<PAGE>

     As filed with the Securities and Exchange Commission on May 23, 2001
                                              Registration No. 333-_____________
--------------------------------------------------------------------------------

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                               ________________
                                   FORM S-3
            REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

                               ________________
                           PRENTISS PROPERTIES TRUST
            (Exact name of registrant as specified in its charter)

              Maryland                                  75-2661588
    (State or other jurisdiction of      (I.R.S. Employer Identification Number)
     incorporation or organization)

 3890 W. Northwest Highway, Suite 400                J. Kevan Dilbeck
        Dallas, Texas 75220                      Prentiss Properties Trust
           (214) 654-0886                  3890 W. Northwest Highway, Suite 400
 (Address, including zip code, and                  Dallas, Texas 75220
  telephone number, including area                     (214) 654-0886
   code of registrant's principal           (Name, address, including zip code,
       executive offices)                     and telephone number, including
                                              area code, of agent for service)

                                   Copy to:
                           Michael E. Dillard, P.C.
                   Akin, Gump, Strauss, Hauer & Feld, L.L.P.
                        1700 Pacific Avenue, Suite 4100
                              Dallas, Texas 75201
                                (214) 969-2800

     Approximate date of commencement of proposed sale to the public: From time
to time after this Registration Statement becomes effective.

     If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [_]

     If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [X]

     If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [_]

     If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]

     If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box: [_]
<PAGE>

                        CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                       Proposed Maximum
                                                                           Aggregate            Proposed Maximum        Amount of
         Title of Each Class                    Aggregate Amount      Offering Price Per      Aggregrate Offering     Registration
     Securities to be Registered              To be  Registered(1)          Share                    Price                Fee
------------------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>                     <C>                     <C>                     <C>
Preferred Share of Beneficial
Interest, Series D. $0.01 par value per            3,773,585              $24.97(2)             $94,226,418(2)         $2,476(3)
share
------------------------------------------------------------------------------------------------------------------------------------
Common Shares of Beneficial
Interest, $0.01 par value per share              3,773,585 (4)             N/A (5)                   N/A (5)             None (5)
------------------------------------------------------------------------------------------------------------------------------------
Preferred Share Purchase Rights                      (6)                   N/A (7)                   N/A (7)             None (7)
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

     (1) Pursuant to Rule 416 of the Securities Act of 1933, as amended, this
         Registration Statement also relates to such additional shares as may be
         issuable as a result of certain adjustments, including, without
         limitation, stock dividends, stock splits and distributions of options,
         warrants and convertible securities.

     (2) Estimated solely for purposes of calculating the registration fee in
         accordance with Rule 457(c) under the Securities Act of 1933, as
         amended, based on the average of the high and low reported sales prices
         on the New York Stock Exchange on May 21, 2001.

     (3) Pursuant to Rule 457(p) the registration fee is being offset by $21,081
         previously paid upon filing Registration No. 333-65793 initially filed
         on October 16, 1998.

     (4) Such number represents the number of Common Shares initially issuable
         upon conversion of the Series D Preferred Shares registered hereby and,
         pursuant to Rule 416 under the Securities Act of 1933, as amended, such
         indeterminate number of Common Shares as may be issued from time to
         time upon conversion of the Series D Preferred Shares by reason of
         adjustment of the conversion price under certain circumstances outlined
         in the Prospectus.

     (5) Rule 457(g) of the Securities Act of 1933 does not require the payment
         of a registration fee because the Company is registering the Series D
         Preferred Shares at the same time it is registering the Common Shares
         into which the Series D Shares are convertible.

     (6) The rights to purchase Junior Participating Cumulative Preferred Shares
         of Beneficial Interest, Series B, par value $0.01 per share, are
         attached to and trade with the common shares. As no additional
         consideration will be received for the rights, no registration fee is
         required with respect to them under rule 457(i).

     (7) Rule 457(g) of the Securities Act of 1933 does not require the payment
         of a registration fee because the Company is registering the rights in
         the same registration statement as the securities being offered
         pursuant to the rights.

         The Registrant hereby amends this Registration Statement on such date
     or dates as may be necessary to delay its effective date until the
     Registrant shall file a further amendment which specifically states that
     this registration statement shall thereafter become effective in accordance
     with Section 8(a) of the Securities Act of 1933, as amended, or until this
     registration statement shall become effective on such date as the
     Securities and Exchange Commission, acting pursuant to said Section 8(a),
     may determine.

                                      ii
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+                                                                              +
+ The information in this prospectus is not complete and may be changed. We may+
+ not sell these securities until the registration statement filed with the    +
+ Securities and Exchange Commission is effective. This Prospectus is not an   +
+ offer to sell these securities and is not soliciting an offer to buy these   +
+ securities in any state where the offer or sale is not permitted.            +
+                                                                              +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++




                   Subject to Completion, dated May 23, 2001
Prospectus


                           Prentiss Properties Trust
                     3890 W. Northwest Highway, Suite 400
                              Dallas, Texas 75220
                                (214) 654-0886

             3,773,585 Series D Cumulative Convertible Redeemable
                    Preferred Shares of Beneficial Interest
                3,773,585 Common Shares of Beneficial Interest

    This prospectus relates to the public offer and sale of up to 3,773,585
Series D Cumulative Convertible Redeemable Preferred Shares and up to 3,773,585
common shares of beneficial interest that we may issue upon conversion of the
Series D Preferred Shares by the selling shareholder named herein or its
transferees, pledgees, employees, donees or successors.

     No public market for the Series D Preferred Shares exists and there can be
no assurance that an active trading market will develop. The common shares trade
on the New York Stock Exchange under the symbol "PP."

                              ____________________


     Investing in our capital stock involves risks. See the sections entitled
"Risk Factors" in the documents we file with the Securities and Exchange
Commission that are incorporated by reference in this Prospectus for certain
risks and uncertainties that you should consider as well as the risk factors
beginning on page 3 of this prospectus.


     Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.









           The date of this prospectus is ___________________, 2001
<PAGE>

                               Table of Contents

<TABLE>
<CAPTION>


                                                                     Page
                                                                     ----
<S>                                                                  <C>
Risk Factors.......................................................   3
Forward-Looking Statements.........................................   3
About This Prospectus..............................................   4
The Company........................................................   5
Ratio of Earnings to Combined Fixed Charges and Preferred Share
 Dividends.........................................................   5
The Exchange.......................................................   6
Use of Proceeds....................................................   6
Description of Shares of Beneficial Interest.......................   6
Registration Rights................................................  14
Restrictions on Ownership and Transfer.............................  14
Federal Income Tax Considerations..................................  16
Selling Shareholders...............................................  32
Plan of Distribution...............................................  33
Legal Opinions.....................................................  34
Experts............................................................  34
Where You Can Find More Information................................  34
</TABLE>

                                       2
<PAGE>

                                 Risk Factors

     You should carefully consider the following information in conjunction with
the other information contained in this prospectus, any prospectus supplement
and the documents and risk factors incorporated by reference herein, before
deciding to invest in the Series D Preferred Shares or the common shares
issuable upon conversion of the Series D Preferred Shares (the "Conversion
Common Shares").

You may not be able to sell your Series D Preferred Shares because no current
market for the Series D Preferred Shares exists and such a market may not
develop.

     There is no established trading market for the Series D Preferred Shares.
We do not currently intend to list the Series D Preferred Shares on a national
securities exchange or the Nasdaq National Market, and even if we did, the
Series D Preferred Shares do not currently meet the listing requirements of any
national exchange or the Nasdaq National Market. Accordingly, we cannot give
assurance as to the following:

     .  whether an active market for the Series D Preferred Shares will develop,

     .  the liquidity of any such market,

     .  your ability to sell the Series D Preferred Shares, or

     .  the prices that you may obtain for your Series D Preferred Shares.

                          Forward-Looking Statements

     This prospectus, any prospectus supplement and the documents incorporated
by reference herein may contain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. When used in this prospectus, words such as "anticipate,"
"believe," "estimate," "expect," "intend," "predict," "project," and similar
expressions, as they relate to us or our management, identify forward-looking
statements. Such forward-looking statements are based on the beliefs of our
management as well as assumptions made by us and information currently available
to us. These forward-looking statements are subject to certain risks,
uncertainties and assumptions, including risks, uncertainties and assumptions
related to the following:

 .  Geographic concentration of our properties;

 .  Our real estate acquisition, redevelopment, development and construction
   activities;

 .  Operating performance of our properties;

 .  Our incurrence of debt;

 .  Limited ability of shareholders to effect a change of control;

 .  Qualifying as a REIT for federal income tax purposes;

 .  Conflicts of interest;

 .  Change in our investment, financing and borrowing policies without
   shareholder approval;

 .  Our dependence on key personnel;

 .  Our third-party property management, leasing, development and construction
   business and related services; and

 .  Effect of shares available for future sale on the price of common shares.

     Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those anticipated, expected or projected. Such forward-looking statements
reflect our current views with respect to future events and are subject to these
and other risks, uncertainties and assumptions relating to our operations,
results of operations, growth strategy and liquidity. All subsequent written and
oral forward-looking statements attributable to us or individuals acting on our
behalf are expressly qualified in their entirety by this paragraph. You should
specifically consider the various factors identified

                                       3
<PAGE>

in this prospectus, any prospectus supplement and the documents incorporated by
reference herein, which could cause actual results to differ. You should refer
to the section entitled "Risk Factors" in this prospectus and beginning on page
32 of our 2000 Annual Report on Form 10-K, which is incorporated by reference,
for a discussion of risk factors that could cause actual results to differ
materially from those indicated by the forward-looking statements.

                             About This Prospectus

     This prospectus is part of a registration statement that we filed with the
SEC utilizing a "shelf registration" process. Under this shelf process, the
selling shareholder or its transferees, pledgees, donees or successors may, from
time to time, sell the securities described in this prospectus. You should read
both this prospectus and any prospectus supplement together with additional
information described under the heading "Where You Can Find More Information."

                                       4
<PAGE>

                                  The Company

     We are a self-administered and self-managed Maryland REIT that acquires,
owns, manages, leases, develops and builds office and industrial properties
throughout the United States. We are self-administered in that we provide our
own administrative services, such as accounting, tax and legal services,
internally through our own employees. We are self-managed in that we internally
provide all the management and maintenance services that our properties require
through our own employees, such as property managers, leasing professionals and
engineers. As of April 10, 2001, we owned interests in a diversified portfolio
of 153 primarily suburban Class A office and suburban industrial properties,
including development projects, as follows:


                                               Number of    Net Rentable
                                               ---------    ------------
                                               Buildings    Square Feet
                                               ---------    -----------

         Office Properties.....................   104        13,882,000
         Industrial Properties.................    43         3,470,000
         Office and Industrial
           Development Projects................     6           780,000
                                                  ---        ----------
             TOTAL.............................   153        18,332,000
                                                  ===        ==========

     In addition to the properties that we own, we manage approximately 19.5
million "net rentable square feet" in office, industrial and other properties
that are owned by unrelated third parties. The term "net rentable square feet"
is used in the industry to refer to the area of a property for which a tenant is
required to pay rent and includes the actual rentable area plus a portion of the
common areas of the property allocated to the tenant.

     Our properties are located in 12 markets that are all included in one of
our four reportable segments as follows:

              Segment                         Market
              -------                         ------

         Mid-Atlantic Region          Atlanta, Metropolitan Washington, D.C.
         Midwest Region               Chicago, Suburban Detroit
         Southwest Region             Dallas/Fort Worth, Houston, Denver, Austin
         West Region                  San Diego, Los Angeles, San Francisco Bay
                                      Area Sacramento

     We operate principally through Prentiss Properties Acquisition Partners,
L.P., our operating partnership, and its subsidiaries and a subsidiary that acts
as manager. Our regional management offices are located in Los Angeles, Dallas,
Chicago, Washington, D.C. and Atlanta. We have approximately 700 employees with
expertise in areas such as acquisitions, development, facilities management,
property management and leasing.

                  Ratio of Earnings to Combined Fixed Charges
                         and Preferred Share Dividends

     The following table sets forth our consolidated ratios of earnings to
combined fixed charges and preferred share dividends for the years ended
December 31, 2000, 1999, 1998 and 1997, and for the period from October 22, 1996
to December 31, 1996, and the predecessor company's consolidated ratios of
earning to combined fixed charges and preferred share dividends for the period
from January 1, 1996 to October 21, 1996. We did not pay any significant
dividends on our outstanding preferred shares in 1997. Accordingly, the ratio of
earnings to fixed charges and preferred share dividends is identical to the
ratio of earnings to fixed charges. Our data from the period prior to our
initial public offering of our common shares and the commencement of our intent
to qualify as a REIT on October 22, 1996, reflects the operations of the
predecessor company.

                 Prentiss Properties Trust               Predecessor Company
                 -------------------------               -------------------

                                       5
<PAGE>

<TABLE>
<CAPTION>
                           Year Ended December 31,
                           -----------------------
                                                                              January 1, 1996
                                                                              ---------------
                                                     October 22, 1996 to       to October 21,
                                                     -------------------       --------------
                            2000  1999  1998  1997    December 31, 1996             1996
                            ----  ----  ----  ----    -----------------             ----
<S>                         <C>   <C>   <C>   <C>    <C>                      <C>
Ratio of earnings to
combined fixed
charges and preferred
share dividends             1.65  1.69  2.00  2.68          7.80                    1.80
</TABLE>

       These computations include us and our subsidiaries and 50% or less equity
companies. For these ratios, "earnings" consists of pretax income from
operations before minority interests plus "combined fixed charges," excluding
interest capitalized. For this purpose, "combined fixed charges" consists of the
interest costs, whether expensed or capitalized, including an interest factor
attributable to rentals, and amortization of debt issuance costs.

                                 The Exchange

       In March 2001, we issued 3,773,585 Series D Preferred Shares to Security
Capital Preferred Growth Incorporated ("SCGP") in exchange for all of our issued
and outstanding Series A Preferred Shares held by SCGP. We exchanged an equal
amount of Series A Preferred Units in the operating partnership for Series D
Preferred Units. The Series D Preferred Units have identical terms to the Series
D Preferred Shares.

       Pursuant to a Registration Rights Agreement, dated as of March 20, 2001,
between us and SCGP, we agreed to file a shelf registration statement under the
Securities Act, of which this prospectus forms a part, relating to the resales
of the Series D Preferred Shares and the Conversion Common Shares. We must
maintain the effectiveness of the registration statement until March 20, 2004,
or such earlier date as all Series D Preferred Shares and Conversion Common
Shares covered by the registration statement either have been sold pursuant to
the registration statement or may be sold in accordance with Rule 144(k) under
the Securities Act.

                                Use of Proceeds

       We will not receive any proceeds from the sale of the Conversion Common
Shares or Series D Preferred Shares by the selling shareholders. We will not
receive any proceeds from the issuance of common shares upon conversion of the
Series D Preferred Shares.

                 Description of Shares of Beneficial Interest

General

       The following summary of the material terms of the Series D Preferred
Shares and the common shares issuable upon conversion thereof is subject to the
detailed provisions of the following:

       .  our current declaration of trust;

       .  our current bylaws;

       .  our articles supplementary relating to our Junior Participating
          Cumulative Preferred Shares of beneficial interest, Series B, par
          value $0.01 per share;

       .  our articles supplementary relating to our 8.30% Series B Cumulative
          Redeemable Perpetual Preferred Shares of beneficial interest, par
          value $0.01 per share;

       .  our articles supplementary relating to our Series C Cumulative
          Redeemable Perpetual Preferred Shares of beneficial interest, par
          value $0.01 per share; and

                                       6
<PAGE>

     .  our articles supplementary relating to our Series D Cumulative
        Convertible Preferred Shares of beneficial interest, par value $0.01 per
        share.

The following summary does not purport to be complete or to give full effect to
the provisions of statutory or common law and should be read in conjunction with
the terms of our declaration of trust, bylaws and articles supplementary.

     Our declaration of trust allows us to issue up to 100,000,000 common shares
and 20,000,000 preferred shares of beneficial interest, par value $0.01 per
share.  As of May 11, 2001, 36,441,652 common shares, no Series B Junior
Preferred Shares, no Series B Preferred Shares, no Series C Preferred Shares and
3,773,585 Series D Preferred Shares were issued and outstanding. As permitted by
Maryland REIT law, our declaration of trust allows our board of trustees,
without any action by our shareholders, to amend our declaration of trust to
increase or decrease the aggregate number of shares of beneficial interest or
the number of shares of any class of shares of beneficial interest that we may
issue.

