##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  x
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
   o
    
    TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
 Commission
file numbers:
    
    1-13130 (Liberty Property Trust)1-13132 (Liberty Property Limited Partnership)
 
 LIBERTY PROPERTY TRUST
LIBERTY PROPERTY LIMITED PARTNERSHIP
 
 (Exact name of registrants as specified in their governing documents)
 MARYLAND(Liberty Property Trust)
    
    23-7768996PENNSYLVANIA(Liberty Property Limited Partnership)
    
    23-2766549(State or other jurisdiction
    
    (I.R.S. Employerof incorporation or organization)
    
    Identification Number)
 500 Chesterfield ParkwayMalvern, Pennsylvania
    
    
    19355(Address of Principal Executive Offices)
    
    (Zip Code)
 Registrants Telephone Number, Including Area Code
    
    (610) 648-1700
 ü
 ü
    1




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Liberty Property Trust/Liberty Property Limited Partnership
Form 10-Q for the period ended June 30, 2005
 Index
    
    
    
    PagePart I.
    
    Financial InformationItem 1.
    
    Financial Statements (unaudited)Condensed consolidated balance sheets of Liberty Property Trust at June 30, 2005 and December 31, 2004
    
    
    3Condensed consolidated statements of operations of Liberty Property Trust for the three months ended June 30, 2005 and June 30, 2004
    
    
    4Condensed consolidated statements of operations of Liberty Property Trust for the six months ended June 30, 2005 and June 30, 2004
    
    
    5Condensed consolidated statements of cash flows of Liberty Property Trust for the six months ended June 30, 2005 and June 30, 2004
    
    
    6Notes to Condensed consolidated financial statements for Liberty Property Trust
    
    
    7Condensed consolidated balance sheets of Liberty Property Limited Partnership at June 30, 2005 and December 31, 2004
    
    
    13Condensed consolidated statements of operations of Liberty Property Limited Partnership for the three months ended June 30, 2005 and June 30, 2004
    
    
    14Condensed consolidated statements of operations of Liberty Property Limited Partnership for the six months ended June 30, 2005 and June 30, 2004
    
    
    15Condensed consolidated statements of cash flows of Liberty Property Limited Partnership for the six months ended June 30, 2005 and June 30, 2004
    
    
    16Notes to Condensed consolidated financial statements for Liberty Property Limited Partnership
    
    
    17Item 2.
    
    Management's Discussion and Analysis of Financial Condition and Results of Operations
    
    
    23Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    31Item 4.
    
    Controls and Procedures
    
    
    31Part II.
    
    Other Information
    
    
    32Signatures for Liberty Property Trust
    
    
    35Signatures for Liberty Property Limited Partnership
    
    
    36Exhibit Index
    
    
    37CERTIFICATIONS OF THE CHIEF EXECUTIVE OFFICERCERTIFICATIONS OF THE CHIEF FINANCIAL OFFICERCERTIFICATION OF THE CEO,LIBERTY PROPERTY LIMITED PARTNERSHIPCERTIFICATIONS OF THE CFO, LIBERTY PROPERTY LIMITED PARTNERSHIPCERTIFICATIONS OF CEO, REQUIRED UNDER RULE 13A-14(B)CERTIFICATIONS OF CFO, REQUIRED UNDER RULE 13A-14(B)CERTIFICATIONS OF CEO LIBERTY PROPERTY LIMITED PARTNERSHIP, REQUIRED BY RULE 13A-14(B)CERTIFICATIONS OF CFO, LIBERTY PROPERTY LIMITED PARTNERSHIP, REQUIRED BY RULE 13A-14(B)
  2




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CONDENSED CONSOLIDATED BALANCE SHEETS OF LIBERTY PROPERTY TRUST
 (In thousands, except share amounts)
 June 30, 2005
    
    December 31, 2004(Unaudited)ASSETSReal estate:Land and land improvements
    
    $
    636,513
    
    
    $
    625,035Building and improvements
    
    
    3,740,516
    
    
    
    3,629,508Less accumulated depreciation
    
    
    (738,391
    )
    
    
    (695,410
    )Operating real estate
    
    
    3,638,638
    
    
    
    3,559,133Development in progress
    
    
    223,976
    
    
    
    81,099Land held for development
    
    
    163,424
    
    
    
    171,122Net real estate
    
    
    4,026,038
    
    
    
    3,811,354Cash and cash equivalents
    
    
    50,991
    
    
    
    33,667Restricted cash
    
    
    24,875
    
    
    
    34,626Accounts receivable
    
    
    15,610
    
    
    
    21,502Deferred rent receivable
    
    
    70,083
    
    
    
    66,528Deferred financing and leasing costs, net of accumulated amortization
(2005, $102,556; 2004, $91,117)
    
    
    118,266
    
    
    
    107,148Investments in unconsolidated joint ventures
    
    
    33,336
    
    
    
    24,372Prepaid expenses and other assets
    
    
    32,887
    
    
    
    63,630Total assets
    
    $
    4,372,086
    
    
    $
    4,162,827LIABILITIESMortgage loans
    
    $
    281,815
    
    
    $
    366,171Unsecured notes
    
    
    1,755,000
    
    
    
    1,455,000Credit facility
    
    
    232,000
    
    
    
    312,000Accounts payable
    
    
    27,325
    
    
    
    24,288Accrued interest
    
    
    35,576
    
    
    
    34,994Dividend payable
    
    
    55,435
    
    
    
    54,485Other liabilities
    
    
    116,391
    
    
    
    111,764Total liabilities
    
    
    2,503,542
    
    
    
    2,358,702Minority interest
    
    
    244,851
    
    
    
    207,866SHAREHOLDERS EQUITYCommon shares of beneficial interest, $.001 par value, 191,200,000
shares authorized, 87,427,370 (includes 59,100 in treasury) and
85,734,136 (includes 59,100 in treasury) shares issued and
outstanding as of June 30, 2005 and December 31, 2004, respectively
    
    
    87
    
    
    
    86Additional paid-in capital
    
    
    1,769,953
    
    
    
    1,708,573Accumulated other comprehensive income
    
    
    14,687
    
    
    
    25,105Unearned compensation
    
    
    (10,269
    )
    
    
    (6,846
    )Distributions in excess of net income
    
    
    (149,438
    )
    
    
    (129,332
    )Common shares in treasury, at cost, 59,100 shares as of June 30, 2005
and December 31, 2004
    
    
    (1,327
    )
    
    
    (1,327
    )Total shareholders equity
    
    
    1,623,693
    
    
    
    1,596,259Total liabilities and shareholders equity
    
    $
    4,372,086
    
    
    $
    4,162,827
  3




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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS OF LIBERTY PROPERTY TRUST
 (Unaudited and in thousands, except per share amounts)
 Three Months EndedJune 30, 2005
    
    June 30, 2004OPERATING REVENUERental
    
    $
    129,749
    
    
    $
    117,426Operating expense reimbursement
    
    
    48,522
    
    
    
    43,190Total operating revenue
    
    
    178,271
    
    
    
    160,616OPERATING EXPENSERental property
    
    
    35,056
    
    
    
    32,610Real estate taxes
    
    
    17,031
    
    
    
    15,146General and administrative
    
    
    9,390
    
    
    
    7,990Depreciation and amortization
    
    
    37,556
    
    
    
    33,357Total operating expenses
    
    
    99,033
    
    
    
    89,103Operating income
    
    
    79,238
    
    
    
    71,513OTHER INCOME (EXPENSE)Interest and other income
    
    
    2,174
    
    
    
    672Interest expense
    
    
    (33,773
    )
    
    
    (29,804
    )Total other income (expense)
    
    
    (31,599
    )
    
    
    (29,132
    )Income before property dispositions, income taxes, minority interest
and equity in earnings (loss) of unconsolidated joint ventures
    
    
    47,639
    
    
    
    42,381Loss on property dispositions, including impairment
    
    
    (4,524
    )
    
    
    (78
    )Income taxes
    
    
    (911
    )
    
    
    (458
    )Minority interest
    
    
    (5,049
    )
    
    
    (4,540
    )Equity in earnings (loss) of unconsolidated joint ventures
    
    
    182
    
    
    
    (125
    )Income from continuing operations
    
    
    37,337
    
    
    
    37,180Discontinued operations, net of minority interest (including net gain on
property dispositions of $7,244 and $0 for the three months ended
June 30, 2005 and 2004)
    
    
    7,220
    
    
    
    176Net income
    
    $
    44,557
    
    
    $
    37,356Earnings per common shareBasic:Income from continuing operations
    
    $
    0.43
    
    
    $
    0.44Income from discontinued operations
    
    
    0.08
    
    
    
    Income per common share  basic
    
    $
    0.51
    
    
    $
    0.44Diluted:Income from continuing operations
    
    $
    0.43
    
    
    $
    0.44Income from discontinued operations
    
    
    0.08
    
    
    
    Income per common share  diluted
    
    $
    0.51
    
    
    $
    0.44Distributions per common share
    
    $
    0.61
    
    
    $
    0.605Weighted average number of common shares outstandingBasic
    
    
    86,685
    
    
    
    84,411Diluted
    
    
    88,134
    
    
    
    85,805
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS OF LIBERTY PROPERTY TRUST
 (Unaudited and in thousands, except per share amounts)
 Six Months EndedJune 30, 2005
    
    June 30, 2004OPERATING REVENUERental
    
    $
    250,718
    
    
    $
    231,477Operating expense reimbursement
    
    
    98,025
    
    
    
    88,652Total operating revenue
    
    
    348,743
    
    
    
    320,129OPERATING EXPENSERental property
    
    
    73,216
    
    
    
    66,778Real estate taxes
    
    
    32,953
    
    
    
    30,665General and administrative
    
    
    17,687
    
    
    
    16,461Depreciation and amortization
    
    
    72,323
    
    
    
    65,006Total operating expenses
    
    
    196,179
    
    
    
    178,910Operating income
    
    
    152,564
    
    
    
    141,219OTHER INCOME (EXPENSE)Interest and other income
    
    
    3,657
    
    
    
    3,410Interest expense
    
    
    (66,721
    )
    
    
    (59,827
    )Total other income (expense)
    
    
    (63,064
    )
    
    
    (56,417
    )Income before property dispositions, income taxes, minority interest
and equity in earnings (loss) of unconsolidated joint ventures
    
