results of
Operations  Liquidity and Capital
Resources  Capital Resources  Market
Capitalization.

The table below summarizes the market risks
associated with our fixed and variable rated debt outstanding
before unamortized debt premiums of $8.1 million as of
September 30, 2003 (dollars in thousands):

|                      |  |                        |        |      |  |      |        |      |  |      |         |            |  |       |         |   |  |   |         |   |  |   |           |   |  |   |           |  
|--------------------- |  | ---------------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------- | ---------- |  | ----- | ------- | - |  | - | ------- | - |  | - | --------- | - |  | - | --------- | -
|                      |  |                       
|                      |  | Expected Maturity Date
|                      |  |                       
|                      |  | 2003                   |        | 2004 |  | 2005 |        | 2006 |  | 2007 |         | Thereafter |  | Total
|                      |  |                        |        |      |  |      |        |      |  |      |         |            |  |      
|Fixed rate debt(1)    |  | $                      | 24,583 |      |  | $    | 99,810 |      |  | $    | 353,303 |            |  | $     | 167,927 |   |  | $ | 132,674 |   |  | $ | 1,304,585 |   |  | $ | 2,082,882 |  
|Average interest rate |  |                        | 7.2    | %    |  |      | 7.9    | %    |  |      | 7.3     | %          |  |       | 7.3     | % |  |   | 7.3     | % |  |   | 7.1       | % |  |   | 7.2       | %
|Variable rate debt(2) |  | $                      | 321    |      |  | $    | 1,227  |      |  | $    | 94,287  |            |  | $     | 1,034   |   |  | $ | 6,989   |   |  | $ | 18,378    |   |  | $ | 122,236   |  
|Average interest rate |  |                        | 3.4    | %    |  |      | 3.4    | %    |  |      | 2.8     | %          |  |       | 3.3     | % |  |   | 2.8     | % |  |   | 3.2       | % |  |   | 2.9       | %



---



|    |                                          
|--- | -----------------------------------------
|(1) | Represents 94.6% of all outstanding debt.
|   
|(2) | Represents 5.4% of all outstanding debt. 

49



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If market rates of interest on our variable rate
debt increased by 10% (or approximately 20 basis points), then
the increase in interest expense on the variable rate debt would
be $0.2 million annually. As of September 30, 2003,
the estimated fair value of our fixed rate debt was
$2,279.6 million based on our estimate of current market
interest rates.

As of December 31, 2002 and 2001, variable
rate debt comprised 9.3% and 8.8%, respectively, of all
outstanding debt. Variable rate debt was $206.1 million and
$187.9 million, respectively, as of December 31, 2002
and 2001. The decrease is due to a lower outstanding balance on
our credit facility and the repayment of AMB Institutional
Alliance Fund II, L.P.s credit facility. This
reduction in our outstanding variable rate debt reduces our risk
associated with unfavorable interest rate fluctuations.

Financial Instruments.We record all derivatives on the
balance sheet at fair value as an asset or liability, with an
offset to accumulated other comprehensive income or income. For
revenues or expenses denominated in non-functional currencies,
we may use derivative financial instruments to manage foreign
currency exchange rate risk. Our derivative financial
instruments in effect at September 30, 2003, were a forward
contract hedging against adverse foreign exchange fluctuations
in the Mexican peso against the U.S. dollar and stock
warrants obtained from tenants.

|                                      |                                  |                |   |        |  |  |   |       | 
|------------------------------------- | -------------------------------- | -------------- | - | ------ |  |  | - | ----- | 
|                                      |                                  | Carrying       |   | Fair  
|Related Derivatives                   |                                  | Amount         |   | Value 
|                                      |                                  |                |   |       
|                                      |                                  |               
|                                      |                                  | (In thousands)
|MXN/USD Forward Contract (USD short): |                                  |                |   |        |  |  |   |      
|                                      | Expected Maturity March 30, 2004 |                |   |        |  |  |   |       | 
|                                      | Contract Amount (MXN pesos)      |                | $ | 37,201 |  |  |   |       | 
|                                      | Forward Exchange Rate            |                |   | 10.86  |  |  |   |       | 
|                                      | Contract Amount (USD Dollars)    |                | $ | 3,426  |  |  |   |       | 
|                                      | Fair Value at September 30, 2003 |                |   |        |  |  | $ | 3,310 | 

Foreign Operations.The U.S. dollar is the functional
currency for our subsidiaries operating in the United States and
Mexico. The functional currency for our subsidiaries operating
outside North America is generally the local currency of the
country in which the entity is located, mitigating the effect of
foreign exchange gains and losses. Our subsidiaries whose
functional currency is not the U.S. dollar translate their
financial statements into U.S. dollars. Assets and
liabilities are translated at the exchange rate in effect as of
the financial statement date. We translate income statement
accounts using the average exchange rate for the period and
significant nonrecurring transactions using the rate on the
transaction date. Gains resulting from the translation are
included in accumulated other comprehensive income as a separate
component of stockholders equity and totaled
$0.3 million for the nine months ended September 30,
2003.