     As a Maryland REIT, we are subject to Maryland REIT law, as amended. Both
Maryland REIT law and our declaration of trust provide that you will not be
personally liable for any of our obligations solely as a result of your status
as our shareholder. Our bylaws further provide that we must indemnify you
against any claim or liability to which you may become subject by reason of your
being or having been a shareholder or former shareholder. In addition, we must
pay or reimburse you for all legal and other expenses reasonably incurred by you
in connection with any such claim or liability successfully defended. It is our
policy to include a clause in our contracts which provides that shareholders
will not be personally liable for obligations entered into on our behalf.
However, with respect to tort claims, contractual claims where shareholder
liability is not removed or claims for taxes and statutory liability you may, in
some jurisdictions, be personally liable to the extent that we do not satisfy
such claims. Inasmuch as we carry public liability insurance that we consider
adequate, any risk of liability to you is limited to situations in which our
assets plus our insurance coverage would be insufficient to satisfy the claims
against us and our shareholders.

Common Shares

     All Conversion Common Shares offered by this prospectus will be duly
authorized, fully paid and nonassessable when issued, and the holders thereof
will not have preemptive or appraisal rights. As a holder of our common shares,
you are entitled to the following:

     .  To receive dividends if, as and when authorized and declared by our
        board of trustees out of legally available assets. We intend to pay
        quarterly dividends to the holders of our common shares.

     .  To share ratably in our assets legally available for distribution to our
        shareholders in the event of our liquidation, dissolution or winding-up
        after payment of, or adequate provision for, all of our known debts and
        liabilities.

     .  To one vote per share on all matters voted on by shareholders, including
        elections of trustees. Our declaration of trust does not allow
        cumulative voting in the election of trustees, which means the holders
        of a majority of the outstanding common shares can elect all of the
        trustees then standing for election.

Your rights to dividends and liquidation preferences are subject to the
preferential rights of any of our other shares or series of shares of beneficial
interest and to the provisions of our declaration of trust regarding shares-in-
trust.  Your voting rights are subject to the provisions of our declaration of
trust regarding shares-in-trust.

     Pursuant to Maryland REIT law, a REIT generally cannot amend its
declaration of trust or merge with or into another entity unless the matter is
approved by the affirmative vote of shareholders holding at least two-thirds of
the shares entitled to vote on the matter. A REIT may establish a lesser
percentage, but not less than a majority of all the votes entitled to be cast on
the matter, in the REIT's declaration of trust. Our declaration of trust
provides for

                                       7
<PAGE>

approval by a majority of all the votes entitled to be cast on the matter in all
situations permitting or requiring action by the shareholders, except with
respect to the following, each of which requires the affirmative vote of the
holders of two-thirds of the outstanding voting shares:

     .  The removal of trustees;

     .  Any amendment to a specific section of our declaration of trust that
        relates to our board of trustees, restrictions on the transfer of
        shares-in-trust, amendments and our termination; and

     .  Our termination.

Our board of trustees may, by a two-thirds vote, amend our declaration of trust
from time to time to qualify as a REIT under the Internal Revenue Code of 1986
or Maryland REIT law without the affirmative vote of our shareholders.

     The transfer agent and registrar for the common shares is First Chicago
Trust Company, a division of Equiserve. The common shares trade on the New York
Stock Exchange under the symbol "PP." We will apply to the New York Stock
Exchange to list the additional common shares to be sold pursuant to any
prospectus supplement, and we anticipate that such shares will be so listed.

Preferred Share Purchase Rights

     On February 6, 1998, we entered into a rights plan with First Chicago Trust
Company, a division of Equiserve, as rights agent, to enable our shareholders to
receive fair and equal treatment in the event of a third party's attempt to
acquire us.  The rights plan could make it more difficult for a third party to
acquire, or could discourage a third party from acquiring, us or a large block
of our common shares.

     On February 17, 1998, we distributed as a dividend one purchase right for
each outstanding common share.  Each purchase right entitles the holder to
purchase one one-thousandth of a share of the Series B Junior Preferred Shares
at an exercise price of $85, subject to adjustment.  The purchase rights are not
currently exercisable and are attached to and trade with the outstanding common
shares.

     The purchase rights become exercisable if a person or group acquires,
obtains the right to acquire or announces a tender offer to acquire 10% or more
of our outstanding common shares. If the acquiror is SCPG, the threshold
percentage is 11% instead of 10%. Each purchase right would then entitle its
holder to acquire Series B Junior Preferred Shares at the exercise price or, at
our option, common shares, cash, property or other securities having a value
equal to twice the exercise price of the purchase right.

     The purchase rights also become exercisable if we are acquired in a merger
or other business combination or if 50% or more of our assets or earning power
is transferred. Each purchase right would then entitle its holder, other than
the acquiring person, to purchase securities of the surviving company having a
market value equal to twice the exercise price of the purchase right.

     Until exercisable, the purchase rights will be evidenced by the common
share certificates and will trade with the common share certificates. The
purchase rights will expire on February 17, 2008. We may redeem each purchase
right at a price of $0.001 at any time until ten days after an announcement that
a person or group has acquired a 10% position in us.  As a result, the purchase
rights should not interfere with any merger or other business combination
approved by our board of trustees.

Preferred Shares

     Our board of trustees may issue preferred shares in one or more series
without shareholder approval. Our board of trustees may establish designations,
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications and terms and
conditions of redemption of our

                                       8
<PAGE>

preferred shares. Thus, without shareholder approval our board of trustees could
authorize the issuance of preferred shares that could have the following
effects:

     .  the dilution of the voting power and other rights of the holders of
        common shares, and

     .  the delay, deference or prevention of a takeover or other transaction
        that holders of some, or a majority, of the common shares might believe
        to be in their best interests or in which holders of some, or a
        majority, of the common shares might receive a premium for their common
        shares over the then market price of such common shares.

As of May 11, 2001, our board of trustees had designated 1,900,000 Series B
Preferred Shares, none of which were outstanding, 1,000,000 Series B Junior
Preferred Shares, none of which were outstanding, 2,000,000 Series C Preferred
Shares, none of which were outstanding, and 3,773,585 Series D Preferred Shares,
all of which were outstanding.

     On June 25, 1998, we privately placed 1,900,000 8.30% Series B Cumulative
Redeemable Perpetual Preferred Units of the operating partnership (the "Series B
Preferred Units") with Belaire Capital Fund LLC. In connection with the private
placement, on June 25, 1998, we designated 1,900,000 Series B Preferred Shares.
The holders of the Series B Preferred Units may exchange the Series B Preferred
Units at any time on or after June 25, 2008 for Series B Preferred Shares at an
exchange rate of one Series B Preferred Share for one Series B Preferred Unit,
subject to adjustments. As of the date hereof, no Series B Preferred Shares were
issued or outstanding.

     On September 17, 1999, we privately placed an aggregate of 2,000,000 9.45%
Series C Cumulative Redeemable Perpetual Preferred Units of the operating
partnership (the "Series C Preferred Units") with Belcrest Realty Corporation
and Belair Real Estate Corporation. In connection with the private placement, on
September 17, 1999, we designated 2,000,000 Series C Preferred Shares. The
holders of the Series C Preferred Units may exchange the Series C Preferred
Units at any time on or after September 17, 2009 for Series C Preferred Shares
at an exchange rate of one Series C Preferred Share for one Series C Preferred
Unit, subject to adjustments. As of the date hereof, no Series C Preferred
Shares were issued or outstanding.

     On April 10, 2001, we completed an asset exchange with Brandywine Realty
Trust.  As part of that exchange, we acquired Brandywine's Northern Virginia
assets which includes a 25% interest in a joint venture that owns two office
properties.  In exchange for the joint venture interest, we issued to Brandywine
a combination of 200,000 7.50% Series E Cumulative Preferred Units of the
operating partnership (the "Series E Preferred Units") and 26,768 common units
of the operating partnership.  The holders of the Series E Preferred Units may
choose to have the Series E Preferred Units redeemed at any time on or after
April 10, 2004.  The Series E Preferred Units are redeemable for either $10.0
million plus accrued but unpaid distributions or, at our option, common shares
having a market value equal to the redemption price.  In addition, the common
units held by Brandywine are exchangeable after April 10, 2003, for either cash
equal to the trading price of one common share at the time of the exchange or,
at our option, one common share.

Series D Preferred Shares

     In March 2001, we issued 3,773,585 Series D Preferred Shares in an exchange
offering. The Series D Preferred Shares are validly issued, fully paid and
nonassessable. The holders of the Series D Preferred Shares have no preemptive
rights with respect to any of our shares of capital stock or any of our other
securities convertible into or carrying rights or options to purchase any such
shares. The Series D Preferred Shares are not subject to any sinking fund or
other similar obligation to redeem or retire the Series D Preferred Shares. We
do not currently intend to list the Series D Preferred Shares on a national
securities exchange or the Nasdaq National Market.

     Transfer Agent. We currently act as Transfer Agent for the Series D
Preferred Shares.

                                       9
<PAGE>

     Dividends. The holders of the Series D Preferred Shares will be entitled to
receive, when, as and if declared by our board of trustees, out of funds legally
available for the payment of dividends, cumulative preferential quarterly cash
dividends of $0.40 per share or the regular cash dividend on the common shares,
or portion thereof, into which a Series D Preferred Share is convertible. Such
dividends are cumulative from the date of original issue and payable quarterly
in arrears on a date which our board of trustees determines (each, a "Dividend
Payment Date"). A Dividend Payment Date may be no later than the thirtieth day
after the last day of each March, June, September and December. Our board of
trustees will establish the record date for the payment of dividends to record
holders. Such record date may not be less than 10 nor more than 50 days
preceding the applicable Dividend Payment Dates.

     Dividends on Series D Preferred Shares will accrue whether or not we have
earnings, whether or not there are funds legally available for the payment of
such dividends and whether or not such dividends are declared. Interest will not
be payable and will not accrue on dividend payments on the Series D Preferred
Shares that are in arrears. Holders of Series D Preferred Shares will not be
entitled to any dividends, whether payable in cash, property or shares of stock,
in excess of the full cumulative dividends on the Series D Preferred Shares.

     As long as any Series D Preferred Shares are outstanding, no dividends will
be declared or paid on any class or shares of beneficial interest ranking on a
parity with the Series D Preferred Shares ("Parity Shares"), unless full
cumulative dividends have been declared and paid or funds reserved for such
payment on the Series D Preferred Shares for all dividend periods terminating on
or prior to the dividend payment date on such class or series of Parity Shares.
However, if accrued dividends on the Series D Preferred Shares for all prior
dividend periods have not been paid in full, then any dividend declared on the
Series D Preferred Shares and on any Parity Shares for any dividend period will
be declared ratably in proportion to accrued and unpaid dividends on the Series
D Preferred Shares and such Parity Shares.

     As long as any Series D Preferred Shares are outstanding and the following
conditions are satisfied, we may declare, pay or set apart funds for the payment
of any dividend or other distribution with respect to any class or series of our
shares of beneficial interest that ranks junior to the Series D Preferred Shares
for such purposes ("Junior Shares") or purchase any Junior Shares:

     .  all cumulative dividends with respect to the Series D Preferred Shares
        and any Parity Shares at the time such dividends are payable have been
        paid or declared, and funds have been set apart for payment of such
        dividends, and

     .  sufficient funds have been paid or declared and set apart for the
        payment of the dividend for the current dividend period with respect to
        the Series D Preferred Shares and any Parity Shares.

Our purchase or redemption of common shares for the purpose of any of our
employee, incentive or benefit plans or that of any subsidiary is not subject to
the above conditions. We will first credit any dividend payment that we make on
the Series D Preferred Shares against the earliest accrued but unpaid dividend
due with respect to the Series D Preferred Shares that remains payable.

     As used herein, the term "dividend" does not include dividends or other
distributions payable solely in Fully Junior Shares, or in options, warrants or
rights to subscribe for or purchase any Fully Junior Shares. The term "Fully
Junior Shares" means Junior Shares that rank junior to the Series D Preferred
Shares both as to the payment of dividends and the distribution of assets upon
liquidation, dissolution and winding up.

     Liquidation Rights. Upon any voluntary or involuntary liquidation,
dissolution or winding up by us, the holders of Series D Preferred Shares will
be entitled to receive out of our assets legally available for distribution to
shareholders a liquidation preference of $26.50 per Series D Preferred Share,
plus an amount per Series D Preferred Share equal to all dividends, whether or
not earned or declared, accrued and unpaid thereon to the date of final
distribution to such holders, and no more.

     We may not make any payment to any holder of Junior Shares until we pay the
holders of Series D Preferred Shares and Parity Shares their liquidation
preference in full. Upon liquidation, if our assets are insufficient

                                       10
<PAGE>

to pay the liquidation preference in full to any holder of the Series D
Preferred Shares or any other Parity Shares, then our assets will be distributed
to the holders of Series D Preferred Shares and any such Parity Shares ratably
in accordance with the respective amounts which would be payable on such Series
D Preferred Shares and any such Parity Shares, if all amounts payable were paid
in full. Neither our consolidation or merger with another entity, a statutory
share exchange nor a sale, lease or transfer of all or substantially all of our
assets will be considered a liquidation, dissolution or winding up, voluntary or
involuntary.

     In determining whether a distribution, by dividend, redemption or other
acquisition of shares or otherwise, to our shareholders whose rights on
dissolution are junior to those of holders of Series D Preferred Shares is
permitted under Maryland law, no effect shall be given to the amounts that would
be needed, if we were to be dissolved at the time of the distribution, to
satisfy the preferential rights upon dissolution of holders of Series D
Preferred Shares.

     Redemption at Our Option. We may not redeem the Series D Preferred Shares
prior to December 29, 2005 except as may be required to maintain our REIT
status. On and after December 29, 2005, we may redeem the Series D Preferred
Shares for cash out of legally available funds, at a redemption price of $26.50
per share, plus accumulated, accrued and unpaid dividends.  We must give 30 to
90 days prior written notice of redemption.

     If we mail notice of redemption of any Series D Preferred Shares and we
deposit the funds necessary for the redemption in trust, dividends will cease to
accrue on the Series D Preferred Shares being redeemed, those shares will no
longer be deemed to be outstanding and all rights of the holders of those shares
will cease, except the right to convert such shares into common shares and the
right to receive the redemption price. If we redeem fewer than all the
outstanding Series D Preferred Shares, we will select the shares to be redeemed
by lot or by any other method.

     Change of Control. In the event of a change of control of Prentiss
Properties Trust, we must elect to either (1) offer to repurchase the Series D
Preferred Shares at a price equal to the liquidation preference, plus accrued
and unpaid dividends, whether or not declared or (2) increase the dividend rate
by the product of:

     .    the greater of

          .    12% or
          .    the most recently published interest rate for ten-year U.S.
               Treasury securities plus 8%

     multiplied by

     .    the greater of:

          .    the liquidation preference per Series D Preferred Share or
          .    the number of common shares into which a Series D Preferred Share
               is convertible multiplied by the average trading price of our
               common stock for the thirty trading days before the change of
               control.

     Conversion. By giving 60 days prior written notice, the holders of the
Series D Preferred Shares have the right to convert all or any portion of such
shares into a number of common shares based on a conversion price of $26.50 per
common share, subject to adjustment (the "Conversion Price"). Conversion may
also occur in the event of a change of control of Prentiss Properties Trust or
the termination of our status as a REIT, or as we otherwise determine. The right
to convert Series D Preferred Shares called for redemption will terminate at the
close of business on the fifth business day prior to the redemption date for
such Series D Preferred Shares unless we do not pay the applicable redemption
price. Holders of Series D Preferred Shares may convert those shares by
surrendering the certificate representing those shares endorsed to us or in
blank at the office of the Transfer Agent, together with a written notice of
conversion.