    
    89,500
    
    
    
    84,802Loss on property dispositions, including impairment
    
    
    (4,929
    )
    
    
    (408
    )Income taxes
    
    
    (1,445
    )
    
    
    (847
    )Minority interest
    
    
    (9,286
    )
    
    
    (9,122
    )Equity in earnings (loss) of unconsolidated joint ventures
    
    
    2,202
    
    
    
    (530
    )Income from continuing operations
    
    
    76,042
    
    
    
    73,895Discontinued operations, net of minority interest (including net gain on
property dispositions of $14,420 and $2,097 for the six months ended
June 30, 2005 and 2004)
    
    
    14,116
    
    
    
    2,132Net income
    
    $
    90,158
    
    
    $
    76,027Earnings per common shareBasic:Income from continuing operations
    
    $
    0.88
    
    
    $
    0.88Income from discontinued operations
    
    
    0.16
    
    
    
    0.03Income per common share  basic
    
    $
    1.04
    
    
    $
    0.91Diluted:Income from continuing operations
    
    $
    0.87
    
    
    $
    0.86Income from discontinued operations
    
    
    0.16
    
    
    
    0.03Income per common share  diluted
    
    $
    1.03
    
    
    $
    0.89Distributions per common share
    
    $
    1.22
    
    
    $
    1.21Weighted average number of common shares outstandingBasic
    
    
    86,278
    
    
    
    83,947Diluted
    
    
    87,716
    
    
    
    85,454
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS OF LIBERTY PROPERTY TRUST
 (Unaudited and in thousands)
 Six Months EndedJune 30, 2005
    
    June 30, 2004OPERATING ACTIVITIESNet income
    
    $
    90,158
    
    
    $
    76,027Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    73,155
    
    
    
    67,020Amortization of deferred financing costs
    
    
    2,344
    
    
    
    1,935Equity in earnings (loss) of unconsolidated joint ventures
    
    
    (2,202
    )
    
    
    530Distributions from unconsolidated joint ventures
    
    
    4,391
    
    
    
    529Minority interest in net income
    
    
    9,858
    
    
    
    9,215Gain on property dispositions
    
    
    (9,491
    )
    
    
    (1,689
    )Noncash compensation
    
    
    2,214
    
    
    
    1,417Changes in operating assets and liabilities:Restricted cash
    
    
    8,519
    
    
    
    (7,872
    )Accounts receivable
    
    
    5,803
    
    
    
    (1,133
    )Deferred rent receivable
    
    
    (3,555
    )
    
    
    (5,255
    )Prepaid expenses and other assets
    
    
    5,693
    
    
    
    (801
    )Accounts payable
    
    
    3,084
    
    
    
    14,891Accrued interest
    
    
    582
    
    
    
    38Other liabilities
    
    
    5,817
    
    
    
    (4,250
    )Net cash provided by operating activities
    
    
    196,370
    
    
    
    150,602INVESTING ACTIVITIESInvestment in properties
    
    
    (192,217
    )
    
    
    (51,965
    )Investment in unconsolidated joint ventures
    
    
    (13,034
    )
    
    
    (1,520
    )Proceeds from disposition of properties/land
    
    
    89,749
    
    
    
    8,739Investment in development in progress
    
    
    (72,975
    )
    
    
    (48,847
    )Investment in land held for development
    
    
    (58,774
    )
    
    
    (18,607
    )Increase in deferred leasing costs
    
    
    (24,232
    )
    
    
    (10,461
    )Net cash used in investing activities
    
    
    (271,483
    )
    
    
    (122,661
    )FINANCING ACTIVITIESNet proceeds from issuance of common shares
    
    
    49,281
    
    
    
    51,611Net proceeds from the issuance of preferred units
    
    
    42,889
    
    
    
    Net proceeds from issuance of unsecured notes
    
    
    296,424
    
    
    
    Proceeds from mortgage loans
    
    
    
    
    
    
    7,723Repayments of mortgage loans
    
    
    (96,656
    )
    
    
    (10,043
    )Proceeds from credit facility
    
    
    339,550
    
    
    
    151,756Repayments on credit facility
    
    
    (419,550
    )
    
    
    (99,756
    )Decrease (increase) in deferred financing costs
    
    
    1,823
    
    
    
    (506
    )Distributions to minority interests
    
    
    (3,710
    )
    
    
    Distributions paid on common shares
    
    
    (105,035
    )
    
    
    (101,088
    )Distributions paid on units
    
    
    (9,866
    )
    
    
    (10,533
    )Net cash provided by (used in) financing activities
    
    
    95,150
    
    
    
    (10,836
    )Increase in cash and cash equivalents
    
    
    20,037
    
    
    
    17,105(Decrease) increase related to foreign currency translation
    
    
    (2,713
    )
    
    
    370Cash and cash equivalents at beginning of period
    
    
    33,667
    
    
    
    21,809Cash and cash equivalents at end of period
    
    $
    50,991
    
    
    $
    39,284SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONSWrite-off of fully depreciated property and deferred costs
    
    $
    19,959
    
    
    $
    1,075Acquisition of properties
    
    
    (17,183
    )
    
    
    (11,305
    )Assumption of mortgage loans
    
    
    17,183
    
    
    
    11,305
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Liberty Property Trust
 
 Notes to Condensed Consolidated Financial Statements (Unaudited)
 June 30, 2005
 Note 1: Basis of Presentation
  Income per Common Share
  For the Three Months Ended June 30, 2005
    
    For the Three Months Ended June 30, 2004Weighted
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    
    
    
    AverageIncome
    
    Shares
    
    Per
    
    Income
    
    Shares
    
    Per(Numerator)
    
    (Denominator)
    
    Share
    
    (Numerator)
    
    (Denominator)
    
    ShareBasic income from continuing operationsIncome from continuing operations
    
    $
    37,337
    
    
    
    86,685
    
    
    $
    0.43
    
    
    $
    37,180
    
    
    
    84,411
    
    
    $
    0.44Dilutive shares for long-term
compensation plans
    
    
    
    
    
    
    1,449
    
    
    
    
    
    
    
    
    
    
    
    1,394Diluted income from continuing operationsIncome from continuing operations and
assumed conversions
    
    
    37,337
    
    
    
    88,134
    
    
    $
    0.43
    
    
    
    37,180
    
    
    
    85,805
    
    
    $
    0.44Basic income from discontinued operationsDiscontinued operations net of minority interest
    
    
    7,220
    
    
    
    86,685
    
    
    $
    0.08
    
    
    
    176
    
    
    
    84,411
    
    
    $
    Dilutive shares for long-term compensation
plans
    
    
    
    
    
    
    1,449
    
    
    
    
    
    
    
    
    
    
    
    1,394Diluted income from discontinued operationsDiscontinued operations net of minority interest
    
    
    7,220
    
    
    
    88,134
    
    
    $
    0.08
    
    
    
    176
    
    
    
    85,805
    
    
    $
    Basic income per common shareNet income
    
    
    44,557
    
    
    
    86,685
    
    
    $
    0.51
    
    
    
    37,356
    
    
    
    84,411
    
    
    $
    0.44Dilutive shares for long-term compensation
plans
    
    
    
    
    
    
    1,449
    
    
    
    
    
    
    
    
    
    
    
    1,394Diluted income per common shareNet income and assumed conversions
    
    $
    44,557
    
    
    
    88,134
    
    
    $
    0.51
    
    
    $
    37,356
    
    
    
    85,805
    
    
    $
    0.44
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##### Table of Contents



For the Six Months Ended June 30, 2005
    
    For the Six Months Ended June 30, 2004Weighted
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    
    
    
    AverageIncome
    
    Shares
    
    Per
    
    Income
    
    Shares
    
    Per(Numerator)
    
    (Denominator)
    
    Share
    
    (Numerator)
    
    (Denominator)
    
    ShareBasic income from continuing operationsIncome from continuing operations
    
    $
    76,042
    
    
    
    86,278
    
    
    $
    0.88
    
    
    $
    73,895
    
    
    
    83,947
    
    
    $
    0.88Dilutive shares for long-term
compensation plans
    
    
    
    
    
    
    1,438
    
    
    
    
    
    
    
    
    
    
    
    1,507Diluted income from continuing operationsIncome from continuing operations and
assumed conversions
    
    
    76,042
    
    
    
    87,716
    
    
    $
    0.87
    
    
    
    73,895
    
    
    
    85,454
    
    
    $
    0.86Basic income from discontinued operationsDiscontinued operations net of minority interest
    
    
    14,116
    
    
    
    86,278
    
    
    $
    0.16
    
    
    
    2,132
    
    
    
    83,947
    
    
    $
    0.03Dilutive shares for long-term compensation
plans
    
    
    
    
    
    
    1,438
    
    
    
    
    
    
    
    
    
    
    
    1,507Diluted income from discontinued operationsDiscontinued operations net of minority interest
    
    
    14,116
    
    
    
    87,716
    
    
    $
    0.16
    
    
    
    2,132
    
    
    
    85,454
    
    
    $
    0.03Basic income per common shareNet income
    
    
    90,158
    
    
    
    86,278
    
    
    $
    1.04
    
    
    
    76,027
    
    
    
    83,947
    
    
    $
    0.91Dilutive shares for long-term compensation
plans
    
    
    
    
    
    
    1,438
    
    
    
    
    
    
    
    
    
    
    
    1,507Diluted income per common shareNet income and assumed conversions
    
    $
    90,158
    
    
    
    87,716
    
    
    $
    1.03
    
    
    $
    76,027
    
    
    
    85,454
    
    
    $
    0.89
 Stock Based Compensation
  Three Months Ended
    
    Six Months EndedJune 30, 2005
    
    June 30, 2004
    
    June 30, 2005
    
    June 30, 2004Net income
    
    $
    44,557
    
    
    $
    37,356
    
    
    $
    90,158
    
    
    $
    76,027Add: Share-based employee compensation
expense included in reported net income
    
    
    156
    

    
    
    83
    
    
    
    258
    
    
    
    120Deduct: Total share-based employee compensation
expense determined under fair value based
method for all awards
    
    
    (163
    )
    
    
    (278
    )
    
    
    (388
    )
    