Our foreign subsidiaries may have transactions
denominated in currencies other than their functional currency.
In these instances, non-monetary assets and liabilities are
reflected at the historical exchange rate, monetary assets and
liabilities are remeasured at the exchange rate in effect at the
end of the period and income statement accounts are remeasured
at the average exchange rate for the period. For the nine months
ended September 30, 2003, losses from remeasurement
included in our results of operations totaled $0.1 million.

We also record gains or losses in the income
statement when a transaction with a third party, denominated in
a currency other than the entitys functional currency, is
settled and the functional currency cash flows realized are more
or less than expected based upon the exchange rate in effect
when the transaction was initiated.






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

We maintain disclosure controls and procedures
that are designed to ensure that information required to be
disclosed in our reports filed under the Securities Exchange Act
of 1934, as amended, is recorded, processed, summarized and
reported within the time periods specified in the Securities and
Exchange Commissions rules and forms, and that such
information is accumulated and communicated to our

50



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management, including our general partners
chief executive officer, president and chief financial officer,
as appropriate, to allow timely decisions regarding required
disclosure. In designing and evaluating the disclosure controls
and procedures, our management recognized that any controls and
procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired
control objectives, and our management was required to apply its
judgment in evaluating the cost-benefit relationship of possible
controls and procedures. Also, we have investments in certain
unconsolidated entities, which are accounted for using the
equity method of accounting. As we do not control or manage
these entities, our disclosure controls and procedures with
respect to such entities are necessarily substantially more
limited than those we maintain with respect to our consolidated
subsidiaries.


As required by Rule 13a-15(b) of the
Securities Exchange Act of 1934, as amended, we carried out an
evaluation, under the supervision and with the participation of
our management, including our general partners chief
executive officer, president and chief financial officer, of the
effectiveness of the design and operation of our disclosure
controls and procedures, as of the end of the quarter covered by
this report. Based on the foregoing, our general partners
chief executive officer, president and chief financial officer
each concluded that our disclosure controls and procedures were
effective at the reasonable assurance level.

There have been no changes in our internal
control over financial reporting during our most recent fiscal
quarter that have materially affected, or are reasonably likely
to materially affect, our internal control over financial
reporting.

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PART II






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

As of September 30, 2003, there were no
pending legal proceedings to which we are a party or of which
any of our properties is the subject, the adverse determination
of which we anticipate would have a material adverse effect upon
our financial condition and results of operations.






|        |                                              
|------- | ---------------------------------------------
|Item 2. | Changes in Securities and Use of
    Proceeds

None.






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

None.






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

None.






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

BUSINESS RISKS

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

General Real Estate Risks



| |                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------
| | Our performance and value are subject to
    general economic conditions and risks associated with our real
    estate assets.

The yields available from equity investments in
real estate depend on the amount of income earned and capital
appreciation generated by the properties, as well as the
expenses incurred in connection with the properties. If our
properties do not generate income sufficient to meet operating
expenses, including debt service and capital expenditures, then
our ability to make distributions to our unitholders and
payments to our noteholders could be adversely affected. In
addition, there are significant expenditures associated with an
investment in real estate (such as mortgage payments, real
estate taxes and maintenance costs) that generally do not
decline when circumstances reduce the income from the property.
Income from, and the value of, our properties may be adversely
affected by:



| |   |                                                                                           
| | - | ------------------------------------------------------------------------------------------
| |  | changes in the general economic climate;                                                  
|
| |  | local conditions, such as oversupply of or a
    reduction in demand for industrial space;
|
| |  | the attractiveness of our properties to potential
    customers;                          
|
| |  | competition from other properties;                                                        
|
| |  | our ability to provide adequate maintenance and
    insurance;                            
|
| |  | increased operating costs;                                                                
|
| |  | increased cost of compliance with regulations; and                                        
|
| |  | the potential for liability under applicable laws
    (including changes in tax laws).    

In addition, periods of economic slowdown or
recession in the United States and in other countries, rising
interest rates or declining demand for real estate, or public
perception that any of these events may occur, would result in a
general decrease in rents or an increased occurrence of defaults
under existing leases, which

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would adversely affect our financial condition
and results of operations. Future terrorist attacks may result
in declining economic activity, which could reduce the demand
for and the value of our properties. To the extent that future
attacks impact our customers, their businesses similarly could
be adversely affected, including their ability to continue to
honor their existing leases.


Our properties are concentrated predominantly in
the industrial real estate sector. As a result of this
concentration, we would feel the impact of an economic downturn
in this sector more acutely than if our portfolio included other
property types.



| |                                                                      
| | ---------------------------------------------------------------------
| | We may be unable to renew leases or relet
    space as leases expire.

