##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 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)PENNSYLVANIA(Liberty Property Limited Partnership)
    
    23-7768996
23-2766549(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification
 500 Chesterfield Parkway 
Malvern, Pennsylvania
    
    19355(Address of Principal Executive Offices)
    
    (Zip Code)Registrants Telephone Number,
Including Area Code (610) 648-1700
 þ o
  þ o o
 o þ




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##### 



Liberty Property Trust/Liberty Property Limited Partnership
Form 10-Q for the period ended September 30, 2007
 Index
    
    
    
    PagePART I.
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements (Unaudited)Condensed consolidated balance sheets of Liberty Property Trust at September
30, 2007 and December 31, 2006
    
    
    3Condensed consolidated statements of operations of Liberty Property Trust for
the three months ended September 30, 2007 and September 30, 2006
    
    
    4Condensed consolidated statements of operations of Liberty Property Trust for
the nine months ended September 30, 2007 and September 30, 2006
    
    
    5Condensed consolidated statements of cash flows of Liberty Property Trust for
the nine months ended September 30, 2007 and September 30, 2006
    
    
    6Notes to condensed consolidated financial statements of Liberty Property Trust
    
    
    7Condensed consolidated balance sheets of Liberty Property Limited Partnership
at September 30, 2007 and December 31, 2006
    
    
    14Condensed consolidated statements of operations of Liberty Property Limited
Partnership for the three months ended September 30, 2007 and September 30, 2006
    
    
    15Condensed consolidated statements of operations of Liberty Property Limited
Partnership for the nine months ended September 30, 2007 and September 30, 2006
    
    
    16Condensed consolidated statements of cash flows of Liberty Property Limited
Partnership for the nine months ended September 30, 2007 and September 30, 2006
    
    
    17Notes to condensed consolidated financial statements of Liberty Property
Limited Partnership
    
    
    18Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    26Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    38Item 4.
    
    Controls and Procedures
    
    
    38PART II.
    
    OTHER INFORMATION
    
    
    39Item 1.
    
    Legal Proceedings
    
    
    39Item 1A.
    
    Risk Factors
    
    
    41Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    41Item 3.
    
    Defaults Upon Senior Securities
    
    
    41Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    41Item 5.
    
    Other Information
    
    
    41Item 6.
    
    Exhibits
    
    
    42Signatures for Liberty Property Trust
    
    
    44Signatures for Liberty Property Limited Partnership
    
    
    45Exhibit Index
    
    
    46Tenth Supplemental IndentureStatement Re: Computation of Ratio of Earnings to Fixed ChargesCertifications of Chief Executive OfficerCertifications of Chief Financial OfficerCertifications of Chief Executive Officer, in its capacity as the general partnerCertifications of Chief Financial Officer, in its capacity as the general partnerCertifications of Chief Executive Officer, required by Rule 13a-14(b)Certifications of Chief Financial Officer, required by Rule 13a-14(b)Certifications of Chief Executive Officer, Liberty Property Limited Partnership required by Rule 13a-14(b)Certifications of Chief Financial Officer, Liberty Property Limited Partnership required by Rule 13a-14(b)
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements (Unaudited)
 
 CONDENSED CONSOLIDATED BALANCE SHEETS OF LIBERTY PROPERTY TRUST
 (In thousands, except share amounts)
 September 30, 2007
    
    
    December 31, 2006ASSETSReal estate:Land and land improvements
    
    $
    751,765
    
    
    $
    666,588Building and improvements
    
    
    4,114,484
    
    
    
    3,735,583Less accumulated depreciation
    
    
    (834,385
    )
    
    
    (786,778
    )Operating real estate
    
    
    4,031,864
    
    
    
    3,615,393Development in progress
    
    
    572,606
    
    
    
    538,521Land held for development
    
    
    246,870
    
    
    
    195,332Net real estate
    
    
    4,851,340
    
    
    
    4,349,246Cash and cash equivalents
    
    
    36,031
    
    
    
    53,737Restricted cash
    
    
    31,200
    
    
    
    55,671Accounts receivable
    
    
    26,708
    
    
    
    23,809Deferred rent receivable
    
    
    73,010
    
    
    
    71,894Deferred financing and leasing costs, net of accumulated
amortization
(2007, $115,802; 2006, $100,406)
    
    
    144,549
    
    
    
    127,902Investments in and advances to unconsolidated joint ventures
    
    
    77,666
    
    
    
    54,723Assets held for sale
    
    
    60,033
    
    
    
    113,150Prepaid expenses and other assets
    
    
    84,572
    
    
    
    60,779Total assets
    
    $
    5,385,109
    
    
    $
    4,910,911LIABILITIESMortgage loans
    
    $
    231,986
    
    
    $
    185,978Unsecured notes
    
    
    2,155,000
    
    
    
    1,955,000Credit facility
    
    
    372,960
    
    
    
    246,960Accounts payable
    
    
    68,604
    
    
    
    40,633Accrued interest
    
    
    29,823
    
    
    
    36,297Dividend and distributions payable
    
    
    59,592
    
    
    
    58,961Other liabilities
    
    
    250,073
    
    
    
    217,751Total liabilities
    
    
    3,168,038
    
    
    
    2,741,580Minority interest
    
    
    373,145
    
    
    
    297,727SHAREHOLDERS EQUITYCommon shares of beneficial interest, $.001 par value,
187,987,000 shares authorized; 92,407,112 (includes
1,249,909 in treasury) and 90,972,979 (includes 59,100 in
treasury) shares issued and outstanding as of September 30,
2007 and December 31, 2006, respectively
    
    
    92
    
    
    
    91Additional paid-in capital
    
    
    1,966,419
    
    
    
    1,906,403Accumulated other comprehensive income
    
    
    24,311
    
    
    
    20,323Distributions in excess of net income
    
    
    (94,945
    )
    
    
    (53,886
    )Common shares in treasury, at cost, 1,249,909 and 59,100
shares as of September 30, 2007 and December 31, 2006,
respectively
    
    
    (51,951
    )
    
    
    (1,327
    )Total shareholders equity
    
    
    1,843,926
    
    
    
    1,871,604Total liabilities and shareholders equity
    
    $
    5,385,109
    
    
    $
    4,910,911
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS OF LIBERTY PROPERTY TRUST
 (Unaudited and in thousands, except per share amounts)
 Three Months EndedSeptember 30, 2007
    
    
    September 30, 2006OPERATING REVENUERental
    
    $
    124,698
    
    
    $
    108,800Operating expense reimbursement
    
    
    53,127
    
    
    
    46,942Total operating revenue
    
    
    177,825
    
    
    
    155,742OPERATING EXPENSERental property
    
    
    36,813
    
    
    
    30,726Real estate taxes
    
    
    19,627
    
    
    
    16,292General and administrative
    
    
    13,144
    
    
    
    12,016Depreciation and amortization
    
    
    40,720
    
    
    
    34,330Total operating expenses
    
    
    110,304
    
    
    
    93,364Operating income
    
    
    67,521
    
    
    
    62,378OTHER INCOME (EXPENSE)Interest and other income
    
    
    2,536
    
    
    
    2,945Interest expense
    
    
    (33,521
    )
    
    
    (28,380
    )Total other income (expense)
    
    
    (30,985
    )
    
    
    (25,435
    )Income before property dispositions, income taxes,
minority interest and equity in (loss) earnings of
unconsolidated joint ventures
    
    
    36,536
    
    
    
    36,943Gain (loss) on property dispositions
    
    
    190
    
    
    
    (104
    )Income taxes
    
    
    1,022
    
    
    
    625Minority interest
    
    
    (5,703
    )
    
    
    (4,935
    )Equity in (loss) earnings of unconsolidated joint ventures
    
    
    (29
    )
    
    
    334Income from continuing operations
    
    
    32,016
    
    
    
    32,863Discontinued operations, net of minority interest
(including net gain on property dispositions of $4,145
and $11,386 for the three months ended September 30, 2007
and 2006, respectively)
    
    
    5,158
    
    
    
    14,022Net income
    
    $
    37,174
    
    
    $
    46,885Earnings per common shareBasic:Income from continuing operations
    
    $
    0.35
    
    
    $
    0.36Income from discontinued operations
    
    
    0.06
    
    
    
    0.16Income per common share  basic
    
    $
    0.41
    
    
    $
    0.52Diluted:Income from continuing operations
    
    $
    0.35
    
    
    $
    0.36Income from discontinued operations
    
    
    0.06
    
    
    
    0.16Income per common share  diluted
    
    $
    0.41
    
    
    $
    0.52Distributions per common share
    
    $
    0.625
    
    
    $
    0.62Weighted average number of common shares outstandingBasic
    
    
    90,905
    
    
    
    89,675Diluted
    
    
    91,367
    
    
    
    90,808
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS OF LIBERTY PROPERTY TRUST
 (Unaudited and in thousands, except per share amounts)
 Nine Months EndedSeptember 30, 2007
    
    
    September 30, 2006OPERATING REVENUERental
    
    $
    357,605
    
    
    $
    322,721Operating expense reimbursement
    
    
    155,386
    
    
    
    134,664Total operating revenue
    
    
    512,991
    
    
    
    457,385OPERATING EXPENSERental property
    
    
    108,294
    
    
    
    91,378Real estate taxes
    
    
    54,459
    
    
    
    48,183General and administrative
    
    
    38,872
    
    
    
    33,579Depreciation and amortization
    
    
    114,566
    
    
    
    100,276Total operating expenses
    
    
    316,191
    
    
    
    273,416Operating income
    
    
    196,800
    
    
    
    183,969OTHER INCOME (EXPENSE)Interest and other income
    
    
    8,125
    
    
    
    6,497Interest expense
    
    
    (89,882
    )
    
    
    (83,502
    )Total other income (expense)
    
    
    (81,757
    )
    
    
    (77,005
    )Income before property dispositions, income taxes,
minority interest and equity in earnings of
unconsolidated joint ventures
    
    
    115,043
    
    
    
    106,964Gain on property dispositions
    
    
    1,641
    
    
    
    17,257Income taxes
    
    
    508
    
    
    
    15Minority interest
    
    
    (17,244
    )
    
    
    (14,957
    )Equity in earnings of unconsolidated joint ventures
    
    
    1,026
    
    
    
    1,250Income from continuing operations
    
    
    100,974
    
    
    
    110,529Discontinued operations, net of minority interest
(including net gain on property dispositions of
$24,376 and $87,588 for the nine months ended
September 30, 2007 and 2006, respectively)
    
    
    28,325
    
    
    
    95,233Net income
    
    $
    129,299
    
    
    $
    205,762Earnings per common shareBasic:Income from continuing operations
    
    $
    1.11
    
    
    $
    1.24Income from discontinued operations
    
    
    0.31
    
    
    
    1.07Income per common share  basic
    
    $
    1.42
    
    
    $
    2.31Diluted:Income from continuing operations
    
    $
    1.10
    
    
    $
    1.22Income from discontinued operations
    
    
    0.31
    
    
    
    1.06Income per common share  diluted
    
    $
    1.41
    
    
    $
    2.28Distributions per common share
    
    $
    1.865
    
    
    $
    1.85Weighted average number of common shares outstandingBasic
    
    
    91,179
    
    
    
    88,923Diluted
    
    
    91,905
    
    
    
    90,184
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW OF LIBERTY PROPERTY TRUST
 (Unaudited and in thousands)
 Nine Months EndedSeptember 30, 2007
    
    
    September 30, 2006OPERATING ACTIVITIESNet income
    
    $
    129,299
    
    
    $
    205,762Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    119,378
    
    
    