    
    (588
    )Pro forma net income
    
    $
    44,550
    
    
    $
    37,161
    
    
    $
    90,028
    
    
    $
    75,559Income per common share:Basic  as reported
    
    $
    0.51
    
    
    $
    0.44
    
    
    $
    1.04
    
    
    $
    0.91Basic  pro forma
    
    $
    0.51
    
    
    $
    0.44
    
    
    $
    1.04
    
    
    $
    0.90Diluted  as reported
    
    $
    0.51
    
    
    $
    0.44
    
    
    $
    1.03
    
    
    $
    0.89Diluted  pro forma
    
    $
    0.51
    
    
    $
    0.43
    
    
    $
    1.03
    
    
    $
    0.88
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##### Table of Contents



Foreign Operations
  Note 2: Organization
  Note 3: Segment Information
  Reportable Segments
    
    MarketsDelaware Valley
    
    Southeastern Pennsylvania; New JerseyMidwest
    
    Lehigh Valley, Pennsylvania; Michigan; Minnesota; Milwaukee; ChicagoMid-Atlantic
    
    Maryland; Piedmont Triad, NC; Greenville, SC; Richmond; Virginia BeachFlorida
    
    Jacksonville; Orlando; Boca Raton; Tampa; TexasUnited Kingdom
    
    County of Kent
   9




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##### Table of Contents



For the Three Months Ended June 30, 2005Delaware Valley
    
    
    MidwestSoutheastern
    
    
    
    
    
    
    Lehigh
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    UnitedPennsylvania
    
    
    Other
    
    
    Valley
    
    
    Other
    
    
    Mid-Atlantic
    
    
    Florida
    
    
    Kingdom
    
    
    TotalOperating revenue
    
    $
    54,352
    
    
    $
    9,977
    
    
    $
    22,155
    
    
    $
    30,187
    
    
    $
    30,740
    
    
    $
    24,317
    
    
    $
    6,543
    
    
    $
    178,271Rental property expenses
and real estate taxes
    
    
    13,805
    
    
    
    3,271
    
    
    
    5,977
    
    
    
    10,910
    
    
    
    9,028
    
    
    
    7,840
    
    
    
    1,256
    
    
    
    52,087Property level operating
income
    
    $
    40,547
    
    
    $
    6,706
    
    
    $
    16,178
    
    
    $
    19,277
    
    
    $
    21,712
    
    
    $
    16,477
    
    
    $
    5,287
    
    
    $
    126,184Interest and other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,174Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33,773
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,390
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37,556
    )Income before property dispositions, income taxes, minority
interest and equity in earnings (loss) of unconsolidated
joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    47,639Loss on property dispositions, including impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,524
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (911
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,049
    )Equity in earnings (loss) of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    182Discontinued operations, net of minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,220Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    44,557
 For the Three Months Ended June 30, 2004Delaware Valley
    
    
    MidwestSoutheastern
    
    
    
    
    
    
    Lehigh
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    UnitedPennsylvania
    
    
    Other
    
    
    Valley
    
    
    Other
    
    
    Mid-Atlantic
    
    
    Florida
    
    
    Kingdom
    
    
    TotalOperating revenue
    
    $
    48,876
    
    
    $
    8,553
    
    
    $
    17,938
    
    
    $
    28,640
    
    
    $
    29,218
    
    
    $
    22,363
    
    
    $
    5,028
    
    
    $
    160,616Rental property expenses
and real estate taxes
    
    
    13,292
    
    
    
    2,943
    
    
    
    5,220
    
    
    
    10,410
    
    
    
    8,142
    
    
    
    6,927
    
    
    
    822
    
    
    
    47,756Property level operating
income
    
    $
    35,584
    
    
    $
    5,610
    
    
    $
    12,718
    
    
    $
    18,230
    
    
    $
    21,076
    
    
    $
    15,436
    
    
    $
    4,206
    
    
    $
    112,860Interest and other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    672Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29,804
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,990
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33,357
    )Income before property dispositions, income taxes, minority interest
and equity in earnings (loss) of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,381Gain on property dispositions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (78
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (458
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,540
    )Equity in earnings (loss) of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (125
    )Discontinued operations, net of minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    176Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    37,356
 10




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##### Table of Contents



For the Six Months Ended June 30, 2005Delaware Valley
    
    MidwestSoutheastern
    
    
    
    
    
    Lehigh
    
    
    
    
    
    
    
    
    
    
    
    
    
    UnitedPennsylvania
    
    Other
    
    Valley
    
    Other
    
    Mid-Atlantic
    
    Florida
    
    Kingdom
    
    TotalOperating revenue
    
    $
    102,087
    
    
    $
    19,825
    
    
    $
    43,460
    
    
    $
    59,974
    
    
    $
    62,939
    
    
    $
    48,732
    
    
    $
    11,726
    
    
    $
    348,743Rental property expenses
and real estate taxes
    
    
    29,458
    
    
    
    7,049
    
    
    
    11,761
    
    
    
    21,907
    
    
    
    18,481
    
    
    
    15,124
    
    
    
    2,389
    
    
    
    106,169Property level operating
income
    
    $
    72,629
    
    
    $
    12,776
    
    
    $
    31,699
    
    
    $
    38,067
    
    
    $
    44,458
    
    
    $
    33,608
    
    
    $
    9,337
    
    
    $
    242,574Interest and other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,657Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (66,721
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,687
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (72,323
    )Income before property dispositions, income taxes, minority interest
and equity in earnings (loss) of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    89,500Loss on property dispositions, including impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,929
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,445
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,286
    )Equity in earnings (loss) of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,202Discontinued operations, net of minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,116Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    90,158
 For the Six Months Ended June 30, 2004Delaware Valley
    
    MidwestSoutheastern
    
    
    
    
    
    Lehigh
    
    
    
    
    
    
    
    
    
    
    
    
    
    UnitedPennsylvania
    
    Other
    
    Valley
    
    Other
    
    Mid-Atlantic
    
    Florida
    
    Kingdom
    
    TotalOperating revenue
    
    $
    94,688
    
    
    $
    17,347
    
    
    $
    36,460
    
    
    $
    58,529
    
    
    $
    58,574
    
    
    $
    45,015
    
    
    $
    9,516
    
    
    $
    320,129Rental property expenses
and real estate taxes
    
    
    27,472
    
    
    
    6,166
    
    
    
    10,897
    
    
    
    20,956
    
    
    
    16,457
    
    
    
    13,546
    
    
    
    1,949
    
    
    
    97,443Property level operating
income
    
    $
    67,216
    
    
    $
    11,181
    
    
    $
    25,563
    
    
    $
    37,573
    
    
    $
    42,117
    
    
    $
    31,469
    
    
    $
    7,567
    
    
    $
    222,686Interest and other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,410Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (59,827
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,461
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (65,006
    )Income before property dispositions, income taxes, minority interest
and equity in earnings (loss) of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    84,802Gain on property dispositions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (408
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (847
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,122
    )Equity in earnings (loss) of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (530
    )Discontinued operations, net of minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,132Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    76,027
 Note 4: SFAS No. 144, Accounting For The Impairment Or Disposal Of Long-Lived Assets"
  11




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##### Table of Contents



Three Months Ended
    
    Six Months EndedJune 30, 2005
    
    June 30, 2004
    
    June 30, 2005
    
    June 30, 2004Revenues
    
    $
    941
    
    
    $
    2,638
    
    
    $
    2,789
    
    
    $
    5,380Operating expenses
    
    
    (84
    )
    
    
    (1,039
    )
    
    
    (864
    )
    
    
    (1,987
    )Interest expense
    
    
    (431
    )
    
    
    (634
    )
    
    
    (930
    )
    
    
    (1,346
    )Depreciation and amortization
    
    
    (159
    )
    
    
    (781
    )
    
    
    (727
    )
    
    
    (1,919
    )Income before minority interest
    
    $
    267
    
    
    $
    184
    
    
    $
    268
    
    
    $
    128
   Note 5: Preferred Units
   Note 6: Impact of Recently Issued Accounting Standards
  12




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##### Table of Contents



CONDENSED
CONSOLIDATED BALANCE SHEETS OF
LIBERTY PROPERTY LIMITED PARTNERSHIP
 (In thousands)
 June 30, 2005
    
    December 31, 2004(Unaudited)ASSETSReal estate:Land and land improvements
    
    $
    636,513
    
    
    $
    625,035Building and improvements
    
    
    3,740,516
    
    
    
    3,629,508Less accumulated depreciation
    
    
    (738,391
    )
    
    
    (695,410
    )Operating real estate
    
    
    3,638,638
    
    
    
    3,559,133Development in progress
    
    
    223,976
    
    
    
    81,099Land held for development
    
    
    163,424
    
    
    
    171,122Net real estate
    
    
    4,026,038
    
    
    
    3,811,354Cash and cash equivalents
    
    
    50,991
    
    
    
    33,667Restricted cash
    
    
    24,875
    
    
    
    34,626Accounts receivable
    
    
    15,610
    
    
    
    21,502Deferred rent receivable
    
    
    70,083
    
    
    
    66,528Deferred financing and leasing costs, net of accumulated amortization
(2005, $102,556; 2004, $91,117)
    
    
    118,266
    
    
    
    107,148Investments in unconsolidated joint ventures
    
    
    33,336
    
    
    
    24,372Prepaid expenses and other assets
    
    
    32,887
    
    
    
    63,630Total assets
    
    $
    4,372,086
    
    
    $
    4,162,827LIABILITIESMortgage loans
    
    $
    281,815
    
    
    $
    366,171Unsecured notes
    
    
    1,755,000
    
    
    
    1,455,000Credit facility
    
    
    232,000
    
    
    
    312,000Accounts payable
    
    
    27,325
    
    
    
    24,288Accrued interest
    
    
    35,576
    
    
    
    34,994Distribution payable
    
    
    55,435
    
    
    
    54,485Other liabilities
    
    
    116,391
    
    
    
    111,764Total liabilities
    
    
    2,503,542
    
    
    
    2,358,702Minority interest
    
    
    625
    
    
    
    3,980OWNERS EQUITYGeneral partners equity   common units
    
    
    1,623,693
    
    
    
    1,596,259Limited partners  equity  preferred units
    
    
    178,859
    
    
    
    135,471   common units
    
    
    65,367
    
    
    
    68,415Total owners equity
    
    
    1,867,919
    
    
    
    1,800,145Total liabilities and owners equity
    
    $
    4,372,086
    
    
    $
    4,162,827
  13




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##### Table of Contents



CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS OFLIBERTY PROPERTY LIMITED PARTNERSHIP
 (Unaudited and in thousands, except per unit amounts
 Three Months EndedJune 30, 2005
    