     The holders of Series D Preferred Shares at the close of business on a
dividend record date will be entitled to receive that dividend on the
corresponding Dividend Payment Date, even if they convert the Series D Preferred
Shares between those dates. The holders of Series D Preferred Shares who
surrender such shares for conversion during the period between the close of
business on any dividend record date and the opening of business on the
corresponding Dividend Payment Date, except shares converted after the issuance
of a redemption notice during such period, must be accompanied by payment of an
amount equal to the dividend payable on such shares on such Dividend Payment
Date. Holders of Series D Preferred Shares on a dividend payment record date
who, or whose transferee, tender any such shares for conversion into common
shares on the corresponding Dividend Payment Date will receive the dividend
payable by us on such Series D Preferred Shares on such date, and the converting
holder need not include payment of the amount of such dividend upon surrender of
Series D Preferred Shares for conversion. We will not otherwise make any payment
or allowance for unpaid dividends, whether or not in arrears, on converted
Series D Preferred Shares or for dividends on the common shares issued upon such
conversion.



                                       11
<PAGE>

     Conversion Price Adjustments. The Conversion Price is subject to adjustment
upon the following events:

     .  the payment of dividends and other distributions payable in common
        shares on any class of our shares of beneficial interest;

     .  the subdivision, combination and reclassification of common shares;

     .  the issuance to all holders of our common shares of rights, options or
        warrants entitling them to subscribe for or purchase common shares at a
        price per share less than 100% of the fair market value per common
        share, as defined in the Series D Articles Supplementary;

     .  the distribution to all holders of our common shares of any of our
        securities, other than common shares, or evidence of our indebtedness or
        assets, excluding cumulative cash dividends or distributions that are
        less than undistributed funds from operations, or rights, options or
        warrants to subscribe for or purchase any of our securities, excluding
        those rights, options and warrants referred to above; and

     .  our tender or exchange offer for all or any portion of the common shares
        which involves the payment of consideration per common share having a
        fair market value that exceeds the Current market price per common
        share, as defined in the Series D Articles Supplementary.

     If we are a party to any transaction, including a merger, consolidation,
statutory share exchange, self tender offer for all or substantially all of our
common shares, sale of all or substantially all of our assets or
recapitalization of our common shares, in which common shares will be converted
into the right to receive shares, securities or other property, each Series D
Preferred Share that is not redeemed or converted into the right to receive
shares, securities or other property prior to such transaction will thereafter
be convertible into the kind and amount of shares of beneficial interest,
securities and other property receivable upon the consummation of such
transaction by a holder of that number of common shares into which one Series D
Preferred Share was convertible immediately prior to such transaction.  Such
holder of common shares (1) may not be a person with which we consolidated or
into which we merged or which merged into us or to which such sale or transfer
was made, as the case may be, and (2) must exercise any rights of election as to
the kind or amount of shares, securities and other property receivable upon such
transaction. We may not become a party to any such transaction unless the terms
thereof are consistent with the foregoing.

     No adjustment of the Conversion Price is required until cumulative
adjustments amount to 1% or more of the Conversion Price. Any adjustments not
made will be carried forward and taken into account in subsequent adjustments.

     Limitation on Issuance of Additional Preferred Shares and Indebtedness.
Without the written consent of the holders of a majority of the issued and
outstanding Series D Preferred Shares, neither we nor the operating partnership,
or any of our subsidiaries, may issue any class of preferred securities or incur
any indebtedness, other than trade payables or accrued expenses incurred in the
ordinary course of business, if such issuance would cause our ratio of
Consolidated EBITDA to Consolidated Fixed Charges, as defined in the Series D
Articles Supplementary, for the four fiscal quarters immediately preceding such
issuance to be less than 1.75 to 1.0.

     Ranking. With respect to payment of dividends and amounts upon liquidation,
dissolution or winding up, the Series D Preferred Shares will rank as follows:

     .  senior to the common shares and any other class or series of our shares
        of beneficial interest over which the Series D Preferred Shares have
        preference or priority in the payment of dividends or distributions upon
        our liquidation, dissolution or winding up;

     .  on a parity with all our equity securities, the terms of which provide
        that the holders of such class or series and the holders of Series D
        Preferred Shares shall be entitled to the receipt of

                                       12
<PAGE>

        dividends and amounts distributable upon liquidation, dissolution or
        winding up in proportion to their respective amounts of accrued and
        unpaid dividends per share or liquidation preference, without the
        preference or priority of one over the other; and

     .  junior to all our existing and future indebtedness and our equity
        securities, the terms of which provide that the holders of such class or
        series are entitled to receipt of dividends or amounts distributable
        upon liquidation, dissolution or winding up, as the case may be, in
        preference or priority to the holders of the Series D Preferred Shares.
        The term "equity securities" does not include convertible debt
        securities, which will rank senior to the Series D Preferred Shares
        prior to conversion.

     Voting Rights. The holders of Series D Preferred Shares generally have no
voting rights. However, if for two consecutive quarterly periods any of the
following conditions exist, the number of trustees constituting our board of
trustees will be increased by two, and the holders of Series D Preferred Shares,
voting as a single class, will have the right to elect the two additional
trustees at any annual meeting of shareholders or a properly called special
meeting:

     .  dividends payable on the Series D Preferred Shares are in arrears,
        whether or not earned or declared;

     .  we fail to pay dividends on the common shares of at least $0.38 per
        share, subject to adjustment; or

     .  we fail to maintain a ratio of Consolidated EBITDA to Consolidated Fixed
        Charges of at least 1.75.

     Whenever all of the above three conditions cease to exist, then such voting
rights will terminate, and the number of trustees on our board of trustees will
be reduced accordingly. The term of office of all trustees so elected will
terminate with the termination of such voting rights.

     In addition, the approval of at least 51% of holders of the outstanding
Series D Preferred Shares, voting as a single class, is required in order to:

     .  amend, alter or repeal our declaration of trust, including our articles
        supplementary, to affect materially and adversely the rights,
        preferences or voting power of the holders of the Series D Preferred
        Shares. The amendment of our declaration of trust to create, authorize
        or increase the authorized number of any Parity Shares, Junior Shares or
        Fully Junior Shares will not be considered to have a material or adverse
        affect on the holders of the Series D Preferred Shares;

     .  enter into a share exchange that affects the Series D Preferred Shares;
        or

     .  consolidate with or merge with another entity, or consolidate or merge
        another entity with and into us.

     The approval of the holders of the outstanding Series D Preferred Shares is
not required in connection with a merger or consolidation if each Series D
Preferred Share remains outstanding without a material and adverse change to its
terms and rights or is converted into or exchanged for convertible preferred
shares of the surviving entity having rights identical in all material respects
to that of the Series D Preferred Shares. Additionally, no such vote of the
holders of the Series D Preferred Shares is required if we redeem all the
outstanding Series D Preferred Shares to the extent such redemption is
authorized by the Series D Articles Supplementary and our declaration of trust.

                                       13
<PAGE>

Registration Rights

     This summary of the material terms of the registration rights agreement
with SCGP does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the registration rights
agreement.

     Pursuant to the registration rights agreement, we have agreed with SCGP,
for the benefit of holders of the Series D Preferred Shares and of any common
shares issued upon the conversion thereof, that we will, at our cost, keep the
registration statement effective until March 20, 2004, or earlier if all Series
D Preferred Shares and common shares covered by the registration statement have
been sold pursuant to the registration statement or may be sold in accordance
with Rule 144(k) under the Securities Act.

     We will provide to each selling shareholder copies of the registration
statement, any amendment thereto, the prospectus that is a part of the
registration statement and such other documents as the selling shareholders may
reasonably request and take other actions as are required to permit unrestricted
resales of the Series D Preferred Shares or the Conversion Common Shares, as the
case may be. A selling shareholder selling Series D Preferred Shares or
Conversion Common Shares pursuant to the registration statement generally will
be

     .  required to deliver a prospectus to purchasers,

     .  subject to civil liability provisions under the Securities Act in
        connection with such sales, and

     .  bound by the provisions of the registration rights agreement that are
        applicable to such selling shareholder, including indemnification
        obligations.

Additionally, prospective investors should be aware that if a selling
shareholder wishes to sell Series D Preferred Shares or Conversion Common Shares
through a broker-dealer, the broker-dealer may be unwilling to proceed with such
sale unless the selling shareholder indemnifies it against securities law
liabilities the broker-dealer may face as a result of participating in a
registered distribution.

Restrictions on Ownership and Transfer

     In order to qualify as a REIT under the Internal Revenue Code, we must
satisfy requirements concerning the ownership of our outstanding shares of
beneficial interest. Specifically, no more than 50% of the value of our
outstanding shares of beneficial interest may be owned, directly or indirectly,
by five or fewer individuals or entities during the last half of a taxable year,
other than the 1996 taxable year, and we must be beneficially owned by 100 or
more persons during at least 335 days of a taxable year of 12 months or during a
proportionate part of a shorter taxable year, other than our 1996 taxable year.

     Because our board of trustees believes it is essential for us to continue
to qualify as a REIT, our declaration of trust contains an ownership limitation
that provides that no person may own more than 8.5% of the number of outstanding
common shares, other than Michael V. Prentiss, who currently may own up to 15%
of the number of outstanding common shares, or more than 9.8% of the number of
outstanding preferred shares of any series, other than SCGP, which may own all
of the Series D Preferred Shares. Our board of trustees may, but is not required
to, decrease the ownership limit applicable to Mr. Prentiss' ownership of common
shares to as low as 9.8% of the outstanding common shares upon an increase in
the number of outstanding common shares or a reduction of the number of common
shares owned, directly or indirectly, by Mr. Prentiss. Upon any such adjustment,
the ownership limitation applicable to other shareholders with respect to the
common shares will be increased proportionately to a maximum of 9.8% of the
number of outstanding common shares.

     As long as we receive evidence that our REIT status will not be lost, our
board of trustees may exempt a recipient of common shares from the ownership
limitation as follows:

     .  upon receipt of a ruling from the Internal Revenue Service (the
        "Service"),

                                       14
<PAGE>

     .  an opinion of counsel, or

     .  other evidence satisfactory to our board of trustees.

Our board of trustees has exempted SCGP from the ownership limitation on the
condition that SCGP not own more than 11% of the number of outstanding common
shares. Our board of trustees may monitor, modify, suspend or revoke SCGP's 11%
ownership limitation as may be required to maintain our REIT status. Our board
of trustees may not grant an exemption from the ownership limitation to any
proposed transferee if such exemption would result in the termination of our
status as a REIT.

     Any transfer of common shares or preferred shares that causes any one of
the following conditions to exist will be null and void, and the intended
transferee will acquire no rights in such common shares or preferred shares:

     .  any person owning, directly or indirectly, common shares or preferred
        shares in excess of the ownership limitation;

     .  our outstanding shares being owned by fewer than 100 persons, as
        determined without reference to any rules of attribution;

     .  our being "closely held" within the meaning of Section 856(h) of the
        Internal Revenue Code; or

     .  our owning, directly or constructively, 10% or more of the ownership
        interests in one of our tenants or the operating partnership's real
        property within the meaning of Section 856(d)(2)(B) of the Internal
        Revenue Code.

If any purported transfer of common shares or preferred shares results in any of
the four above conditions, the common shares or preferred shares in excess of
the applicable limitation will be designated as "shares-in-trust" and
transferred automatically to a share trust effective on the day before the
purported transfer of such common shares or preferred shares. The record holder
of the common shares or preferred shares that are designated as shares-in-trust
will be required to submit such number of common shares or preferred shares to
us for registration in the name of the share trust. We will designate the
trustee of the share trust, but the trustee of the share trust will not be
affiliated with us. We will name one or more charitable organizations as the
share trust's beneficiary.

     Shares-in-trust will remain issued and outstanding common shares or
preferred shares and will be entitled to the same rights and privileges as all
other shares of the same class or series. The share trust will receive all
dividends and distributions on the shares-in-trust and will hold such dividends
and distributions in trust for the benefit of the share trust's beneficiary. The
share trustee will vote all shares-in-trust. The trustee of the share trust may
transfer the shares-in-trust, provided the transferee:

     .  purchases such shares-in-trust for valuable consideration, and

     .  acquires such shares-in-trust without such acquisition resulting in a
        transfer to another share trust and resulting in the redesignation of
        such common shares or preferred shares as shares-in-trust.

     The prohibited owner with respect to shares-in-trust:

     .  will be required to repay to the share trust the amount of any dividends
        or distributions received by the prohibited owner that are attributable
        to any shares-in-trust, and

     .  will generally receive from the share trustee the lower of (1) the
        amount paid by the prohibited owner for the common shares designated as
        shares-in-trust, or, in the case of a gift or devise, the "market
        price," as defined in our declaration of trust, per share on the date of
        such transfer, or (2) the amount received by the share trustee from the
        sale of such shares-in-trust. Any amounts received by the trustee

                                       15
<PAGE>

        of the share trust in excess of the amounts to be paid to the prohibited
        owner will be distributed to the share trust's beneficiary.

     The shares-in-trust will be deemed to have been offered for sale to us, or
our designee, at a price per share equal to the lesser of the following:

     .  the price per share in the transaction that created such shares-in-
        trust, or, in the case of a gift or devise, the market price per share
        on the date of such transfer, or

     .  the market price per share on the date that we, or our designee, accepts
        such offer.

We will have the right to accept such offer for a period of 90 days after the
date of the purported transfer that resulted in such shares-in-trust.

     Any person who acquires or attempts to acquire common shares or preferred
shares in violation of the above restrictions, or any person who owned common
shares or preferred shares that were transferred to a share trust, is required
to immediately give written notice to us and to provide such other information
to us as we may request in order to determine the effect, if any, of such
transfer on our status as a REIT.

     Our declaration of trust requires all persons who own, directly or
indirectly, more than 5%, or such lower percentages as required pursuant to
regulations under the Internal Revenue Code, of the outstanding common shares
and preferred shares, within 30 days after January 1 of each year, to provide a
written statement or affidavit to us stating their name and address, the number
of common shares and preferred shares owned, and a description of how such
shares are held. In addition, each direct or indirect shareholder must provide
such additional information to us as we may request in order to determine the
effect, if any, of such ownership on our status as a REIT and to ensure
compliance with the ownership limitation.

     The ownership limitation generally will not apply to the acquisition of
common shares or preferred shares by an underwriter that participates in a
public offering of such shares. In addition, our board of trustees, upon receipt
of a ruling from the Service or an opinion of counsel and upon such other
conditions as our board of trustees may direct, may exempt a person from the
ownership limitation. However, our board of trustees may not grant an exemption
from the ownership limitation to any proposed transferee whose ownership, direct
or indirect, of our shares of beneficial interest in excess of the ownership
limitation would result in the termination of our status as a REIT. These
restrictions will continue to apply until our board of trustees determines that
it is no longer in our best interests to attempt to qualify, or to continue to
qualify, as a REIT and there is an affirmative vote of a majority of the votes
entitled to be cast on such matter at a regular or special meeting of our
shareholders.

     The ownership limitation could have the effect of delaying, deferring or
preventing a transaction or a change in control that might involve a premium
price for our common shares or might otherwise be in the best interest of our
shareholders. All certificates representing common shares or preferred shares
will bear a legend referring to the restrictions described above.

Federal Income Tax Considerations

     The following is a summary of the material federal income tax
considerations that may be relevant to a prospective holder of Series D
Preferred Shares or Conversion Common Shares (collectively, the "Offered
Securities"). This discussion does not address all aspects of taxation that may
be relevant to particular shareholders in light of their personal investment or
tax circumstances, or to shareholders, such as insurance companies, tax-exempt
organizations (except to the extent described below), financial institutions,
broker-dealers, foreign corporations, and persons who are not citizens or
residents of the United States (except to the extent described below), that are
subject to special treatment under the federal income tax laws.

     This discussion is based on current provisions of the Internal Revenue
Code, existing, temporary, and currently proposed Treasury Regulations
promulgated under the Internal Revenue Code, the legislative history of

                                       16
<PAGE>

the Internal Revenue Code, existing administrative rulings and practices of the
Service, and judicial decisions. No assurance can be given that future
legislative, judicial, or administrative actions or decisions, which may be
retroactive in effect, will not affect the accuracy of any statements in this
prospectus with respect to the transactions entered into or contemplated prior
to the effective date of such changes. Akin, Gump, Strauss, Hauer & Feld, L.L.P.
has opined that this summary of the material federal income tax consequences
fairly summarizes, subject to the limitations described herein, the federal
income tax considerations that are likely to be material to a holder of the
Offered Securities.

     Because your income tax considerations may vary depending on your personal
investment or tax circumstances, we recommend that you consult your own tax
advisor regarding the specific tax consequences to you of the purchase,
ownership and sale of the Offered Securities and of our election to be taxed as
a REIT, including the federal, state, local, foreign and other tax consequences
of such purchase, ownership, sale and election, and of potential changes in
applicable tax laws.