    113,927Amortization of deferred financing costs
    
    
    3,002
    
    
    
    3,188Equity in earnings of unconsolidated joint ventures
    
    
    (1,026
    )
    
    
    (1,250
    )Distributions from unconsolidated joint ventures
    
    
    1,934
    
    
    
    3,026Minority interest in net income
    
    
    18,542
    
    
    
    19,184Gain on property dispositions
    
    
    (26,017
    )
    
    
    (104,845
    )Noncash compensation
    
    
    6,691
    
    
    
    5,205Changes in operating assets and liabilities:Restricted cash
    
    
    25,861
    
    
    
    18,289Accounts receivable
    
    
    (2,770
    )
    
    
    (8,071
    )Deferred rent receivable
    
    
    (5,140
    )
    
    
    1,162Prepaid expenses and other assets
    
    
    (25,736
    )
    
    
    (28,428
    )Accounts payable
    
    
    28,004
    
    
    
    8,234Accrued interest
    
    
    (6,474
    )
    
    
    (8,088
    )Other liabilities
    
    
    29,679
    
    
    
    (7,701
    )Net cash provided by operating activities
    
    
    295,227
    
    
    
    219,594INVESTING ACTIVITIESInvestment in properties
    
    
    (265,150
    )
    
    
    (220,163
    )Investments in and advances to unconsolidated joint ventures
    
    
    (22,854
    )
    
    
    (5,484
    )Net proceeds from disposition of properties/land
    
    
    284,616
    
    
    
    383,331Investment in development in progress
    
    
    (373,904
    )
    
    
    (255,415
    )Investment in land held for development
    
    
    (104,336
    )
    
    
    (52,064
    )Investment in deferred leasing costs
    
    
    (36,095
    )
    
    
    (20,796
    )Net cash used in investing activities
    
    
    (517,723
    )
    
    
    (170,591
    )FINANCING ACTIVITIESNet proceeds from issuance of common shares
    
    
    53,754
    
    
    
    60,875Purchase of treasury shares
    
    
    (50,624
    )
    
    
    Net proceeds from issuance of preferred units
    
    
    99,957
    
    
    
    Redemption of preferred units
    
    
    (23,650
    )
    
    
    Net proceeds from issuance of unsecured notes
    
    
    446,205
    
    
    
    Repayments of unsecured notes
    
    
    (250,000
    )
    
    
    Repayments of mortgage loans
    
    
    (8,118
    )
    
    
    (37,586
    )Proceeds from credit facility
    
    
    917,750
    
    
    
    419,095Repayments on credit facility
    
    
    (791,750
    )
    
    
    (346,065
    )Increase in deferred financing costs
    
    
    (967
    )
    
    
    (1,971
    )Distribution paid on common shares
    
    
    (169,745
    )
    
    
    (164,005
    )Distribution paid on units
    
    
    (19,838
    )
    
    
    (16,876
    )Net cash provided by (used in) financing activities
    
    
    202,974
    
    
    
    (86,533
    )Decrease in cash and cash equivalents
    
    
    (19,522
    )
    
    
    (37,530
    )Increase in cash and cash equivalents related to foreign currency translation
    
    
    1,816
    
    
    
    2,474Cash and cash equivalents at the beginning of period
    
    
    53,737
    
    
    
    61,629Cash and cash equivalents at end of period
    
    $
    36,031
    
    
    $
    26,573SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONSWrite-off of fully depreciated property and deferred costs
    
    $
    71,305
    
    
    $
    75,447Assumption of mortgage loans
    
    $
    54,126
    
    
    $
    Issuance of operating partnership units
    
    $
    
    
    
    $
    30,000
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Liberty Property Trust
 
 Notes to Condensed Consolidated Financial Statements (Unaudited)
 September 30, 2007
 Note 1: Organization and Basis of Presentation
 Organization
  Basis of Presentation
  Income per Common Share
  For the Three Months Ended September 30, 2007
    
    
    For the Three Months Ended September 30, 2006Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    
    
    
    
    AverageIncome
    
    
    Shares
    
    
    
    
    
    
    Income
    
    
    Shares(Numerator)
    
    
    (Denominator)
    
    
    Per Share
    
    
    (Numerator)
    
    
    (Denominator)
    
    
    Per ShareBasic income from continuing operationsIncome from continuing operations
    
    $
    32,016
    
    
    
    90,905
    
    
    $
    0.35
    
    
    $
    32,863
    
    
    
    89,675
    
    
    $
    0.36Diluted shares for long-term compensation plans
    
    
    
    
    
    
    462
    
    
    
    
    
    
    
    
    
    
    
    1,133Diluted income from continuing operationsIncome from continuing operations and assumed
conversions
    
    
    32,016
    
    
    
    91,367
    
    
    $
    0.35
    
    
    
    32,863
    
    
    
    90,808
    
    
    $
    0.36Basic income from discontinued operationsDiscontinued operations net of minority interest
    
    
    5,158
    
    
    
    90,905
    
    
    $
    0.06
    
    
    
    14,022
    
    
    
    89,675
    
    
    $
    0.16Dilutive shares for long-term compensation plans
    
    
    
    
    
    
    462
    
    
    
    
    
    
    
    
    
    
    
    1,133Diluted income from discontinued operationsDiscontinued operations net of minority interest
    
    
    5,158
    
    
    
    91,367
    
    
    $
    0.06
    
    
    
    14,022
    
    
    
    90,808
    
    
    $
    0.16Basic income per common shareNet income
    
    
    37,174
    
    
    
    90,905
    
    
    $
    0.41
    
    
    
    46,885
    
    
    
    89,675
    
    
    $
    0.52Dilutive shares for long-term compensation plans
    
    
    
    
    
    
    462
    
    
    
    
    
    
    
    
    
    
    
    1,133Diluted income per common shareNet income and assumed conversions
    
    $
    37,174
    
    
    
    91,367
    
    
    $
    0.41
    
    
    $
    46,885
    
    
    
    90,808
    
    
    $
    0.52
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##### Table of Contents



For the Nine Months Ended September 30, 2007
    
    
    For the Nine Months Ended September 30, 2006WeightedWeighted
    
    
    
    
    
    
    
    
    
    
    AverageIncome
    
    
    Average Shares
    
    
    
    
    
    
    Income
    
    
    Shares(Numerator)
    
    
    (Denominator)
    
    
    Per Share
    
    
    (Numerator)
    
    
    (Denominator)
    
    
    Per ShareBasic income from continuing operationsIncome from continuing operations
    
    $
    100,974
    
    
    
    91,179
    
    
    $
    1.11
    
    
    $
    110,529
    
    
    
    88,923
    
    
    $
    1.24Diluted shares for long-term compensation plans
    
    
    
    
    
    
    726
    
    
    
    
    
    
    
    
    
    
    
    1,261Diluted income from continuing operationsIncome from continuing operations and assumed
conversions
    
    
    100,974
    
    
    
    91,905
    
    
    $
    1.10
    
    
    
    110,529
    
    
    
    90,184
    
    
    $
    1.22Basic income from discontinued operationsDiscontinued operations net of minority interest
    
    
    28,325
    
    
    
    91,179
    
    
    $
    0.31
    
    
    
    95,233
    
    
    
    88,923
    
    
    $
    1.07Dilutive shares for long-term compensation plans
    
    
    
    
    
    
    726
    
    
    
    
    
    
    
    
    
    
    
    1,261Diluted income from discontinued operationsDiscontinued operations net of minority interest
    
    
    28,325
    
    
    
    91,905
    
    
    $
    0.31
    
    
    
    95,233
    
    
    
    90,184
    
    
    $
    1.06Basic income per common shareNet income
    
    
    129,299
    
    
    
    91,179
    
    
    $
    1.42
    
    
    
    205,762
    
    
    
    88,923
    
    
    $
    2.31Dilutive shares for long-term compensation plans
    
    
    
    
    
    
    726
    
    
    
    
    
    
    
    
    
    
    
    1,261Diluted income per common shareNet income and assumed conversions
    
    $
    129,299
    
    
    
    91,905
    
    
    $
    1.41
    
    
    $
    205,762
    
    
    
    90,184
    
    
    $
    2.28
 Share-Based Compensation
 Share-Based Payment
    Foreign Currency Translation
  8




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##### Table of Contents



Note 2: 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; TexasArizona
    
    PhoenixUnited Kingdom
    
    County of Kent
 Disclosures about Segments of an
Enterprise and Related Information,
    For the Three Months Ended September 30, 2007
 Delaware Valley
    
    
    MidwestSoutheastern
    
    
    
    
    
    
    Lehigh
    
    
    
    
    
    
    Mid-
    
    
    
    
    
    
    
    
    
    
    UnitedPennsylvania
    
    
    Other
    
    
    Valley
    
    
    Other
    
    
    Atlantic
    
    
    Florida
    
    
    Arizona
    
    
    Kingdom
    
    
    TotalOperating revenue
    
    $
    43,760
    
    
    $
    13,897
    
    
    $
    23,164
    
    
    $
    22,440
    
    
    $
    34,368
    
    
    $
    36,283
    
    
    $
    2,955
    
    
    $
    958
    
    
    $
    177,825Rental property expenses and
real estate taxes
    
    
    14,255
    
    
    
    4,660
    
    
    
    5,790
    
    
    
    7,435
    
    
    
    10,267
    
    
    
    13,187
    
    
    
    642
    
    
    
    204
    
    
    
    56,440Property level operating
income
    
    $
    29,505
    
    
    $
    9,237
    
    
    $
    17,374
    
    
    $
    15,005
    
    
    $
    24,101
    
    
    $
    23,096
    
    
    $
    2,313
    
    
    $
    754
    
    
    
    121,385Interest and other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,536Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33,521
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,144
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (40,720
    )Income before property
dispositions, income taxes, minority
interest and equity in loss of unconsolidated joint
ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,536Gain on property dispositions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    190Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,022Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,703
    )Equity in loss of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29
    )Discontinued operations, net of minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,158Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    37,174
 9




---



##### Table of Contents



For the Three Months Ended September 30, 2006
 Delaware Valley
    
    
    MidwestSoutheastern
    
    
    
    
    
    
    Lehigh
    
    
    
    
    
    
    Mid-
    
    
    
    
    
    
    
    
    
    
    UnitedPennsylvania
    
    
    Other
    
    
    Valley
    
    
    Other
    
    
    Atlantic
    
    
    Florida
    
    
    Arizona
    
    
    Kingdom
    
    
    TotalOperating revenue
    
    $
    42,831
    
    
    $
    13,346
    
    
    $
    20,686
    
    
    $
    19,172
    
    
    $
    30,874
    
    
    $
    27,600
    
    
    $
    1,003
    
    
    $
    230
    
    
    $
    155,742Rental property expenses
and real estate taxes
    
    
    14,178
    
    
    
    4,267
    
    
    
    2,893
    
    
    
    6,730
    
    
    
    9,632
    
    
    
    9,117
    
    
    
    154
    
    
    
    47
    
    
    
    47,018Property level operating
income
    
    $
    28,653
    
    
    $
    9,079
    
    
    $
    17,793
    
    
    $
    12,442
    
    
    $
    21,242
    
    
    $
    18,483
    
    
    $
    849
    
    
    $
    183
    
    
    
    108,724Interest and other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,945Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (28,380
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,016
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34,330
    )Income before property dispositions, income taxes,
minority interest and equity in earnings of
unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,943Loss on property dispositions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (104
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    625Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,935
    )Equity in earnings of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    334Discontinued operations, net of minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,022Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    46,885
 For the Nine Months Ended September 30, 2007
 Delaware Valley
    