    June 30, 2004OPERATING REVENUERental
    
    $
    129,749
    
    
    $
    117,426Operating expense reimbursement
    
    
    48,522
    
    
    
    43,190Total operating revenue
    
    
    178,271
    
    
    
    160,616OPERATING EXPENSERental property
    
    
    35,056
    
    
    
    32,610Real estate taxes
    
    
    17,031
    
    
    
    15,146General and administrative
    
    
    9,390
    
    
    
    7,990Depreciation and amortization
    
    
    37,556
    
    
    
    33,357Total operating expenses
    
    
    99,033
    
    
    
    89,103Operating income
    
    
    79,238
    
    
    
    71,513OTHER INCOME (EXPENSE)Interest and other income
    
    
    2,174
    
    
    
    672Interest expense
    
    
    (33,773
    )
    
    
    (29,804
    )Total other income (expense)
    
    
    (31,599
    )
    
    
    (29,132
    )Income before property dispositions, income taxes, minority interest
and equity in earnings (loss) of unconsolidated joint ventures
    
    
    47,639
    
    
    
    42,381Loss on property dispositions, including impairment
    
    
    (4,524
    )
    
    
    (78
    )Income taxes
    
    
    (911
    )
    
    
    (458
    )Minority interest
    
    
    (368
    )
    
    
    166Equity in earnings (loss) of unconsolidated joint ventures
    
    
    182
    
    
    
    (125
    )Income from continuing operations
    
    
    42,018
    
    
    
    41,886Discontinued operations (including net gain on property dispositions of
$7,244 and $0 for the three months ended June 30, 2005 and 2004)
    
    
    7,511
    
    
    
    184Net income
    
    
    49,529
    
    
    
    42,070Preferred unit distributions
    
    
    (2,663
    )
    
    
    (3,104
    )Excess of preferred unit redemption over caring amount
    
    
    (500
    )
    
    
    Income available to common unitholders
    
    $
    46,366
    
    
    $
    38,966Earnings per common unitBasic:Income from continuing operations
    
    $
    0.43
    
    
    $
    0.44Income from discontinued operations
    
    
    0.08
    
    
    
    Income per common unit  basic
    
    $
    0.51
    
    
    $
    0.44Diluted:Income from continuing operations
    
    $
    0.43
    
    
    $
    0.44Income from discontinued operations
    
    
    0.08
    
    
    
    Income per common unit  diluted
    
    $
    0.51
    
    
    $
    0.44Distributions per common unit
    
    $
    0.61
    
    
    $
    0.605Weighted average number of common units outstandingBasic
    
    
    90,203
    
    
    
    88,082Diluted
    
    
    91,651
    
    
    
    89,476
  14




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##### Table of Contents



CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS OF LIBERTY PROPERTY LIMITED PARTNERSHIP
 (Unaudited and in thousands, except per unit amounts)
 Six Months EndedJune 30, 2005
    
    June 30, 2004OPERATING REVENUERental
    
    $
    250,718
    
    
    $
    231,477Operating expense reimbursement
    
    
    98,025
    
    
    
    88,652Total operating revenue
    
    
    348,743
    
    
    
    320,129OPERATING EXPENSERental property
    
    
    73,216
    
    
    
    66,778Real estate taxes
    
    
    32,953
    
    
    
    30,665General and administrative
    
    
    17,687
    
    
    
    16,461Depreciation and amortization
    
    
    72,323
    
    
    
    65,006Total operating expenses
    
    
    196,179
    
    
    
    178,910Operating income
    
    
    152,564
    
    
    
    141,219OTHER INCOME (EXPENSE)Interest and other income
    
    
    3,657
    
    
    
    3,410Interest expense
    
    
    (66,721
    )
    
    
    (59,827
    )Total other income (expense)
    
    
    (63,064
    )
    
    
    (56,417
    )Income before property dispositions, income taxes, minority interest
and equity in earnings (loss) of unconsolidated joint ventures
    
    
    89,500
    
    
    
    84,802Loss on property dispositions, including impairment
    
    
    (4,929
    )
    
    
    (408
    )Income taxes
    
    
    (1,445
    )
    
    
    (847
    )Minority interest
    
    
    (355
    )
    
    
    297Equity in earnings (loss) of unconsolidated joint ventures
    
    
    2,202
    
    
    
    (530
    )Income from continuing operations
    
    
    84,973
    
    
    
    83,314Discontinued operations (including net gain on property dispositions of
$14,420 and $2,097 for the six months ended June 30, 2005 and 2004)
    
    
    14,688
    
    
    
    2,225Net income
    
    
    99,661
    
    
    
    85,539Preferred unit distributions
    
    
    (5,339
    )
    
    
    (6,208
    )Excess of preferred unit redemption over caring amount
    
    
    (500
    )
    
    
    Income available to common unitholders
    
    $
    93,822
    
    
    $
    79,331Earnings per common unitBasic:Income from continuing operations
    
    $
    0.88
    
    
    $
    0.88Income from discontinued operations
    
    
    0.16
    
    
    
    0.03Income per common unit  basic
    
    $
    1.04
    
    
    $
    0.91Diluted:Income from continuing operations
    
    $
    0.87
    
    
    $
    0.86Income from discontinued operations
    
    
    0.16
    
    
    
    0.03Income per common unit  diluted
    
    $
    1.03
    
    
    $
    0.89Distributions per common unit
    
    $
    1.22
    
    
    $
    1.21Weighted average number of common units outstandingBasic
    
    
    89,869
    
    
    
    87,632Diluted
    
    
    91,308
    
    
    
    89,139
  15




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##### Table of Contents



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS OF
LIBERTY PROPERTY LIMITED PARTNERSHIP
 (Unaudited and in thousands)
 Six Months EndedJune 30, 2005
    
    June 30, 2004OPERATING ACTIVITIESNet income
    
    $
    99,661
    
    
    $
    85,539Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    73,155
    
    
    
    67,020Amortization of deferred financing costs
    
    
    2,344
    
    
    
    1,935Equity in earnings (loss) of unconsolidated joint ventures
    
    
    (2,202
    )
    
    
    530Distributions from unconsolidated joint ventures
    
    
    4,391
    
    
    
    529Minority interest in net income
    
    
    355
    
    
    
    (297
    )Gain on property dispositions
    
    
    (9,491
    )
    
    
    (1,689
    )Noncash compensation
    
    
    2,214
    
    
    
    1,417Changes in operating assets and liabilities:Restricted cash
    
    
    8,519
    
    
    
    (7,872
    )Accounts receivable
    
    
    5,803
    
    
    
    (1,133
    )Deferred rent receivable
    
    
    (3,555
    )
    
    
    (5,255
    )Prepaid expenses and other assets
    
    
    5,693
    
    
    
    (801
    )Accounts payable
    
    
    3,084
    
    
    
    14,891Accrued interest
    
    
    582
    
    
    
    38Other liabilities
    
    
    5,817
    
    
    
    (4,250
    )Net cash provided by operating activities
    
    
    196,370
    
    
    
    150,602INVESTING ACTIVITIESInvestment in properties
    
    
    (192,217
    )
    
    
    (51,965
    )Investment in unconsolidated joint ventures
    
    
    (13,034
    )
    
    
    (1,520
    )Proceeds from disposition of properties/land
    
    
    89,749
    
    
    
    8,739Investment in development in progress
    
    
    (72,975
    )
    
    
    (48,847
    )Investment in land held for development
    
    
    (58,774
    )
    
    
    (18,607
    )Increase in deferred leasing costs
    
    
    (24,232
    )
    
    
    (10,461
    )Net cash used in investing activities
    
    
    (271,483
    )
    
    
    (122,661
    )FINANCING ACTIVITIESProceeds from the issuance of preferred units
    
    
    42,889
    
    
    
    Proceeds from issuance of unsecured notes
    
    
    296,424
    
    
    
    Proceeds from mortgage loans
    
    
    
    
    
    
    7,723Repayments of mortgage loans
    
    
    (96,656
    )
    
    
    (10,043
    )Proceeds from credit facility
    
    
    339,550
    
    
    
    151,756Repayments on credit facility
    
    
    (419,550
    )
    
    
    (99,756
    )Increase in deferred financing costs
    
    
    1,823
    
    
    
    (506
    )Capital contributions
    
    
    49,281
    
    
    
    51,611Distributions to partners
    
    
    (118,611
    )
    
    
    (111,621
    )Net cash provided by (used in) financing activities
    
    
    95,150
    
    
    
    (10,836
    )Increase in cash and cash equivalents
    
    
    20,037
    
    
    
    17,105(Decrease) increase related to foreign currency translation
    
    
    (2,713
    )
    
    
    370Cash and cash equivalents at beginning of period
    
    
    33,667
    
    
    
    21,809Cash and cash equivalents at end of period
    
    $
    50,991
    
    
    $
    39,284SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONSWrite-off of fully depreciated property and deferred costs
    
    $
    19,959
    
    
    $
    1,075Acquisition of properties
    
    
    (17,183
    )
    
    
    (11,305
    )Assumption of mortgage loans
    
    
    17,183
    
    
    
    11,305
  16




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##### Table of Contents



Liberty Property Limited Partnership
 
 Notes to Condensed Consolidated Financial Statements (Unaudited)
 June 30, 2005
 Note 1: Basis of Presentation
  Income
per Common Unit
  For the Three Months Ended June 30, 2005
    
    For the Three Months Ended June 30, 2004Weighted
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    
    
    
    AverageIncome
    
    Units
    
    Per
    
    Income
    
    Units
    
    Per(Numerator)
    
    (Denominator)
    
    Unit
    
    (Numerator)
    
    (Denominator)
    
    UnitIncome from continuing operations
    
    $
    42,018
    
    
    
    
    
    
    
    
    
    
    $
    41,886Less: Preferred unit distributions
    
    
    (2,663
    )
    
    
    
    
    
    
    
    
    
    
    (3,104
    )Excess of preferred unit redemption
over carrying amount
    
    
    (500
    )
    
    
    
    
    
    
    
    
    
    
    Basic income from continuing operationsIncome from continuing operations
available to common unitholders
    
    
    38,855
    
    
    
    90,203
    
    
    $
    0.43
    
    
    
