##### Table of Contents



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




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Liberty Property Trust/Liberty Property Limited Partnership
Form 10-Q for the period ended September 30, 2005
  
 Index
    
    
    
    PagePart I.
    
    Financial InformationItem 1.
    
    Financial Statements (unaudited)Condensed consolidated balance sheets of Liberty Property Trust at September 30,
2005 and December 31, 2004
    
    
    3Condensed consolidated statements of operations of Liberty Property Trust for the
three months ended September 30, 2005 and September 30, 2004
    
    
    4Condensed consolidated statements of operations of Liberty Property Trust for the
nine months ended September 30, 2005 and September 30, 2004
    
    
    5Condensed consolidated statements of cash flows of Liberty Property Trust for the
nine months ended September 30, 2005 and September 30, 2004
    
    
    6Notes to condensed consolidated financial statements of Liberty Property Trust
    
    
    7Condensed consolidated balance sheets of Liberty Property Limited Partnership at
September 30, 2005 and December 31, 2004
    
    
    13Condensed consolidated statements of operations of Liberty Property Limited
Partnership for the three months ended September 30, 2005 and September 30, 2004
    
    
    14Condensed consolidated statements of operations of Liberty Property Limited
Partnership for the nine months ended September 30, 2005 and September 30, 2004
    
    
    15Condensed consolidated statements of cash flows of Liberty Property Limited
Partnership for the nine months ended September 30, 2005 and September 30, 2004
    
    
    16Notes to condensed consolidated financial statements of Liberty Property Limited
Partnership
    
    
    17Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    22Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    30Item 4.
    
    Controls and Procedures
    
    
    30Part II.
    
    Other Information
    
    
    31Signatures for Liberty Property Trust
    
    
    33Signatures for Liberty Property Limited Partnership
    
    
    34Exhibit Index
    
    
    35CERTIFICATIONS OF CEO REQUIRED BY RULE 13A-14(A)CERTIFICATIONS OF CFO REQUIRED BY RULE 13A-14(A)CERTIFICATIONS OF CEO REQUIRED BY RULE 13A-14(A)CERTIFICATIONS OF CFO REQUIRED BY RULE 13A-14(A)CERTIFICATIONS OF CEO REQUIRED BY RULE 13A-14(B)CERTIFICATIONS OF CFO REQUIRED BY RULE 13A-14(B)CERTIFICATIONS OF CEO REQUIRED BY RULE 13A-14(B)CERTIFICATIONS OF CFO REQUIRED BY RULE 13A-14(B)
  2




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##### Table of Contents



CONDENSED CONSOLIDATED BALANCE SHEETS OF LIBERTY PROPERTY TRUST
(In thousands, except share amounts)
 September 30, 2005
    
    
    December 31, 2004(Unaudited)ASSETSReal estate:Land and land improvements
    
    $
    637,864
    
    
    $
    625,035Building and improvements
    
    
    3,742,060
    
    
    
    3,629,508Less accumulated depreciation
    
    
    (759,974
    )
    
    
    (695,410
    )Operating real estate
    
    
    3,619,950
    
    
    
    3,559,133Development in progress
    
    
    326,219
    
    
    
    81,099Land held for development
    
    
    147,462
    
    
    
    171,122Net real estate
    
    
    4,093,631
    
    
    
    3,811,354Cash and cash equivalents
    
    
    43,209
    
    
    
    33,667Restricted cash
    
    
    21,799
    
    
    
    34,626Accounts receivable
    
    
    18,978
    
    
    
    21,502Deferred rent receivable
    
    
    71,675
    
    
    
    66,528Deferred financing and leasing costs, net of accumulated amortization
(2005, $108,963; 2004, $91,117)
    
    
    115,780
    
    
    
    107,148Investments in unconsolidated joint ventures
    
    
    33,319
    
    
    
    24,372Prepaid expenses and other assets
    
    
    59,272
    
    
    
    63,630Total assets
    
    $
    4,457,663
    
    
    $
    4,162,827LIABILITIESMortgage loans
    
    $
    257,765
    
    
    $
    366,171Unsecured notes
    
    
    1,755,000
    
    
    
    1,455,000Credit facility
    
    
    289,000
    
    
    
    312,000Accounts payable
    
    
    35,643
    
    
    
    24,288Accrued interest
    
    
    26,739
    
    
    
    34,994Dividend payable
    
    
    56,160
    
    
    
    54,485Other liabilities
    
    
    148,126
    
    
    
    111,764Total liabilities
    
    
    2,568,433
    
    
    
    2,358,702Minority interest
    
    
    250,686
    
    
    
    207,866SHAREHOLDERS EQUITYCommon shares of beneficial interest, $.001 par value, 191,200,000
shares authorized, 87,868,575 (includes 59,100 in treasury) and
85,734,136 (includes 59,100 in treasury) shares issued and
outstanding as of September 30, 2005 and December 31, 2004, respectively
    
    
    87
    
    
    
    86Additional paid-in capital
    
    
    1,788,730
    
    
    
    1,708,573Accumulated other comprehensive income
    
    
    12,124
    
    
    
    25,105Unearned compensation
    
    
    (9,530
    )
    
    
    (6,846
    )Distributions in excess of net income
    
    
    (151,540
    )
    
    
    (129,332
    )Common shares in treasury, at cost, 59,100 shares as of September 30, 2005
and December 31, 2004
    
    
    (1,327
    )
    