Taxation of Prentiss Properties Trust

     We have elected to be taxed as a REIT since our tax year ending on December
31, 1996. Qualification and taxation as a REIT depends upon our ability to
continuously meet the various REIT qualification tests, which include actual
annual operating results, distribution levels and share ownership. We believe
that, commencing with such taxable year, we have been organized and have
operated in such a manner so as to qualify for taxation as a REIT under the
Internal Revenue Code, and we intend to continue to operate in such a manner but
cannot assure you that we will do so. In addition, Akin Gump has opined, based
upon representations of fact given by us to them, that we were organized and
have operated in conformity with the requirements for qualification as a REIT
under the Internal Revenue Code beginning with our taxable year ending December
31, 1996, and through the date hereof and our current and proposed method of
operation will enable us to continue to qualify as a REIT. In rendering its
opinion, Akin Gump has not independently verified these facts. We can give no
assurance, however, that the Service will agree that we have or will remain so
qualified.

     As a REIT, we generally are not subject to federal corporate income tax on
our net income that is distributed currently to our shareholders. That treatment
substantially eliminates the "double taxation", i.e., taxation at both the
corporate and shareholder levels, that generally results from an investment in a
corporation. However, we will be subject to federal income tax in the following
circumstances:

     .  we will be taxed at regular corporate rates on any undistributed REIT
        taxable income, including undistributed net capital gains.

     .  we may be subject to the "alternative minimum tax" on our undistributed
        items of tax preference, if any.

     .  if we have (1) net income from the sale or other disposition of
        "foreclosure property" that is held primarily for sale to customers in
        the ordinary course of business or (2) other nonqualifying income from
        foreclosure property, we will be subject to tax at the highest corporate
        rate on such income.

     .  if we have net income from prohibited transactions, which are, in
        general, sales or other dispositions of property, other than foreclosure
        property, held primarily for sale to customers in the ordinary course of
        business, such income will be subject to a 100% tax.

     .  if we fail to satisfy the 75% gross income test or the 95% gross income
        test, as discussed below, and nonetheless have maintained our
        qualification as a REIT because other requirements have been met, we
        will be subject to a 100% tax on (1) the gross income attributable to
        the greater of the amount by

                                       17
<PAGE>

        which we fail the 75% or 95% gross income test multiplied by (2) a
        fraction intended to reflect our profitability.

     .  if we should fail to distribute during each calendar year at least the
        sum of (1) 85% of our REIT ordinary income for such year, (2) 95% of our
        REIT capital gain net income for such year, and (3) any undistributed
        taxable income from prior periods, we will be subject to a 4% excise tax
        on the excess of such required distribution over the amounts actually
        distributed. To the extent that we elect to retain and pay income tax on
        the net long-term capital gain that we receive in a taxable year, such
        retained amounts will be treated as having been distributed for purposes
        of the 4% excise tax.

     .  if we acquire any asset from a C corporation, i.e., a corporation
        generally subject to full corporate-level tax, in a transaction in which
        the basis of the asset in our hands is determined by reference to the
        basis of the asset, or any other asset, in the hands of the C
        corporation and we recognize gain on the disposition of such asset
        during the 10-year period beginning on the date on which such asset was
        acquired by us, then to the extent of such asset's "built-in-gain",
        i.e., the excess of the fair market value of such asset at the time of
        our acquisition over the adjusted basis in such asset at such time, such
        gain will be subject to tax at the highest regular corporate rate
        applicable, as provided in Treasury Regulations that have not yet been
        promulgated. The results described above with respect to the recognition
        of "built-in-gain" assume that we will make an election pursuant to IRS
        Notice 88-19 if we were to make any such acquisition.

Requirements for Qualification

     The Internal Revenue Code defines a REIT as a corporation, trust, or
association:

     (1)  that is managed by one or more trustees or directors;

     (2)  the beneficial ownership of which is evidenced by transferable shares
          or by transferable certificates of beneficial interest;

     (3)  that would be taxable as a domestic corporation but for the REIT
          sections of the Internal Revenue Code;

     (4)  that is neither a financial institution under the Internal Revenue
          Code nor an insurance company to which subchapter L of the Internal
          Revenue Code applies;

     (5)  the beneficial ownership of which is held by 100 or more persons;

     (6)  not more than 50% in value of the outstanding shares of which is
          owned, directly or indirectly, by five or fewer individuals or
          entities during the last half of each taxable year (the "5/50 Rule");

     (7)  that makes an election to be a REIT, or has made such election for a
          previous taxable year, and satisfies all relevant filing and other
          administrative requirements established by the Service that must be
          met in order to elect and maintain REIT status;

     (8)  that uses a calendar year for federal income tax purposes and complies
          with the recordkeeping requirements of the Internal Revenue Code and
          Treasury Regulations promulgated thereunder; and

     (9)  that meets the Internal Revenue Code's income and asset tests.

     If we comply with the requirements for ascertaining the ownership of our
outstanding shares of beneficial interest and do not know or have reason to know
that we have violated the 5/50 Rule, we will be deemed to satisfy the 5/50 Rule
for the taxable year. We have issued sufficient common shares with sufficient
diversity of ownership to allow us to satisfy requirements (5) and (6). In
addition, our declaration of trust provides for restrictions

                                       18
<PAGE>

regarding transfer of our shares that are intended to assist us in continuing to
satisfy the share ownership requirements described in clauses (5) and (6) above.

     For purposes of determining stock ownership under the 5/50 Rule, a
supplemental unemployment compensation benefits plan, a private foundation, or a
portion of a trust permanently set aside or used exclusively for charitable
purposes is generally considered an individual. A trust that is a qualified
trust under the Internal Revenue Code, however, is generally not considered an
individual, and beneficiaries of such trust are treated as holding shares of a
REIT in proportion to their actuarial interests in such trust for purposes of
the 5/50 Rule.

     We currently have three wholly-owned subsidiaries, the general partner of
the operating partnership, the general partner of Prentiss Properties Real
Estate Fund I, L.P. and the general partner of Prentiss Austin Properties, L.P.,
and may have additional wholly-owned subsidiaries in the future.  The Internal
Revenue Code provides that a corporation that is a "qualified REIT subsidiary"
shall not be treated as a separate corporation, and all assets, liabilities, and
items of income, deduction, and credit of a "qualified REIT subsidiary" shall be
treated as assets, liabilities, and items of income, deduction, and credit of
the REIT. A "qualified REIT subsidiary" is a corporation all of the capital
stock of which is owned by the REIT. In applying the requirements described
herein, any of our "qualified REIT subsidiaries" will be ignored, and all
assets, liabilities, and items of income, deduction, and credit of such
subsidiaries will be treated as our assets, liabilities, and items of income,
deduction, and credit. All of our corporate subsidiaries are "qualified REIT
subsidiaries." Those subsidiaries, therefore, will not be subject to federal
corporate income taxation, although they may be subject to state and local
taxation.

     In the case of a REIT that is a partner in a partnership, the Treasury
Regulations provide that the REIT will be deemed to own its proportionate share,
determined on the basis of the REIT's capital interest in the partnership, of
the assets of the partnership and will be deemed to be entitled to the gross
income of the partnership attributable to such share. In addition, the assets
and gross income of the partnership will retain the same character in the hands
of the REIT for purposes of the REIT tests of the Internal Revenue Code,
including satisfying the gross income and asset tests described below. Thus, our
proportionate share of the assets, liabilities, and items of income of the
operating partnership and the noncorporate subsidiaries of the operating
partnership will be treated as our assets, liabilities, and items of income for
purposes of applying the requirements described herein.

Income Tests

     In order for us to qualify and to maintain our qualification as a REIT, two
requirements relating to our gross income must be satisfied annually. First, at
least 75% of our gross income, excluding gross income from prohibited
transactions, for each taxable year must consist of defined types of income
derived directly or indirectly from investments relating to real property or
mortgages on real property, including "rents from real property" and, interest
on obligations secured by mortgages on real property, or qualified temporary
investment income. Second, at least 95% of our gross income, excluding gross
income from prohibited transactions, for each taxable year must be derived from
such real property or temporary investments, and from dividends, other types of
interest, some payments under hedging instruments and gain from the sale or
disposition of stock or securities and some hedging instruments, or from any
combination of the foregoing.

     The rent we receive from our tenants will qualify as "rents from real
property" in satisfying the gross income requirements for a REIT described above
only if the following conditions are met:

     .  the amount of rent must not be based, in whole or in part, on the income
        or profits of any person. However, an amount received or accrued
        generally will not be excluded from the term "rents from real property"
        solely by reason of being based on a fixed percentage or percentages of
        receipts or sales.

     .  the rent received from a tenant will not qualify as "rents from real
        property" in satisfying the gross income tests if we, or a direct or
        indirect owner of 10% or more of our shares of beneficial interest,
        directly or constructively owns 10% or more of such tenant.

                                       19
<PAGE>

     .  if rent attributable to personal property, leased in connection with a
        lease of a property, is greater than 15% of the total rent received
        under the lease, then the portion of rent attributable to such personal
        property will not qualify as "rents from real property."

     .  for the rent to qualify as "rents from real property," we generally must
        not operate or manage our properties or furnish or render services to
        the tenants of such properties, other than through an "independent
        contractor" who is adequately compensated and from whom we derive no
        revenue.

The "independent contractor" requirement, however, does not apply to the extent
the services provided by us are "usually or customarily rendered" in connection
with the rental of space for occupancy only, e.g., furnishing water, heat,
light, and air conditioning and cleaning windows, public entrances, and lobbies,
and are not otherwise considered "rendered to the occupant", for example renting
parking spaces on a reserved basis to tenants. In addition, we may furnish or
render a very small amount of "noncustomary services" to the tenants of a
property other than through an independent contractor as long as the amount that
we receive for such services does not exceed 1% of our total receipts from the
property. For this purpose, the amount attributable to our noncustomary services
will be at least equal to 150% of our cost of providing the services.  In
addition, services provided through "taxable REIT subsidiaries" (as defined
below) may qualify as "rents from real property" even though we do not use an
independent contractor to provide such services.

     We do not charge rent for any portion of any property that is based, in
whole or in part, on the income or profits of any person, except by reason of
being based on a fixed percentage or percentages of receipts or sales, as
described above. Furthermore, we expect that, with respect to other properties
that we may acquire in the future, we will not charge rent for any portion of
any property that is based, in whole or in part, on the income or profits of any
person to the extent that the receipt of such rent would jeopardize our status
as a REIT. In addition, although we currently receive rent from tenants that
could be considered related parties under the Internal Revenue Code (a "Related
Party Tenant"), we expect that, to the extent that we receive rent from a
Related Party Tenant, such rent will not cause us to fail to satisfy either the
75% or 95% gross income test. We currently do not receive rent attributable to
personal property that is greater than 15% of the rent received under the
applicable Lease. We expect that in the future we will not allow the rent
attributable to personal property leased in connection with any lease of real
property to exceed 15% of the total rent received under the lease, if the
receipt of such rent would cause us to fail to satisfy either the 75% or 95%
gross income test.

     Through the operating partnership and the noncorporate subsidiaries, none
of which constitutes a qualifying independent contractor, we provide and will
provide in the future real estate services to our tenants. We believe that all
such services are "usually or customarily rendered" in connection with the
rental of space for occupancy only and are not otherwise "rendered to the
occupant," so that the provision of such services does not jeopardize the
qualification of the rent as "rents from real property." In the case of any
services that are not "usual and customary" under the foregoing rules, we employ
and will continue to employ qualifying independent contractors to provide such
services. Furthermore, we expect that we will not provide noncustomary services
with respect to other properties that we acquire in the future, other than
through a qualifying independent contractor or through a taxable REIT
subsidiary, to the extent that the provision of such services would cause us to
fail to satisfy either the 75% or 95% gross income test.

     If any portion of the rent does not qualify as "rents from real property"
because such rent is attributable to personal property and exceeds 15% of the
total rent received under the applicable lease, the portion of the rent that is
attributable to the personal property will not be qualifying income for purposes
of either the 75% or 95% gross income test. Thus, if the rent attributable to
such personal property, plus any other income received by us during a taxable
year that is not qualifying income for purposes of the 95% gross income test,
exceeds 5% of our gross income during such year, we would likely lose our REIT
status. If any portion of the rent received under a lease does not qualify as
"rents from real property" because either the rent is considered based on the
income or profits of any person or the tenant is a Related Party Tenant, none of
the rent we receive under such lease would qualify as "rents from real
property." In that case, if the rent we receive under such a lease, plus any
other income we receive during the taxable year that is not qualifying income
for purposes of the 95% gross income test, exceeds 5% of our

                                       20
<PAGE>

gross income for such year, we would also likely lose our REIT status. Finally,
if any portion of the rent does not qualify as "rents from real property"
because we furnish noncustomary services to the tenants of a property other than
through a qualifying independent contractor, none of the rent we receive with
respect to the related property would qualify as "rents from real property." In
that case, if the rent we receive with respect to the related property, plus any
other income we receive during the taxable year that is not qualifying income
for purposes of the 95% gross income test, exceeds 5% of our gross income for
such year, we would likewise lose our REIT status.

     Through our operating partnership, we may receive other types of income
that will not qualify for purposes of the 75% or 95% gross income test. In
particular, dividends paid with respect to the stock of Prentiss Properties
Resources, Inc., a taxable REIT subsidiary owned by the operating partnership
will be qualifying income for purposes of the 95% gross income test, but not the
75% gross income test. In addition, the operating partnership has received, and
in the future will receive indirectly, fees for the performance of services by a
noncorporate subsidiary with respect to properties that are owned, directly or
indirectly, by the operating partnership. Although the tax law is not entirely
clear, to the extent that the operating partnership owns, directly or
indirectly, both an interest in such properties and an interest in the
Noncorporate Subsidiary providing the services, such fees should be disregarded
for purposes of the 75% and 95% gross income tests. However, the remainder of
such fees received by the operating partnership, that is, any portion of the
fees that is attributable to a third party's ownership interest in our
properties, will be nonqualifying income for purposes of the 75% and 95% gross
income tests. In addition, any fees received, directly or indirectly, by the
operating partnership in exchange for providing services with respect to
properties owned by unrelated third parties will not be qualifying income for
purposes of the 75% and 95% gross income tests. Furthermore, to the extent that
we receive interest that is accrued on the late payment of the rent, such
amounts will not qualify as "rents from real property" and, thus, will not be
qualifying income for purposes of the 75% gross income test, however, that
interest will be treated as interest that qualifies for the 95% gross income
test. We believe that the aggregate amount of any such nonqualifying income in
any taxable year has not caused and will not cause us to fail to satisfy either
the 75% or 95% gross income test.

     The net income derived from a prohibited transaction is subject to a 100%
tax. The term "prohibited transaction" generally includes a sale or other
disposition of property, other than foreclosure property, that is held primarily
for sale to customers in the ordinary course of a trade or business. We believe
that no asset owned by us or the operating partnership will be held for sale to
customers and that a sale of any such asset will not be in the ordinary course
of our or the operating partnership's business. Whether an asset is held
"primarily for sale to customers in the ordinary course of a trade or business"
depends, however, on the facts and circumstances in effect from time to time,
including those related to a particular asset. Nevertheless, we will attempt to
comply with the terms of safe-harbor provisions in the Internal Revenue Code
prescribing when asset sales will not be characterized as prohibited
transactions. Complete assurance cannot be given, however, that we can comply
with the safe-harbor provisions of the Internal Revenue Code or avoid owning
property that may be characterized as property held "primarily for sale to
customers in the ordinary course of a trade or business."

     It is possible that, from time to time, we or the operating partnership
will enter into hedging transactions with respect to one or more of our assets
or liabilities. Any such hedging transaction could take a variety of forms,
including interest rate swap contracts, interest rate cap or floor contracts,
futures or forward contracts, and options. To the extent that we or the
operating partnership enters into an interest rate swap, cap agreement, option,
futures contract, forward rate agreement, or similar financial instrument to
reduce the interest rate risks with respect to indebtedness incurred or to be
incurred to acquire or carry real estate assets, any periodic income or gain
from the disposition of such contract should be qualifying income for purposes
of the 95% gross income test, but not the 75% gross income test. To the extent
that we or the operating partnership hedges with other types of financial
instruments or in other situations, it may not be entirely clear how the income
from those transactions will be treated for purposes of the various income tests
that apply to REITs under the Internal Revenue Code. We intend to structure any
hedging transactions in a manner that does not jeopardize our status as a REIT.