    38,782
    
    
    
    88,082
    
    
    $
    0.44Dilutive units for long-term
compensation plans
    
    
    
    
    
    
    1,448
    
    
    
    
    
    
    
    
    
    
    
    1,394Diluted income from continuing operationsIncome from continuing operations available
to common unitholders and assumed
conversions
    
    
    38,855
    
    
    
    91,651
    
    
    $
    0.43
    
    
    
    38,782
    
    
    
    89,476
    
    
    $
    0.44Basic income from discontinued operationsDiscontinued operations
    
    
    7,511
    
    
    
    90,203
    
    
    $
    0.08
    
    
    
    184
    
    
    
    88,082
    
    
    $
    Dilutive units for long-term compensation
plans
    
    
    
    
    
    
    1,448
    
    
    
    
    
    
    
    
    
    
    
    1,394Diluted income from discontinued operationsDiscontinued operations
    
    
    7,511
    
    
    
    91,651
    
    
    $
    0.08
    
    
    
    184
    
    
    
    89,476
    
    
    $
    Basic income per common unitIncome available to common unitholders
    
    
    46,366
    
    
    
    90,203
    
    
    $
    0.51
    
    
    
    38,966
    
    
    
    88,082
    
    
    $
    0.44Dilutive units for long-term compensation
plans
    
    
    
    
    
    
    1,488
    
    
    
    
    
    
    
    
    
    
    
    1,394Diluted income per common unitIncome available to common unitholders
and assumed conversions
    
    $
    46,366
    
    
    
    91,651
    
    
    $
    0.51
    
    
    $
    38,966
    
    
    
    89,476
    
    
    $
    0.44
 17




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##### Table of Contents



For the Six Months Ended June 30, 2005
    
    For the Six Months Ended June 30, 2004Weighted
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    
    
    
    AverageIncome
    
    Units
    
    Per
    
    Income
    
    Units
    
    Per(Numerator)
    
    (Denominator)
    
    Unit
    
    (Numerator)
    
    (Denominator)
    
    UnitIncome from continuing operations
    
    $
    84,973
    
    
    
    
    
    
    
    
    
    
    $
    83,314Less: Preferred unit distributions
    
    
    (5,339
    )
    
    
    
    
    
    
    
    
    
    
    (6,208
    )Excess of preferred unit redemption
over caring amount
    
    
    (500
    )
    
    
    
    
    
    
    
    
    
    
    Basic income from continuing operationsIncome from continuing operations
available to common unitholders
    
    
    79,134
    
    
    
    89,869
    
    
    $
    0.88
    
    
    
    77,106
    
    
    
    87,632
    
    
    $
    0.88Dilutive units for long-term
compensation plans
    
    
    
    
    
    
    1,439
    
    
    
    
    
    
    
    
    
    
    
    1,507Diluted income from continuing operationsIncome from continuing operations available
to common unitholders and assumed
conversions
    
    
    79,134
    
    
    
    91,308
    
    
    $
    0.87
    
    
    
    77,106
    
    
    
    89,139
    
    
    $
    0.86Basic income from discontinued operationsDiscontinued operations
    
    
    14,688
    
    
    
    89,869
    
    
    $
    0.16
    
    
    
    2,225
    
    
    
    87,632
    
    
    $
    0.03Dilutive units for long-term compensation
plans
    
    
    
    
    
    
    1,439
    
    
    
    
    
    
    
    
    
    
    
    1,507Diluted income from discontinued operationsDiscontinued operations
    
    
    14,688
    
    
    
    91,308
    
    
    $
    0.16
    
    
    
    2,225
    
    
    
    89,139
    
    
    $
    0.03Basic income per common unitIncome available to common unitholders
    
    
    93,822
    
    
    
    89,869
    
    
    $
    1.04
    
    
    
    79,331
    
    
    
    87,632
    
    
    $
    0.91Dilutive units for long-term compensation
plans
    
    
    
    
    
    
    1,439
    
    
    
    
    
    
    
    
    
    
    
    1,507Diluted income per common unitIncome available to common unitholders
and assumed conversions
    
    $
    93,822
    
    
    
    91,308
    
    
    $
    1.03
    
    
    $
    79,331
    
    
    
    89,139
    
    
    $
    0.89
 Foreign Operations
  Note 2: Organization
  18




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##### Table of Contents



Note 3: Segment Information
  Reportable Segments
    
    MarketsDelaware Valley
    
    Southeastern Pennsylvania; New JerseyMidwest
    
    Lehigh Valley, Pennsylvania; Michigan; Minnesota; Milwaukee; ChicagoMid-Atlantic
    
    Maryland; Piedmont Triad, NC; Greenville, SC; Richmond; Virginia BeachFlorida
    
    Jacksonville; Orlando; Boca Raton; Tampa; TexasUnited Kingdom
    
    County of Kent
   For the Three Months Ended June 30, 2005Delaware Valley
    
    
    MidwestSoutheastern
    
    
    
    
    
    
    Lehigh
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    UnitedPennsylvania
    
    
    Other
    
    
    Valley
    
    
    Other
    
    
    Mid-Atlantic
    
    
    Florida
    
    
    Kingdom
    
    
    TotalOperating revenue
    
    $
    54,352
    
    
    $
    9,977
    
    
    $
    22,155
    
    
    $
    30,187
    
    
    $
    30,740
    
    
    $
    24,317
    
    
    $
    6,543
    
    
    $
    178,271Rental property expenses
and real estate taxes
    
    
    13,805
    
    
    
    3,271
    
    
    
    5,977
    
    
    
    10,910
    
    
    
    9,028
    
    
    
    7,840
    
    
    
    1,256
    
    
    
    52,087Property level operating
income
    
    $
    40,547
    
    
    $
    6,706
    
    
    $
    16,178
    
    
    $
    19,277
    
    
    $
    21,712
    
    
    $
    16,477
    
    
    $
    5,287
    
    
    $
    126,184Interest and other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,174Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33,773
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,390
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37,556
    )Income before property dispositions, income taxes, minority interest
and equity in earnings (loss) of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    47,639Loss on property dispositions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,524
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (911
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (368
    )Equity in earnings (loss) of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    182Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,511Preferred unit distributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,663
    )Excess of preferred unit redemption on carrying amount
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (500
    )Income available to common unitholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    46,366
 19




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##### Table of Contents



For the Three Months Ended June 30, 2004Delaware Valley
    
    
    MidwestSoutheastern
    
    
    
    
    
    
    Lehigh
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    UnitedPennsylvania
    
    
    Other
    
    
    Valley
    
    
    Other
    
    
    Mid-Atlantic
    
    
    Florida
    
    
    Kingdom
    
    
    TotalOperating revenue
    
    $
    48,876
    
    
    $
    8,553
    
    
    $
    17,938
    
    
    $
    28,640
    
    
    $
    29,218
    
    
    $
    22,363
    
    
    $
    5,028
    
    
    $
    160,616Rental property expenses
and real estate taxes
    
    
    13,292
    
    
    
    2,943
    
    
    
    5,220
    
    
    
    10,410
    
    
    
    8,142
    
    
    
    6,927
    
    
    
    822
    
    
    
    47,756Property level operating
income
    
    $
    35,584
    
    
    $
    5,610
    
    
    $
    12,718
    
    
    $
    18,230
    
    
    $
    21,076
    
    
    $
    15,436
    
    
    $
    4,206
    
    
    $
    112,860Interest and other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    672Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29,804
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,990
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33,357
    )Income before property dispositions,
income taxes, minority  interest and equity in earnings (loss) of
unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,381Gain on property dispositions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (78
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (458
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    166Equity in earnings (loss) of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (125
    )Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    184Preferred unit distributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,104
    )Income available to common unitholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    38,966
 For the Six Months Ended June 30, 2005Delaware Valley
    
    
    MidwestSoutheastern
    
    
    
    
    
    
    Lehigh
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    UnitedPennsylvania
    
    
    Other
    
    
    Valley
    
    
    Other
    
    
    Mid-Atlantic
    
    
    Florida
    
    
    Kingdom
    
    
    TotalOperating revenue
    
    $
    102,087
    
    
    $
    19,825
    
    
    $
    43,460
    
    
    $
    59,974
    
    
    $
    62,939
    
    
    $
    48,732
    
    
    $
    11,726
    
    
    $
    348,743Rental property expenses
and real estate taxes
    
    
    29,458
    
    
    
    7,049
    
    
    
    11,761
    
    
    
    21,907
    
    
    
    18,481
    
    
    
    15,124
    
    
    
    2,389
    
    
    
    106,169Property level operating
income
    
    $
    72,629
    
    
    $
    12,776
    
    
    $
    31,699
    
    
    $
    38,067
    
    
    $
    44,458
    
    
    $
    33,608
    
    
    $
    9,337
    
    
    $
    242,574Interest and other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,657Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (66,721
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,687
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (72,323
    )Income before property dispositions, income taxes, minority interest
and equity in earnings (loss) of unconsolidated joint
ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    89,500Loss on property dispositions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,929
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,445
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (355
    )Equity in earnings (loss) of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,202Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,688Preferred unit distributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,339
    )Excess of preferred unit redemption over carrying amount
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (500
    )Income available to common unitholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    93,822
 For the Six Months Ended June 30, 2004Delaware Valley
    
    
    MidwestSoutheastern
    
    
    
    
    
    
    Lehigh
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    UnitedPennsylvania
    
    
    Other
    
    
    Valley
    
    
    Other
    
    
    Mid-Atlantic
    
    
    Florida
    
    
    Kingdom
    
    
    TotalOperating revenue
    
    $
    94,688
    
    
    $
    17,347
    
    
    $
    36,460
    
    
    $
    58,529
    
    
    $
    58,574
    
    
    $
    45,015
    
    
    $
    9,516
    
    
    $
    320,129Rental property expenses
and real estate taxes
    
    
    27,472
    
    
    
    6,166
    
    
    
    10,897
    
    
    
    20,956
    
    
    
    16,457
    
    
    
    13,546
    
    
    
    1,949
    
    
    
    97,443Property level operating
income
    
    $
    67,216
    
    
    $
    11,181
    
    
    $
    25,563
    
    
    $
    37,573
    
    
    $
    42,117
    
    
    $
    31,469
    
    
    $
    7,567
    
    
    $
    222,686Interest and other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,410Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (59,827
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,461
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (65,006
    )Income before property dispositions, income taxes, minority interest
and equity in earnings (loss) of unconsolidated joint
ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    84,802
 20