    
    MidwestSoutheastern
    
    
    
    
    
    
    Lehigh
    
    
    
    
    
    
    Mid-
    
    
    
    
    
    
    
    
    
    
    UnitedPennsylvania
    
    
    Other
    
    
    Valley
    
    
    Other
    
    
    Atlantic
    
    
    Florida
    
    
    Arizona
    
    
    Kingdom
    
    
    TotalOperating revenue
    
    $
    130,645
    
    
    $
    41,254
    
    
    $
    66,386
    
    
    $
    62,657
    
    
    $
    99,118
    
    
    $
    105,955
    
    
    $
    5,031
    
    
    $
    1,945
    
    
    $
    512,991Rental property expenses
and real estate taxes
    
    
    43,639
    
    
    
    13,506
    
    
    
    16,734
    
    
    
    21,593
    
    
    
    30,278
    
    
    
    35,383
    
    
    
    1,090
    
    
    
    530
    
    
    
    162,753Property level operating
income
    
    $
    87,006
    
    
    $
    27,748
    
    
    $
    49,652
    
    
    $
    41,064
    
    
    $
    68,840
    
    
    $
    70,572
    
    
    $
    3,941
    
    
    $
    1,415
    
    
    
    350,238Interest and other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,125Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (89,882
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (38,872
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (114,566
    )Income before property dispositions, income taxes,
minority interest and equity in earnings of
unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    115,043Gain on property dispositions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,641Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    508Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,244
    )Equity in earnings of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,026Discontinued operations, net of minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,325Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    129,299
 10




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##### Table of Contents



For the Nine Months Ended September 30, 2006
 Delaware Valley
    
    
    MidwestSoutheastern
    
    
    
    
    
    
    Lehigh
    
    
    
    
    
    
    Mid-
    
    
    
    
    
    
    
    
    
    
    UnitedPennsylvania
    
    
    Other
    
    
    Valley
    
    
    Other
    
    
    Atlantic
    
    
    Florida
    
    
    Arizona
    
    
    Kingdom
    
    
    TotalOperating revenue
    
    $
    127,994
    
    
    $
    39,429
    
    
    $
    62,406
    
    
    $
    59,399
    
    
    $
    87,707
    
    
    $
    78,178
    
    
    $
    1,550
    
    
    $
    722
    
    
    $
    457,385Rental property expenses
and real estate taxes
    
    
    40,815
    
    
    
    11,810
    
    
    
    13,361
    
    
    
    20,987
    
    
    
    26,497
    
    
    
    25,722
    
    
    
    193
    
    
    
    176
    
    
    
    139,561Property level operating
income
    
    $
    87,179
    
    
    $
    27,619
    
    
    $
    49,045
    
    
    $
    38,412
    
    
    $
    61,210
    
    
    $
    52,456
    
    
    $
    1,357
    
    
    $
    546
    
    
    
    317,824Interest and other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,497Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (83,502
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33,579
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (100,276
    )Income before property dispositions, income taxes,
minority interest and equity in earnings of
unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    106,964Gain on property dispositions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,257Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,957
    )Equity in earnings of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,250Discontinued operations, net of minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    95,233Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    205,762
 Note 3: SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Revenues
    
    $
    6,573
    
    
    $
    16,358
    
    
    $
    25,597
    
    
    $
    56,828Operating expenses
    
    
    (2,981
    )
    
    
    (6,854
    )
    
    
    (10,692
    )
    
    
    (21,845
    )Interest expense
    
    
    (736
    )
    
    
    (2,570
    )
    
    
    (3,689
    )
    
    
    (9,850
    )Depreciation and amortization
    
    
    (1,606
    )
    
    
    (3,643
    )
    
    
    (5,969
    )
    
    
    (13,261
    )Income before property dispositions and minority interest
    
    $
    1,250
    
    
    $
    3,291
    
    
    $
    5,247
    
    
    $
    11,872
  Allocation of Interest to Discontinued Operations
 11




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##### Table of Contents



Note 4: Joint Ventures
 Liberty/Commerz 1701 JFK Boulevard, LP
  Accounting for the Sale of Real Estate
 Liberty Illinois, LP
  Blythe Valley JV Sarl
  Note 5: Unsecured Notes
   Note 6: Preferred Units
   Note 7: Accelerated Share Repurchase
  12




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##### Table of Contents



Note 8: Recently Issued Accounting Standards
 SFAS No. 157
 Fair
Value Measurements
 SFAS No. 159
 The Fair Value Option for Financial Assets and
Financial Liabilities
 FIN 48
 Accounting for Uncertainty in Income
Taxes Accounting for Income Taxes,
   Note 9: Subsequent Events
    13




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##### Table of Contents



CONDENSED CONSOLIDATED BALANCE SHEETS OF
 LIBERTY PROPERTY LIMITED PARTNERSHIP
 (In thousands)
 September 30, 2007
    
    
    December 31, 2006(Unaudited)ASSETSReal estate:Land and land improvements
    
    $
    751,765
    
    
    $
    666,588Building and improvements
    
    
    4,114,484
    
    
    
    3,735,583Less accumulated depreciation
    
    
    (834,385
    )
    
    
    (786,778
    )Operating real estate
    
    
    4,031,864
    
    
    
    3,615,393Development in progress
    
    
    572,606
    
    
    
    538,521Land held for development
    
    
    246,870
    
    
    
    195,332Net real estate
    
    
    4,851,340
    
    
    
    4,349,246Cash and cash equivalents
    
    
    36,031
    
    
    
    53,737Restricted cash
    
    
    31,200
    
    
    
    55,671Accounts receivable
    
    
    26,708
    
    
    
    23,809Deferred rent receivable
    
    
    73,010
    
    
    
    71,894Deferred financing and leasing costs, net of accumulated
amortization (2007, $115,802; 2006 $100,406)
    
    
    144,549
    
    
    
    127,902Investments in and advances to unconsolidated joint ventures
    
    
    77,666
    
    
    
    54,723Assets held for sale
    
    
    60,033
    
    
    
    113,150Prepaid expenses and other assets
    
    
    84,572
    
    
    
    60,779Total assets
    
    $
    5,385,109
    
    
    $
    4,910,911LIABILITIESMortgage loans
    
    $
    231,986
    
    
    $
    185,978Unsecured notes
    
    
    2,155,000
    
    
    
    1,955,000Credit facility
    
    
    372,960
    
    
    
    246,960Accounts payable
    
    
    68,604
    
    
    
    40,633Accrued interest
    
    
    29,823
    
    
    
    36,297Dividend and distributions payable
    
    
    59,592
    
    
    
    58,961Other liabilities
    
    
    250,073
    
    
    
    217,751Total liabilities
    
    
    3,168,038
    
    
    
    2,741,580Minority interest
    
    
    464
    
    
    
    419OWNERS EQUITYGeneral partners equity  common units
    
    
    1,843,926
    
    
    
    1,871,604Limited partners equity  preferred units
    
    
    287,963
    
    
    
    210,960 common units
    
    
    84,718
    
    
    
    86,348Total owners equity
    
    
    2,216,607
    
    
    
    2,168,912Total liabilities and owners equity
    
    $
    5,385,109
    
    
    $
    4,910,911
  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)
 Three Months EndedSeptember 30, 2007
    
    
    September 30, 2006OPERATING REVENUERental
    
    $
    124,698
    
    
    $
    108,800Operating expense reimbursement
    
    
    53,127
    
    
    
    46,942Total operating revenue
    
    
    177,825
    
    
    
    155,742OPERATING EXPENSERental property
    
    
    36,813
    
    
    
    30,726Real estate taxes
    
    
    19,627
    
    
    
    16,292General and administrative
    
    
    13,144
    
    
    
    12,016Depreciation and amortization
    
    
    40,720
    
    
    
    34,330Total operating expenses
    
    
    110,304
    
    
    
    93,364Operating income
    
    
    67,521
    
    
    
    62,378OTHER INCOME (EXPENSE)Interest and other income
    
    
    2,536
    
    
    
    2,945Interest expense
    
    
    (33,521
    )
    
    
    (28,380
    )Total other income (expense)
    
    
    (30,985
    )
    
    
    (25,435
    )Income before property dispositions, income taxes,
minority interest and equity in (loss) earnings of
unconsolidated joint ventures
    
    
    36,536
    
    
    
    36,943Gain (loss) on property dispositions
    
    
    190
    
    
    
    (104
    )Income taxes
    
    
    1,022
    
    
    
    625Minority interest
    
    
    11
    
    
    
    Equity in (loss) earnings of unconsolidated joint ventures
    
    
    (29
    )
    
    
    334Income from continuing operations
    
    
    37,730
    
    
    
    37,798Discontinued operations (including net gain on property
dispositions of $4,145 and $11,386 for the three months
ended September 30, 2007 and 2006, respectively)
    
    
    5,395
    
    
    
    14,677Net income
    
    
    43,125
    
    
    
    52,475Preferred unit distributions
    
    
    (4,246
    )
    
    
    (3,401
    )Income available to common unitholders
    
    $
    38,879
    
    
    $
    49,074Earnings per common unitBasic:Income from continuing operations
    
    $
    0.35
    
    
    $
    0.36Income from discontinued operations
    
    
    0.06
    
    
    
    0.16Income per common unit  basic
    
    $
    0.41
    
    
    $
    0.52Diluted:Income from continuing operations
    
    $
    0.35
    
    
    $
    0.36Income from discontinued operations
    
    
    0.06
    
    
    
    0.16Income per common unit  diluted
    
    $
    0.41
    
    
    $
    0.52Distributions per common unit
    
    $
    0.625
    
    
    $
    0.62Weighted average number of common units outstandingBasic
    
    
    95,095
    
    
    
    93,877Diluted
    
    
    95,557
    
    
    
    95,010
  15




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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)
 Nine Months EndedSeptember 30, 2007
    
    
    September 30, 2006OPERATING REVENUERental
    
    $
    357,605
    
    
    $
    322,721Operating expense reimbursement
    
    
    155,386
    
    
    
    134,664Total operating revenue
    
    
    512,991
    
    
    
    457,385OPERATING EXPENSERental property
    
    
    108,294
    
    
    
    91,378Real estate taxes
    
    
    54,459
    
    
    
    48,183General and administrative
    
    
    38,872
    
    
    
    33,579Depreciation and amortization
    
    
    114,566
    
    
    
    100,276Total operating expenses
    
    
    316,191
    
    
    
    273,416Operating income
    
    
    196,800
    
    
    
    183,969OTHER INCOME (EXPENSE)Interest and other income
    
    
    8,125
    
    
    
    6,497Interest expense
    
    
    (89,882
    )
    
    
    (83,502
    )Total other income (expense)
    
    
    (81,757
    )
    
    
    (77,005
    )Income before property dispositions, income taxes,
minority interest and equity in earnings of
unconsolidated joint ventures
    
    
    115,043
    
    
    
    106,964Gain on property dispositions
    
    
    1,641
    
    
    
    17,257Income taxes
    
    
    508
    
    
    
    15Minority interest
    
    
    (45
    )
    
    
    Equity in earnings of unconsolidated joint ventures
    
    
    1,026
    
    
    
    1,250Income from continuing operations
    
    
    118,173
    
    
    
    125,486Discontinued operations (including net gain on property
dispositions of $24,376 and $87,588 for the nine months
ended September 30, 2007 and 2006, respectively)
    
    
    29,623
    
    
    
    99,460Net income
    
    
    147,796
    
    
    