    
    (1,327
    )Total shareholders equity
    
    
    1,638,544
    
    
    
    1,596,259Total liabilities and shareholders equity
    
    $
    4,457,663
    
    
    $
    4,162,827
  3




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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS OF LIBERTY PROPERTY TRUST
(Unaudited and in thousands, except per share amounts)
 Three Months EndedSeptember 30, 2005
    
    
    September 30, 2004OPERATING REVENUERental
    
    $
    120,808
    
    
    $
    114,348Operating expense reimbursement
    
    
    51,646
    
    
    
    46,678Total operating revenue
    
    
    172,454
    
    
    
    161,026OPERATING EXPENSERental property
    
    
    27,078
    
    
    
    24,014Real estate taxes
    
    
    17,897
    
    
    
    16,919Utilities
    
    
    10,998
    
    
    
    9,195General and administrative
    
    
    9,175
    
    
    
    8,529Depreciation and amortization
    
    
    37,410
    
    
    
    32,957Total operating expenses
    
    
    102,558
    
    
    
    91,614Operating income
    
    
    69,896
    
    
    
    69,412OTHER INCOME (EXPENSE)Interest and other income
    
    
    2,165
    
    
    
    1,264Interest expense
    
    
    (33,317
    )
    
    
    (29,905
    )Total other income (expense)
    
    
    (31,152
    )
    
    
    (28,641
    )Income before property dispositions, income taxes, minority interest
and equity in earnings (loss) of unconsolidated joint ventures
    
    
    38,744
    
    
    
    40,771Gain on property dispositions
    
    
    21
    
    
    
    128Income taxes
    
    
    (796
    )
    
    
    (532
    )Minority interest
    
    
    (4,710
    )
    
    
    (4,331
    )Equity in earnings (loss) of unconsolidated joint ventures
    
    
    231
    
    
    
    (143
    )Income from continuing operations
    
    
    33,490
    
    
    
    35,893Discontinued operations, net of minority interest (including net gain on
property dispositions of $19,529 and $2,166 for the three months ended
September 30, 2005 and 2004)
    
    
    18,385
    
    
    
    3,586Net income
    
    $
    51,875
    
    
    $
    39,479Earnings per common shareBasic:Income from continuing operations
    
    $
    0.38
    
    
    $
    0.43Income from discontinued operations
    
    
    0.21
    
    
    
    0.04Income per
common share  basic
    
    $
    0.59
    
    
    $
    0.47Diluted:Income from continuing operations
    
    $
    0.37
    
    
    $
    0.42Income from discontinued operations
    
    
    0.21
    
    
    
    0.04Income per
common share  diluted
    
    $
    0.58
    
    
    $
    0.46Distributions per common share
    
    $
    0.615
    
    
    $
    0.61Weighted average number of common shares outstandingBasic
    
    
    87,443
    
    
    
    84,877Diluted
    
    
    88,922
    
    
    
    86,327
  4




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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, 2005
    
    
    September 30, 2004OPERATING REVENUERental
    
    $
    368,929
    
    
    $
    343,461Operating expense reimbursement
    
    
    149,307
    
    
    
    134,975Total operating revenue
    
    
    518,236
    
    
    
    478,436OPERATING EXPENSERental property
    
    
    81,193
    
    
    
    74,464Real estate taxes
    
    
    50,716
    
    
    
    47,458Utilities
    
    
    29,799
    
    
    
    25,259General and administrative
    
    
    26,861
    
    
    
    24,988Depreciation and amortization
    
    
    109,136
    
    
    
    97,342Total operating expenses
    
    
    297,705
    
    
    
    269,511Operating income
    
    
    220,531
    
    
    
    208,925OTHER INCOME (EXPENSE)Interest and other income
    
    
    6,073
    
    
    
    4,734Interest expense
    
    
    (99,260
    )
    
    
    (89,172
    )Total other income (expense)
    
    
    (93,187
    )
    
    
    (84,438
    )Income before property dispositions, income taxes, minority interest
and equity in earnings (loss) of unconsolidated joint ventures
    
    
    127,344
    
    
    
    124,487Loss on property dispositions and impairment
    
    
    (4,908
    )
    
    
    (280
    )Income taxes
    
    
    (2,241
    )
    
    
    (1,379
    )Minority interest
    
    
    (13,959
    )
    
    
    (13,407
    )Equity in earnings (loss) of unconsolidated joint ventures
    
    
    2,433
    
    
    
    (673
    )Income from continuing operations
    
    
    108,669
    
    
    
    108,748Discontinued operations, net of minority interest (including net gain on
property dispositions of $33,949 and $4,263 for the nine months ended
September 30, 2005 and 2004)
    
    
    33,364
    
    
    
    6,758Net income
    
    $
    142,033
    
    
    $
    115,506Earnings per common shareBasic:Income from continuing operations
    
    $
    1.26
    
    
    $
    1.29Income from discontinued operations
    
    
    0.38
    
    
    
    0.08Income per common share  basic
    
    $
    1.64
    
    
    $
    1.37Diluted:Income from continuing operations
    
    $
    1.23
    
    
    $
    1.27Income from discontinued operations
    
    
    0.38
    
    
    
    0.08Income per common share  diluted
    
    $
    1.61
    
    
    $
    1.35Distributions per common share
    
    $
    1.835
    
    
    $
    1.82Weighted average number of common shares outstandingBasic
    
    
    86,670
    
    
    
    84,260Diluted
    
    
    88,128
    
    
    