As of September 30, 2003, leases on a total
of 3.4% of our industrial properties (based on annualized base
rent) will expire on or prior to December 31, 2003. We
derive most of our income from rent received from our tenants.
Accordingly, our financial condition, results of operations,
cash flow and our ability to make distributions to our
unitholders and payments to our noteholders could be adversely
affected if we are unable to promptly relet or renew these
expiring leases, if the rental rates upon renewal or reletting
are significantly lower than expected, or if our reserves for
these purposes prove inadequate. If a tenant experiences a
downturn in its business or other type of financial distress,
then it may be unable to make timely rental payments or renew
its lease. Further, our ability to rent space and the rents that
we can charge are impacted, not only by customer demand, but by
the number of other properties we have to compete with to appeal
to tenants.



| |                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------
| | Real estate investments are relatively
    illiquid, making it difficult for us to respond promptly to
    changing conditions.

Real estate assets are not as liquid as other
types of assets. Further, our general partner is a real estate
investment trust and the Internal Revenue Code regulates the
number of properties that we can dispose of in a year, their tax
bases and the cost of improvements that we make to the
properties. These limitations may affect our ability to sell
properties. This lack of liquidity and the Internal Revenue Code
restrictions may limit our ability to vary our portfolio
promptly in response to changes in economic or other conditions
and, as a result, could adversely affect our financial
condition, results of operations, cash flow and our ability to
make distributions to our unitholders and payments to our
noteholders.



| |                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------
| | We may be unable to consummate acquisitions
    on advantageous terms or acquisitions may not perform as we
    expect.

We acquire and intend to continue to acquire
primarily industrial properties. The acquisition of properties
entails various risks, including the risks that our investments
may not perform as we expect, that we may be unable to quickly
and efficiently integrate our new acquisitions into our existing
operations and that our cost estimates for bringing an acquired
property up to market standards may prove inaccurate. Further,
we face significant competition for attractive investment
opportunities from other well-capitalized real estate investors,
including both publicly-traded real estate investment trusts and
private institutional investment funds. This competition
increases as investments in real estate become increasingly
attractive relative to other forms of investment. As a result of
competition, we may be unable to acquire additional properties
as we desire or the purchase price may be significantly
elevated. In addition, we expect to finance future acquisitions
through a combination of borrowings under our unsecured credit
facility, proceeds from debt or limited partnership unit
offerings by us or our subsidiaries and proceeds from property
divestitures, which may not be available and which could
adversely affect our cash flow. Any of the above risks could
adversely affect our financial condition, results of operations,
cash flow and ability to make distributions to our unitholders
and payments to our noteholders.



| |                                                                                            
| | -------------------------------------------------------------------------------------------
| | We may be unable to complete renovation and
    development projects on advantageous terms.

As part of our business, we develop new and
renovate existing properties. The real estate development and
renovation business involves significant risks that could
adversely affect our financial condition, results of

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operations, cash flow and ability to make
distributions to our unitholders and payments to our
noteholders, which include:




| |   |                                                                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we may not be able to obtain financing for
    development projects on favorable terms and complete
    construction on schedule or within budget, resulting in
    increased debt service expense and construction costs and delays
    in leasing the properties and generating cash flow;
|
| |  | we may not be able to obtain, or may experience
    delays in obtaining, all necessary zoning, land-use, building,
    occupancy and other governmental permits and authorizations;                                                                                                         
|
| |  | the properties may perform below anticipated
    levels, producing cash flow below budgeted amounts;                                                                                                                                                                                        
|
| |  | substantial renovation and new development
    activities, regardless of their ultimate success, typically
    require a significant amount of managements time and
    attention, diverting their attention from our day-to-day
    operations; and                                       
|
| |  | upon completion of construction, we may not be
    able to obtain, or obtain on advantageous terms, permanent
    financing for activities that we have financed through
    construction loans.                                                                                            



| |                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------
| | Our performance and value are impacted by
    the local economic conditions of and the risks associated with
    doing business in California.

As of September 30, 2003, our industrial
properties located in California represented 28.8% of the
aggregate square footage of our industrial operating properties
and 31.9% of our industrial annualized base rent. Our revenue
from, and the value of, our properties located in California may
be affected by local real estate conditions (such as an
oversupply of or reduced demand for industrial properties) and
the local economic climate. Business layoffs, downsizing,
industry slowdowns, changing demographics, and other factors may
adversely impact Californias economic climate. Because of
the number of properties we have located in California, a
downturn in Californias economy or real estate conditions
could adversely affect our financial condition, results of
operations, cash flow and ability to make distributions to our
unitholders and payments to our noteholders. In addition,
certain of our properties are subject to possible loss from
seismic activity.



| |                                                                
| | ---------------------------------------------------------------
| | We may experience losses that our insurance
    does not cover.