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##### Table of Contents



For the Six Months Ended June 30, 2004Delaware Valley
    
    MidwestSoutheastern
    
    
    
    
    
    Lehigh
    
    
    
    
    
    
    
    
    
    
    
    
    
    UnitedPennsylvania
    
    Other
    
    Valley
    
    Other
    
    Mid-Atlantic
    
    Florida
    
    Kingdom
    
    TotalGain on property dispositions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (408
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (847
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    297Equity in earnings (loss) of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (530
    )Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,225Preferred unit distributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,208
    )Income available to common unitholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    79,331
 Note 4: SFAS No. 144, Accounting For The Impairment Or Disposal Of Long-Lived
Assets
  Three Months Ended
    
    Six Months EndedJune 30, 2005
    
    June 30, 2004
    
    June 30, 2005
    
    June 30, 2004Revenues
    
    $
    941
    
    
    $
    2,638
    
    
    $
    2,789
    
    
    $
    5,380Operating expenses
    
    
    (84
    )
    
    
    (1,039
    )
    
    
    (864
    )
    
    
    (1,987
    )Interest expense
    
    
    (431
    )
    
    
    (634
    )
    
    
    (930
    )
    
    
    (1,346
    )Depreciation and amortization
    
    
    (159
    )
    
    
    (781
    )
    
    
    (727
    )
    
    
    (1,919
    )Income
    
    $
    267
    
    
    $
    184
    
    
    $
    268
    
    
    $
    128
   Note 5: Preferred Units
   21




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##### Table of Contents



Note 6: Impact of Recently Issued Accounting Standards
  22




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##### Table of Contents



Item 2: Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Overview
        23




---



##### Table of Contents



Net RentPer Square Foot
    
    Total Square Feet
    
    Percent OccupiedJune 30,
    
    June 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004
    
    2005
    
    2004Industrial-Distribution
    
    $
    4.27
    
    
    $
    4.33
    
    
    
    29,802
    
    
    
    25,463
    
    
    
    91.1
    %
    
    
    92.7
    %Industrial-Flex
    
    $
    8.71
    
    
    $
    8.81
    
    
    
    13,330
    
    
    
    13,487
    
    
    
    90.8
    %
    
    
    90.1
    %Office
    
    $
    14.11
    
    
    $
    14.32
    
    
    
    20,001
    
    
    
    18,969
    
    
    
    87.6
    %
    
    
    89.9
    %$
    8.25
    
    
    $
    8.59
    
    
    
    63,133
    
    
    
    57,919
    
    
    
    89.9
    %
    
    
    91.2
    %
  Forward-Looking Statements
  Critical Accounting Policies and Estimates
  Results of Operations
   Comparison of Three and Six Months Ended June 30, 2005 to Three and Six Months Ended June 30, 2004.
  24




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##### Table of Contents



Three Months Ended
    
    
    
    
    
    Six Months EndedJune 30 ,2005
    
    June 30, 2004
    
    % inc (dec)
    
    
    
    
    
    June 30, 2005
    
    June 30, 2004
    
    % inc (dec)Delaware Valley SE Pennsylvania
    
    $
    40,547
    
    
    $
    35,584
    
    
    
    13.9
    %
    (1
    )
    
    
    
    $
    72,629
    
    
    $
    67,216
    
    
    
    8.1
    %
    (1
    ) Other
    
    
    6,706
    
    
    
    5,610
    
    
    
    19.5
    %
    (2
    )
    
    
    
    
    12,776
    
    
    
    11,181
    
    
    
    14.3
    %
    (2
    )Midwest Lehigh Valley
    
    
    16,178
    
    
    
    12,718
    
    
    
    27.2
    %
    (3
    )
    
    
    
    
    31,699
    
    
    
    25,563
    
    
    
    24.0
    %
    (3
    ) Other
    
    
    19,277
    
    
    
    18,230
    
    
    
    5.7
    %
    
    
    
    
    
    
    38,067
    
    
    
    37,573
    
    
    
    1.3
    %Mid-Atlantic
    
    
    21,712
    
    
    
    21,076
    
    
    
    3.0
    %
    
    
    
    
    
    
    44,458
    
    
    
    42,117
    
    
    
    5.6
    %Florida
    
    
    16,477
    
    
    
    15,436
    
    
    
    6.7
    %
    
    
    
    
    
    
    33,608
    
    
    
    31,469
    
    
    
    6.8
    %United Kingdom
    
    
    5,287
    
    
    
    4,206
    
    
    
    25.7
    %
    (4
    )
    
    
    
    
    9,337
    
    
    
    7,567
    
    
    
    23.4
    %
    (4
    )Totals
    
    $
    126,184
    
    
    $
    112,860
    
    
    
    11.8
    %
    
    
    
    
    
    $
    242,574
    
    
    $
    222,686
    
    
    
    8.9
    %
  (1)
    
    The increases for both the three and six month periods ended June 30,
2005 versus the three and six months ended June 30, 2004 are primarily
due to Termination Fees accepted in the three months ended June 30, 2005
of $8.9 million versus $4.1 million for the same period of 2004.(2)
    
    The increases for both the three and six month periods ended June 30,
2005 versus the three and six months ended June 30, 2004 are primarily
due to an increase in occupancy and increased investment in operating
real estate for the respective periods.(3)
    
    The increases for both the three and six month periods ended June 30,
2005 versus the three and six months ended June 30, 2004 are due to
increased investment in operating real estate for the respective periods.(4)
    
    The increases for both the three and six month periods ended June 30,
2005 versus the three and six months ended June 30, 2004 are primarily
due to Termination Fees accepted in the three months ended June 30, 2005
of $1.6 million versus $0 for the same period of 2004.     25




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 30, 2005
    
    
    June 30, 2004
    
    
    June 30, 2005
    
    
    June 30, 2005Same Store:Rental revenue
    
    $
    108,862
    
    
    $
    111,449
    
    
    $
    219,739
    
    
    $
    222,814Operating expenses:Rental property expense
    
    
    33,069
    
    
    
    32,078
    
    
    
    69,860
    
    
    
    65,943Real estate taxes
    
    
    15,856
    
    
    
    14,863
    
    
    
    30,585
    
    
    
    30,033Operating expense recovery
    
    
    (45,896
    )
    
    
    (42,384
    )
    
    
    (93,266
    )
    
    
    (88,063
    )Unrecovered operating expenses
    
    
    3,029
    
    
    
    4,557
    
    
    
    7,179
    
    
    
    7,913Property level operating income
    
    
    105,833
    
    
    
    106,892
    
    
    
    212,560
    
    
    
    214,901Less straight line rent
    
    
    1,643
    
    
    
    3,041
    
    
    
    3,466
    
    
    
    5,801Cash basis property level operating income
    
    $
    104,190
    
    
    $
    103,851
    
    
    $
    209,094
    
    
    $
    209,100Reconciliation of non-GAAP financial measure:Property level operating income  Same Store
    
    $
    105,833
    
    
    $
    106,892
    
    
    $
    212,560
    
    
    $
    214,901Property level operating income  properties purchased
or developed subsequent to January 1, 2004
    
    
    8,605
    
    
    
    1,545
    
    
    
    16,269
    
    
    
    1,542Termination fees
    
    
    11,746
    
    
    
    4,423
    
    
    
    13,745
    
    
    
    6,243General and administrative expense
    
    
    (9,390
    )
    
    
    (7,990
    )
    
    
    (17,687
    )
    
    
    (16,461
    )Deprecation and amortization expense
    
    
    (37,556
    )
    
    
    (33,357
    )
    
    
    (72,323
    )
    
    
    (65,006
    )Other income (expense)
    
    
    (31,599
    )
    
    
    (29,132
    )
    
    
    (63,064
    )
    
    
    (56,417
    )Loss on property dispositions, including impairment
    
    
    (4,524
    )
    
    
    (78
    )
    
    
    (4,929
    )
    
    
    (408
    )Income taxes
    
    
    (911
    )
    
    
    (458
    )
    
    
    (1,445
    )
    
    
    (847
    )Minority interest
    
    
    (5,049
    )
    
    
    (4,540
    )
    
    
    (9,286
    )
    
    
    (9,122
    )Equity in earnings (loss) of unconsolidated joint ventures
    
    
    182
    
    
    
    (125
    )
    
    
    2,202
    
    
    
    (530
    )Discontinued operations, net of minority interest
    
    
    7,220
    
    
    
    176
    
    
    
    14,116
    
    
    
    2,132Net income
    
    $
    44,557
    
    
    $
    37,356
    
    
    $
    90,158
    
    
    $
    76,027
    26




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##### Table of Contents



Liquidity and Capital Resources
       27




---



##### Table of Contents



MORTGAGES
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    WEIGHTEDPRINCIPAL
    
    
    PRINCIPAL
    
    
    UNSECURED
    
    
    CREDIT
    
    
    
    
    
    
    AVERAGEAMORTIZATION
    
    
    MATURITIES
    
    
    NOTES
    
    
    FACILITY
    
    
    TOTAL
    
    
    INTEREST RATE2005 (6 months)
    
    $
    4,310
    
    
    $
    53,880
    
    
    $
    
    
    
    $
    
    
    
    $
    58,190
    
    
    
    7.29
    %2006
    
    
    6,963
    
    
    
    68,894
    
    
    
    100,000
    
    
    
    232,000
    
    
    
    407,857
    
    
    
    5.15
    %2007
    
    
    6,082
    
    
    
    1,553
    
    
    
    100,000
    
    
    
    
    
    
    
    107,635
    
    
    
    7.25
    %2008
    
    
    5,555
    
    
    
    39,570
    
    
    
    
    
    
    
    
    
    
    
    45,125
    
    
    
    6.85
    %2009
    
    
    3,110
    
    
    
    46,165
    
    
    
    270,000
    
    
    
    
    
    
    
    319,275
    
    
    
    7.78
    %2010
    
    
    2,121
    
    
    
    4,747
    
    
    
    200,000
    
    
    
    
    
    
    
    206,868
    
    
    
    8.41
    %2011
    
    
    1,713
    
    
    
    3,532
    
    
    
    250,000
    
    
    
    
    
    
    
    255,245
    
    
    
    7.26
    %2012
    
    
    684
    
    
    