    224,946Preferred unit distributions
    
    
    (11,874
    )
    
    
    (10,203
    )Excess of preferred unit redemption over carrying amount
    
    
    (696
    )
    
    
    Income available to common unitholders
    
    $
    135,226
    
    
    $
    214,743Earnings per common unitBasic:Income from continuing operations
    
    $
    1.11
    
    
    $
    1.24Income from discontinued operations
    
    
    0.31
    
    
    
    1.07Income per common unit  basic
    
    $
    1.42
    
    
    $
    2.31Diluted:Income from continuing operations
    
    $
    1.10
    
    
    $
    1.22Income from discontinued operations
    
    
    0.31
    
    
    
    1.06Income per common unit  diluted
    
    $
    1.41
    
    
    $
    2.28Distributions per common unit
    
    $
    1.865
    
    
    $
    1.85Weighted average number of common units outstandingBasic
    
    
    95,369
    
    
    
    92,717Diluted
    
    
    96,095
    
    
    
    93,978
  16




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##### Table of Contents



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW OF
 LIBERTY PROPERTY LIMITED PARTNERSHIP
 (Unaudited and in thousands)
 Nine Months EndedSeptember 30, 2007
    
    
    September 30, 2006OPERATING ACTIVITIESNet income
    
    $
    147,796
    
    
    $
    224,946Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    119,378
    
    
    
    113,927Amortization of deferred financing costs
    
    
    3,002
    
    
    
    3,188Equity in earnings of unconsolidated joint ventures
    
    
    (1,026
    )
    
    
    (1,250
    )Distributions from unconsolidated joint ventures
    
    
    1,934
    
    
    
    3,026Minority interest in net income
    
    
    45
    
    
    
    Gain on property dispositions
    
    
    (26,017
    )
    
    
    (104,845
    )Noncash compensation
    
    
    6,691
    
    
    
    5,205Changes in operating assets and liabilities:Restricted cash
    
    
    25,861
    
    
    
    18,289Accounts receivable
    
    
    (2,770
    )
    
    
    (8,071
    )Deferred rent receivable
    
    
    (5,140
    )
    
    
    1,162Prepaid expenses and other assets
    
    
    (25,736
    )
    
    
    (28,428
    )Accounts payable
    
    
    28,004
    
    
    
    8,234Accrued interest
    
    
    (6,474
    )
    
    
    (8,088
    )Other liabilities
    
    
    29,679
    
    
    
    (7,701
    )Net cash provided by operating activities
    
    
    295,227
    
    
    
    219,594INVESTING ACTIVITIESInvestment in properties
    
    
    (265,150
    )
    
    
    (220,163
    )Investments in and advances to unconsolidated joint ventures
    
    
    (22,854
    )
    
    
    (5,484
    )Net proceeds from disposition of properties/land
    
    
    284,616
    
    
    
    383,331Investment in development in progress
    
    
    (373,904
    )
    
    
    (255,415
    )Investment in land held for development
    
    
    (104,336
    )
    
    
    (52,064
    )Investment in deferred leasing costs
    
    
    (36,095
    )
    
    
    (20,796
    )Net cash used in investing activities
    
    
    (517,723
    )
    
    
    (170,591
    )FINANCING ACTIVITIESNet proceeds from issuance of preferred units
    
    
    99,957
    
    
    
    Redemption of preferred units
    
    
    (23,650
    )
    
    
    Net proceeds from issuance of unsecured notes
    
    
    446,205
    
    
    
    Repayments of unsecured notes
    
    
    (250,000
    )
    
    
    Repayments of mortgage loans
    
    
    (8,118
    )
    
    
    (37,586
    )Proceeds from credit facility
    
    
    917,750
    
    
    
    419,095Repayments on credit facility
    
    
    (791,750
    )
    
    
    (346,065
    )Increase in deferred financing costs
    
    
    (967
    )
    
    
    (1,971
    )Capital contributions
    
    
    53,754
    
    
    
    60,875Distributions to partners
    
    
    (240,207
    )
    
    
    (180,881
    )Net cash provided by (used in) financing activities
    
    
    202,974
    
    
    
    (86,533
    )Decrease in cash and cash equivalents
    
    
    (19,522
    )
    
    
    (37,530
    )Increase in cash and cash equivalents related to foreign currency translation
    
    
    1,816
    
    
    
    2,474Cash and cash equivalents at beginning of period
    
    
    53,737
    
    
    
    61,629Cash and cash equivalents at end of period
    
    $
    36,031
    
    
    $
    26,573SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONSWrite-off of fully depreciated property and deferred costs
    
    $
    71,305
    
    
    $
    75,447Assumption of mortgage loans
    
    $
    54,126
    
    
    $
    Issuance of operating partnership units
    
    $
    
    
    
    $
    30,000
  17




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##### Table of Contents



Liberty Property Limited Partnership
 
 Notes to Condensed Consolidated Financial Statements (Unaudited)
 September 30, 2007
 Note 1: Organization and Basis of Presentation
 Organization
  Basis of Presentation
  18




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##### Table of Contents



Income per Common Unit
  For the Three Months Ended September 30, 2007
    
    
    For the Three Months Ended September 30, 2006Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedIncome
    
    
    Average Units
    
    
    
    
    
    
    Income
    
    
    Average Units(Numerator)
    
    
    (Denominator)
    
    
    Per Unit
    
    
    (Numerator)
    
    
    (Denominator)
    
    
    Per UnitIncome from continuing operations
    
    $
    37,730
    
    
    
    
    
    
    
    
    
    
    $
    37,798Less: Preferred unit distributions
    
    
    (4,246
    )
    
    
    
    
    
    
    
    
    
    
    (3,401
    )Basic income from continuing operationsIncome from continuing operations available to
common unitholders
    
    
    33,484
    
    
    
    95,095
    
    
    $
    0.35
    
    
    
    34,397
    
    
    
    93,877
    
    
    $
    0.36Dilutive units for long-term compensation plans
    
    
    
    
    
    
    462
    
    
    
    
    
    
    
    
    
    
    
    1,133Diluted income from continuing operationsIncome from continuing operations available to
common unitholders and assumed conversions
    
    
    33,484
    
    
    
    95,557
    
    
    $
    0.35
    
    
    
    34,397
    
    
    
    95,010
    
    
    $
    0.36Basic income from discontinued operationsDiscontinued operations
    
    
    5,395
    
    
    
    95,095
    
    
    $
    0.06
    
    
    
    14,677
    
    
    
    93,877
    
    
    $
    0.16Dilutive units for long-term compensation plans
    
    
    
    
    
    
    462
    
    
    
    
    
    
    
    
    
    
    
    1,133Diluted income from discontinued operationsDiscontinued operations
    
    
    5,395
    
    
    
    95,557
    
    
    $
    0.06
    
    
    
    14,677
    
    
    
    95,010
    
    
    $
    0.16Basic income per common unitIncome available to common unitholders
    
    
    38,879
    
    
    
    95,095
    
    
    $
    0.41
    
    
    
    49,074
    
    
    
    93,877
    
    
    $
    0.52Diluted units for long-term compensation plans
    
    
    
    
    
    
    462
    
    
    
    
    
    
    
    
    
    
    
    1,133Diluted income per common unitIncome available to common unitholders and
assumed conversions
    
    $
    38,879
    
    
    
    95,557
    
    
    $
    0.41
    
    
    $
    49,074
    
    
    
    95,010
    
    
    $
    0.52
 19




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##### Table of Contents



For the Nine Months Ended September 30, 2007
    
    
    For the Nine Months Ended September 30, 2006Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedIncome
    
    
    Average Units
    
    
    Per
    
    
    Income
    
    
    Average Units(Numerator)
    
    
    (Denominator)
    
    
    Unit
    
    
    (Numerator)
    
    
    (Denominator)
    
    
    Per UnitIncome from continuing operations
    
    $
    118,173
    
    
    
    
    
    
    
    
    
    
    $
    125,486Less: Preferred unit distributions
    
    
    (11,874
    )
    
    
    
    
    
    
    
    
    
    
    (10,203
    )Less: Excess of preferred unit
redemption over carrying amount
    
    
    (696
    )
    
    
    
    
    
    
    
    
    
    
    Basic income from continuing operationsIncome from continuing operations
available to common unitholders
    
    
    105,603
    
    
    
    95,369
    
    
    $
    1.11
    
    
    
    115,283
    
    
    
    92,717
    
    
    $
    1.24Dilutive units for long-term
compensation plans
    
    
    
    
    
    
    726
    
    
    
    
    
    
    
    
    
    
    
    1,261Diluted income from continuing
operationsIncome from continuing operations
available to common unitholders and
assumed conversions
    
    
    105,603
    
    
    
    96,095
    
    
    $
    1.10
    
    
    
    115,283
    
    
    
    93,978
    
    
    $
    1.22Basic income from discontinued
operationsDiscontinued operations
    
    
    29,623
    
    
    
    95,369
    
    
    $
    0.31
    
    
    
    99,460
    
    
    
    92,717
    
    
    $
    1.07Dilutive units for long-term
compensation plans
    
    
    
    
    
    
    726
    
    
    
    
    
    
    
    
    
    
    
    1,261Diluted income from discontinued
operationsDiscontinued operations
    
    
    _29,623
    
    
    
    96,095
    
    
    $
    0.31
    
    
    
    99,460
    
    
    
    93,978
    
    
    $
    1.06Basic income per common unitIncome available to common unitholders
    
    
    135,226
    
    
    
    95,369
    
    
    $
    1.42
    
    
    
    214,743
    
    
    
    92,717
    
    
    $
    2.31Diluted units for long-term
compensation plans
    
    
    
    
    
    
    726
    
    
    
    
    
    
    
    
    
    
    
    1,261Diluted income per common unitIncome available to common unitholders
and assumed conversions
    
    $
    135,226
    
    
    
    96,095
    
    
    $
    1.41
    
    
    $
    214,743
    
    
    
    93,978
    
    
    $
    2.28
 Foreign Currency Translation
  20




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##### Table of Contents



Note 2: 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; TexasArizona
    
    PhoenixUnited Kingdom
    
    County of Kent
 Disclosures about Segments of an
Enterprise and Related Information,
    For the Three Months Ended September 30, 2007
 Delaware Valley
    
    
    MidwestSoutheastern
    
    
    
    
    
    
    Lehigh
    
    
    
    
    
    
    Mid-
    
    
    
    
    
    
    
UnitedPennsylvania
    
    
    Other
    
    
    Valley
    
    
    Other
    
    
    Atlantic
    
    
    Florida
    
    
    Arizona
    
    
    Kingdom
    
    
    TotalOperating revenue
    
    $
    43,760
    
    
    $
    13,897
    
    
    $
    23,164
    
    
    $
    22,440
    
    
    $
    34,368
    
    
    $
    36,283
    
    
    $
    2,955
    
    
    $
    958
    
    
    $
    177,825Rental property expenses and
real estate taxes
    
    
    14,255
    
    
    
    4,660
    
    
    
    5,790
    
    
    
    7,435
    
    
    
    10,267
    
    
    
    13,187
    
    
    
    642
    
    
    
    204
    
    
    
    56,440Property level operating income
    
    $
    29,505
    
    
    $
    9,237
    
    
    $
    17,374
    
    
    $
    15,005
    
    
    $
    24,101
    
    
    $
    23,096
    
    
    $
    2,313
    
    
    $
    754
    
    
    