    85,747
  5




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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
OF LIBERTY PROPERTY TRUST
(Unaudited and in thousands)
 Nine Months EndedSeptember 30, 2005
    
    
    September 30, 2004OPERATING ACTIVITIESNet income
    
    $
    142,033
    
    
    $
    115,506Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    110,841
    
    
    
    101,165Amortization of deferred financing costs
    
    
    3,527
    
    
    
    2,928Equity in earnings (loss) of unconsolidated joint ventures
    
    
    (2,433
    )
    
    
    673Distributions from unconsolidated joint ventures
    
    
    4,544
    
    
    
    682Minority interest in net income
    
    
    15,304
    
    
    
    13,700Gain on property dispositions
    
    
    (29,041
    )
    
    
    (3,983
    )Noncash compensation
    
    
    3,094
    
    
    
    1,932Changes in operating assets and liabilities:Restricted cash
    
    
    11,411
    
    
    
    (6,511
    )Accounts receivable
    
    
    2,422
    
    
    
    (5,180
    )Deferred rent receivable
    
    
    (5,147
    )
    
    
    (8,263
    )Prepaid expenses and other assets
    
    
    (20,132
    )
    
    
    (15,478
    )Accounts payable
    
    
    11,410
    
    
    
    24,480Accrued interest
    
    
    (8,255
    )
    
    
    (11,049
    )Other liabilities
    
    
    37,679
    
    
    
    (4,132
    )Net cash provided by operating activities
    
    
    277,257
    
    
    
    206,470INVESTING ACTIVITIESInvestment in properties
    
    
    (219,032
    )
    
    
    (166,694
    )Investment in unconsolidated joint ventures
    
    
    (13,335
    )
    
    
    (5,072
    )Proceeds from disposition of properties/land
    
    
    147,000
    
    
    
    13,780Investment in development in progress
    
    
    (167,404
    )
    
    
    (76,298
    )Investment in land held for development
    
    
    (69,920
    )
    
    
    (22,358
    )Increase in deferred leasing costs
    
    
    (27,162
    )
    
    
    (22,570
    )Net cash used in investing activities
    
    
    (349,853
    )
    
    
    (279,212
    )FINANCING ACTIVITIESNet proceeds from issuance of common shares
    
    
    68,165
    
    
    
    69,485Net proceeds from the issuance of preferred units
    
    
    48,686
    
    
    
    Net proceeds from issuance of unsecured notes
    
    
    296,424
    
    
    
    197,517Repayments of unsecured notes
    
    
    
    
    
    
    (100,000
    )Net proceeds from mortgage loans
    
    
    
    
    
    
    9,525Repayments of mortgage loans
    
    
    (126,768
    )
    
    
    (14,051
    )Proceeds from credit facility
    
    
    461,650
    
    
    
    298,056Repayments on credit facility
    
    
    (484,650
    )
    
    
    (219,956
    )Increase in deferred financing costs
    
    
    (139
    )
    
    
    (275
    )Distributions to minority interests
    
    
    (3,932
    )
    
    
    Distributions paid on common shares
    
    
    (158,308
    )
    
    
    (152,350
    )Distributions paid on units
    
    
    (15,284
    )
    
    
    (15,410
    )Net cash provided by financing activities
    
    
    85,844
    
    
    
    72,541Increase (decrease) in cash and cash equivalents
    
    
    13,248
    
    
    
    (201
    )(Decrease) increase related to foreign currency translation
    
    
    (3,706
    )
    
    
    167Cash and cash equivalents at beginning of period
    
    
    33,667
    
    
    
    21,809Cash and cash equivalents at end of period
    
    $
    43,209
    
    
    $
    21,775SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONSWrite-off of fully depreciated property and deferred costs
    
    $
    26,429
    
    
    $
    9,188Acquisition of properties
    
    
    (23,973
    )
    
    
    (11,305
    )Assumption of mortgage loans
    
    
    23,973
    
    
    
    11,305
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Liberty Property Trust
 
 Notes to Condensed Consolidated Financial Statements (Unaudited)
 September 30, 2005
 Note 1: Organization and Basis of Presentation
 Organization
  Basis of Presentation
  Income per Common Share
  For the Three Months Ended Sept. 30, 2005
    
    
    For the Three Months Ended Sept. 30, 2004Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    
    
    
    
    AverageIncome
    
    
    Shares
    
    
    Per
    
    
    Income
    
    
    Shares
    
    
    Per(Numerator)
    
    
    (Denominator)
    
    
    Share
    
    
    (Numerator)
    
    
    (Denominator)
    
    
    ShareBasic income from continuing operationsIncome from continuing operations
    
    $
    33,490
    
    
    
    87,443
    
    
    $
    0.38
    
    
    $
    35,893
    
    
    
    84,877
    
    
    $
    0.43Dilutive shares for long-term
compensation plans
    
    
    
    
    
    
    1,479
    
    
    
    
    
    
    
    
    
    
    
    1,450Diluted income from continuing operationsIncome from continuing operations and
assumed conversions
    
    
    33,490
    
    
    
    88,922
    
    
    $
    0.37
    
    
    
    35,893
    
    
    
    86,327
    
    
    $
    0.42Basic income from discontinued operationsDiscontinued operations net of minority interest
    
    
    18,385
    
    
    
    87,443
    
    
    $
    0.21
    
    
    
    3,586
    
    
    