We carry commercial liability, property and
rental loss insurance covering all the properties that we own
and manage in types and amounts that we believe are adequate and
appropriate given the relative risks applicable to the property,
the cost of coverage and industry practice. Certain losses, such
as those due to terrorism, windstorms, floods or seismic
activity, may be insured subject to certain limitations,
including large deductibles or co-payments and policy limits.
Although we have obtained coverage for certain acts of
terrorism, with policy specifications and insured limits that we
consider commercially reasonable given the cost and availability
of such coverage, we cannot be certain that we will be able to
renew coverage on comparable terms or collect under such
policies. In addition, there are other types of losses, such as
those from riots, bio-terrorism, or acts of war, that are not
generally insured in our industry because it is not economically
feasible to do so. We may incur material losses in excess of
insurance proceeds and we may not be able to continue to obtain
insurance at commercially reasonable rates. If we experience a
loss that is uninsured or that exceeds our insured limits with
respect to one or more of our properties, then we could lose the
capital invested in the damaged properties, as well as the
anticipated future revenue from those properties and, if there
is recourse debt, then we would remain obligated for any
mortgage debt or other financial obligations related to the
properties. Moreover, as the general partner of the joint
ventures, we generally will be liable for all of the joint
ventures unsatisfied recourse obligations. Any such losses
could adversely affect our financial condition, results of
operations, cash flow and ability to make distributions to our
unitholders and payments to our noteholders.

A number of our properties are located in areas
that are known to be subject to earthquake activity, including
California where, as of September 30, 2003, we had 288
industrial buildings, aggregating approximately
24.0 million square feet and representing 28.8% of our
industrial operating properties based on

54



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aggregate square footage and 31.9% based on
industrial annualized base rent. We carry replacement-cost
earthquake insurance on all of our properties located in areas
historically subject to seismic activity, subject to coverage
limitations and deductibles that we believe are commercially
reasonable. We evaluate our earthquake insurance coverage
annually in light of current industry practice through an
analysis prepared by outside consultants.




| |                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | We are subject to risks and liabilities in
    connection with properties owned through joint ventures, limited
    liability companies and partnerships.

As of September 30, 2003, we owned
approximately 45.7 million square feet of our properties
through several joint ventures, limited liability companies or
partnerships with third parties. Our organizational documents do
not limit the amount of available funds that we may invest in
partnerships, limited liability companies or joint ventures and
we intend to continue to develop and acquire properties through
joint ventures, limited liability companies and partnerships
with other persons or entities when warranted by the
circumstances. Such partners may share certain approval rights
over major decisions. Partnership, limited liability company or
joint venture investments involve certain risks, including:



| |   |                                                                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | if our partners, co-members or joint venturers go
    bankrupt, then we and any other remaining general partners,
    members, or joint venturers would generally remain liable for
    the partnerships, limited liability companys, or
    joint ventures liabilities;        
|
| |  | our partners, co-members or joint venturers might
    have economic or other business interests or goals that are
    inconsistent with our business interests or goals that would
    affect our ability to operate the property;                                                 
|
| |  | our partners, co-members or joint venturers may
    have the power to act contrary to our instructions, requests,
    policies, or objectives; and                                                                                                                                 
|
| |  | the joint venture, limited liability and
    partnership agreements often restrict the transfer of a joint
    venturers, members or partners interest or
    buy-sell or may otherwise restrict our ability to
    sell the interest when we desire or on advantageous terms.

We generally seek to maintain sufficient control
of our partnerships, limited liability companies, and joint
ventures to permit us to achieve our business objectives,
however, we may not be able to do so, and the occurrence of one
or more of the events described above could adversely affect our
financial condition, results of operations, cash flow and
ability to make distributions to our unitholders and payments to
our noteholders.



| |                                                                                              
| | ---------------------------------------------------------------------------------------------
| | We may be unable to complete divestitures
    on advantageous terms or contribute properties.

We intend to continue to divest ourselves of
retail centers and industrial properties that do not meet our
strategic objectives, provided that we can negotiate acceptable
terms and conditions. Our ability to dispose of properties on
advantageous terms depends on factors beyond our control,
including competition from other sellers and the availability of
attractive financing for potential buyers of our properties. If
we are unable to dispose of properties on favorable terms or
redeploy the proceeds of property divestitures in accordance
with our investment strategy, then our financial condition,
results of operations, cash flow and ability to make
distributions to our unitholders and payments to our noteholders
could be adversely affected.

We also anticipate contributing or selling
properties to funds and joint ventures. If we do not have
sufficient properties available that meet the investment
criteria of current or future property funds, or if the funds
have reduced or no access to capital on favorable terms, then
such contributions or sales could be delayed or prevented,
adversely affecting our financial condition, results of
operations, cash flow and ability to make distributions to our
unitholders and payments to our noteholders.



| |                                                                                      
| | -------------------------------------------------------------------------------------
| | Contingent or unknown liabilities could
    adversely affect our financial condition.