    121,385Interest and other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,536Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33,521
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,144
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (40,720
    )Income before property dispositions, income taxes, minority
interest and equity in loss of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,536Gain on property dispositions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    190Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,022Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11Equity in loss of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29
    )Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,395Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    43,125
 21




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##### Table of Contents



For the Three Months Ended September 30, 2006
 Delaware Valley
    
    
    MidwestSoutheastern
    
    
    
    
    
    
    Lehigh
    
    
    
    
    
    
    Mid-
    
    
    
    
    
    
    
    
    
    
    UnitedPennsylvania
    
    
    Other
    
    
    Valley
    
    
    Other
    
    
    Atlantic
    
    
    Florida
    
    
    Arizona
    
    
    Kingdom
    
    
    TotalOperating revenue
    
    $
    42,831
    
    
    $
    13,346
    
    
    $
    20,686
    
    
    $
    19,172
    
    
    $
    30,874
    
    
    $
    27,600
    
    
    $
    1,003
    
    
    $
    230
    
    
    $
    155,742Rental property expenses and
real estate taxes
    
    
    14,178
    
    
    
    4,267
    
    
    
    2,893
    
    
    
    6,730
    
    
    
    9,632
    
    
    
    9,117
    
    
    
    154
    
    
    
    47
    
    
    
    47,018Property level operating income
    
    $
    28,653
    
    
    $
    9,079
    
    
    $
    17,793
    
    
    $
    12,442
    
    
    $
    21,242
    
    
    $
    18,483
    
    
    $
    849
    
    
    $
    183
    
    
    
    108,724Interest and other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,945Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (28,380
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,016
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34,330
    )Income before property dispositions, income taxes, minority
interest and equity in earnings of unconsolidated joint
ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,943Loss on property dispositions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (104
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    625Equity in earnings of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    334Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,677Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    52,475
 For the Nine Months Ended September 30, 2007
 Delaware Valley
    
    
    MidwestSoutheastern
    
    
    
    
    
    
    Lehigh
    
    
    
    
    
    
    Mid-
    
    
    
    
    
    
    
    
    
    
    UnitedPennsylvania
    
    
    Other
    
    
    Valley
    
    
    Other
    
    
    Atlantic
    
    
    Florida
    
    
    Arizona
    
    
    Kingdom
    
    
    TotalOperating revenue
    
    $
    130,645
    
    
    $
    41,254
    
    
    $
    66,386
    
    
    $
    62,657
    
    
    $
    99,118
    
    
    $
    105,955
    
    
    $
    5,031
    
    
    $
    1,945
    
    
    $
    512,991Rental property expenses and
real estate taxes
    
    
    43,639
    
    
    
    13,506
    
    
    
    16,734
    
    
    
    21,593
    
    
    
    30,278
    
    
    
    35,383
    
    
    
    1,090
    
    
    
    530
    
    
    
    162,753Property level operating income
    
    $
    87,006
    
    
    $
    27,748
    
    
    $
    49,652
    
    
    $
    41,064
    
    
    $
    68,840
    
    
    $
    70,572
    
    
    $
    3,941
    
    
    $
    1,415
    
    
    
    350,238Interest and other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,125Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (89,882
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (38,872
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (114,566
    )Income before property dispositions, income taxes, minority
interest and equity in earnings of unconsolidated joint
ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    115,043Gain on property dispositions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,641Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    508Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (45
    )Equity in earnings of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,026Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,623Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    147,796
 22




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##### Table of Contents



For the Nine Months Ended September 30, 2006
 Delaware Valley
    
    
    MidwestSoutheastern
    
    
    
    
    
    
    Lehigh
    
    
    
    
    
    
    Mid-
    
    
    
    
    
    
    
    
    
    
    UnitedPennsylvania
    
    
    Other
    
    
    Valley
    
    
    Other
    
    
    Atlantic
    
    
    Florida
    
    
    Arizona
    
    
    Kingdom
    
    
    TotalOperating revenue
    
    $
    127,994
    
    
    $
    39,429
    
    
    $
    62,406
    
    
    $
    59,399
    
    
    $
    87,707
    
    
    $
    78,178
    
    
    $
    1,550
    
    
    $
    722
    
    
    $
    457,385Rental property expenses and
real estate taxes
    
    
    40,815
    
    
    
    11,810
    
    
    
    13,361
    
    
    
    20,987
    
    
    
    26,497
    
    
    
    25,722
    
    
    
    193
    
    
    
    176
    
    
    
    139,561Property level operating income
    
    $
    87,179
    
    
    $
    27,619
    
    
    $
    49,045
    
    
    $
    38,412
    
    
    $
    61,210
    
    
    $
    52,456
    
    
    $
    1,357
    
    
    $
    546
    
    
    
    317,824Interest and other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,497Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (83,502
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33,579
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (100,276
    )Income before property dispositions, income taxes, minority
interest and equity in earnings of unconsolidated joint
ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    106,964Gain on property dispositions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,257Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15Equity in earnings of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,250Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    99,460Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    224,946
 Note 3: SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Revenues
    
    $
    6,573
    
    
    $
    16,358
    
    
    $
    25,597
    
    
    $
    56,828Operating expenses
    
    
    (2,981
    )
    
    
    (6,854
    )
    
    
    (10,692
    )
    
    
    (21,845
    )Interest expense
    
    
    (736
    )
    
    
    (2,570
    )
    
    
    (3,689
    )
    
    
    (9,850
    )Depreciation and amortization
    
    
    (1,606
    )
    
    
    (3,643
    )
    
    
    (5,969
    )
    
    
    (13,261
    )Income before property dispositions and minority interest
    
    $
    1,250
    
    
    $
    3,291
    
    
    $
    5,247
    
    
    $
    11,872
  Allocation of Interest to Discontinued Operations
 23




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##### Table of Contents



Note 4: Joint Ventures
 Liberty/Commerz 1701 JFK Boulevard, LP
   Liberty Illinois, LP
  Blythe Valley JV Sarl
  Note 5: Unsecured Notes
   Note 6: Preferred Units
   Note 7: Recently Issued Accounting Standards
 SFAS No. 157
 Fair
Value Measurements
 24




---



##### Table of Contents



SFAS No. 159
 The Fair Value Option for Financial Assets and
Financial Liabilities
 FIN 48
 Accounting for Uncertainty in Income
Taxes Accounting for Income Taxes,
   Note 8: Subsequent Events
    25




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 OVERVIEW
     WHOLLY OWNED CAPITAL ACTIVITY
 Acquisitions
  26




---



##### Table of Contents



Dispositions
  Development
  Comcast Center Activity
  JOINT VENTURE CAPITAL ACTIVITY
  Acquisitions
  Dispositions
  27




---



##### Table of Contents



Development
  Blythe Valley JV Sarl
  Liberty Washington, LP
   PROPERTIES IN OPERATION
  Net RentPer Square Foot
    
    
    Total Square Feet
    
    
    Percent OccupiedSeptember 30
    
    
    September 30
    
    
    September 302007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Wholly Owned Properties in Operation:Industrial-Distribution
    
    $
    4.23
    
    
    $
    4.34
    
    
    
    27,729
    
    
    
    26,042
    
    
    
    94.5
    %
    
    
    95.3
    %Industrial-Flex
    
    $
    8.87
    
    
    $
    8.72
    
    
    
    12,207
    
    
    
    12,525
    
    
    
    91.1
    %
    
    
    93.7
    %Office
    
    $
    13.60
    
    
    $
    13.90
    
    
    
    21,529
    
    
    
    20,076
    
    
    
    91.9
    %
    
    
    90.3
    %$
    8.38
    
    
    $
    8.45
    
    
    
    61,465
    
    
    
    58,643
    
    
    
    92.9
    %
    
    
    93.3
    %
 Net RentPer Square Foot
    
    
    Total Square Feet
    
    
    Percent OccupiedSeptember 30
    
    
    September 30
    
    
    September 302007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Joint Venture Properties in Operation:Industrial-Distribution
    
    $
    3.69
    
    
    $
    4.09
    
    
    
    7,705
    
    
    
    5,638
    
    
    
    93.3
    %
    
    
    91.3
    %Industrial-Flex
    
    $
    30.04
    
    
    $
    30.08
    
    
    
    171
    
    
    
    170
    
    
    
    89.4
    %
    
    
    100.0
    %Office
    
    $
    31.04
    
    
    $
    33.64
    
    
    
    855
    
    
    
    364
    
    
    
    90.7
    %
    
    
    98.1
    %$
    6.79
    
    
    $
    6.73
    
    
    
    8,731
    
    
    
    6,172
    
    
    
    93.0
    %
    
    
    92.0
    %
 28




---



##### Table of Contents



Net RentPer Square Foot
    
    
    Total Square Feet
    
    
    Percent OccupiedSeptember 30
    
    
    September 30
    
    
    September 302007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Properties in Operation:Industrial-Distribution
    
    $
    4.11
    
    
    $
    4.29
    
    
    
    35,434
    
    
    
    31,680
    
    
    
    94.2
    %
    
    
    94.6
    %Industrial-Flex
    
    $
    9.16
    
    
    $
    9.02
    
    
    
    12,378
    
    
    
    12,695
    
    
    
    91.1
    %
    
    
    93.8
    %Office
    
    $
    14.24
    
    
    $
    14.29
    
    
    
    22,384
    
    
    
    20,440
    
    
    
    91.9
    %
    
    
    90.5
    %$
    8.18
    
    
    $
    8.29
    
    
    
    70,196
    
    
    
    64,815
    
    
    
    92.9
    %
    
    
    93.1
    %
  Forward-Looking Statements
  Critical Accounting Policies and Estimates
  Results of Operations
   Comparison of Three and Nine Months Ended September 30, 2007 to Three and Nine Months Ended
September 30, 2006
 Overview
  29




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##### Table of Contents



Segments
  Property Level Operating Income:
 Three Months Ended
    

    
    
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,
    
    
    
    
    
    
    
    
    
    
    September 30,
    
    
    September 30,2007
    
    
    2006
    
    
    % inc (dec)
    
    
    
    
    
    
    2007
    
    
    2006
    
    
    % inc (dec)Delaware Valley SE Pennsylvania
    
    $
    29,505
    
    
    $
    28,653
    
    
    
    3.0
    %
    
    
    
    
    
    $
    87,006
    
    
    $
    87,179
    
    
    
    (0.2
    )% Other
    
    
    9,237
    
    
    
    9,079
    
    
    
    1.7
    %
    
    
    
    
    
    
    27,748
    
    
    
    27,619
    
    
    
    0.5
    %Midwest Lehigh Valley
    
    
    17,374
    
    
    
    17,793
    
    
    
    (2.4
    )%
    
    
    (1
    )
    
    
    49,652
    
    
    
    49,045
    
    
    
    1.2
    %
    
    
    (1
    ) Other
    
    
    15,005
    
    
    
    12,442
    
    
    
    20.6
    %
    
    
    (2
    )
    
    
    41,064
    
    
    
    38,412
    
    
    
    6.9
    %
    
    
    (2
    )Mid-Atlantic
    
    
    24,101
    
    
    
    21,242
    
    
    
    13.5
    %
    
    
    (2
    )
    
    
    68,840
    
    
    
    61,210
    
    
    
    12.5
    %
    
    
    (2
    )Florida
    
    
    23,096
    
    
    
    18,483
    
    
    
    25.0
    %
    
    
    (2
    )
    
    
    70,572
    
    
    
    52,456
    
    
    
    34.5
    %
    
    
    (2
    )Arizona
    
    
    2,313
    
    
    
    849
    
    
    
    172.4
    %
    
    
    (3
    )
    
    
    3,941
    
    
    
    1,357
    
    
    