    84,877
    
    
    $
    0.04Dilutive shares for long-term compensation
plans
    
    
    
    
    
    
    1,479
    
    
    
    
    
    
    
    
    
    
    
    1,450Diluted income from discontinued operationsDiscontinued operations net of minority interest
    
    
    18,385
    
    
    
    88,922
    
    
    $
    0.21
    
    
    
    3,586
    
    
    
    86,327
    
    
    $
    0.04Basic income per common shareNet income
    
    
    51,875
    
    
    
    87,443
    
    
    $
    0.59
    
    
    
    39,479
    
    
    
    84,877
    
    
    $
    0.47Dilutive shares for long-term compensation
plans
    
    
    
    
    
    
    1,479
    
    
    
    
    
    
    
    
    
    
    
    1,450Diluted income per common shareNet income and assumed conversions
    
    $
    51,875
    
    
    
    88,922
    
    
    $
    0.58
    
    
    $
    39,479
    
    
    
    86,327
    
    
    $
    0.46
 7




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##### Table of Contents



For the Nine Months Ended Sept. 30, 2005
    
    
    For the Nine Months Ended Sept. 30, 2004Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    
    
    
    
    AverageIncome
    
    
    Shares
    
    
    Per
    
    
    Income
    
    
    Shares
    
    
    Per(Numerator)
    
    
    (Denominator)
    
    
    Share
    
    
    (Numerator)
    
    
    (Denominator)
    
    
    ShareBasic income from continuing operationsIncome from continuing operations
    
    $
    108,669
    
    
    
    86,670
    
    
    $
    1.26
    
    
    $
    108,748
    
    
    
    84,260
    
    
    $
    1.29Dilutive shares for long-term
compensation plans
    
    
    
    
    
    
    1,458
    
    
    
    
    
    
    
    
    
    
    
    1,487Diluted income from continuing operationsIncome from continuing operations and
assumed conversions
    
    
    108,669
    
    
    
    88,128
    
    
    $
    1.23
    
    
    
    108,748
    
    
    
    85,747
    
    
    $
    1.27Basic income from discontinued operationsDiscontinued operations net of minority interest
    
    
    33,364
    
    
    
    86,670
    
    
    $
    0.38
    
    
    
    6,758
    
    
    
    84,260
    
    
    $
    0.08Dilutive shares for long-term compensation
plans
    
    
    
    
    
    
    1,458
    
    
    
    
    
    
    
    
    
    
    
    1,487Diluted income from discontinued operationsDiscontinued operations net of minority interest
    
    
    33,364
    
    
    
    88,128
    
    
    $
    0.38
    
    
    
    6,758
    
    
    
    85,747
    
    
    $
    0.08Basic income per common shareNet income
    
    
    142,033
    
    
    
    86,670
    
    
    $
    1.64
    
    
    
    115,506
    
    
    
    84,260
    
    
    $
    1.37Dilutive shares for long-term compensation
plans
    
    
    
    
    
    
    1,458
    
    
    
    
    
    
    
    
    
    
    
    1,487Diluted income per common shareNet income and assumed conversions
    
    $
    142,033
    
    
    
    88,128
    
    
    $
    1.61
    
    
    $
    115,506
    
    
    
    85,747
    
    
    $
    1.35
 Stock Based Compensation
  Three Months Ended
    
    
    Nine Months EndedSept. 30, 2005
    
    
    Sept. 30, 2004
    
    
    Sept. 30, 2005
    
    
    Sept. 30, 2004Net income
    
    $
    51,875
    
    
    $
    39,479
    
    
    $
    142,033
    
    
    $
    115,506Add: Share-based employee compensation
expense included in reported net income
    
    
    193
    
    
    
    78
    
    
    
    451
    
    
    
    198Deduct: Total share-based employee compensation
expense determined under fair value based
method for all awards
    
    
    (193
    )
    
    
    (269
    )
    
    
    (581
    )
    
    
    (857
    )Pro forma net income
    
    $
    51,875
    
    
    $
    39,288
    
    
    $
    141,903
    
    
    $
    114,847Income per common share:Basic  as reported
    
    $
    0.59
    
    
    $
    0.47
    
    
    $
    1.64
    
    
    $
    1.37Basic  pro forma
    
    $
    0.59
    
    
    $
    0.46
    
    
    $
    1.64
    
    
    $
    1.36Diluted  as reported
    
    $
    0.58
    
    
    $
    0.46
    
    
    $
    1.61
    
    
    $
    1.35Diluted  pro forma
    
    $
    0.58
    
    
    $
    0.46
    
    
    $
    1.61
    
    
    $
    1.34
 8




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##### Table of Contents



Foreign Operations
  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; TexasUnited Kingdom
    
    County of Kent
   9




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##### Table of Contents



For the Three Months Ended September 30, 2005Delaware Valley
    
    
    MidwestSoutheastern
    
    
    
    
    
    
    Lehigh
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    UnitedPennsylvania
    
    
    Other
    
    
    Valley
    
    
    Other
    
    
    Mid-Atlantic
    
    
    Florida
    
    
    Kingdom
    
    
    TotalOperating revenue
    
    $
    47,525
    
    
    $
    9,957
    
    
    $
    22,779
    
    
    $
    30,875
    
    
    $
    31,532
    
    
    $
    25,240
    
    
    $
    4,546
    
    
    $
    172,454Rental
property expenses, real estate taxes and utilities
    
    
    14,716
    
    
    
    3,579
    
    
    