At the time of our formation we acquired assets
from our predecessor entities subject to all of their potential
existing liabilities, without recourse. In addition, we have and
may in the future acquire properties

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subject to liabilities and without any recourse,
or with only limited recourse, with respect to unknown
liabilities. As a result, if a liability were asserted against
us based upon ownership of any of these entities or properties,
then we might have to pay substantial sums to settle it, which
could adversely affect our cash flow. Unknown liabilities with
respect to entities or properties acquired might include:




| |   |                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | liabilities for clean-up or remediation of
    undisclosed environmental conditions;                                                                                 
|
| |  | claims of customers, vendors or other persons
    dealing with our predecessors prior to the formation
    transactions or the former owners of the properties;      
|
| |  | accrued but unpaid liabilities incurred in the
    ordinary course of business;                                                                                      
|
| |  | tax liabilities; and                                                                                                                                                 
|
| |  | claims for indemnification by the general
    partners, officers and directors and others indemnified by our
    predecessors or the former owners of the properties.

Risks Associated With Our International
Business



| |                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------
| | Our international growth is subject to
    special risks and we may not be able to effectively manage our
    international growth.

We have acquired and developed, and expect to
continue to acquire and develop, properties in foreign
countries. Because local markets affect our operations, our
international investments are subject to economic fluctuations
in the foreign locations in which we invest. In addition, our
international operations are subject to the usual risks of doing
business abroad such as revisions in tax treaties or other laws
governing the taxation of our foreign revenues, restrictions on
the transfer of funds, and, in certain parts of the world,
property rights uncertainty and political instability. We cannot
predict the likelihood that any of these developments may occur.
Further, we have entered, and may in the future enter, into
agreements with non-U.S. entities that are governed by the laws
of, and are subject to dispute resolution in, the courts of
another country or region. We cannot accurately predict whether
such a forum would provide us with an effective and efficient
means of resolving disputes that may arise. And even if we are
able to obtain a satisfactory decision through arbitration or a
court proceeding, we could have difficulty enforcing any award
or judgment on a timely basis.

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



| |                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------
| | Acquired properties may be located in new
    markets, where we may face risks associated with investing in an
    unfamiliar market.

We have acquired and may continue to acquire
properties in international markets that are new to us. When we
acquire properties located in these markets, we may face risks
associated with a lack of market knowledge or understanding of
the local economy, forging new business relationships in the
area and unfamiliarity with local government and permitting
procedures. We work to mitigate such risks through extensive
diligence and research and associations with experienced
partners, however there can be no guarantee that all such risks
will be eliminated.



| |                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We are subject to risks from potential
    fluctuations in exchange rates between the U.S. dollar and the
    currencies of the foreign countries in which we
    invest.

We are pursuing, and intend to continue to
pursue, growth opportunities in international markets. As we
invest in countries where the U.S. dollar is not the
national currency, we are subject to foreign currency risks from
the potential fluctuations in exchange rates between the
U.S. dollar and the currencies of the foreign countries in
which we invest. A significant depreciation in the value of the
currency of one or more foreign countries where we have a
significant investment may materially affect our results of
operations. We attempt to mitigate any such effects by borrowing
under our multi-currency credit facility in the foreign currency
of the

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country we are investing in and by putting in
place foreign currency put option contracts. For leases
denominated in foreign currencies, we may, but might not, use
derivative financial instruments to manage the foreign exchange
risk. We cannot, however, assure you that our efforts will
successfully neutralize all foreign currency risks.


Debt Financing Risks



| |                                                           
| | ----------------------------------------------------------
| | We could incur more debt, increasing our
    debt service.

It is our policy to incur debt, either directly
or through our subsidiaries, only if it will not cause our share
of debt-to-total market capitalization ratio to exceed
approximately 45%. The aggregate amount of indebtedness that we
may incur under our policy increases directly with an increase
in the market price per share of AMB Property Corporations
capital stock. Further, our general partners management
could alter or eliminate this policy without unitholder or
noteholder approval. If we change this policy, then we could
become more highly leveraged, resulting in an increase in debt
service that could adversely affect the cash available for
distribution to our unitholders.



| |                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------
| | We face risks associated with the use of
    debt to fund acquisitions and developments, including
    refinancing risk.

As of September 30, 2003, we had total debt
outstanding of $2.2 billion. We are subject to risks
normally associated with debt financing, including the risk that
our cash flow will be insufficient to meet required payments of
principal and interest. We anticipate that we will repay only a
small portion of the principal of our debt prior to maturity.
Accordingly, we will likely need to refinance at least a portion
of our outstanding debt as it matures. There is a risk that we
may not be able to refinance existing debt or that the terms of
any refinancing will not be as favorable as the terms of our
existing debt. If we are unable to refinance or extend principal
payments due at maturity or pay them with proceeds of other
capital transactions, then we expect that our cash flow will not
be sufficient in all years to make distributions to our
unitholders and payments to our noteholders and to repay all
such maturing debt. Furthermore, if prevailing interest rates or
other factors at the time of refinancing (such as the reluctance
of lenders to make commercial real estate loans) result in
higher interest rates upon refinancing, then the interest
expense relating to that refinanced indebtedness would increase.