    190.4
    %
    
    
    (3
    )United Kingdom
    
    
    754
    
    
    
    183
    
    
    
    312.0
    %
    
    
    (4
    )
    
    
    1,415
    
    
    
    546
    
    
    
    159.2
    %
    
    
    (5
    )Totals
    
    $
    121,385
    
    
    $
    108,724
    
    
    
    11.6
    %
    
    
    
    
    
    $
    350,238
    
    
    $
    317,824
    
    
    
    10.2
    %
 
 (1)
    
    Results for the three and nine months ended September 30, 2006 include a
non-recurring bankruptcy settlement. The decrease related to the settlement in
2007 was partially offset in the three months ended September 2007 and
completely offset in the nine months ending September 30, 2007 by an increase in
average gross investment in operating real estate.(2)
    
    The increases for the three and nine months ended September 30, 2007
versus the three and nine months ended September 30, 2006 are primarily due to
an increase in average gross investment in operating real estate and increased
occupancy during 2007.(3)
    
    The increases for the three and nine months ended September 30, 2007
versus the three and nine months ended September 30, 2006 are primarily due to
an increase in average gross investment in operating real estate during 2007.(4)
    
    The increase for the three months ended September 30, 2007 versus the
three months ended September 30, 2006 is primarily due to an increase in average
gross investment in operating real estate during 2007.(5)
    
    The increase for the nine months ended September 30, 2007 versus the
nine months ended September 30, 2006 is primarily due to an increase in average
gross investment in operating real estate and increased occupancy during 2007. Same Store
  30




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Same Store:Rental revenue
    
    $
    106,295
    
    
    $
    104,517
    
    
    $
    317,615
    
    
    $
    310,690Operating expenses:Rental property expense
    
    
    33,566
    
    
    
    30,524
    
    
    
    100,341
    
    
    
    91,833Real estate taxes
    
    
    15,845
    
    
    
    15,635
    
    
    
    47,384
    
    
    
    46,347Operating expense recovery
    
    
    (48,091
    )
    
    
    (46,106
    )
    
    
    (143,528
    )
    
    
    (133,847
    )Unrecovered operating expenses
    
    
    1,320
    
    
    
    53
    
    
    
    4,197
    
    
    
    4,333Property level operating income
    
    
    104,975
    
    
    
    104,464
    
    
    
    313,418
    
    
    
    306,357Less straight line rent
    
    
    673
    
    
    
    1,536
    
    
    
    1,858
    
    
    
    4,425Cash basis property level operating income
    
    $
    104,302
    
    
    $
    102,928
    
    
    $
    311,560
    
    
    $
    301,932Reconciliation of non-GAAP financial measure:Property level operating income  Same Store
    
    $
    104,975
    
    
    $
    104,464
    
    
    $
    313,418
    
    
    $
    306,357Property level operating income  properties purchased or
developed subsequent to January 1, 2006
    
    
    14,545
    
    
    
    3,751
    
    
    
    33,670
    
    
    
    6,103Termination fees
    
    
    1,865
    
    
    
    509
    
    
    
    3,150
    
    
    
    5,364General and administrative expense
    
    
    (13,144
    )
    
    
    (12,016
    )
    
    
    (38,872
    )
    
    
    (33,579
    )Depreciation and amortization expense
    
    
    (40,720
    )
    
    
    (34,330
    )
    
    
    (114,566
    )
    
    
    (100,276
    )Other income (expense)
    
    
    (30,985
    )
    
    
    (25,435
    )
    
    
    (81,757
    )
    
    
    (77,005
    )Gain (loss) on property dispositions
    
    
    190
    
    
    
    (104
    )
    
    
    1,641
    
    
    
    17,257Income taxes
    
    
    1,022
    
    
    
    625
    
    
    
    508
    
    
    
    15Minority interest
    
    
    (5,703
    )
    
    
    (4,935
    )
    
    
    (17,244
    )
    
    
    (14,957
    )Equity in (loss) earnings of unconsolidated joint ventures
    
    
    (29
    )
    
    
    334
    
    
    
    1,026
    
    
    
    1,250Discontinued operations, net of minority interest
    
    
    5,158
    
    
    
    14,022
    
    
    
    28,325
    
    
    
    95,233Net income
    
    $
    37,174
    
    
    $
    46,885
    
    
    $
    129,299
    
    
    $
    205,762
 31




---



##### Table of Contents



General and Administrative
  Depreciation and Amortization
  Interest Expense
  Other
   32




---



##### Table of Contents



Liquidity and Capital Resources
       33




---



##### Table of Contents



MORTGAGES
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    WEIGHTEDPRINCIPAL
    
    
    PRINCIPAL
    
    
    UNSECURED
    
    
    CREDIT
    
    
    
    
    
    
    AVERAGEAMORTIZATION
    
    
    MATURITIES
    
    
    NOTES
    
    
    FACILITY
    
    
    TOTAL
    
    
    INTEREST RATE2007 (3 months)
    
    $
    2,568
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2,568
    
    
    
    6.94
    %2008
    
    
    8,576
    
    
    
    39,753
    
    
    
    
    
    
    
    152,960
    (1)
    
    
    201,289
    
    
    
    6.34
    %2009
    
    
    6,345
    
    
    
    46,148
    
    
    
    270,000
    
    
    
    
    
    
    
    322,493
    
    
    
    7.77
    %2010
    
    
    5,563
    
    
    
    4,738
    
    
    
    200,000
    
    
    
    220,000
    
    
    
    430,301
    
    
    
    7.21
    %2011
    
    
    4,882
    
    
    
    10,730
    
    
    
    250,000
    
    
    
    
    
    
    
    265,612
    
    
    
    7.25
    %2012
    
    
    4,041
    
    
    
    32,910
    
    
    
    235,000
    
    
    
    
    
    
    
    271,951
    
    
    
    6.47
    %2013
    
    
    3,542
    
    
    
    4,518
    
    
    
    -
    
    
    
    
    
    
    
    8,060
    
    
    
    6.35
    %2014
    
    
    3,553
    
    
    
    2,681
    
    
    
    200,000
    
    
    
    
    
    
    
    206,234
    
    
    
    5.66
    %2015
    
    
    2,978
    
    
    
    44,469
    
    
    
    300,000
    
    
    
    
    
    
    
    347,447
    
    
    
    5.24
    %2016
    
    
    2,220
    
    
    
    
    
    
    
    300,000
    
    
    
    
    
    
    
    302,220
    
    
    
    5.50
    %2017 & thereafter
    
    
    1,771
    
    
    
    
    
    
    
    400,000
    
    
    
    
    
    
    
    401,771
    
    
    
    6.84
    %$
    46,039
    
    
    $
    185,947
    
    
    $
    2,155,000
    
    
    $
    372,960
    
    
    $
    2,759,946
    
    
    
    6.54
    %
 
 (1)
    
    Represents a deposit by the joint venture partner in the Comcast Center (see
Note 4 to the Companys financial statements) which bears interest at the greater of
5% or the current rate on the $600 million Credit Facility until development of the
Comcast Center building is completed.  General
  34




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##### Table of Contents



Industrial-
    
    
    Industrial-Distribution
    
    
    Flex
    
    
    Office
    
    
    TotalWholly Owned Properties
    
    Square
    
    
    Annual
    
    
    Square
    
    
    Annual
    
    
    Square
    
    
    Annual
    
    
    Square
    
    
    Annualin Operation:
    
    Feet
    
    
    Rent
    
    
    Feet
    
    
    Rent
    
    
    Feet
    
    
    Rent
    
    
    Feet
    
    
    Rent2007 (3 months)
    
    
    427
    
    
    $
    1,777
    
    
    
    377
    
    
    $
    3,244
    
    
    
    576
    
    
    $
    6,384
    
    
    
    1,380
    
    
    $
    11,4052008
    
    
    3,191
    
    
    
    13,107
    
    
    
    2,069
    
    
    
    18,982
    
    
    
    1,925
    
    
    
    28,515
    
    
    
    7,185
    
    
    
    60,6042009
    
    
    4,076
    
    
    
    18,490
    
    
    
    1,973
    
    
    
    18,229
    
    
    
    3,023
    
    
    
    44,362
    
    
    
    9,072
    
    
    
    81,0812010
    
    
    2,755
    
    
    
    13,392
    
    
    
    1,724
    
    
    
    15,881
    
    
    
    2,738
    
    
    
    38,978
    
    
    
    7,217
    
    
    
    68,2512011
    
    
    2,909
    
    
    
    13,414
    
    
    
    1,190
    
    
    
    12,444
    
    
    
    2,336
    
    
    
    36,182
    
    
    
    6,435
    
    
    
    62,0402012
    
    
    4,501
    
    
    
    22,318
    
    
    
    1,480
    
    
    
    14,561
    
    
    
    2,425
    
    
    
    38,525
    
    
    
    8,406
    
    
    
    75,404Thereafter
    
    
    8,337
    
    
    
    44,513
    
    
    
    2,312
    
    
    
    25,467
    
    
    
    6,762
    
    
    
    125,897
    
    
    
    17,411
    
    
    
    195,877TOTAL
    
    
    26,196
    
    
    $
    127,011
    
    
    
    11,125
    
    
    $
    108,808
    
    
    
    19,785
    
    
    $
    318,843
    
    
    
    57,106
    
    
    $
    554,662
 Industrial-
    
    
    Industrial-Distribution
    
    
    Flex
    
    
    Office
    
    
    TotalJoint Venture Properties
    
    Square
    
    
    Annual
    
    
    Square
    
    
    Annual
    
    
    Square
    
    
    Annual
    
    
    Square
    
    
    Annualin Operation:
    
    Feet
    
    
    Rent
    
    
    Feet
    
    
    Rent
    
    
    Feet
    
    
    Rent
    
    
    Feet
    
    
    Rent2007 (3 months)
    
    
    607
    
    
    $
    2,221
    
    
    
    44
    
    
    $
    1,523
    
    
    
    
    
    
    $
    
    
    
    
    651
    
    
    $
    3,7442008
    
    
    1,156
    
    
    
    4,996
    
    
    
    9
    
    
    
    310
    
    
    
    69
    
    
    
    2,019
    
    
    
    1,234
    
    
    
    7,3252009
    
    
    361
    
    
    
    1,400
    
    
    
    11
    
    
    
    330
    
    
    
    61
    
    
    
    2,332
    
    
    
    433
    
    
    
    4,0622010
    
    
    965
    
    
    
    3,976
    
    
    
    19
    
    
    
    756
    
    
    
    65
    
    
    
    2,605
    
    
    
    1,049
    
    
    
    7,3372011
    
    
    868
    
    
    
    3,600
    
    
    
    11
    
    
    
    385
    
    
    
    91
    
    
    
    3,415
    
    
    
    970
    
    
    
    7,4002012
    
    
    452
    
    
    
    2,121
    
    
    
    19
    
    
    
    663
    
    
    
    98
    
    
    
    3,671
    
    
    
    569
    
    
    
    6,455Thereafter
    
    
    2,783
    
    
    
    13,199
    
    
    
    39
    
    
    
    1,395
    
    
    
    391
    
    
    
    14,034
    
    
    
    3,213
    
    
    
    28,628TOTAL
    
    
    7,192
    
    
    $
    31,513
    
    
    
    152
    
    
    $
    5,362
    
    
    
    775
    
    
    $
    28,076
    
    
    