     If we fail to satisfy one or both of the 75% or 95% gross income tests for
any taxable year, we nevertheless may qualify as a REIT for such year if we are
entitled to relief under the Internal Revenue Code. Those relief provisions
generally will be available if our failure to meet such tests is due to
reasonable cause and not due to willful neglect, we attach a schedule of the
sources of our income to our return, and any incorrect information on the

                                       21
<PAGE>

schedule was not due to fraud with intent to evade tax. It is not possible,
however, to state whether in all circumstances we would be entitled to the
benefit of those relief provisions. Even if those relief provisions apply, a
100% tax would be imposed on:

     .  the gross income attributable to the greater of the amount by which we
        fail the 75% or 95% gross income test multiplied by

     .  a fraction intended to reflect our profitability.

     In connection with and pursuant to the Termination and Release Agreement by
and between Mack-Cali Realty Corporation ("Mack-Cali") and us, Mack-Cali placed
twenty-five million dollars ($25,000,000) into an escrow account for the benefit
of us (the "Escrowed Funds") which, subject to certain restrictions, shall be
drawn down by us each year by the maximum amount that can be paid at that time
to us without causing us to fail either the 75% or 95% gross income tests.  On
September 26, 2000, we requested and received $8.0 million from the escrow
account, and during the first quarter of 2001 we received an additional $7.0
million from the escrow account. We received a private letter ruling from the
Service dated April 5, 2001 stating that the receipt of the remaining Escrowed
Funds would not cause us to fail to maintain our REIT status. We requested and
have received the remaining $10.0 million from the escrow account.

Asset Tests

     We, at the close of each quarter of each taxable year, also must satisfy
the following two tests relating to the nature of our assets:

     .  at least 75% of the value of our total assets must be represented by
        cash or cash items, which generally include receivables, government
        securities, "real estate assets," (which generally includes interests in
        real property, interests in mortgages on real property and shares of
        other REITs) or, in cases where we raise new capital through stock or
        publicly offered long-term, at least five-year, debt, temporary
        investments in stock or debt instruments during the one-year period
        following our receipt of such capital.

     .  of the investments not included in the 75% asset class, the value of any
        one issuer's securities we owned may not exceed 5% of the value of our
        total assets; and we may not own more than 10% of any one issuer's
        outstanding voting securities, except for its interests in the operating
        partnership, the noncorporate subsidiaries, and any qualified REIT
        subsidiary. We are also prohibited from owning more than 10% of the
        value of the outstanding securities of any one issuer. However, this
        does not apply to taxable REIT subsidiaries, qualified REIT subsidiaries
        and certain non-qualified corporate subsidiaries in which the REIT does
        not own more than 10% of the voting securities.

     For purposes of the 75% asset test, the term "interest in real property"
includes an interest in land and improvements thereon, such as buildings or
other inherently permanent structures, including items that are structural
components of such buildings or structures, a leasehold of real property, and an
option to acquire real property, or a leasehold of real property.

     For purposes of the asset tests, we are deemed to own our proportionate
share of the assets of the operating partnership and each noncorporate
subsidiary, rather than our interests in those entities. At least 75% of the
value of our total assets have been and will be represented by real estate
assets, cash and cash items, including receivables, and government securities.
Through the operating partnership, we own 100% of the nonvoting stock of
Prentiss Properties Resources, Inc. We do not own, directly or indirectly, any
of the voting stock of Prentiss Properties Resources, Inc. and believe that the
value of our ownership interest in Prentiss Properties Resources, Inc. does not
exceed 5% of the value of our total assets. In addition, we have not owned, and
will not own securities of any one issuer the value of which

                                       22
<PAGE>

exceeds 5% of the value of our total assets or more than 10% of any one issuer's
outstanding voting securities, (and, we will not own more than 10% of the value
of one issuer's outstanding securities, other than securities of taxable REIT
subsidiaries and certain non-qualified corporate subsidiaries in which we do not
own more than 10% of the voting securities) except for our interests in the
operating partnership, the noncorporate subsidiaries, and any qualified REIT
subsidiary. In addition, we have represented that we will not acquire or
dispose, or cause the operating partnership to acquire or dispose, of assets in
the future in a way that would cause it to violate either asset test.

     If we should fail to satisfy the asset tests at the end of a calendar
quarter, such a failure would not cause us to lose our REIT status if:

     .  we satisfied the asset tests at the close of the preceding calendar
        quarter and

     .  the discrepancy between the value of our assets and the asset test
        requirements arose from changes in the market values of our assets and
        was not wholly or partly caused by an acquisition of nonqualifying
        assets.

If the condition described in the second clause is not satisfied, we still could
avoid disqualification by eliminating any discrepancy within 30 days after the
close of the calendar quarter in which it arose.

Distribution Requirements

     In order to avoid corporate income taxation of our earnings, we are
required to distribute each taxable year dividends, other than capital gain
dividends and retained capital gains, to our shareholders in an aggregate amount
at least equal to the sum of:

     .  90% of our "REIT taxable income", computed without regard to the
        dividends paid deduction and excluding our net capital gain, and

     .  90% of the net income, after tax, if any, from foreclosure property,
        minus.

     .  the sum of items of noncash income.

Such distributions must be paid in the taxable year to which they relate, or in
the following taxable year if declared before we timely file our federal income
tax return for such year and if paid on or before the first regular dividend
payment date after such declaration. To the extent that we do not distribute all
of our net capital gain or distribute at least 90%, but less than 100%, of our
"REIT taxable income," as adjusted, we will be subject to tax thereon at regular
corporate tax rates. Furthermore, if we should fail to distribute during each
calendar year at least the sum of:

     .  85% of our REIT ordinary income for such year,

     .  95% of our REIT capital gain income for such year, and

     .  any undistributed taxable income from prior periods,

we will be subject to a 4% nondeductible excise tax on the excess of such
required distribution over the amounts actually distributed. We have made, and
intend to continue to make, timely distributions sufficient to satisfy the
annual distribution requirement. We may elect to retain and pay income tax on
our long-term capital gains. Any such retained amount will be treated as having
been distributed by us for purposes of the 4% excise tax described above.

     It is possible that, from time to time, we may experience timing
differences between the actual receipt of income and actual payment of
deductible expenses and the inclusion of that income and deduction of such
expenses in arriving at our REIT taxable income. Further, it is possible that,
from time to time, we may be allocated a share of

                                       23
<PAGE>

net capital gain attributable to the sale of depreciated property that exceeds
our allocable share of cash attributable to that sale. Therefore, we may have
less cash than is necessary to meet our annual 95% distribution requirement or
to avoid corporate income tax or the excise tax imposed on undistributed income.
In such a situation, we may find it necessary to arrange for short-term, or
possibly long-term, borrowings or to raise funds through the issuance of
preferred shares or common shares.

     We may be able to rectify a failure to meet the distribution requirement
for a year by paying "deficiency dividends" to our shareholders in a later year,
which may be included in our deduction for dividends paid for the earlier year.
Although we may be able to avoid being taxed on amounts distributed as
deficiency dividends, we will be required to pay to the Service interest based
upon the amount of any deduction taken for deficiency dividends.

Recordkeeping Requirements

     Pursuant to applicable Treasury Regulations, we must maintain records and
request on an annual basis information from our shareholders designed to
disclose the actual ownership of our outstanding shares. We have complied and
intend to continue to comply with such requirements in the future.

Failure to Qualify

     If we fail to qualify for taxation as a REIT in any taxable year, and the
relief provisions do not apply, we will be subject to tax, including any
applicable alternative minimum tax, on our taxable income at regular corporate
rates. Distributions to our shareholders in any year in which we fail to qualify
will not be deductible nor will they be required to be made. In such event, to
the extent of our current and accumulated earnings and profits, all
distributions to shareholders will be taxable as ordinary income, and corporate
distributees may be eligible for the dividends received deduction. Unless
entitled to relief under specific statutory provisions, we will also be
disqualified from taxation as a REIT for the four taxable years following the
year during which we ceased to qualify as a REIT. It is not possible to state
whether in all circumstances we would be entitled to such statutory relief.

Taxation of Taxable U.S. Shareholders

     As long as we qualify as a REIT, distributions not designated as capital
gain dividends or retained capital gains made to our taxable U.S. shareholders
out of current or accumulated earnings and profits will be taken into account by
such U.S. shareholders as ordinary income and will not be eligible for the
dividends received deduction generally available to corporations.  As used
herein, the term "U.S. shareholder" means a holder of Offered Securities that
for U.S. federal income tax purposes is:

     .  a citizen or resident of the United States,

     .  a corporation, partnership, or other entity created or organized in or
        under the laws of the United States or of any political subdivision
        thereof,

     .  an estate whose income from sources without the United States is
        includible in gross income for U.S. federal income tax purposes
        regardless of its connection with the conduct of a trade or business
        within the United States , or

     .  any trust with respect to which (A) a U.S. court is able to exercise
        primary supervision over the administration of such trust and (B) one or
        more U.S. fiduciaries have the authority to control all substantial
        decisions of the trust.

     Distributions that are designated as capital gain dividends generally will
be taxed as long-term capital gains to the extent they do not exceed our actual
net capital gain for the taxable year without regard to the period for which the
shareholder has held his Offered Securities. However, corporate shareholders may
be required to treat up to 20% of capital gain dividends as ordinary income. We
may elect to retain and pay income tax on our net long-term capital gains. In
that case, our shareholders would include in income their proportionate share of
our

                                       24
<PAGE>

undistributed long-term capital gains. In addition, the shareholders would
be deemed to have paid their proportionate share of the tax paid by us, which
would be credited or refunded to the shareholders. Each shareholder's basis in
his shares would be increased by the amount of the undistributed long term
capital gain included in the shareholder's income, less the shareholder's share
of the tax paid by us.

     Distributions in excess of current and accumulated earnings and profits
will not be taxable to a shareholder to the extent that they do not exceed the
adjusted basis of the shareholder's Offered Securities, but rather will reduce
the adjusted basis of such shares. To the extent that such distributions in
excess of current and accumulated earnings and profits exceed the adjusted basis
of a shareholder's Offered Securities, such distributions will be included in
income as gains from the sale or exchange of a capital asset, assuming the
Offered Securities are capital assets in the hands of the shareholder. In
addition, any distribution we declare in October, November, or December of any
year and payable to a shareholder of record on a specified date in any such
month shall be treated as both paid by us and received by the shareholder on
December 31 of such year, provided that the distribution is actually paid by us
during January of the following calendar year.

     Shareholders may not include in their individual income tax returns any of
our net operating losses or capital losses. Instead, we will carry over such
losses for potential offset against our future income. Taxable distributions
from us and gain from the disposition of the Offered Securities will not be
treated as passive activity income and, therefore, shareholders generally will
not be able to apply any "passive activity losses", such as losses from limited
partnerships that engage in passive activities in which a shareholder is a
limited partner, against such income. In addition, taxable distributions from us
generally will be treated as investment income for purposes of the investment
interest limitations. Capital gains from the disposition of Offered Securities,
or distributions treated as such, however, will be treated as investment income
only if the shareholder so elects, in which case such capital gains will be
taxed at ordinary income rates. We have notified and will continue to notify
shareholders after the close of our taxable year as to the portions of the
distributions attributable to that year that constitute ordinary income, return
of capital, and capital gain.

Tax Consequences Upon Conversion of Series D Preferred Shares into Conversion
Common Shares

     Generally, except with respect to cash received in lieu of fractional
shares, no gain or loss will be recognized upon the conversion of the Preferred
Shares into Conversion Common Shares. The tax basis of a holder of Preferred
Shares (a "Preferred Holder") in the Conversion Common Shares received will
equal that holder's tax basis in the Preferred Shares surrendered in the
conversion reduced by any basis attributable to fractional shares deemed
received and the holding period for the Conversion Common Shares will include
the Preferred Holder's holding period for the Preferred Shares. Based on the
Service's present advance ruling policy, cash received in lieu of a fractional
common share upon conversion of Preferred Shares should be treated as a payment
in redemption of the fractional share interest in those common shares.

Deemed Dividends on Series D Preferred Shares

     The conversion price of the Preferred Shares may be adjusted if we make
distributions of stock, cash, or other property to Preferred Holders. While we
do not presently contemplate making such a distribution, if we make a
distribution of cash or property resulting in an adjustment to the conversion
price, a Preferred Holder may be viewed as receiving a "deemed distribution"
which is taxable as a dividend under the Internal Revenue Code.

Redemption of Offered Securities

     The treatment to be accorded to any redemption by us of Offered Securities
can only be determined on the basis of particular facts as to each shareholder
at the time of redemption. In general, a shareholder will recognize capital gain
or loss measured by the difference between the amount realized by the
shareholder upon the redemption and that shareholder's adjusted tax basis in the
Offered Securities redeemed, provided the Offered Securities are held as a
capital asset, if that redemption:

                                       25
<PAGE>

     .  results in a "complete termination" of the shareholder's interest in all
        classes of our shares under the Internal Revenue Code,

     .  is "substantially disproportionate" with respect to the holder's
        interest in us under the Internal Revenue Code, which generally will not
        be the case if only the Preferred Shares are redeemed, since they
        generally do not have voting rights, or

     .  is "not essentially equivalent to a dividend" with respect to the
        shareholder under the Internal Revenue Code.

In determining whether any of these tests have been met, shares considered to be
owned by the shareholder by reason of constructive ownership rules set forth in
the Internal Revenue Code, as well as shares actually owned, must generally be
taken into account. To the extent a minority shareholder's interest in us is
minimal, any reduction of such shareholder's interest in us by a redemption
should be treated as a sale or exchange of such stock interest. However, to the
extent a redemption does not change the shareholder's net ownership in us, such
a redemption will be treated as a distribution to such redeeming shareholder.
Because the determination as to whether any of the alternative tests of the
redemption provisions of the Internal Revenue Code will be satisfied with
respect to any particular shareholder depends upon the facts and circumstances
at the time when the determination must be made, prospective investors are
advised to consult their own tax advisors to determine their tax treatment.

     If the redemption does not meet any of the tests under the redemption
provisions of the Internal Revenue Code, then the redemption proceeds received
from the Offered Securities will be treated as a distribution on the Offered
Securities as described under "--Taxation of Taxable U.S. Shareholders." If the
redemption is taxed as a dividend, the shareholder's adjusted tax basis in the
Offered Securities will be transferred to any other share holdings of that
holder in us. If, however, the shareholder has no remaining share holdings in
us, that basis could be transferred to a related person or it may be lost.

Taxation of Shareholders on the Disposition of the Offered Securities

     In general, any gain or loss realized upon a taxable disposition of the
Offered Securities by a shareholder who is not a dealer in securities will be
treated as capital gain or loss if the Offered Securities have been held as a
capital asset. Such gain or loss will generally constitute long-term capital
gain or loss and will be taxable at a rate of 20% if the Offered Securities have
been held for more than twelve months. Otherwise, such a gain will be taxed at
the holder's regular marginal tax rate. However, any loss upon a sale or
exchange of Offered Securities by a shareholder who has held such shares for six
months or less, after applying holding period rules, will be treated as a long-
term capital loss to the extent of distributions from us required to be treated
by such shareholder as long-term capital gain. All or a portion of any loss
realized upon a taxable disposition of the Offered Securities may be disallowed
if other Offered Securities are purchased within 30 days before or after the
disposition.

Capital Gains and Losses

     The highest marginal individual income tax rate is 39.6%. The maximum tax
rate on net capital gains applicable to noncorporate taxpayers is 20% for sales
and exchanges of assets held for more than one year. The maximum tax rate on
long-term capital gain from the sale or exchange of depreciable real property,
held for more than 18 months is 25% to the extent that such gain would have been
treated as ordinary income if the property were "section 1245 property." With
respect to distributions designated by us as capital gain dividends and any
retained capital gains that we are deemed to distribute, we may designate,
subject to limits, whether such a distribution is taxable to its noncorporate
stockholders at a 20%, or 25% tax rate. Thus, the tax rate differential between
capital gain and ordinary income for noncorporate taxpayers may be significant.
In addition, the characterization of income as capital or ordinary may affect
the deductibility of capital losses. Capital losses not offset by capital gains
may be deducted against a noncorporate taxpayer's ordinary income only up to a
maximum annual amount of $3,000. Unused capital losses may be carried forward.
All net capital gain of a corporate taxpayer is subject to tax at

                                       26
<PAGE>

ordinary corporate rates. A corporate taxpayer can deduct capital losses only to
the extent of capital gains, with unused losses being carried back three years
and forward five years.