In addition, if we mortgage one or more of our
properties to secure payment of indebtedness and we are unable
to meet mortgage payments, then the property could be foreclosed
upon or transferred to the mortgagee with a consequent loss of
income and asset value. A foreclosure on one or more of our
properties could adversely affect our financial condition,
results of operations, cash flow and ability to make
distributions to our unitholders and payments to our noteholders.



| |                                                     
| | ----------------------------------------------------
| | We are dependent on external sources of
    capital.

In order for our general partner, AMB Property
Corporation, to qualify as a real estate investment trust, it is
required each year to distribute to its stockholders at least
90% of its real estate investment trust taxable income
(determined without regard to the dividends-paid deduction and
by excluding any net capital gain) and it is taxed on its income
to the extent it is not fully distributed. We are required to
make distributions to AMB Property Corporation that will enable
it to satisfy this distribution requirement and avoid tax
liability. Consequently, we may not be able to fund all future
capital needs, including acquisition and development activities,
from cash retained from operations and must rely on third-party
sources of capital. Our ability to access private debt and
equity capital on favorable terms or at all is dependent upon a
number of factors, including, general market conditions, the
markets perception of our growth potential, our current
and potential future earnings and cash distributions and the
market price of AMB Property Corporations capital stock.

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| |                                                                                     
| | ------------------------------------------------------------------------------------
| | Covenants in our debt agreements could
    adversely affect our financial condition.

The terms of our credit agreements and other
indebtedness require that we comply with a number of customary
financial and other covenants, such as maintaining debt service
coverage and leverage ratios and maintaining insurance coverage.
These covenants may limit flexibility in our operations, and our
failure to comply with these covenants could cause a default
under the applicable debt agreement even if we have satisfied
our payment obligations. Further, as of September 30, 2003,
we had 34 non-recourse secured loans that are
cross-collateralized by 72 properties, totaling
$820.5 million (not including unamortized debt premium). If
we default on any of these loans, we may then be required to
repay such indebtedness, together with applicable prepayment
charges, to avoid foreclosure on all the cross-collateralized
properties within the applicable pool. Foreclosure on our
properties, or our inability to refinance our loans on favorable
terms, could adversely impact our financial condition, results
of operations, cash flow and ability to make distributions to
our unitholders and payments to our noteholders. In addition,
our credit facilities and senior debt securities contain certain
cross-default provisions, which are triggered in the event that
our other material indebtedness is in default. These
cross-default provisions may require us to repay or restructure
the credit facilities and the senior debt securities in addition
to any mortgage or other debt that is in default, which could
adversely affect our financial condition, results of operations,
cash flow and ability to make distributions to our unitholders
and payments to our noteholders.

Conflicts of Interest Risks



| |                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------
| | Some of AMB Property Corporations
    directors and executive officers are involved in other real
    estate activities and investments.

Some of AMB Property Corporations executive
officers and directors own interests in real estate-related
businesses and investments that they acquired prior to AMB
Property Corporations initial public offering in 1997.
These interests include minority ownership interests in
Institutional Housing Partners, L.P., a residential housing
finance company (Messrs. Burke and Moghadam) and Aspire
Development, Inc. and Aspire Development, L.P., developers of
properties not within our investment criteria
(Messrs. Belmonte, Burke and Moghadam). AMB Property
Corporations executive officers continued
involvement in other real estate-related activities could divert
their attention from our day-to-day operations. AMB Property
Corporations executive officers have entered into
non-competition agreements with AMB Property Corporation
pursuant to which they have agreed not to engage in any
activities, directly or indirectly, in respect of commercial
real estate, and not to make any investment in respect of any
industrial or retail real estate, other than through ownership
of not more than 5% of the outstanding shares of a public
company engaged in such activities or through the existing
investments referred to in this report. State law may limit AMB
Property Corporations ability to enforce these agreements.



| |                                                                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Certain of AMB Property Corporations
    executive officers and directors may have conflicts of interest
    with us in connection with other properties that they own or
    control.

As of September 30, 2003, Aspire
Development, L.P. owned interests in three retail development
projects in the U.S., which are individually less than
15,000 feet. In addition, Messrs. Moghadam and Burke,
each a founder and director, own less than 1% interests in two
partnerships that own office buildings in various markets; these
interests have negligible value. Luis A. Belmonte, an executive
officer of AMB Property Corporation, owns less than a 10%
interest, representing an estimated value of $150,000, in a
limited partnership, which owns an office building located in
Oakland, California.