    6,029
    
    
    
    11,795
    
    
    
    10,215
    
    
    
    8,871
    
    
    
    768
    
    
    
    55,973Property level operating
income
    
    $
    32,809
    
    
    $
    6,378
    
    
    $
    16,750
    
    
    $
    19,080
    
    
    $
    21,317
    
    
    $
    16,369
    
    
    $
    3,778
    
    
    $
    116,481Interest and other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,165Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33,317
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,175
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37,410
    )Income before property dispositions, income taxes, minority interest
and equity in earnings (loss) of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38,744Gain on property dispositions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (796
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,710
    )Equity in earnings (loss) of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    231Discontinued operations, net of minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,385Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    51,875
 For the Three Months Ended September 30, 2004Delaware Valley
    
    
    MidwestSoutheastern
    
    
    
    
    
    
    Lehigh
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    UnitedPennsylvania
    
    
    Other
    
    
    Valley
    
    
    Other
    
    
    Mid-Atlantic
    
    
    Florida
    
    
    Kingdom
    
    
    TotalOperating revenue
    
    $
    45,934
    
    
    $
    8,725
    
    
    $
    18,699
    
    
    $
    29,492
    
    
    $
    30,298
    
    
    $
    22,827
    
    
    $
    5,051
    
    
    $
    161,026Rental
property expenses, real estate taxes and utilities
    
    
    14,029
    
    
    
    3,025
    
    
    
    4,918
    
    
    
    10,821
    
    
    
    9,338
    
    
    
    7,062
    
    
    
    935
    
    
    
    50,128Property level operating
income
    
    $
    31,905
    
    
    $
    5,700
    
    
    $
    13,781
    
    
    $
    18,671
    
    
    $
    20,960
    
    
    $
    15,765
    
    
    $
    4,116
    
    
    $
    110,898Interest and other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,264Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29,905
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,529
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (32,957
    )Income before property dispositions, income taxes, minority interest
and equity in earnings (loss) of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,771Gain on property dispositions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    128Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (532
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,331
    )Equity in earnings (loss) of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (143
    )Discontinued operations, net of minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,586Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    39,479
 10




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##### Table of Contents



For the Nine Months Ended September 30, 2005Delaware Valley
    
    
    MidwestSoutheastern
    
    
    
    
    
    
    Lehigh
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    UnitedPennsylvania
    
    
    Other
    
    
    Valley
    
    
    Other
    
    
    Mid-Atlantic
    
    
    Florida
    
    
    Kingdom
    
    
    TotalOperating revenue
    
    $
    149,551
    
    
    $
    28,868
    
    
    $
    66,238
    
    
    $
    90,792
    
    
    $
    92,544
    
    
    $
    73,970
    
    
    $
    16,273
    
    
    $
    518,236Rental property expenses,
real estate taxes and
utilities
    
    
    44,100
    
    
    
    10,283
    
    
    
    17,790
    
    
    
    33,703
    
    
    
    28,681
    
    
    
    23,993
    
    
    
    3,158
    
    
    
    161,708Property level operating
income
    
    $
    105,451
    
    
    $
    18,585
    
    
    $
    48,448
    
    
    $
    57,089
    
    
    $
    63,863
    
    
    $
    49,977
    
    
    $
    13,115
    
    
    $
    356,528Interest and other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,073Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (99,260
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (26,861
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (109,136
    )Income before property dispositions, income taxes, minority interest
and equity in earnings (loss) of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    127,344Loss on property dispositions and impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,908
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,241
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,959
    )Equity in earnings (loss) of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,433Discontinued operations, net of minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,364Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    142,033
 For the Nine Months Ended September 30, 2004Delaware Valley
    
    
    MidwestSoutheastern
    
    
    
    
    
    
    Lehigh
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    UnitedPennsylvania
    
    
    Other
    
    
    Valley
    
    
    Other
    
    
    Mid-Atlantic
    
    
    Florida
    
    
    Kingdom
    
    
    TotalOperating revenue
    
    $
    140,406
    
    
    $
    25,230
    
    
    $
    55,159
    
    
    $
    87,964
    
    
    $
    87,267
    
    
    $
    67,842
    
    
    $
    14,568
    
    
    $
    478,436Rental property expenses,
real estate taxes and
utilities
    
    
    41,426
    
    
    
    8,889
    
    
    
    15,816
    
    
    
    31,776
    
    
    
    25,782
    
    
    
    20,608
    
    
    
    2,884
    
    
    
    147,181Property level operating
income
    
    $
    98,980
    
    
    $
    16,341
    
    
    $
    39,343
    
    
    $
    56,188
    
    
    $
    61,485
    
    
    $
    47,234
    
    
    $
    11,684
    
    
    $
    331,255Interest and other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,734Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (89,172
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24,988
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (97,342
    )Income before property dispositions, income taxes, minority interest
and equity in earnings (loss) of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    124,487Loss on property dispositions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (280
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,379
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,407
    )Equity in earnings (loss) of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (673
    )Discontinued operations, net of minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,758Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    115,506
 Note
3: SFAS No. 144, Accounting For The Impairment Or Disposal
Of Long-Lived Assets
  11




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSept. 30, 2005
    
    
    Sept. 30, 2004
    
    
    Sept. 30, 2005
    
    
    Sept. 30, 2004Revenues
    
    $
    507
    
    
    $
    5,034
    
    
    $
    6,070
    
    
    $
    13,157Operating expenses
    
    
    (162
    )
    