Taxable REIT Subsidiaries

     The Real Estate Investment Trust Modernization Act, effective for 2001 and
later years, allows a corporation (other than a REIT) in which a REIT directly
or indirectly owns stock and that has made a joint election with the REIT, to
perform services for tenants without disqualifying the rents received (as under
prior law). These subsidiaries, called Taxable Real Estate Investment Trust
Subsidiaries (a "taxable REIT subsidiary" or "TRS"), are subject to taxation and
will be limited in the amount of debt, rental and other payments between the
REIT and the TRS.

     The operating partnership formed Prentiss Properties Resources, Inc. on
March 28, 2001 to function as a TRS and provide services to the operating
partnership.  In exchange for its ownership interests in Prentiss Properties
Resources, Inc., the operating partnership contributed its ownership interests
in Prentiss Properties Limited, Inc., notes issued by Prentiss Properties
Limited, Inc., cash, and other assets not directly related to the core business
of the Company.

     The fair market value of all TRS securities cannot exceed 20% of the REIT's
fair market value.  At this time, the Company does not anticipate that its
investments in all future TRS will exceed 20% of the value of the Company.

Information Reporting Requirements and Backup Withholding

     We report and will continue to report to our U.S. shareholders and to the
Service the amount of distributions paid during each calendar year, and the
amount of tax withheld, if any. Under the backup withholding rules, a
shareholder may be subject to backup withholding at the rate of 31% with respect
to distributions paid unless such holder is a corporation or is otherwise exempt
categories and, when required, demonstrates this fact or provides a taxpayer
identification number, certifies as to no loss of exemption from backup
withholding, and otherwise complies with the applicable requirements of the
backup withholding rules. If you are a Shareholder, and do not provide us with
his correct taxpayer identification number, you may be subject to penalties
imposed by the Service. Any amount paid as backup withholding will be creditable
against your income tax liability. In addition, we may be required to withhold a
portion of capital gain distributions to you if you fail to certify your
nonforeign status to us.

Taxation of Tax-Exempt Shareholders

     Tax-exempt entities, including qualified employee pension and profit
sharing trusts and individual retirement accounts generally are exempt from
federal income taxation. However, they are subject to taxation on their
unrelated business taxable income. While many investments in real estate
generate unrelated business taxable income, the Service has issued a published
ruling that dividend distributions from a REIT to an exempt employee pension
trust do not constitute unrelated business taxable income, provided that the
shares of the REIT are not otherwise used in an unrelated trade or business of
the exempt employee pension trust. Based on that ruling, amounts distributed by
us to tax-exempt entities generally should not constitute unrelated business
taxable income. However, if tax-exempt entities finances its acquisition of the
Offered Securities with debt, a portion of its income from us will constitute
unrelated business taxable income pursuant to the "debt-financed property"
rules. Furthermore, social clubs, voluntary employee benefit associations,
supplemental unemployment benefit trusts, and qualified group legal services
plans that are exempt from taxation under paragraphs section 501(c) (7), (9),
(17), and (20), respectively, of the Internal Revenue Code are subject to
different unrelated business taxable income rules, which generally will require
them to characterize distributions from us as unrelated business taxable income.
In addition, a pension trust that owns more than 10% of our shares may be
required to treat a percentage of the

                                       27
<PAGE>

dividends from us as unrelated business taxable income. That percentage is the
gross income derived by us from an unrelated trade or business, determined as if
we were a pension trust, divided by our gross income for the year in which the
dividends are paid. The unrelated business taxable income rule applies to a
pension trust holding more than 10% of our stock only if (1) the unrelated
business taxable income percentage is at least 5%, (2) we qualify as a REIT by
reason of the modification of the 5/50 Rule that allows the beneficiaries of the
pension trust to be treated as holding our shares in proportion to their
actuarial interests in the pension trust, and (3) we are a "pension-held" REIT,
that is, either (A) one pension trust owns more than 25% of the value of our
shares or (B) a group of pension trusts individually holding more than 10% of
the value of our shares collectively own more than 50% of the value of our
shares. Because the Ownership Limitation prohibits any pension trust from owning
more than 8.5% of the common shares or more than 9.8% of any class or series of
the Preferred Shares, we should not be a "pension-held" REIT.

Taxation of Non-U.S. Shareholders

     The rules governing U.S. federal income taxation of nonresident alien
individuals, foreign corporations, foreign partnerships, and other foreign
shareholders (collectively referred to as foreign shareholders) are complex and
no attempt will be made herein to provide more than a summary of such rules.
Prospective foreign shareholders should consult with their own tax advisors to
determine the impact of federal, state, and local income tax laws with regard to
an investment in the Offered Securities, including any reporting requirements.

     If you are a foreign shareholder, distributions that are not attributable
to gain from our sales or exchanges of U.S. real property interests and that we
do not designate as capital gains dividends or retained capital gains will be
treated as dividends of ordinary income to the extent that they are made out of
our current or accumulated earnings and profits. Such distributions ordinarily
will be subject to a withholding tax equal to 30% of the gross amount of the
distribution unless an applicable tax treaty reduces or eliminates that tax.
However, if income from the investment in the Offered Securities is treated as
effectively connected with the foreign shareholder's conduct of a U.S. trade or
business, the foreign shareholder generally will be subject to federal income
tax at graduated rates, in the same manner as U.S. shareholders are taxed with
respect to such distributions, and also may be subject to the 30% branch profits
tax in the case of a foreign shareholder that is a non-U.S. corporation. We
expect to withhold U.S. income tax at the rate of 30% on the gross amount of any
such distributions made to a foreign shareholder unless a lower treaty rate
applies and any required form evidencing eligibility for that reduced rate is
filed with us or the foreign shareholder files the required form with us
claiming that the distribution is effectively connected income. Distributions in
excess of our current and accumulated earnings and profits will not be taxable
to a shareholder to the extent that such distributions do not exceed the
adjusted basis of the shareholder's common shares, but rather will reduce the
adjusted basis of such shares. To the extent that distributions in excess of
current and accumulated earnings and profits exceed the adjusted basis of a
foreign shareholder's Offered Securities, such distributions will give rise to
tax liability if the foreign shareholder would otherwise be subject to tax on
any gain from the sale or disposition of his Offered Securities, as described
below. Because it generally cannot be determined at the time a distribution is
made whether or not such distribution will be in excess of current and
accumulated earnings and profits, the entire amount of any distribution normally
will be subject to withholding at the same rate as a dividend. Amounts so
withheld, however, are refundable to the extent it is determined subsequently
that such distribution was, in fact, in excess of our current and accumulated
earnings and profits.

     We are required to withhold 10% of any distribution in excess of our
current and accumulated earnings and profits. Consequently, although we intend
to withhold at a rate of 30% on the entire amount of any distribution, to the
extent that we do not do so, any portion of a distribution not subject to
withholding at a rate of 30% will be subject to withholding at a rate of 10%.

     For any year in which we qualify as a REIT, distributions that are
attributable to gain from sales or exchanges by us of U.S. real property
interests will be taxed to a foreign shareholder under the provisions of the
Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA"). Under FIRPTA,
distributions attributable to gain from sales of U.S. real property interests
are taxed to a foreign shareholder as if such gain were effectively connected
with a U.S. business.  Foreign shareholders thus would be taxed at the normal
capital gain rates

                                       28
<PAGE>

applicable to U.S. shareholders, subject to applicable alternative minimum tax
and a special alternative minimum tax in the case of nonresident alien
individuals. Distributions subject to FIRPTA also may be subject to the 30%
branch profits tax in the hands of a non-U.S. corporate shareholder not entitled
to treaty relief or exemption. We are required to withhold 35% of any
distribution that is designated by us as a capital gains dividend. The amount
withheld is creditable against the Non-U.S. Shareholder's FIRPTA tax liability.

     Gain recognized by a foreign shareholder upon a sale of his common shares
generally will not be taxed under FIRPTA if we are a "domestically controlled
REIT," defined generally as a REIT in which at all times during a specified
testing period less than 50% in value of the stock was held directly or
indirectly by non-U.S. persons. However, because the Offered Securities will be
publicly traded, no assurance can be given that we are or will continue to be a
"domestically controlled REIT." In addition, a foreign shareholder that owned,
actually or constructively, 5% or less of the common shares or preferred shares
at all times during a specified testing period will not be subject to tax under
FIRPTA if the common shares or preferred shares, as applicable, are "regularly
traded" on an established securities market. Furthermore, gain not subject to
FIRPTA will be taxable to a foreign shareholder if (1) investment in the Offered
Securities is effectively connected with the foreign shareholder's U.S. trade or
business, in which case the foreign shareholder will be subject to the same
treatment as U.S. shareholders with respect to such gain, or (2) the foreign
shareholder is a nonresident alien individual who was present in the U.S. for
183 days or more during the taxable year and  other conditions apply, in which
case the nonresident alien individual will be subject to a 30% tax on the
individual's capital gains. If the gain on the sale of the Offered Securities
were to be subject to taxation under FIRPTA, the foreign shareholder would be
subject to the same treatment as U.S. shareholders with respect to such gain,
subject to applicable alternative minimum tax, a special alternative minimum tax
in the case of nonresident alien individuals, and the possible application of
the 30% branch profits tax in the case of non-U.S. corporations.

Possible Legislation or Other Action Affecting Tax Consequences

     The rules dealing with federal income taxation are constantly under review
by persons involved in the legislative process and by the Service and the U.S.
Treasury Department. Changes to the Federal laws and interpretations thereof
could adversely affect an investment in us. We cannot predict whether, when, in
what forms, or with what effective dates, the tax laws applicable to us or an
investment in us will be changed.

Other Tax Consequences

     We, the general partner, the operating partnership, a noncorporate
subsidiary, Prentiss Properties Resources, Inc., or our shareholders may be
subject to state or local taxation in various state or local jurisdictions,
including those in which we, it or they own property, transact business, or
reside. Such state and local tax treatment may not conform to the federal income
tax consequences discussed above. Consequently, prospective shareholders should
consult their own tax advisors regarding the effect of state and local tax laws
on an investment in us.

     In particular, the State of Texas imposes a franchise tax upon corporations
and limited liability companies that do business in Texas, including REITs that
are organized as corporations. While we are organized as a Maryland real estate
investment trust and are therefore not subject to the Texas franchise tax, we
own, directly or indirectly, qualified REIT subsidiaries and limited liability
companies that are subject to the tax. The Texas franchise tax imposed on a
corporation doing business in Texas generally is equal to the greater of (1)
 .25% of "taxable capital", generally, financial accounting net worth with
adjustments, apportioned to Texas; or (2) 4.5% of "taxable earned surplus",
generally, federal taxable income with adjustments, apportioned to Texas. A
corporation's taxable capital and taxable earned surplus are apportioned to
Texas based upon a fraction, the numerator of which is the corporation's gross
receipts from business transacted in Texas and the denominator of which is the
corporation's gross receipts from all sources.

                                       29
<PAGE>

Tax Aspects of the Operating Partnership and the Noncorporate Subsidiaries

     The following discussion summarizes material federal income tax
considerations applicable to our direct or indirect investment in the operating
partnership and the Noncorporate Subsidiaries, each of the operating partnership
and the noncorporate subsidiaries is referred to herein as a "partnership". The
discussion does not cover state or local tax laws or any federal tax laws other
than income tax laws.

Classification as a Partnership

     We will be entitled to include in our income our distributive share of each
partnership's income and to deduct our distributive share of each partnership's
losses only if each partnership is classified for federal income tax purposes as
a partnership rather than as a corporation or an association taxable as a
corporation. An entity will be classified as a partnership rather than as a
corporation for federal income tax purposes if the entity is treated as a
partnership under Treasury regulations relating to entity classification and is
not a "publicly traded" partnership.

     In general, under the entity classification regulations, we will be treated
as a partnership for federal income tax purposes. The federal income tax
classification of an entity that was in existence prior to January 1, 1997, the
effective date of the entity classification regulations, such as the
partnerships, will be respected for all periods prior to January 1, 1997 if:

     .   The entity had a reasonable basis for its claimed classification.

     .   the entity and all members of the entity recognized the federal tax
         consequences of any changes in the entity's classification within the
         60 months prior to January 1, 1997, and

     .   neither the entity nor any of its members was notified in writing by a
         taxing authority on or before May 8, 1996 that the classification of
         the entity was under examination.

Each partnership in existence on January 1, 1997 reasonably claimed partnership
classification under the entity classification regulations in effect prior to
January 1, 1997, and such classification should be respected for federal income
tax purposes. In addition, no partnership was notified by a taxing authority on
or before May 8, 1996 that its classification was under examination. The
partnerships intend to continue to be classified as partnerships and no
partnership will elect to be treated as an association taxable as a corporation
for federal income tax purposes under the entity classification regulations. We
have represented to Akin, Gump that, to the best of our knowledge, each
partnership will be treated as a "partnership" for federal income tax purposes.

     A publicly traded partnership is a partnership whose interests trade on an
established securities market or are readily tradable on a secondary market, or
the substantial equivalent thereof. A publicly traded partnership will be
treated as a corporation for federal income tax purposes unless at least 90% of
such partnership's gross income for a taxable year consists of "qualifying
income" under the publicly traded partnership provisions of the Internal Revenue
Code, which generally includes any income that is qualifying income for purposes
of the 95% gross income test applicable to REITs. The U.S. Treasury Department
has issued regulations that provide limited safe harbors from the definition of
a publicly traded partnership. Pursuant to one of those safe harbors, interests
in a partnership will not be treated as readily tradable on a secondary market
or the substantial equivalent thereof if all interests in the partnership were
issued in a transaction, or transactions, that was not required to be registered
under the Securities Act, and the partnership does not have more than 100
partners at any time during the partnership's taxable year. In determining the
number of partners in a partnership, a person owning an interest in a flow-
through entity, that is, a partnership, grantor trust, or S corporation, that
owns an interest in the partnership is treated as a partner in such partnership
only if substantially all of the value of the owner's interest in the flow-
through entity is attributable to the flow-through entity's interest, direct or
indirect, in the partnership and a principal purpose of the use of the flow-
through entity is to permit the partnership to satisfy the 100-partner
limitation. Each partnership qualifies for this private placement exclusion. If
a partnership is considered a publicly traded partnership under the publicly
traded partnership regulations because it is deemed to have more than 100
partners, such partnership should

                                       30
<PAGE>

not be treated as a corporation because it should have a sufficient amount of
passive-type income to meet the qualifying income exception to publicly traded
partnership status.

     If for any reason one of the partnerships are taxable as corporations,
rather than as  partnerships, for federal income tax purposes, we would likely
not be able to qualify as a REIT. In addition, any change in a partnership's
status for tax purposes might be treated as a taxable event, in which case we
might incur a tax liability without any related cash distribution. Further,
items of income and deduction of such partnership would not pass through to its
partners, and its partners would be treated as shareholders for tax purposes.
Consequently, such partnership would be required to pay income tax at corporate
tax rates on its net income, and distributions to its partners would constitute
dividends that would not be deductible in computing such partnership's taxable
income.

Income Taxation of the Partnerships and their Partners

     Partners, not Partnerships, Subject to Tax. A partnership is not a taxable
entity for federal income tax purposes. Rather, we will be required to take into
account its allocable share of each partnership's income, gains, losses,
deductions, and credits for any taxable year of such partnership ending within
or with our taxable year, without regard to whether we have received or will
receive any distribution from such partnership.

     Partnership Allocations. Although a partnership agreement generally will
determine the allocation of income and losses among partners, such allocations
will be disregarded for tax purposes under the partnership provisions of the
Internal Revenue Code and Treasury Regulations if they do not comply with those
provisions.  If an allocation is not recognized for federal income tax purposes,
the item subject to the allocation will be reallocated in accordance with the
partners' interests in the partnership, which will be determined by taking into
account all of the facts and circumstances relating to the economic arrangement
of the partners with respect to such item. Each partnership's allocations of
taxable income and loss are intended to comply with the requirements of the
partnership provisions of the Internal Revenue Code and the Treasury
Regulations.