In addition, several of AMB Property
Corporations executive officers individually own:



| |   |                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------
| |  | less than 1% interests in the stocks of certain
    publicly-traded real estate investment trusts; and
|
| |  | certain other de minimus holdings in equity
    securities of real estate companies.                  

Thomas W. Tusher, a member of AMB Property
Corporations board of directors and chair of the
boards compensation committee, is a limited partner in a
venture in which Messrs. Moghadam and Burke are two of
three members in the controlling general partner. The venture
owns an office building. Mr. Tusher owns a 20%

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interest in the venture and Messrs. Moghadam
and Burke each have a 26.7% interest in the venture. These
interests in the venture have negligible value. The venture was
formed in 1985, prior to the time of AMB Property
Corporations initial public offering. The property and
asset management of the office building has recently been
transferred from us to a third party. We are still involved in
certain transitional matters relating to the property, including
certain matters relating to the financing thereof.


We believe that the properties and activities set
forth above generally do not directly compete with any of our
properties. However, it is possible that a property in which an
executive officer or director, or an affiliate of an executive
officer or director of AMB Property Corporation, has an interest
may compete with us in the future if we were to invest in a
property similar in type and in close proximity to that
property. In addition, AMB Property Corporations executive
officers and directors continued involvement in
these properties could divert managements attention from
our day-to-day operations. We will not acquire any properties
from AMB Property Corporations executive officers,
directors or their affiliates unless the transaction is approved
by a majority of the disinterested and independent (as defined
by the rules of the New York Stock Exchange) members of AMB
Property Corporations board of directors with respect to
that transaction.



| |                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------
| | AMB Property Corporations duty to its
    stockholders may conflict with the interests of our limited
    partners and noteholders.

AMB Property Corporation has fiduciary
obligations to its stockholders, the discharge of which, may
conflict with the interests of our limited partners and
noteholders.

Risks Associated with Government
Regulations



| |                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------
| | Compliance or failure to comply with the
    Americans with Disabilities Act and other similar regulations
    could result in substantial costs.

Under the Americans with Disabilities Act, places
of public accommodation must meet certain federal requirements
related to access and use by disabled persons. Noncompliance
could result in the imposition of fines by the federal
government or the award of damages to private litigants. If we
are required to make unanticipated expenditures to comply with
the Americans with Disabilities Act, including removing access
barriers, then our cash flow and the amounts available for
dividends to our stockholders may be adversely affected. Our
properties are also subject to various federal, state and local
regulatory requirements, such as state and local fire and
life-safety requirements. We could incur fines or private damage
awards if we fail to comply with these requirements. While we
believe that our properties are currently in material compliance
with these regulatory requirements, the requirements may change
or new requirements may be imposed that could require
significant unanticipated expenditures by us that will affect
our cash flow and results of operations.



| |                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------
| | The costs of compliance with environmental
    laws and regulations could exceed our budgets for these
    items.

Under various federal, state and local laws,
ordinances and regulations, a current or previous owner or
operator of real estate may be liable for the costs of
investigation, removal or remediation of certain hazardous or
toxic substances or petroleum products at, on, under or in its
property. The costs of removal or remediation of such substances
could be substantial. These laws typically impose liability and
clean-up responsibility without regard to whether the owner or
operator knew of or caused the presence of the contaminants.
Even if more than one person may have been responsible for the
contamination, each person covered by the environmental laws may
be held responsible for all of the clean-up costs incurred. In
addition, third parties may sue the owner or operator of a site
for damages based on personal injury, property damage, or other
costs, including investigation and clean-up costs, resulting
from the environmental contamination.

Environmental laws also require that owners or
operators of buildings containing asbestos properly manage and
maintain the asbestos, adequately inform or train those who may
come into contact with asbestos and undertake special
precautions, including removal or other abatement, in the event
that asbestos is disturbed during building renovation or
demolition. These laws may impose fines and penalties on building

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owners or operators who fail to comply with these
requirements and may allow third parties to seek recovery from
owners or operators for personal injury associated with exposure
to asbestos. Some of our properties may contain
asbestos-containing building materials.


In addition, some of our properties are leased or
have been leased, in part, to owners and operators of businesses
that use, store, or otherwise handle petroleum products or other
hazardous or toxic substances, creating a potential for the
release of such hazardous or toxic substances. Further, certain
of our properties are on, adjacent to or near other properties
that have contained or currently contain petroleum products or
other hazardous or toxic substances, or upon which others have
engaged, are engaged or may engage in activities that may
release such hazardous or toxic substances. From time to time,
we may acquire properties, or interests in properties, with
known adverse environmental conditions where we believe that the
environmental liabilities associated with these conditions are
quantifiable and that the acquisition will yield a superior
risk-adjusted return. In such an instance, we underwrite the
costs of environmental investigation, clean-up and monitoring
into the acquisition cost and obtain appropriate environmental
insurance for the property. Further, in connection with certain
divested properties, we have agreed to remain responsible for,
and to bear the cost of, remediating or monitoring certain
environmental conditions on the properties.