    
    (1,339
    )
    
    
    (1,525
    )
    
    
    (3,802
    )Interest expense
    
    
    (531
    )
    
    
    (980
    )
    
    
    (2,239
    )
    
    
    (2,886
    )Depreciation and amortization
    
    
    (222
    )
    
    
    (1,141
    )
    
    
    (1,546
    )
    
    
    (3,681
    )(Loss) income before minority interest
    
    $
    (408
    )
    
    $
    1,574
    
    
    $
    760
    
    
    $
    2,788
   Note 4: Preferred Units
  Note 5: Impact of Recently Issued Accounting Standards
 Accounting for
Stock-Based Compensation Accounting for Stock
Issued to Employees Statement of Cash Flows
  12




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##### Table of Contents



CONDENSED CONSOLIDATED BALANCE SHEETS OF
LIBERTY PROPERTY LIMITED PARTNERSHIP
(In thousands)
 September 30, 2005
    
    
    December 31, 2004(Unaudited)ASSETSReal estate:Land and land improvements
    
    $
    637,864
    
    
    $
    625,035Building and improvements
    
    
    3,742,060
    
    
    
    3,629,508Less accumulated depreciation
    
    
    (759,974
    )
    
    
    (695,410
    )Operating real estate
    
    
    3,619,950
    
    
    
    3,559,133Development in progress
    
    
    326,219
    
    
    
    81,099Land held for development
    
    
    147,462
    
    
    
    171,122Net real estate
    
    
    4,093,631
    
    
    
    3,811,354Cash and cash equivalents
    
    
    43,209
    
    
    
    33,667Restricted cash
    
    
    21,799
    
    
    
    34,626Accounts receivable
    
    
    18,978
    
    
    
    21,502Deferred rent receivable
    
    
    71,675
    
    
    
    66,528Deferred financing and leasing costs, net of accumulated amortization
(2005, $108,963; 2004, $91,117)
    
    
    115,780
    
    
    
    107,148Investments in unconsolidated joint ventures
    
    
    33,319
    
    
    
    24,372Prepaid expenses and other assets
    
    
    59,272
    
    
    
    63,630Total assets
    
    $
    4,457,663
    
    
    $
    4,162,827LIABILITIESMortgage loans
    
    $
    257,765
    
    
    $
    366,171Unsecured notes
    
    
    1,755,000
    
    
    
    1,455,000Credit facility
    
    
    289,000
    
    
    
    312,000Accounts payable
    
    
    35,643
    
    
    
    24,288Accrued interest
    
    
    26,739
    
    
    
    34,994Distribution payable
    
    
    56,160
    
    
    
    54,485Other liabilities
    
    
    148,126
    
    
    
    111,764Total liabilities
    
    
    2,568,433
    
    
    
    2,358,702Minority interest
    
    
    418
    
    
    
    3,980OWNERS EQUITYGeneral
partners equity  common units
    
    
    1,638,545
    
    
    
    1,596,259Limited
partners equity  preferred units
    
    
    184,657
    
    
    
    135,471 common units
    
    
    65,610
    
    
    
    68,415Total owners equity
    
    
    1,888,812
    
    
    
    1,800,145Total liabilities and owners equity
    
    $
    4,457,663
    
    
    $
    4,162,827
  13




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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, 2005
    
    
    September 30, 2004OPERATING REVENUERental
    
    $
    120,808
    
    
    $
    114,348Operating expense reimbursement
    
    
    51,646
    
    
    
    46,678Total operating revenue
    
    
    172,454
    
    
    
    161,026OPERATING EXPENSERental property
    
    
    27,078
    
    
    
    24,014Real estate taxes
    
    
    17,897
    
    
    
    16,919Utilities
    
    
    10,998
    
    
    
    9,195General and administrative
    
    
    9,175
    
    
    
    8,529Depreciation and amortization
    
    
    37,410
    
    
    
    32,957Total operating expenses
    
    
    102,558
    
    
    
    91,614Operating income
    
    
    69,896
    
    
    
    69,412OTHER INCOME (EXPENSE)Interest and other income
    
    
    2,165
    
    
    
    1,264Interest expense
    
    
    (33,317
    )
    
    
    (29,905
    )Total other income (expense)
    
    
    (31,152
    )
    
    
    (28,641
    )Income before property dispositions, income taxes, minority interest
and equity in earnings (loss) of unconsolidated joint ventures
    
    
    38,744
    
    
    
    40,771Gain on property dispositions
    
    
    21
    
    
    
    128Income taxes
    
    
    (796
    )
    
    
    (532
    )Minority interest
    
    
    (15
    )
    
    
    164Equity in earnings (loss) of unconsolidated joint ventures
    
    
    231
    
    
    
    (143
    )Income from continuing operations
    
    
    38,185
    
    
    
    40,388Discontinued operations (including net gain on property dispositions of
$19,529 and $2,166 for the three months ended September 30, 2005 and 2004)
    
    
    19,121
    
    
    
    3,740Net income
    
    
    57,306
    
    
    
    44,128Preferred unit distributions
    
    
    (3,353
    )
    
    
    (2,960
    )Income available to common unitholders
    
    $
    53,953
    
    
    $
    41,168Earnings per common unitBasic:Income from continuing operations
    
    $
    0.38
    
    
    $
    0.43Income from discontinued operations
    
    
    0.21
    
    
    