    8,119
    
    
    $
    64,951
 Industrial-
    
    
    Industrial-Distribution
    
    
    Flex
    
    
    Office
    
    
    TotalProperties
    
    Square
    
    
    Annual
    
    
    Square
    
    
    Annual
    
    
    Square
    
    
    Annual
    
    
    Square
    
    
    Annualin Operation:
    
    Feet
    
    
    Rent
    
    
    Feet
    
    
    Rent
    
    
    Feet
    
    
    Rent
    
    
    Feet
    
    
    Rent2007 (3 months)
    
    
    1,034
    
    
    $
    3,998
    
    
    
    421
    
    
    $
    4,767
    
    
    
    576
    
    
    $
    6,384
    
    
    
    2,031
    
    
    $
    15,1492008
    
    
    4,347
    
    
    
    18,103
    
    
    
    2,078
    
    
    
    19,292
    
    
    
    1,994
    
    
    
    30,534
    
    
    
    8,419
    
    
    
    67,9292009
    
    
    4,437
    
    
    
    19,890
    
    
    
    1,984
    
    
    
    18,559
    
    
    
    3,084
    
    
    
    46,694
    
    
    
    9,505
    
    
    
    85,1432010
    
    
    3,720
    
    
    
    17,368
    
    
    
    1,743
    
    
    
    16,637
    
    
    
    2,803
    
    
    
    41,583
    
    
    
    8,266
    
    
    
    75,5882011
    
    
    3,777
    
    
    
    17,014
    
    
    
    1,201
    
    
    
    12,829
    
    
    
    2,427
    
    
    
    39,597
    
    
    
    7,405
    
    
    
    69,4402012
    
    
    4,953
    
    
    
    24,439
    
    
    
    1,499
    
    
    
    15,224
    
    
    
    2,523
    
    
    
    42,196
    
    
    
    8,975
    
    
    
    81,859Thereafter
    
    
    11,120
    
    
    
    57,712
    
    
    
    2,351
    
    
    
    26,862
    
    
    
    7,153
    
    
    
    139,931
    
    
    
    20,624
    
    
    
    224,505TOTAL
    
    
    33,388
    
    
    $
    158,524
    
    
    
    11,277
    
    
    $
    114,170
    
    
    
    20,560
    
    
    $
    346,919
    
    
    
    65,225
    
    
    $
    619,613
  35




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##### Table of Contents



Square FeetScheduled
    
    Industrial-
    
    
    Industrial
    
    
    
    
    
    
    
    
    
    
    Percent
    
    
    TotalIn-Service Date
    
    Distribution
    
    
    Flex
    
    
    Office
    
    
    Total
    
    
    Leased
    
    
    InvestmentWholly OwnedProperties underDevelopment
    
    4th Quarter 2007
    
    
    168,000
    
    
    
    174,177
    
    
    
    523,583
    
    
    
    865,760
    
    
    
    82.8
    %
    
    $
    118,9101st Quarter 2008
    
    
    269,040
    
    
    
    
    
    
    
    
    
    
    
    269,040
    
    
    
    55.4
    %
    
    
    15,4672nd Quarter 2008
    
    
    
    
    
    
    34,000
    
    
    
    172,757
    
    
    
    206,757
    
    
    
    63.6
    %
    
    
    36,1963rd Quarter 2008
    
    
    341,000
    
    
    
    115,600
    
    
    
    
    
    
    
    456,600
    
    
    
    21.9
    %
    
    
    25,5704th Quarter 2008
    
    
    963,540
    
    
    
    
    
    
    
    139,700
    
    
    
    1,103,240
    
    
    
    
    
    
    
    70,5981st Quarter 2009
    
    
    63,600
    
    
    
    
    
    
    
    90,352
    
    
    
    153,952
    
    
    
    
    
    
    
    21,5132nd Quarter 2009
    
    
    920,400
    
    
    
    
    
    
    
    254,320
    
    
    
    1,174,720
    
    
    
    3.9
    %
    
    
    102,9923rd Quarter 2009
    
    
    
    
    
    
    
    
    
    
    73,345
    
    
    
    73,345
    
    
    
    
    
    
    
    13,233TOTAL
    
    
    2,725,580
    
    
    
    323,777
    
    
    
    1,254,057
    
    
    
    4,303,414
    
    
    
    26.6
    %
    
    
    404,479Comcast Center
    
    4th Quarter 2007, 1st & 2nd Quarter 2008
    
    
    
    
    
    
    
    
    
    
    902,648
    
    
    
    902,648
    
    
    
    94.1
    %
    
    
    357,289Joint VentureProperties underDevelopment
    
    4th Quarter 2007
    
    
    340,000
    
    
    
    
    
    
    
    
    
    
    
    340,000
    
    
    
    100.0
    %
    
    
    16,3912nd Quarter 2008
    
    
    
    
    
    
    
    
    
    
    54,230
    
    
    
    54,230
    
    
    
    
    
    
    
    26,1763rd Quarter 2008
    
    
    296,100
    
    
    
    
    
    
    
    
    
    
    
    296,100
    
    
    
    39.5
    %
    
    
    18,296TOTAL
    
    
    636,100
    
    
    
    
    
    
    
    54,230
    
    
    
    690,330
    
    
    
    61.8
    %
    
    
    60,863Total Properties
underDevelopment
    
    TOTAL
    
    
    3,361,680
    
    
    
    323,777
    
    
    
    2,210,935
    
    
    
    5,896,392
    
    
    
    41.0
    %
    
    $
    822,631
   Calculation of Funds from Operations
  36




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30, 2007
    
    
    September 30, 2006
    
    
    September 30, 2007
    
    
    September 30, 2006Reconciliation of net income to FFO  basicNet Income
    
    $
    37,174
    
    
    $
    46,885
    
    
    $
    129,299
    
    
    $
    205,762Basic  Income available to common shareholders
    
    
    37,174
    
    
    
    46,885
    
    
    
    129,299
    
    
    
    205,762Basic  income available to common shareholders per weighted
average share
    
    $
    0.41
    
    
    $
    0.52
    
    
    $
    1.42
    
    
    $
    2.31Adjustments:Depreciation and amortization of unconsolidated joint ventures
    
    
    1,134
    
    
    
    792
    
    
    
    2,819
    
    
    
    2,108Depreciation and amortization
    
    
    41,715
    
    
    
    37,404
    
    
    
    118,704
    
    
    
    111,804Gain on property dispositions
    
    
    (5,302
    )
    
    
    (12,192
    )
    
    
    (27,238
    )
    
    
    (106,487
    )Minority interest share in addback for depreciation and
amortization and gain on property dispositions
    
    
    (1,648
    )
    
    
    (1,160
    )
    
    
    (4,132
    )
    
    
    (479
    )Funds from operations available to common
shareholders  basic
    
    $
    73,073
    
    
    $
    71,729
    
    
    $
    219,452
    
    
    $
    212,708Basic Funds from operations available to common shareholders
per weighted average share
    
    $
    0.80
    
    
    $
    0.80
    
    
    $
    2.41
    
    
    $
    2.39Reconciliation of net income to FFO  diluted:Net Income
    
    $
    37,174
    
    
    $
    46,885
    
    
    $
    129,299
    
    
    $
    205,762Diluted  income available to common shareholders
    
    
    37,174
    
    
    
    46,885
    
    
    
    129,299
    
    
    
    205,762Diluted  income available to common shareholders per
weighted average share
    
    $
    0.41
    
    
    $
    0.52
    
    
    $
    1.41
    
    
    $
    2.28Adjustments:Depreciation and amortization of unconsolidated joint ventures
    
    
    1,134
    
    
    
    792
    
    
    
    2,819
    
    
    
    2,108Depreciation and amortization
    
    
    41,715
    
    
    
    37,404
    
    
    
    118,704
    
    
    
    111,804Gain on property dispositions
    
    
    (5,302
    )
    
    
    (12,192
    )
    
    
    (27,238
    )
    
    
    (106,487
    )Minority interest less preferred share distributions and excess
of preferred unit redemption over carrying amount
    
    
    1,705
    
    
    
    2,189
    
    
    
    5,927
    
    
    
    8,981Funds from operations available to common shareholders  diluted
    
    $
    76,426
    
    
    $
    75,078
    
    
    $
    229,511
    
    
    $
    222,168Diluted Funds from operations available to common
shareholders per weighted average share
    
    $
    0.80
    
    
    $
    0.79
    
    
    $
    2.39
    
    
    $
    2.36Reconciliation of weighted average shares:Weighted average common shares  all basic calculations
    
    
    90,905
    
    
    
    89,675
    
    
    
    91,179
    
    
    
    88,923Dilutive shares for long term compensation plans
    
    
    462
    
    
    
    1,133
    
    
    
    726
    
    
    
    1,261Diluted shares for net income calculations
    
    
    91,367
    
    
    
    90,808
    
    
    
    91,905
    
    
    
    90,184Weighted average common units
    
    
    4,190
    
    
    
    4,202
    
    
    
    4,190
    
    
    
    3,794Diluted shares for Funds from operations calculations
    
    
    95,557
    
    
    
    95,010
    
    
    
    96,095
    
    
    
    93,978
 37




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##### Table of Contents



Inflation
  
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
 Changes
in Internal Controls
 38




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
 The Company has been substituted for Republic as a party to certain litigation as
a result of the Companys merger with Republic on October 4, 2007. The
litigation is summarized below. The litigation arises out of a
dispute between Republic and certain parties, two of whom were
members of its Board of Trustees and founders of
Republic. The dispute includes claims arising from the termination of
a development arrangement in West Palm Beach, Florida and an attempt
by Republic to acquire a certain office property from an entity
controlled by the aforementioned related parties pursuant to an
option agreement entered in to at the time of Republics formation.On November 17, 2006, Republic disclosed in a Form 8-K that Mr. Grigg, its
President and Chief Development Officer, had notified it that he was terminating
his employment, purportedly for good reason, as such term is defined in his
employment agreement, dated December 20, 2005. Mr. Grigg also asserted that, as a
result of such termination, he was entitled to the severance payments provided
for under the terms of the employment agreement. The cash portion of such
severance payments could be valued at up to approximately $1.8 million. The
Company disagrees with Mr. Grigg that there is a basis for termination by
Mr. Grigg for good reason; therefore, we believe that Mr. Grigg terminated his
employment without good reason as of November 13, 2006, the date of his
termination letter. Accordingly, we believe that no severance payments are due,
and we have not remitted any such payments, to Mr. Grigg under the terms of his
employment agreement.On December 22, 2006, Mr. Grigg filed a lawsuit against Republic in the Superior
Court of the District of Columbia. Mr. Grigg alleges, among other things, that
(i) Republic breached his employment agreement, (ii) Republic breached its duties
of good faith and fair dealing and (iii) the Noncompetition Agreement dated
December 20, 2005 between Mr. Grigg and Republic is unenforceable and void.
Mr. Grigg seeks, among other remedies, (i) the severance payment allegedly due
under the employment agreement, (ii) other damages in an amount to be finally
determined at trial and (iii) the voiding of the Noncompetition Agreement.
The Company believes that Mr. Griggs lawsuit is without merit, generally denies the
allegations in the complaint and denies that Mr. Grigg is entitled to any of the
relief sought in his complaint. Republic originally asserted various
counterclaims against Mr. Grigg, including claims for common law fraud, state
securities fraud, breach of his employment agreement, breach of fiduciary duties
and unjust enrichment. Republic subsequently voluntarily dismissed without
prejudice its common law fraud, state securities fraud and unjust enrichment
claims in order to pursue those claims in the below described litigation pending
in the United States District Court for the District of Columbia. The
Companys
counterclaims against Mr. Grigg for breach of his employment agreement and breach
of his fiduciary duties remain pending in the District of Columbia Superior Court
litigation. On March 30, 2007, the Court denied, in its entirety, Mr. Griggs
motion to dismiss these counterclaims. The Company seeks damages and other
appropriate relief on these counterclaims.On March 6, 2007, Mr. Richard Kramer,
Republics former Non-executive Chairman of the
Board, filed a lawsuit against Republic in the United States District Court for
the District of Maryland Southern Division, in which he seeks advancement for
legal fees incurred by him purportedly in connection with an independent
counsels investigation with respect to certain matters involving Republics
course of dealing in a West Palm Beach development project, as well as those fees
incurred in filing and prosecuting this lawsuit. On May 3, 2007, Mr. Kramer
voluntarily dismissed this case, and filed an almost identical lawsuit against
Republic in the Circuit Court of Baltimore County, Maryland. We believe that
Mr. Richard Kramers lawsuit is without merit and have filed a motion to dismiss
or, in the alternative, motion for summary judgment, seeking the dismissal of
Mr. Richard Kramers lawsuit. Mr. Richard Kramer has filed a motion for summary
judgment against the Company. On November 2, 2007 the Court
denied Mr. Kramers motion for summary judgment and granted
the Companys motion to dismiss.On March 28, 2007, Republic filed a lawsuit against Messrs. Richard Kramer and
Grigg and Republic Properties Corporation in the United States District Court of
the District of Columbia. This lawsuit asserts, among other things, claims
against (i) all three defendants for (a) federal and state securities fraud and
(b) common law fraud; (ii) Messrs. Richard Kramer and Grigg for (a) federal and
state control person liability and (b) unjust enrichment; and (iii) Republic
Properties Corporation for (a) breach of contract and (b) indemnification. The
Company seeks, among other remedies, (i) damages in an amount not less than
 39