At the time of acquisition, we subject all of our
properties to a Phase I or similar environmental
assessments by independent environmental consultants and we may
have additional Phase II testing performed upon
consultants recommendation. These environmental
assessments have not revealed, and we are not aware of, any
environmental liability that we believe would have a material
adverse effect on our financial condition or results of
operations taken as a whole. Nonetheless, it is possible that
the assessments did not reveal all environmental liabilities and
that there are material environmental liabilities unknown to us,
or that known environmental conditions may give rise to
liabilities that are greater than we anticipated. Further, our
properties current environmental condition may be affected
by customers, the condition of land, operations in the vicinity
of the properties (such as releases from underground storage
tanks), or by unrelated third parties. If the costs of
compliance with existing or future environmental laws and
regulations exceed our budgets for these items, then our
financial condition, results of operations, cash flow, and
ability to make distributions to our unitholders and payments to
our noteholders could be adversely affected.

Risks Associated With Our Dependence on our
General Partners Key Personnel

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

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|        |                                     
|------- | ------------------------------------
|Item 6. | Exhibits and Reports on
    Form 8-K

(a) Exhibits:

|        |      |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|------- | ---- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |            
|Number  |      | Description
|        |      |            
|        | 4.1  |             |  | $75,000,000 5.53% Fixed Rate
    Note No. B-1 dated November 10, 2003, attaching
    the Form of Parent Guarantee dated November 10, 2003.                                                                                                                                                                                                                                                                                                                                                              
|        | 10.1 |             |  | Note Purchase Agreement dated as of
    November 5, 2003, by and between AMB Property, L.P.
    and Teachers Insurance and Annuity Association of America
    (incorporated by reference to Exhibit 99.1 of the
    Registrants Current Report on Form 8-K filed on
    November 6, 2003).                                                                                                                                                                                                             
|        | 10.2 |             |  | Agreement of Sale, made as of October 6,
    2003, by and between AMB Property, L.P., International
    Airport Centers L.L.C. and certain affiliated entities
    (incorporated by reference to Exhibit 99.3 of the
    Registrants Current Report on Form 8-K filed on
    November 6, 2003).                                                                                                                                                                                                        
|        | 31.1 |             |  | Rule 13a-14 (a)/ 15d-14
    (a) Certifications dated November 14, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        | 32.1 |             |  | 18 U.S.C. § 1350 Certifications
    dated November 14, 2003. The certifications in this exhibit
    are being furnished solely to accompany this report pursuant to
    18 U.S.C. § 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.

(b) Reports on Form 8-K:

AMB Property, L.P. filed a Current Report on
Form 8-K on November 6, 2003, in connection with the
issuance of $75.0 million in senior unsecured notes under
its medium-term note program.

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SIGNATURES

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



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



| |     |                      
| | --- | ---------------------
| | By: | /s/ HAMID R. MOGHADAM

| |                             
| | ----------------------------
| |                             
| | Hamid R. Moghadam           
| | Chairman of the Board and   
| | Chief Executive Officer     
| | (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                           
| | Chief Financial Officer and               
| | Executive Vice President                  
| | (Duly Authorized Officer and
    Principal
| | Financial and Accounting Officer)         

Date: November 14, 2003

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EXHIBIT INDEX

|        |      |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|------- | ---- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |            
|Number  |      | Description
|        |      |            
|        | 4.1  |             |  | $75,000,000 5.53% Fixed Rate
    Note No. B-1 dated November 10, 2003, attaching
    the Form of Parent Guarantee dated November 10, 2003.                                                                                                                                                                                                                                                                                                                                                              
|        | 10.1 |             |  | Note Purchase Agreement dated as of
    November 5, 2003, by and between AMB Property, L.P.
    and Teachers Insurance and Annuity Association of America
    (incorporated by reference to Exhibit 99.1 of the
    Registrants Current Report on Form 8-K filed on
    November 6, 2003).                                                                                                                                                                                                             
|        | 10.2 |             |  | Agreement of Sale, made as of October 6,
    2003, by and between AMB Property, L.P., International
    Airport Centers L.L.C. and certain affiliated entities
    (incorporated by reference to Exhibit 99.3 of the
    Registrants Current Report on Form 8-K filed on
    November 6, 2003).                                                                                                                                                                                                        
|        | 31.1 |             |  | Rule 13a-14 (a)/ 15d-14
    (a) Certifications dated November 14, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        | 32.1 |             |  | 18 U.S.C. § 1350 Certifications
    dated November 14, 2003. The certifications in this exhibit
    are being furnished solely to accompany this report pursuant to
    18 U.S.C. § 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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