    0.04Income per common unit  basic
    
    $
    0.59
    
    
    $
    0.47Diluted:Income from continuing operations
    
    $
    0.37
    
    
    $
    0.42Income from discontinued operations
    
    
    0.21
    
    
    
    0.04Income per common unit  diluted
    
    $
    0.58
    
    
    $
    0.46Distributions per common unit
    
    $
    0.615
    
    
    $
    0.61Weighted average number of common units outstandingBasic
    
    
    90,961
    
    
    
    88,545Diluted
    
    
    92,440
    
    
    
    89,995
  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)
 Nine Months EndedSeptember 30, 2005
    
    
    September 30, 2004OPERATING REVENUERental
    
    $
    368,929
    
    
    $
    343,461Operating expense reimbursement
    
    
    149,307
    
    
    
    134,975Total operating revenue
    
    
    518,236
    
    
    
    478,436OPERATING EXPENSERental property
    
    
    81,193
    
    
    
    74,464Real estate taxes
    
    
    50,716
    
    
    
    47,458Utilities
    
    
    29,799
    
    
    
    25,259General and administrative
    
    
    26,861
    
    
    
    24,988Depreciation and amortization
    
    
    109,136
    
    
    
    97,342Total operating expenses
    
    
    297,705
    
    
    
    269,511Operating income
    
    
    220,531
    
    
    
    208,925OTHER INCOME (EXPENSE)Interest and other income
    
    
    6,073
    
    
    
    4,734Interest expense
    
    
    (99,260
    )
    
    
    (89,172
    )Total other income (expense)
    
    
    (93,187
    )
    
    
    (84,438
    )Income before property dispositions, income taxes, minority interest
and equity in earnings (loss) of unconsolidated joint ventures
    
    
    127,344
    
    
    
    124,487Loss on property dispositions and impairment
    
    
    (4,908
    )
    
    
    (280
    )Income taxes
    
    
    (2,241
    )
    
    
    (1,379
    )Minority interest
    
    
    (370
    )
    
    
    461Equity in earnings (loss) of unconsolidated joint ventures
    
    
    2,433
    
    
    
    (673
    )Income from continuing operations
    
    
    122,258
    
    
    
    122,616Discontinued operations (including net gain on property dispositions of
$33,949 and $4,263 for the nine months ended September 30, 2005 and 2004)
    
    
    34,709
    
    
    
    7,051Net income
    
    
    156,967
    
    
    
    129,667Preferred unit distributions
    
    
    (8,692
    )
    
    
    (9,168
    )Excess of preferred unit redemption over carrying amount
    
    
    (500
    )
    
    
    Income available to common unitholders
    
    $
    147,775
    
    
    $
    120,499Earnings per common unitBasic:Income from continuing operations
    
    $
    1.26
    
    
    $
    1.29Income from discontinued operations
    
    
    0.38
    
    
    
    0.08Income per common unit  basic
    
    $
    1.64
    
    
    $
    1.37Diluted:Income from continuing operations
    
    $
    1.23
    
    
    $
    1.27Income from discontinued operations
    
    
    0.38
    
    
    
    0.08Income per common unit  diluted
    
    $
    1.61
    
    
    $
    1.35Distributions per common unit
    
    $
    1.835
    
    
    $
    1.82Weighted average number of common units outstandingBasic
    
    
    90,237
    
    
    
    87,939Diluted
    
    
    91,695
    
    
    
    89,426
  15




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##### Table of Contents



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS OF
LIBERTY PROPERTY LIMITED PARTNERSHIP
(Unaudited and in thousands)
 Nine Months EndedSeptember 30, 2005
    
    
    September 30, 2004OPERATING ACTIVITIESNet income
    
    $
    156,967
    
    
    $
    129,667Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    110,841
    
    
    
    101,165Amortization of deferred financing costs
    
    
    3,527
    
    
    
    2,928Equity in earnings (loss) of unconsolidated joint ventures
    
    
    (2,433
    )
    
    
    673Distributions from unconsolidated joint ventures
    
    
    4,544
    
    
    
    682Minority interest in net income
    
    
    370
    
    
    
    (461
    )Gain on property dispositions
    
    
    (29,041
    )
    
    
    (3,983
    )Noncash compensation
    
    
    3,094
    
    
    
    1,932Changes in operating assets and liabilities:Restricted cash
    
    
    11,411
    
    
    
    (6,511
    )Accounts receivable
    
    
    2,422
    
    
    
    (5,180
    )Deferred rent receivable
    
    
    (5,147
    )
    
    
    (8,263
    )Prepaid expenses and other assets
    
    
    (20,132
    )
    
    
    (15,478
    )Accounts payable
    
    
    11,410
    
    
    
    24,480Accrued interest
    
    
    (8,255
    )
    
    
    (11,049
    )Other liabilities
    
    
    37,679
    
    
    
    (4,132
    )Net cash provided by operating activities
    
    
    277,257
    
    
    
    206,470INVESTING ACTIVITIESInvestment in properties
    
    
    (219,032
    )
    
    
    (166,694
    )Investment in unconsolidated joint ventures
    
    
    (13,335
    )
    
    
    (5,072
    )Proceeds from disposition of properties/land
    
    
    147,000
    
    
    
    13,780Investment in development in progress
    
    
    (167,404
    )
    
    
    (76,298
    )Investment in land held for development
    
    
    (69,920
    )
    
    
    (22,358
    )Increase in deferred leasing costs
    
    
    (27,162
    )
    