    32,936
    
    
    
    235,000
    
    
    
    
    
    
    
    268,620
    
    
    
    6.47
    %2014
    
    
    
    
    
    
    
    
    
    
    200,000
    
    
    
    
    
    
    
    200,000
    
    
    
    5.65
    %2015
    
    
    
    
    
    
    
    
    
    
    300,000
    
    
    
    
    
    
    
    300,000
    
    
    
    5.13
    %2018
    
    
    
    
    
    
    
    
    
    
    100,000
    
    
    
    
    
    
    
    100,000
    
    
    
    7.50
    %$
    30,538
    
    
    $
    251,277
    
    
    $
    1,755,000
    
    
    $
    232,000
    
    
    $
    2,268,815
    
    
    
    6.54
    %
  General
   Industrial-
    
    
    Industrial-Distribution
    
    
    Flex
    
    
    Office
    
    
    TotalSquare
    
    
    Annual
    
    
    Square
    
    
    Annual
    
    
    Square
    
    
    Annual
    
    
    Square
    
    
    AnnualFeet
    
    
    Net Rent
    
    
    Feet
    
    
    Net Rent
    
    
    Feet
    
    
    Net Rent
    
    
    Feet
    
    
    Net Rent2005 (6 months)
    
    
    871
    

    
    $
    4,264
    
    
    
    853
    
    
    $
    6,550
    
    
    
    1,219
    
    
    $
    15,740
    
    
    
    2,943
    
    
    $
    26,5542006
    
    
    3,635
    
    
    
    14,021
    
    
    
    2,211
    
    
    
    19,891
    
    
    
    1,511
    
    
    
    21,503
    
    
    
    7,357
    
    
    
    55,4152007
    
    
    3,698
    
    
    
    16,876
    
    
    
    2,059
    
    
    
    19,479
    
    
    
    2,223
    
    
    
    32,060
    
    
    
    7,980
    
    
    
    68,4152008
    
    
    4,538
    
    
    
    18,913
    
    
    
    2,104
    
    
    
    19,818
    
    
    
    2,684
    
    
    
    40,420
    
    
    
    9,326
    
    
    
    79,1512009
    
    
    2,944
    
    
    
    14,445
    
    
    
    1,578
    
    
    
    14,695
    
    
    
    2,772
    
    
    
    43,920
    
    
    
    7,294
    
    
    
    73,0602010
    
    
    1,407
    
    
    
    7,936
    
    
    
    1,176
    
    
    
    11,446
    
    
    
    1,825
    
    
    
    28,969
    
    
    
    4,408
    
    
    
    48,351Thereafter
    
    
    10,065
    
    
    
    53,640
    
    
    
    2,127
    
    
    
    24,109
    
    
    
    5,287
    
    
    
    92,377
    
    
    
    17,479
    
    
    
    170,126TOTAL
    
    
    27,158
    
    
    $
    130,095
    
    
    
    12,108
    
    
    $
    115,988
    
    
    
    17,521
    
    
    $
    274,989
    
    
    
    56,787
    
    
    $
    521,072
 28




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##### Table of Contents



Square FeetScheduled
    
    Industrial-
    
    
    Industrial-
    
    
    
    
    
    
    
    
    
    
    Percent
    
    
    TotalIn-Service Date
    
    Distribution
    
    
    Flex
    
    
    Office
    
    
    Total
    
    
    Leased
    
    
    Investment3rd Quarter 2005
    
    
    221,603
    
    
    
    
    
    
    
    35,157
    
    
    
    256,760
    
    
    
    95.3
    %
    
    $
    19,2594th Quarter 2005
    
    
    1,149,600
    
    
    
    
    
    
    
    100,000
    
    
    
    1,249,600
    
    
    
    98.2
    %
    
    

    84,2881st Quarter 2006
    
    
    
    
    
    
    
    
    
    
    102,000
    
    
    
    102,000
    
    
    
    24.4
    %
    
    
    15,6182nd Quarter 2006
    
    
    
    
    
    
    134,400
    
    
    
    123,340
    
    
    
    257,740
    
    
    
    62.8
    %
    
    
    38,4643rd Quarter 2006
    
    
    737,752
    
    
    
    83,200
    
    
    
    113,855
    
    
    
    934,807
    
    
    
    1.6
    %
    
    
    58,8274th Quarter 2006
    
    
    
    
    
    
    93,600
    
    
    
    93,515
    
    
    
    187,115
    
    
    
    3.6
    %
    
    
    25,527Thereafter
    
    
    
    
    
    
    
    
    
    
    1,523,856
    
    
    
    1,523,856
    
    
    
    38.5
    %
    
    
    495,251TOTAL
    
    
    2,108,955
    
    
    
    311,200
    
    
    
    2,091,723
    
    
    
    4,511,878
    
    
    
    50.2
    %
    
    $
    737,234
   Calculation of Funds from Operations
  29




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 30
    
    
    June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Basic
 Income available to common shareholders
    
    $
    44,557
    
    
    $
    37,356
    
    
    $
    90,158
    
    
    $
    76,027Basic  income available to common shareholders per weighted
average share
    
    $
    .51
    
    
    $
    .44
    
    
    $
    1.04
    
    
    $
    .91Adjustments:Depreciation and amortization of unconsolidated joint ventures
    
    
    286
    
    
    
    558
    
    
    
    652
    
    
    
    1,444Depreciation and amortization
    
    
    37,085
    
    
    
    33,474
    
    
    
    71,783
    
    
    
    65,486(Gain) loss on property dispositions
    
    
    (6,740
    )
    
    
    78
    
    
    
    (15,607
    )
    
    
    (1,689
    )Minority interest share in addback for depreciation and
amortization and gain on property dispositions
    
    
    (1,185
    )
    
    
    (1,416
    )
    
    
    (2,211
    )
    
    
    (2,727
    )Funds
from operations available to common shareholders  basic
    
    $
    74,003
    
    
    $
    70,050
    
    
    $
    144,775
    
    
    $
    138,541Basic Funds from operations available to common shareholders
per weighted average share
    
    $
    .85
    
    
    $
    .83
    
    
    $
    1.68
    
    
    $
    1.65Reconciliation of net income to FFO  diluted:Diluted  income available to common shareholders
    
    $
    44,557
    
    
    $
    37,356
    
    
    $
    90,158
    
    
    $
    76,027Diluted  income available to common shareholders per
weighted Average share
    
    $
    .51
    
    
    $
    .44
    
    
    $
    1.03
    
    
    $
    .89Adjustments:Depreciation and amortization of unconsolidated joint ventures
    
    
    286
    
    
    
    558
    
    
    
    652
    
    
    
    1,444Depreciation and amortization
    
    
    37,085
    
    
    
    33,474
    
    
    
    71,783
    
    
    
    64,486(Gain) loss on property dispositions
    
    
    (6,740
    )
    
    
    78
    
    
    
    (15,607
    )
    
    
    (1,689
    )Minority interest less preferred share distributions
    
    
    1,797
    
    
    
    1,610

    
    
    
    3,652
    
    
    
    3,304Funds from operations available to common shareholders  diluted
    
    $
    76,985
    
    
    $
    73,076
    
    
    $
    150,638
    
    
    $
    144,572Diluted Funds from operations available to common
shareholders per weighted average share
    
    $
    .84
    
    
    $
    .82
    
    
    $
    1.65
    
    
    $
    1.62Reconciliation of weighted average shares:Weighted average common shares  all basic calculations
    
    
    86,685
    
    
    
    84,411
    
    
    
    86,278
    
    
    
    83,947Dilutive shares for long term compensation plans
    
    
    1,449
    
    
    
    1,394
    
    
    
    1,438
    
    
    
    1,507Diluted shares for net income calculations
    
    
    88,134
    
    
    
    85,805
    
    
    
    87,716
    
    
    
    85,454Weighted average common units
    
    
    3,517
    
    
    
    3,671
    
    
    
    3,592
    
    
    
    3,684Diluted shares for Funds from operations calculations
    
    
    91,651
    
    
    
    89,476
    
    
    
    91,308
    
    
    
    89,138
 Inflation
  30




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##### Table of Contents



Item 3: Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4: Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   Changes in Internal Controls
  31




---



##### Table of Contents



Part II: Other Information
 Item 1.
    
    Legal ProceedingsItem 2.
    
    Changes in Securities, Use of Proceeds and Issuer Purchases of Equity SecuritiesOn June 16, 2005 the Operating Partnership issued 400,000 7.0% Series E Cumulative
Redeemable Preferred Units of Limited Partnership Interest (the Series E Units). The
aggregate sale price of the Series E Units was $20.0 million. The Series E Units were sold
to an institutional investor in a private placement in reliance on the exemption from
registration under Section 4(2) of the Securities Act of 1933, as amended. The Series E
Units are convertible after ten years (or, under limited circumstances, a shorter period of
time), on a one-for-one basis, into the 7.0% Series E Cumulative Redeemable Preferred Shares
of Beneficial Interest of the Trust (the Preferred Shares), which were authorized for
issuance by the Trust in connection with this transaction. The Series E Units have
identical rights, preferences and privileges as the Preferred Shares. The Series E Units do
not include any mandatory redemption or sinking fund provisions. The holders of the Series
E Units have certain rights to cause the Trust to register the Preferred Shares pursuant to
the terms of a registration rights agreement entered into in connection with this private
placement.The aggregate net proceeds of the sale of the Units, approximately $20.0 million, were used
to redeem $20.0 million of 9.125% Series C Cumulative Redeemable Preferred Units of Limited
Partnership Interest.On June 30, 2005, the Operating Partnership issued 880,000 6.65% Series F Cumulative
Redeemable Preferred Units of Limited Partnership Interest (the Series F Units). The
aggregate sale price of the Series F Units was $44 million. The Series F Units were sold to
an institutional investor in a private placement in reliance on the exemption from
registration under Section 4(2) of the Securities Act of 1933, as amended. The Series F
Units are convertible after ten years (or, under limited circumstances, a shorter period of
time), on a one-for-one basis, into the 6.65% Series F Cumulative Redeemable Preferred
Shares of Beneficial Interest of the Trust (the Preferred Shares), which were authorized
for issuance by the Trust in connection with this transaction. The Series F Units have
identical rights, preferences and privileges as the Preferred Shares. The Series F Units do
not include any mandatory redemption or sinking fund provisions. The holders of the Series
F Units have certain rights to cause the Trust to register the Preferred Shares pursuant to
the terms of a registration rights agreement entered into in connection with this private
placement.The aggregate net proceeds of the sale of the Units, approximately $44.3 million, were used
to repay the borrowings under the Credit Facility and for general corporate purposes.In connection with the sale of the Series E and F Units, the Operating Partnership amended
its Second Restated and Amended Agreement of Limited Partnership, as amended, pursuant to
the Fifth and Sixth Amendments thereto filed as Exhibits 10.1 and 10.2, respectively, and
filed Articles Supplementary to the Amended and Restated Declaration of Trust of the Trust
creating the Series E and Series F Preferred Shares. The Articles Supplementary are filed
as Exhibits 4.1 and 4.2, respectively, to this Report.The Units are pari passu with the 7.45% Series B Cumulative Redeemable Preferred Units of
Limited Partnership of the Operating Partnership and the 7.625% Series D Cumulative
Redeemable Preferred Units of Limited Partnership of the Operating Partnership, and senior
to all other units of limited partnership interest of the Operating Partnership. The
Preferred Shares are pari passu with the 7.45% Series B Cumulative Redeemable Preferred
Shares of Beneficial Interest and the 7.625% Series D Cumulative Redeemable Preferred Shares
of Beneficial Interest of the, and senior to the Common Shares of Beneficial Interest of the
Trust.
 Item 3.
    