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##### Table of Contents



$1.2 million, the approximate value (at the time of issuance) of the partnership
units issued by Republic Property Limited Partnership to Republic Properties Corporation in connection with the West Palm
Beach City Center Development Contribution Agreement, (ii) additional damages
incurred by us as a result of the termination of the West Palm Beach Professional
Services Agreement, (iii) recovery of the costs, including attorneys fees,
associated with the previously-disclosed independent investigation, (iv)
reimbursement for Republics expenses in this litigation, including attorneys fees, and
(v) other damages, including punitive damages, in an amount to be finally
determined at trial. On April 27, 2007, Republic filed an Amended Complaint in
the District of Columbia District Court action, adding to the claims set forth
immediately above a claim for declaratory judgment that Mr. Kramer was not
entitled to advancement or reimbursement of any of the fees sought in his
Maryland litigation. Republic Properties Corporation, Mr. Richard Kramer and Mr. Grigg have filed motions to
dismiss this lawsuit, which are currently pending.On May 21, 2007, Republic proffered a lease (the Lease) to 25 Massachusetts
Avenue Property LLC (the Owner) for certain space in
Republic Square I, an office building in Washington, D.C.
(the Option Property). Based
on information provided by the Owner, immediately prior to the proffer of the
Lease, approximately 50% of the Option Propertys net rentable area was under lease and
approximately 37% of the Option Propertys net rentable area was rent paying space. Had
the Owner accepted the Lease, more than 85% of the space in the
Option Property would have been rent paying space. The base rents and other material terms of the
Lease proffer are based on the Owners lease up projections for the Property and
the Lease is on the Owners form lease agreement.On May 22, 2007, the Owner rejected the proffer of the Lease, asserting, among
other things, that it was not a bona fide business proposal for Republics own
occupancy and leasing of space. On May 29, 2007, Republic (i) re-tendered the
Lease to the Owner for certain space at the Option Property and
(ii) exercised its exclusive option to purchase the fee interest
in the Option Property
pursuant to the Option Agreement among the Owner, 660 North Capitol Street
Property LLC and Republic dated as of November 28, 2005 (the Option Agreement).
On May 30, 2007, the Owner rejected the Lease and claimed that there has been no
effective exercise of the Option. The Company believes that the Lease was
properly tendered for an appropriate purpose and, accordingly, the Company
re-proffered the Lease to the Owner. The Owner rejected the Lease proffer and
disputed whether the Lease entitled Republic to purchase the Property, pursuant
to its exercise of the option, at the Purchase Price (as defined in the Option
Agreement).In response to the Owners rejection, on June 15, 2007, Republic filed a lawsuit
against the Owner in the Court of Chancery in the State of Delaware. This lawsuit
asserts, among other things, that (i) by refusing to accept Republics option
exercise the Owner has breached the Option Agreement and (ii) by deciding not to
refinance a construction loan on the Property and rejecting the Lease, the Owner
has breached the covenant of good faith and fair dealing implied in every
contract governed by the laws of the District of Columbia. Republic
sought, among
other remedies, to obtain (I) an injunction against the Owners sale of the
Option Property to any party other than Republic, (II) a declaration that the Lease and
option exercise are effective and (III) an order that the Owner specifically
perform its obligation to sell the Option Property to Republic pursuant to the Option
Agreement. Also on June 15, 2007, Republic filed a Notice of Pendency of Action
(Lis Pendens) in the Office of the Recorder of Deeds in the District of Columbia,
in order to record Republics interest in the Option Property as reflected in the
Delaware Chancery Court action. On July 2, 2007, the Owner answered the complaint
and counterclaimed, seeking monetary damages related to the Owners purported
attempts to sell the Option Property to a third party. The outcome of this lawsuit
is uncertain. The Company cannot provide any assurance that the purchase and sale
of the Option Property pursuant to the Option Agreement will occur. As previously
disclosed, two of Republics founders and Trustees, Richard L. Kramer and Steven
A. Grigg, currently control the Owner. As previously disclosed, Mark R. Keller,
Republics former Chief Executive Officer, holds an ownership interest in the
Owner.The outcome of the lawsuits described above could have an adverse effect
on our results of operations, financial position and cash flow.
 40




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##### Table of Contents



Item 1A. Risk Factors
 There have been no material changes to the risk factors disclosed in Item 1A of
Part 1 Risk Factors, in our Form 10-K for the year ended December 31, 2006.
 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 The following table provides information relating to the Companys repurchase
of common shares for the second and third quarter of 2007.
 Total Number of
    
    Approximate DollarShares Purchased
    
    Value of SharesTotal Number
    
    Average
    

as Part of Publicly
    
    that May Yet Beof Shares
    
    Price Paid
    
    Announced
    
    Purchased UnderPeriod
    
    Purchased
    
    per Share
    
    Program
    
    the Program(1)June 1 - June 30
    
    
    776,277
    
    
    $
    41.988
    
    
    
    776,277
    
    
    $
    50,000,000July 1 - July 31
    
    
    301,122
    
    
    $
    41.988
    
    
    
    301,122
    
    
    $
    50,000,000August 1- August 31
    
    
    113,410
    
    
    $
    41.988
    
    
    
    113,410
    
    
    $
    50,000,000Sept. 1 - Sept. 30
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    50,000,000Total
    
    
    1,190,809
    
    
    $
    41.988
    
    
    
    1,190,809
    
    
    $
    50,000,000
 
 (1)
    
    On June 25, 2007, the Company announced that the Board of
Trustees had approved a $50 million accelerated share repurchase program
(ASR) as part of an approval of an overall program to repurchase up to
$100 million of the Trusts common shares of beneficial interest over the
period beginning on the date of the authorization and ending on March 13,
2012. The Company further announced that, upon completion of the ASR, the
Company will consider repurchasing the balance of the $100 million overall
share repurchase authorization in open market transactions, in privately
negotiated transactions or through the use of derivatives. The specific
timing and amount of repurchases will vary based on market conditions,
securities law limitations and other factors. The repurchases will be
made using the Companys cash resources, and the program may be suspended
or discontinued at any time without prior notice. This table does not
include shares tendered to satisfy the exercise price in connection with
cashless exercises of employee stock options or shares tendered to satisfy
tax withholding obligations in connection with employee equity awards. 
 Item 3. Defaults upon Senior Securities
 None.
 
 Item 4. Submission of Matters to a Vote of Security Holders
 None.
 
 Item 5. Other Information
 None.
 41




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##### Table of Contents



Item 6.
    
    Exhibits2.1
    
    Agreement and Plan Merger, dated as of July 23, 2007, by and among
Liberty Property Trust, Liberty Property Limited Partnership,
Liberty Acquisition LLC, Republic Property Trust and Republic
Property Limited Partnership. (Incorporated by reference to Exhibit
2.1 to the Current Report on Form 8-K of the Registrants, filed with
the Securities and Exchange Commission on July 24, 2007).3.1
    
    Articles Supplementary to the Amended and Restated Declaration of
Trust of the Trust relating to the 7.40% Series H Cumulative
Redeemable Preferred Partnership Interests. (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
August 23, 2007 (the August 23, 2007 Form 8-K)).3.2
    
    Eighth Amendment to the Second Amendment and Restated Agreement of
Limited Partnership of Liberty Property Limited Partnership.
(Incorporated by reference to Exhibit 10 to the August 23, 2007 Form
8-K).4.1*
    
    Tenth Supplemental Indenture, dated as of September 25, 2007,
between Liberty Property Limited Partnership, as Issuer, and The
Bank of New York Trust Company, N.A., as Trustee, supplementing the
Senior Indenture, dated as of October 24, 1997, between Liberty
Property Limited Partnership, as Obligor, and The Bank of New York
Trust Company, N.A., (as successor to J.P. Morgan Trust Company,
National Association and the First National Bank of Chicago), as
Trustee, and relating to $300,000,000 principal amount of 6.625%
Senior Notes due 2017 of Liberty Property Limited Partnership.12.1*
    
    Statement Re: Computation of Ratio of Earnings to Fixed Charges and
Ratio of Earnings to Combined Fixed Charges.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 1934.31.3*
    
    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.)
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##### Table of Contents



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. 43




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##### Table of Contents



SIGNATURES
  LIBERTY PROPERTY TRUST
 November 5, 2007William P. Hankowsky
    
    
    
    DatePresident and Chief Executive OfficerNovember 5, 2007George J. Alburger, Jr.
    
    
    
    DateExecutive Vice President and Chief Financial Officer
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##### Table of Contents



SIGNATURES
  LIBERTY PROPERTY LIMITED PARTNERSHIP
 BY: Liberty Property TrustGeneral PartnerNovember 5, 2007William P. Hankowsky
    
    
    
    DatePresident and Chief Executive OfficerNovember 5, 2007George J. Alburger, Jr.
    
    
    
    DateExecutive Vice President and Chief Financial Officer
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##### Table of Contents



EXHIBIT INDEX
 EXHIBITNO.
    
    DESCRIPTION4.1
    
    Tenth Supplemental Indenture, dated as of September 25, 2007, between Liberty Property
Limited Partnership, as Issuer, and The Bank of New York Trust Company, N.A., as
Trustee, supplementing the Senior Indenture, dated as of October 24, 1997, between
Liberty Property Limited Partnership, as Obligor, and The Bank of New York Trust
Company, N.A., (as successor to J.P. Morgan Trust Company, National Association and the
First National Bank of Chicago), as Trustee, and relating to $300,000,000 principal
amount of 6.625% Senior Notes due 2017 of Liberty Property Limited Partnership.12.1
    
    Statement Re: Computation of Ratio of Earnings to Fixed Charges and Ratio of Earnings
to Combined Fixed Charges.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 1934.31.3
    
    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.)
 46