     Tax Allocations with Respect to Contributed Properties. Pursuant to the
partnership provisions of the Internal Revenue Code, income, gain, loss, and
deduction attributable to appreciated or depreciated property that is
contributed to a partnership in exchange for an interest in the partnership must
be allocated in a manner such that the contributor is charged with, or benefits
from, the unrealized gain or unrealized loss associated with the property at the
time of the contribution. The amount of such unrealized gain or unrealized loss
is generally equal to the difference between the fair market value of the
contributed property at the time of contribution and the adjusted tax basis of
such property at the time of contribution.

     Under the operating limited partnership agreement, depreciation or
amortization deductions of the operating partnership generally are allocated
among the partners in accordance with their respective interests in the
operating partnership, except to the extent that the operating partnership is
required under the partnership provisions of the Internal Revenue Code and
Treasury Regulations to use a method for allocating tax depreciation deductions
attributable to our properties that results in our receiving a
disproportionately large share of such deductions. In addition, gain on the sale
of a property contributed to the operating partnership in exchange for Units
will be specially allocated to the contributor to the extent of any "built-in"
gain with respect to such property for federal income tax purposes. Depending on
the allocation method elected under the Internal Revenue Code, it is possible
that we may be allocated lower amounts of depreciation deductions for tax
purposes with respect to contributed properties than would be allocated to us if
such properties were to have a tax basis equal to their fair market value at the
time of contribution and may be allocated taxable gain in the event of a sale of
such contributed properties in excess of the economic profit allocated to us as
a result of such sale. These allocations may cause us to recognize taxable
income in excess of cash proceeds, which might adversely affect our ability to
comply with the REIT distribution requirement, although we do not anticipate
that this event will occur. The foregoing principles also will affect the
calculation of our earnings and profits for purposes of determining which
portion of our distributions is taxable as a dividend. The allocations described
in this paragraph may result in a higher portion of our distributions being
taxed as dividends than would have occurred had we purchased our properties for
cash.

                                       31
<PAGE>

     Basis in Operating Partnership Interest.  Our adjusted tax basis in our
partnership interest in the operating partnership generally is equal to (1) the
amount of cash and the basis of any other property contributed to the operating
partnership by us, (2) increased by (A) our allocable share of the operating
partnership's income and (B) our allocable share of indebtedness of the
operating partnership, and (3) reduced, but not below zero, by (A) our allocable
share of the operating partnership's loss and (B) the amount of cash distributed
to us, including constructive cash distributions resulting from a reduction in
our share of indebtedness of the operating partnership.

     If the allocation of our distributive share of the operating partnership's
loss would reduce the adjusted tax basis of our partnership interest in the
operating partnership below zero, the recognition of such loss will be deferred
until such time as the recognition of such loss would not reduce our adjusted
tax basis below zero. To the extent that the operating partnership's
distributions, or any decrease in our share of the indebtedness of the operating
partnership, would reduce our adjusted tax basis below zero, such distributions,
including such constructive distributions, will constitute taxable income to us.
Such distributions and constructive distributions normally will be characterized
as capital gain, and if our partnership interest in the operating partnership
has been held for longer than the one-year long-term capital gain holding
period, the distributions and constructive distributions will constitute long-
term capital gain.

Sale of the Operating Partnership's or a Noncorporate Subsidiary's Property

     Generally, any gain realized by a partnership on the sale of property held
for more than one year will be long-term capital gain, except for any portion of
such gain that is treated as depreciation or cost recovery recapture.  Any gain
recognized by a partnership on the disposition of the contributed properties,
and any gain recognized upon the disposition of the properties acquired by a
partnership for cash, over and above the gain allocated to the contributor, as
discussed above, will be allocated among the partners in accordance with their
respective percentage interests in the partnership. Our bylaws provide that any
decision to sell any real estate asset in which a trustee, or officer, or any
affiliate of the foregoing, has a direct or indirect interest, will be made by a
majority of the trustees including a majority of the Independent Trustees.

     Our share of any gain realized by a partnership on the sale of any property
held by the partnership as inventory or other property held primarily for sale
to customers in the ordinary course of the partnership's trade or business will
be treated as income from a prohibited transaction that is subject to a 100%
penalty tax. Such prohibited transaction income also may have an adverse effect
upon our ability to satisfy the income tests for REIT status. We, however, do
not presently intend to acquire or hold or to allow a partnership to acquire or
hold any property that represents inventory or other property held primarily for
sale to customers in the ordinary course of our or a partnership's trade or
business.

Selling Shareholders

     The holder listed below, and its transferees, pledgees, donees or other
successors, are the selling shareholders. The selling shareholders may include
Merrill Lynch International Private Finance Limited, a pledgee of SCGP. If
necessary, a supplement to this prospectus will identify any other selling
shareholder. The following table sets forth, as of a recent practicable date
prior to the effectiveness of the registration statement of which this
prospectus forms a part, information with respect to the selling shareholders
named below and the respective number of Series D Preferred Shares and
Conversion Common Shares owned by each such selling shareholder that may be
offered pursuant to this prospectus. Each selling shareholder is registering the
entire amount of the Series D Preferred Shares and Conversion Common Shares set
forth opposite its name in the table below, which sets forth the number and
percentage of the outstanding common shares owned beneficially by each such
selling shareholder.

                                       32
<PAGE>

<TABLE>
<CAPTION>
                                                     Series D Preferred Shares
                                                     -------------------------

                                Beneficial Ownership                                                    Beneficial Ownership
                                --------------------                                                    --------------------
                              Prior to the Offering(1)                 Number of Shares Offered(1)       After the Offering(1)
                          -----------------------------------         -----------------------------  ----------------------------
Selling Shareholder                         Percent of total                                                       Percent of total
-------------------                         ----------------                                                       ----------------
                              Shares           Outstanding                                              Shares        Outstanding
                          --------------    -----------------                                        -----------   ----------------
<S>                       <C>             <C>                          <C>                          <C>           <C>
Security Capital               3,773,585           100%                     3,773,585                     0             *
 Preferred Growth
 Incorporated
</TABLE>


<TABLE>
<CAPTION>
                                                     Conversion Common Shares
                                                     ------------------------

                                Beneficial Ownership                                                     Beneficial Ownership
                                -------------------                                                      --------------------
                               Prior to the Offering(1)              Number of Shares Offered(1)          After the Offering(1)
                          -----------------------------------       ----------------------------    -------------------------------
Selling Shareholder                         Percent of total                                                       Percent of total
--------------------                      -------------------                                                     -----------------
                               Shares        Outstanding(2)                                           Shares          Outstanding
                          --------------  ---------------------                                     -----------   ------------------
<S>                       <C>                 <C>                          <C>                      <C>           <C>

Security Capital               3,773,585           9.38%                    3,773,585                     0            *
 Preferred Growth
 Incorporated
</TABLE>
________________
 * less than 1%.

(1)  Because the selling shareholders may offer all, some or none of the Series
     D Preferred Shares or the Conversion Common Shares, and because the
     offering contemplated by this prospectus is currently not being
     underwritten, no estimate can be given as to the number of the Series D
     Preferred Shares or the Conversion Common Shares that will be held by each
     such selling shareholder upon or prior to the termination of this offering.
     We have assumed for purposes of the above chart that the selling
     shareholders will sell all of their shares.  All other information has been
     obtained from the selling shareholders.

(2)  Based upon a total of 36,441,652 common shares outstanding as of May 11,
     2001.

Plan of Distribution


     The selling shareholders may from time to time offer and sell Conversion
Common Shares on the New York Stock Exchange, in the over-the-counter market or
otherwise.  They may sell the Series D Preferred Shares or the Conversion Common
Shares in the following manner, among others:

 .  in ordinary brokerage transactions;      .  through put or call transactions;
 .  in block transactions;                   .  through short sales; or
 .  in private negotiated transactions;      .  pursuant to Rule 144.


Those transactions may or may not involve brokers or dealers. If the
transactions do include brokers, the selling shareholders expect to pay
customary brokerage commissions and charges. We will pay all expenses other than
underwriting discounts, selling commissions and fees, and legal and accounting
fees incurred by the selling shareholders incident to the offering and sale of
their respective Series D Preferred Shares or the Conversion Common Shares.

     The selling shareholders are not obligated to sell any or all of their
respective Series D Preferred Shares or the Conversion Common Shares offered
pursuant to this prospectus.  The selling shareholders reserve the right to

                                       33
<PAGE>

accept and to reject in whole or in part any proposed purchase of the Series D
Preferred Shares or the Conversion Common Shares.

     To the extent required, a supplement to this prospectus or a post effective
amendment to the registration statement of which this prospectus is a part will
set forth the aggregate principal amount of the Series D Preferred Shares or the
Conversion Common Shares to be sold, the name of the selling shareholder, the
purchase price, the name of any agent, dealer or underwriter and any applicable
commission with respect to a particular offer. The selling shareholders and any
agents, broker-dealers or underwriters that participate with the selling
shareholders in the distribution of the Series D Preferred Shares or the
Conversion Common Shares may be deemed to be "underwriters" within the meaning
of the Securities Act. In that event, any discounts, commissions or concessions
received by such broker-dealers, agents or underwriters and any profit on the
resale of the Series D Preferred Shares or the Conversion Common Shares
purchased by them may be deemed to be underwriting discounts or commissions
under the Securities Act.

     We have agreed to indemnify the selling shareholders and their respective
directors, officers and controlling persons against liabilities relating to the
registration statement, including liabilities under the Securities Act.  Each
selling shareholder has agreed to indemnify us and our directors, officers and
controlling persons against liabilities relating to any information given to us
by that selling shareholder in writing for inclusion in the registration
statement, including liabilities under the Securities Act.

Legal Opinions

     The legality of the issuance of our Series D Preferred Shares or the
Conversion Common Shares will be passed upon by Ballard Spahr Andrews &
Ingersoll, LLP, Baltimore, Maryland.  Akin, Gump, Strauss, Hauer & Feld, L.L.P.
will provide a legal opinion regarding certain tax matters.

Experts

     The financial statements and financial statement schedule incorporated in
this Prospectus by reference to the Annual Report on Form 10-K for the year
ended December 31, 2000 have been so incorporated in reliance on the reports of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.

Where You Can Find More Information

     We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
from our web site at http://www.pplinc.com or at the SEC's web site at
http://www.sec.gov.

     We filed a registration statement on Form S-3 to register with the SEC the
Series D Preferred Shares and the Conversion Common Shares. This prospectus is a
part of that registration statement. As allowed by SEC rules, this prospectus
does not contain all of the information you can find in the registration
statement or the exhibits to the registration statement.

     The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information filed with the
SEC will automatically update and supersede previously filed information,
including information contained in this document.

     We incorporate by reference the documents listed below and any future
filings made with the SEC under Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act from the date hereof until our offering is completed.

                                       34
<PAGE>

     1.  Our Annual Report on Form 10-K, File No. 001-14516, for the year ended
         December 31, 2000, filed on March 27, 2001.

     2.  Our Quarterly Report on Form 10-Q, File No. 001-14516, for the quarter
         ended March 31, 2001, filed on May 15, 2001.

     3.  Our Current Reports filed since January 1, 2001 as follows:

             .  Form 8-K, File No. 001-14516, filed on March 22, 2001.
             .  Form 8-K, File No. 001-14516, filed on April 23, 2001.

     4.  The description of the common shares contained in our registration
         statement on Form 8-A, File No. 001-14516, filed on October 17, 1996,
         under the Exchange Act, including any reports filed under the Exchange
         Act for the purpose of updating such description.

     5.  The description of the Series B Junior Preferred Shares contained in
         our registration statement on Form 8-A, File No. 000-23813, filed on
         February 17, 1998, as amended by our registration statement of Form 8-
         A, File No. 001-14516, filed on March 10, 1998, including any reports
         filed under the Exchange Act for the purpose of updating such
         description.

     You may request a copy of these filings, at no cost, by writing or
telephoning:

             Prentiss Properties Trust
             3890 W. Northwest Highway, Suite 400
             Dallas, Texas 75220
             (214) 654-0886

     You should rely on the information incorporated by reference or provided in
this prospectus or any prospectus supplement. We have authorized no one to
provide different information to you. We are not making an offer of these
securities in any state where such offer is not permitted. You should not assume
that the information in this prospectus or any prospectus supplement is accurate
as of any date other than the date on the front of the document.

                                       35
<PAGE>

                                    PART II

                    INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14. Other Expenses of Issuance and Distribution

         The following sets forth the estimated expenses, other than
underwriting discounts and commissions, in connection with the issuance and
distribution of the securities being registered hereby, all of which be paid for
by Prentiss Properties Trust (the "Company"):

     SEC registration fee.................................  $ 2,476
     Accounting fees and expenses.........................  $ 4,000
     Blue Sky fees and expenses...........................  $ 1,000
     Legal fees and expenses..............................  $20,000
     Printing.............................................  $ 5,000
     Miscellaneous........................................  $ 2,000
                                                            -------
          TOTAL...........................................  $34,476
                                                            =======

Item 15. Indemnification of Officers and Directors

     Maryland REIT law permits a Maryland real estate investment trust to
include in its Declaration of Trust a provision limiting the liability of its
trustees and officers to the trust and its shareholders for money damages,
except for liability resulting from (a) actual receipt of an improper benefit or
profit in money, property or services or (b) active and deliberate dishonesty
established by a final judgment as being material to the cause of action. The
Company's declaration of trust contains such a provision, which eliminates such
liability to the maximum extent permitted by Maryland REIT law.

     The Company's declaration of trust authorizes it, to the maximum extent
permitted by Maryland law, to obligate itself to indemnify and to pay or
reimburse reasonable expenses in advance of final disposition of a proceeding to
(a) any present or former Trustee or officer or (b) any individual who, while a
Trustee of the Company and at the request of the Company, serves or has served
another real estate investment trust, corporation, partnership, joint venture,
trust, employee benefit plan or any other enterprise as a trustee, director,
officer or partner of such real estate investment trust, corporation,
partnership, joint venture, trust, employee benefit plan or any other enterprise
as a trustee, director, officer or partner of such real estate investment trust,
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise from and against any claim or liability to which such person may
become subject or which such person may incur by reason of his status as a
present or former shareholder. The bylaws of the Company obligate it, to the
maximum extent permitted by Maryland law, to indemnify and to pay or reimburse
reasonable expenses in advance of the final disposition of a proceeding to (a)
any present or former Trustee or officer who is made a party to the proceeding
by reason of his service in that capacity or (b) any individual who, while a
Trustee of the Company and at the request of the Company, serves or has served
another real estate investment trust, corporation, partnership, joint venture,
trust, employee benefit plan or any other enterprise as a trustee, director,
officer or partner of such real estate investment trust, corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise and
who is made a party to the proceeding by reason of his service in that capacity.
The Company's declaration of trust and bylaws also permit the Company to
indemnify and advance expenses to any person who served a predecessor of the
Company in any of the capacities described above and to any employee or agent of
the Company or a predecessor of the Company. The Company's bylaws require the
Company to indemnify a Trustee or officer who has been successful, on the merits
or otherwise, in the defense of any proceeding to which he is made a party by
reason of his service in that capacity.

     Maryland REIT law permits a Maryland real estate investment trust to
indemnify and advance expenses to its trustees, officers, employees and agents
to the same extent as is permitted by Maryland General Corporation Law

                                      II-1
<PAGE>

for directors and officers of Maryland corporations. Maryland General
Corporation Law permits a corporation to indemnify its present and former
directors and officers, among others, against judgments, penalties, fines,
settlements and reasonable expenses actually incurred by them in connection with
any proceeding to which they may be made a party by reason of their service in
those or other capacities unless it is established that (a) the act or omission
of the director or officer was material to the matter giving rise to the
proceeding and (i) was committed in bad faith or (ii) was the result of active
and deliberate dishonesty, (b) the director or officer actually received an
improper personal benefit in money, property or services or (c) in the case of
any criminal proceeding, the director or officer had reasonable cause to believe
that the act or omission was unlawful. However, a Maryland corporation may not
indemnify for an adverse judgment in a suit by or in the right of the
corporation or for a judgment of liability on the basis that a personal benefit
was improperly received unless a court orders indemnification and then only for
expenses. In accordance with Maryland General Corporation Law, the bylaws of the
Company require it, as a condition to advancing expenses, to obtain (a) a
written affirmation by the Trustee or officer of his good faith belief that he
has met the standard of conduct necessary for indemnification by the Company as
authorized by the Company's bylaws and (b) a written undertaking by or on his
behalf to repay the amount paid or reimbursed by the Company if it shall
ultimately be determined that the standard of conduct was not met.