    Defaults upon Senior SecuritiesNone.
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Item 4.
    
    Submission of Matters to a Vote of Security HoldersAt the 2005 Annual Meeting of Shareholders of the Trust, held on May 19, 2005, the following
matters were approved by the requisite vote of the Shareholders, as follows:
 1.
    
    Managements nominees, Frederick F. Buchholz, Thomas C. DeLoach, Jr., Daniel
P. Garton and Stephen B. Siegel, were elected to fill the four available positions as
Class II trustees. Voting (expressed in number of shares) was as follows: Mr.
Buchholz: 73,218,026 for, 1,216,860 against or withheld and no abstentions or broker
non-votes; Mr. DeLoach: 73,496,078 for, 938,808 against or withheld and no abstentions
or broker non-votes; Mr. Garton: 73,494,381 for, 940,505 against or withheld and no
abstentions or broker non-votes; and Mr. Siegel: 73,335,742 for, 1,099,144 against or
withheld and no abstentions or broker non-votes.2.
    
    The Shareholders approved a proposal to ratify the selection of Ernst & Young
LLP as the Trusts independent registered public accounting firm for 2005. Voting
(expressed in number of shares) was as follows: 73,436,888 for, 958,582 against and
39,415 abstentions or broker non-votes.3.
    
    The Shareholders approved a shareholder proposal relating to trustee election
by majority vote of the shareholders. Voting (expressed in number of shares) was as
follows: 44,478,232 for, 21,595,009 against and 8,361,645 abstentions or broker
non-votes.4.
    
    The Shareholders did not approve a shareholder proposal relating to the
establishment of a special committee to review environmental issues. Voting (expressed
in number of shares) was as follows: 4,583,761 for, 56,920,289 against and 12,930,836
abstentions or broker non-votes.
 Item 5.
    
    Other InformationNone.Item 6.
    
    Exhibits
 4.1
    
    
    Articles Supplementary, as filed with the State Department of
Assessments and Taxation of Maryland on June 17, 2005.
(Incorporated by reference to Exhibit 3(i) to the Current Report on
Form 8-K of the Registrants, filed with the Securities and Exchange
Commission on June 17, 2005.)4.2
    
    
    Articles Supplementary, as filed with the State Department of
Assessments and Taxation of Maryland on June 30, 2005.
(Incorporated by reference to Exhibit 3(i) to the Current Report on
Form 8-K of the Registrants, filed with the Securities and Exchange
Commission on June 30, 2005.)10.1
    
    
    Fifth Amendment to the Second Amended and Restated Agreement of
Limited Partnership of Liberty Property Limited Partnership.
(Incorporated by reference to Exhibit 10 to the Current Report on
Form 8-K of the Registrants, filed with the Securities and Exchange
Commission on June 17, 2005.)10.2
    
    
    Sixth Amendment to the Second Amended and Restated Agreement of
Limited Partnership of Liberty Property Limited Partnership.
(Incorporated by reference to Exhibit 10 to the Current Report on
Form 8-K of the Registrants, filed with the Securities and Exchange
Commission on June 30, 2005.)31.1 *
    
    
    Certifications of the Chief Executive Officer of Liberty Property
Trust required by Rule 13a-14(a) under the Securities Exchange Act
of 1934.31.2 *
    
    
    Certifications of the Chief Financial Officer of Liberty Property
Trust required by Rule 13a-14(a) under the Securities Exchange Act
of 1934.
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31.3 *
    
    
    Certifications of the Chief Executive Officer of Liberty Property
Trust, in its capacity as the general partner of Liberty Property
Limited Partnership, required by Rule 13a-14(a) under the
Securities Exchange Act of 1934.31.4 *
    
    
    Certifications of the Chief Financial Officer of Liberty Property
Trust, in its capacity as the general partner of Liberty Property
Limited Partnership, required by Rule 13a-14(a) under the
Securities Exchange Act of 1934.32.1 *
    
    
    Certifications of the Chief Executive Officer of Liberty Property
Trust required under Rule 13a-14(b) of the Securities Exchange Act
of 1934, as amended. (This exhibit shall not be deemed filed for
purposes of Section 18 of the Securities Exchange Act of 1934, as
amended, or otherwise subject to the liability of that section.
Further, this exhibit shall not be deemed to be incorporated by
reference into any filing under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended.)32.2 *
    
    
    Certifications of the Chief Financial Officer of Liberty Property
Trust required by Rule 13a-14(b) under the Securities Exchange Act
of 1934, as amended. (This exhibit shall not be deemed filed for
purposes of Section 18 of the Securities Exchange Act of 1934, as
amended, or otherwise subject to the liability of that section.
Further, this exhibit shall not be deemed to be incorporated by
reference into any filing under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended.)32.3 *
    
    
    Certifications of the Chief Executive Officer of Liberty Property
Trust, in its capacity as the general partner of Liberty Property
Limited Partnership, required by Rule 13a-14(b) under the
Securities Exchange Act of 1934, as amended. (This exhibit shall
not be deemed filed for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended, or otherwise subject to the
liability of that section. Further, this exhibit shall not be
deemed to be incorporated by reference into any filing under the
Securities Act of 1933, as amended, or the Securities Exchange Act
of 1934, as amended.)32.4 *
    
    
    Certifications of the Chief Financial Officer of Liberty Property
Trust, in its capacity as the general partner of Liberty Property
Limited Partnership, required by Rule 13a-14(b) under the
Securities Exchange Act of 1934, as amended. (This exhibit shall
not be deemed filed for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended, or otherwise subject to the
liability of that section. Further, this exhibit shall not be
deemed to be incorporated by reference into any filing under the
Securities Act of 1933, as amended, or the Securities Exchange Act
of 1934, as amended.)
 
 *
    
    Filed herewith. 34




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SIGNATURES
  LIBERTY PROPERTY TRUST/s/ WILLIAM P. HANKOWSKY
    
    
    
    August 5, 2005William P. Hankowsky
    
    
    
    DatePresident and Chief Executive Officer/s/ GEORGE J. ALBURGER, JR.
    
    
    
    August 5, 2005George J. Alburger, Jr.
    
    
    
    DateExecutive Vice President and Chief Financial Officer
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SIGNATURES
  LIBERTY PROPERTY LIMITED PARTNERSHIP
 BY:
    
    Liberty Property TrustGeneral Partner
 /s/ WILLIAM P. HANKOWSKY
    
    
    
    August 5, 2005William P. Hankowsky
    
    
    
    DatePresident and Chief Executive Officer/s/ GEORGE J. ALBURGER, JR.
    
    
    
    August 5, 2005George J. Alburger, Jr.
    
    
    
    DateExecutive Vice President and Chief Financial Officer
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EXHIBIT INDEX
 EXHIBIT NO.
    
    DESCRIPTION31.1
    
    Certifications of the Chief Executive Officer of Liberty Property Trust required by Rule
13a-14(a) under the Securities Exchange Act of 1934.31.2
    
    Certifications of the Chief Financial Officer of Liberty Property Trust required by Rule
13a-14(a) under the Securities Exchange Act of 1934.31.3
    
    Certifications of the Chief Executive Officer of Liberty Property Trust, in its capacity as
the general partner of Liberty Property Limited Partnership, required by Rule 13a-14(a) under
the Securities Exchange Act of 1934.31.4
    
    Certifications of the Chief Financial Officer of Liberty Property Trust, in its capacity as
the general partner of Liberty Property Limited Partnership, required by Rule 13a-14(a) under
the Securities Exchange Act of 1934.32.1
    
    Certifications of the Chief Executive Officer of Liberty Property Trust required under Rule
13a-14(b) of the Securities Exchange Act of 1934, as amended. (This exhibit shall not be
deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended,
or otherwise subject to the liability of that section. Further, this exhibit shall not be
deemed to be incorporated by reference into any filing under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended.)32.2
    
    Certifications of the Chief Financial Officer of Liberty Property Trust required by Rule
13a-14(b) under the Securities Exchange Act of 1934, as amended. (This exhibit shall not be
deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended,
or otherwise subject to the liability of that section. Further, this exhibit shall not be
deemed to be incorporated by reference into any filing under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended.)32.3
    
    Certifications of the Chief Executive Officer of Liberty Property Trust, in its capacity as
the general partner of Liberty Property Limited Partnership, required by Rule 13a-14(b) under
the Securities Exchange Act of 1934, as amended. (This exhibit shall not be deemed filed
for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise
subject to the liability of that section. Further, this exhibit shall not be deemed to be
incorporated by reference into any filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended.)32.4
    
    Certifications of the Chief Financial Officer of Liberty Property Trust, in its capacity as
the general partner of Liberty Property Limited Partnership, required by Rule 13a-14(b) under
the Securities Exchange Act of 1934, as amended. (This exhibit shall not be deemed filed
for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise
subject to the liability of that section. Further, this exhibit shall not be deemed to be
incorporated by reference into any filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended.)
 37