Item 16. Exhibits and Financial Statement Schedules

(a)      Exhibits

Exhibit
Number                                 Exhibits
------                                 --------

3.1        Form of Amended and Restated Declaration of Trust of the Company
           (filed as Exhibit 3.1 to the Company's Registration Statement on
           Amendment No. 1 of Form S-11, filed on September 18, 1996, File No.
           333-09863, and incorporated by reference herein).

3.2        Articles Supplementary, dated February 17, 1998, Classifying and
           Designating a Series of Preferred Shares of Beneficial Interest as
           Junior Participating Cumulative Convertible Redeemable Preferred
           Shares of Beneficial Interest, Series B, and Fixing Distribution and
           Other Preferences and Rights of Such Shares (filed as Exhibit 3 to
           the Company's Registration Statement on Form 8-A, filed on February
           17, 1998, File No. 000-23813, and incorporated by reference herein).

3.3        Articles Supplementary, dated June 25, 1998, Classifying and
           Designating a Series of Preferred Shares of Beneficial Interest as
           Series B Cumulative Redeemable Perpetual Preferred Shares of
           Beneficial Interest and Fixing Distribution and Other Preferences and
           Rights of Such Shares (filed as Exhibit 3.5 to the Company's Form 10-
           Q, filed on August 12, 1998, and incorporated by reference herein).

3.4        Articles Supplementary, dated September 17, 1999, Classifying and
           Designating a Series of Preferred Shares of Beneficial Interest as
           Series C Cumulative Redeemable Perpetual Preferred Shares of
           Beneficial Interest and Fixing Distribution and Other Preferences and
           Rights of Such Shares (filed as Exhibit 3.6 to the Company's Form 10-
           Q, filed on November 11, 1999, and incorporated by reference herein).

3.5        Articles Supplementary, dated March 20, 2001, Classifying and
           Designating a Series of Preferred Shares of Beneficial Interest as
           Series D Cumulative Convertible Redeemable Preferred Shares of
           Beneficial Interest and Fixing Distribution and Other Preferences and
           Rights of Such Shares (filed as Exhibit 3.7 to the Company's Annual
           Report on Form 10-K, filed on March 27, 2001, and incorporated by
           reference herein).

3.6        Bylaws of the Company (filed as Exhibit 3.2 to the Company's
           Registration Statement on Amendment No. 1 of Form S-11, filed on
           September 18, 1996, File No. 333-09863, and incorporated by reference
           herein).


                                      II-2
<PAGE>

4.1        Form of common shares Certificate (filed as Exhibit 4.1 to the
           Company's Registration Statement on Amendment No. 1 of Form S-11,
           filed on September 18, 1996, File No. 333-09863, and incorporated by
           reference herein).

4.2        Rights Agreement, dated February 6, 1998, between the Company and
           First Chicago Trust Company of New York, as Rights Agent (filed as
           Exhibit 4.1 to the Company's Registration Statement on Form 8-A,
           filed on February 17, 1998, File No. 000-23813, and incorporated by
           reference herein).

4.3        Form of Rights Certificate (included as Exhibit A to the Rights
           Agreement).

4.4        Form of Series D Preferred Share Certificate (filed as Exhibit 4.4 to
           the Company's Annual Report on Form 10-K, filed on March 27, 2001,
           and incorporated by reference herein).

5*         Opinion of Ballard Spahr Andrews & Ingersoll, L.L.P.

8*         Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P. regarding tax
           matters.

10.1       Second Amended and Restated Agreement of Limited Partnership of
           Prentiss Properties Acquisition Partners, L.P. (filed as Exhibit 10.2
           to the Company's Annual Report on Form 10-K, filed on March 25, 1997,
           and incorporated by reference herein).

10.2       First Amendment to the Second Amended and Restated Agreement of
           Limited Partnership of Prentiss Properties Acquisition Partners, L.P.
           (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K,
           filed on January 15, 1998, and incorporated by reference herein).

10.3       Second Amendment to the Second Amended and Restated Agreement of
           Limited Partnership of Prentiss Properties Acquisition Partners, L.P.
           (filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-
           Q, filed on August 12, 1998, and incorporated by reference herein).

10.4       Eighth Amendment to the Second Amended and Restated Agreement of
           Limited Partnership of Prentiss Properties Acquisition Partners, L.P.
           (filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-
           Q, filed on November 11, 1999, and incorporated herein by reference).

10.5       Thirteenth Amendment to the Second Amended and Restated Agreement of
           Limited Partnership of Prentiss Properties Acquisition Partners, L.P.
           (filed as Exhibit 10.12 to the Company's Annual Report on Form 10-K,
           filed on March 27, 2001, and incorporated herein by reference).

10.6       Registration Rights Agreement, dated March 20, 2001, by and between
           the Company and Security Capital Preferred Growth Incorporated (filed
           as Exhibit 10.15 to the Company's Annual Report on Form 10-K, filed
           on March 27, 2001, and incorporated herein by reference).

10.7       Fourteenth Amendment to the Second Amended and Restated Agreement of
           Limited Partnership of Prentiss Properties Acquisition Partners, L.P.
           (filed as Exhibit 10.1 to the Company's Current Report on Form 10-K,
           filed on April 23, 2001, and incorporated herein by reference).

12*        Statement regarding Computation of Ratios of Earnings to Combined
           Fixed Charges and Preferred Share Dividends.

23.1*      Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P. (included in
           Exhibit 8).

23.2*      Consent of PricewaterhouseCoopers LLP.

23.3*      Consent of Ballard Spahr Andrews & Ingersoll, LLP (included in
           Exhibit 5).


                                      II-3
<PAGE>

24*        Power of Attorney (included on the signature page of this
           Registration Statement).
_______________________________
*    Filed herewith.

(b)  Financial Statement Schedules

None.

Item 17.  Undertakings

          The undersigned registrant hereby undertakes:

          (1)  To file, during any period in which offers or sales are being
made of the securities registered hereby, a post-effective amendment to this
registration statement:

               (i)    To include any prospectus required by Section 10(a)(3) of
               the Securities Act;

               (ii)   To reflect in the prospectus any facts or events arising
               after the effective date of the registration statement (or the
               most recent post-effective amendment thereof) which, individually
               or in the aggregate, represent a fundamental change in the
               information set forth in the registration statement
               (notwithstanding the foregoing, any increase or decrease in the
               volume of securities offered (if the total dollar value of
               securities offered would not exceed that which was registered)
               and any deviation from the low or high and of the estimated
               maximum offering range may be reflected in the form of prospectus
               filed with the SEC pursuant to Rule 424(b) if, in the aggregate,
               the changes in volume and price represent no more than 20 percent
               change in the maximum aggregate offering price set forth in the
               "Calculation of Registration Fee" table in the effective
               registration statement); and

               (iii)  To include any material information with respect to the
               plan of distribution not previously disclosed in the registration
               statement or any material change to such information in the
               registration statement;

provided, however, that the undertakings set forth in subparagraphs (i) and (ii)
above do not apply if the information required to be included in a post-
effective amendment by those paragraphs is contained in periodic reports filed
with or furnished to the SEC by the registrant pursuant to Section 13 or 15(d)
of the Exchange Act that are incorporated by reference in this registration
statement;

          (2)  That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and

          (3)  To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.

          The undersigned registrant hereby further undertakes that, for
purposes of determining any liability under the Securities Act, each filing of
the registrant's annual report pursuant to Section 13(a) or 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in this registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

          The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3

                                      II-4
<PAGE>

under the Exchange Act; and, where interim financial information required to be
presented by Article 3 of Regulation S-X is not set forth in the prospectus, to
deliver, or cause to be delivered to each person to whom the prospectus is sent
or given, the latest quarterly report that is specifically incorporated by
reference in the prospectus to provide such interim financial information.

     Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions or otherwise, the registrant has
been advised that the in the opinion of the SEC such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted against the registrant by such director, officer
or controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of their counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

     The undersigned registrant further hereby undertakes that:

     (1)  For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.

     (2)  For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

                                      II-5
<PAGE>

                                  SIGNATURES


     Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Dallas, state of Texas, on May 23, 2001.


                                    PRENTISS PROPERTIES TRUST



                                    By:  /s/ Thomas F. August
                                         ---------------------------------------
                                         Thomas F. August
                                         President, Chief Executive Officer and
                                         Trustee



                               POWER OF ATTORNEY

     The undersigned directors and officers of Prentiss Properties Trust hereby
constitute and appoint Michael V. Prentiss, Thomas F. August and Gregory S.
Imhoff, and any of them, with full power to act and full power of substitution
and resubstitution, our true and lawful attorneys-in-fact with full power to
execute in our name and behalf in the capacities indicated below any and all
amendments (including post-effective amendments and amendments thereto) to this
Registration Statement and to file the same, with all exhibits thereto and other
documents relating thereto and any registration statement relating to any
offering made pursuant to this Registration Statement that is to be effective
upon filing pursuant to Rule 462(b) under the Securities Act with the Commission
and hereby ratify and confirm all that such attorneys-in-fact, or any of them,
or their substitutes shall lawfully do or cause to be done by virtue hereof.


     Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated below.

         Name                              Title                      Date
         ----                              -----                      ----

/s/ Michael V. Prentiss      Chairman of the Board and Trustee     May 23, 2001
--------------------------
Michael V. Prentiss

/s/ Thomas F. August         President, Chief Executive Officer    May 23, 2001
--------------------------
Thomas F. August             and Trustee
                             (Principal Executive Officer)         May 23, 2001

/s/ Thomas J. Hynes, Jr.     Trustee                               May 23, 2001
--------------------------
Thomas J. Hynes, Jr.

                             Trustee
--------------------------
Barry J.C. Parker

                                      II-6
<PAGE>

/s/ Leonard M. Riggs, Jr.   Trustee                             May 23, 2001
---------------------------
Leonard M. Riggs, Jr.

/s/ Ronald G. Steinhart     Trustee                             May 23, 2001
---------------------------
Ronald G. Steinhart

/s/ Lawrence A. Wilson      Trustee                             May 23, 2001
---------------------------
Lawrence A. Wilson

/s/ Michael A. Ernst        Senior Vice President and Chief     May 23, 2001
---------------------------
Michael A. Ernst            Financial Officer
                            (Principal Financial Officer)

/s/ Thomas P. Simon         Senior Vice President and Chief     May 23, 2001
---------------------------
Thomas P. Simon             Accounting Officer
                            (Chief Accounting Officer)

                                      II-7
<PAGE>

                                 EXHIBIT INDEX

Exhibit
Number                                 Exhibits
------                                 --------

3.1         Form of Amended and Restated Declaration of Trust of the Company
            (filed as Exhibit 3.1 to the Company's Registration Statement on
            Amendment No. 1 of Form S-11, filed on September 18, 1996, File No.
            333-09863, and incorporated by reference herein).

3.2         Articles Supplementary, dated February 17, 1998, Classifying and
            Designating a Series of Preferred Shares of Beneficial Interest as
            Junior Participating Cumulative Convertible Redeemable Preferred
            Shares of Beneficial Interest, Series B, and Fixing Distribution and
            Other Preferences and Rights of Such Shares (filed as Exhibit 3 to
            the Company's Registration Statement on Form 8-A, filed on February
            17, 1998, File No. 000-23813, and incorporated by reference herein).

3.3         Articles Supplementary, dated June 25, 1998, Classifying and
            Designating a Series of Preferred Shares of Beneficial Interest as
            Series B Cumulative Redeemable Perpetual Preferred Shares of
            Beneficial Interest and Fixing Distribution and Other Preferences
            and Rights of Such Shares (filed as Exhibit 3.5 to the Company's
            Form 10-Q, filed on August 12, 1998, and incorporated by reference
            herein).

3.4         Articles Supplementary, dated September 17, 1999, Classifying and
            Designating a Series of Preferred Shares of Beneficial Interest as
            Series C Cumulative Redeemable Perpetual Preferred Shares of
            Beneficial Interest and Fixing Distribution and Other Preferences
            and Rights of Such Shares (filed as Exhibit 3.6 to the Company's
            Form 10-Q, filed on November 11, 1999, and incorporated by reference
            herein).

3.5         Articles Supplementary, dated March 20, 2001, Classifying and
            Designating a Series of Preferred Shares of Beneficial Interest as
            Series D Cumulative Convertible Redeemable Preferred Shares of
            Beneficial Interest and Fixing Distribution and Other Preferences
            and Rights of Such Shares (filed as Exhibit 3.7 to the Company's
            Annual Report on Form 10-K, filed on March 27, 2001, and
            incorporated by reference herein).

3.6         Bylaws of the Company (filed as Exhibit 3.2 to the Company's
            Registration Statement on Amendment No. 1 of Form S-11, filed on
            September 18, 1996, File No. 333-09863, and incorporated by
            reference herein).

4.1         Form of common shares Certificate (filed as Exhibit 4.1 to the
            Company's Registration Statement on Amendment No. 1 of Form S-11,
            filed on September 18, 1996, File No. 333-09863, and incorporated by
            reference herein).

4.2         Rights Agreement, dated February 6, 1998, between the Company and
            First Chicago Trust Company of New York, as Rights Agent (filed as
            Exhibit 4.1 to the Company's Registration Statement on Form 8-A,
            filed on February 17, 1998, File No. 000-23813, and incorporated by
            reference herein).

4.3         Form of Rights Certificate (included as Exhibit A to the Rights
            Agreement).

4.4         Form of Series D Preferred Share Certificate (filed as Exhibit 4.4
            to the Company's Annual Report on Form 10-K, filed on March 27,
            2001, and incorporated by reference herein).

5*          Opinion of Ballard Spahr Andrews & Ingersoll, L.L.P.

8*          Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P. regarding tax
            matters.

<PAGE>

10.1        Second Amended and Restated Agreement of Limited Partnership of
            Prentiss Properties Acquisition Partners, L.P. (filed as Exhibit
            10.2 to the Company's Annual Report on Form 10-K, filed on March 25,
            1997, and incorporated by reference herein).

10.2        First Amendment to the Second Amended and Restated Agreement of
            Limited Partnership of Prentiss Properties Acquisition Partners,
            L.P. (filed as Exhibit 4.1 to the Company's Current Report on Form
            8-K, filed on January 15, 1998, and incorporated by reference
            herein).

10.3        Second Amendment to the Second Amended and Restated Agreement of
            Limited Partnership of Prentiss Properties Acquisition Partners,
            L.P. (filed as Exhibit 10.3 to the Company's Quarterly Report on
            Form 10-Q, filed on August 12, 1998, and incorporated by reference
            herein).

10.4        Eighth Amendment to the Second Amended and Restated Agreement of
            Limited Partnership of Prentiss Properties Acquisition Partners,
            L.P. (filed as Exhibit 10.1 to the Company's Quarterly Report on
            Form 10-Q, filed on November 11, 1999, and incorporated herein by
            reference).

10.5        Thirteenth Amendment to the Second Amended and Restated Agreement of
            Limited Partnership of Prentiss Properties Acquisition Partners,
            L.P. (filed as Exhibit 10.12 to the Company's Annual Report on Form
            10-K, filed on March 27, 2001, and incorporated herein by
            reference).

10.6        Registration Rights Agreement, dated March 20, 2001, by and between
            the Company and Security Capital Preferred Growth Incorporated
            (filed as Exhibit 10.15 to the Company's Annual Report on Form 10-K,
            filed on March 27, 2001, and incorporated herein by reference).

10.7        Fourteenth Amendment to the Second Amended and Restated Agreement of
            Limited Partnership of Prentiss Properties Acquisition Partners,
            L.P. (filed as Exhibit 10.1 to the Company's Current Report on Form
            10-K, filed on April 23, 2001, and incorporated herein by
            reference).

12*         Statement regarding Computation of Ratios of Earnings to Combined
            Fixed Charges and Preferred Share Dividends.

23.1*       Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P. (included in
            Exhibit 8).

23.2*       Consent of PricewaterhouseCoopers LLP.

23.3*       Consent of Ballard Spahr Andrews & Ingersoll, LLP (included in
            Exhibit 5).

24*         Power of Attorney (included on the signature page of this
            Registration Statement).

_______________________________
*     Filed herewith.