    
    (22,570
    )Net cash used in investing activities
    
    
    (349,853
    )
    
    
    (279,212
    )FINANCING ACTIVITIESNet proceeds from the issuance of preferred units
    
    
    48,686
    
    
    
    Net proceeds from issuance of unsecured notes
    
    
    296,424
    
    
    
    197,517Repayments of unsecured notes
    
    
    
    
    
    
    (100,000
    )Net proceeds from mortgage loans
    
    
    
    
    
    
    9,525Repayments of mortgage loans
    
    
    (126,768
    )
    
    
    (14,051
    )Proceeds from credit facility
    
    
    461,650
    
    
    
    298,056Repayments on credit facility
    
    
    (484,650
    )
    
    
    (219,956
    )Increase in deferred financing costs
    
    
    (139
    )
    
    
    (275
    )Capital contributions
    
    
    68,165
    
    
    
    69,485Distributions to partners
    
    
    (177,524
    )
    
    
    (167,760
    )Net cash provided by financing activities
    
    
    85,844
    
    
    
    72,541Increase (decrease) in cash and cash equivalents
    
    
    13,248
    
    
    
    (201
    )(Decrease) increase related to foreign currency translation
    
    
    (3,706
    )
    
    
    167Cash and cash equivalents at beginning of period
    
    
    33,667
    
    
    
    21,809Cash and cash equivalents at end of period
    
    $
    43,209
    
    
    $
    21,775SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONSWrite-off of fully depreciated property and deferred costs
    
    $
    26,429
    
    
    $
    9,188Acquisition of properties
    
    
    (23,973
    )
    
    
    (11,305
    )Assumption of mortgage loans
    
    
    23,973
    
    
    
    11,305
  16




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##### Table of Contents



Liberty Property Limited Partnership
 
 Notes to Condensed Consolidated Financial Statements (Unaudited)
 September 30, 2005
 Note 1: Organization and Basis of Presentation
 Organization
  Basis of Presentation
  Income per Common Unit
  For the Three Months Ended Sept. 30, 2005
    
    
    For the Three Months Ended Sept. 30, 2004Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    
    
    
    
    AverageIncome
    
    
    Units
    
    
    Per
    
    
    Income
    
    
    Units
    
    
    Per(Numerator)
    
    
    (Denominator)
    
    
    Unit
    
    
    (Numerator)
    
    
    (Denominator)
    
    
    UnitIncome from continuing operations
    
    $
    38,185
    
    
    
    
    
    
    
    
    
    
    $
    40,388Less: Preferred unit distributions
    
    
    (3,353
    )
    
    
    
    
    
    
    
    
    
    
    (2,960
    )Basic income from continuing operationsIncome from continuing operations
available to common unitholders
    
    
    34,832
    
    
    
    90,961
    
    
    $
    0.38
    
    
    
    37,428
    
    
    
    88,545
    
    
    $
    0.43Dilutive units for long-term
compensation plans
    
    
    
    
    
    
    1,479
    
    
    
    
    
    
    
    
    
    
    
    1,450Diluted income from continuing operationsIncome from continuing operations available
to common unitholders and assumed
conversions
    
    
    34,832
    
    
    
    92,440
    
    
    $
    0.37
    
    
    
    37,428
    
    
    
    89,995
    
    
    $
    0.42Basic income from discontinued operationsDiscontinued operations
    
    
    19,121
    
    
    
    90,961
    
    
    $
    0.21
    
    
    
    3,740
    
    
    
    88,545
    
    
    $
    0.04Dilutive units for long-term compensation
plans
    
    
    
    
    
    
    1,479
    
    
    
    
    
    
    
    
    
    
    
    1,450Diluted income from discontinued operationsDiscontinued operations
    
    
    19,121
    
    
    
    92,440
    
    
    $
    0.21
    
    
    
    3,740
    
    
    
    89,995
    
    
    $
    0.04Basic income per common unitIncome available to common unitholders
    
    
    53,953
    
    
    
    90,961
    
    
    $
    0.59
    
    
    
    41,168
    
    
    
    88,545
    
    
    $
    0.47Dilutive units for long-term compensation
plans
    
    
    
    
    
    
    1,479
    
    
    
    
    
    
    
    
    
    
    
    1,450Diluted income per common unitIncome available to common unitholders
and assumed conversions
    
    $
    53,953
    
    
    
    92,440
    
    
    $
    0.58
    
    
    $
    41,168
    
    
    
    89,995
    
    
    $
    0.46
 17




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##### Table of Contents



For the Nine Months Ended September 30, 2005
    
    
    For the Nine Months Ended September 30, 2004Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    
    
    
    
    AverageIncome
    
    
    Units
    
    
    Per
    
    
    Income
    
    
    Units
    
    
    Per(Numerator)
    
    
    (Denominator)
    
    
    Unit
    
    
    (Numerator)
    
    
    (Denominator)
    
    
    UnitIncome from continuing operations
    
    $
    122,258
    
    
    
    
    
    
    
    
    
    
    $
    122,616Less: Preferred unit distributions
    
    
    (8,692
    )
    
    
    
    
    
    
    
    
    
    
    (9,168
    )Excess of preferred unit redemption
over carrying amount
    
    
    (500
    )
    
    
    
    
    
    
    
    
    
    
    Basic income from continuing operationsIncome from continuing operations
available to common unitholders
    
    
    113,066
    
    
    
    90,237
    
    
    $
    1.26
    
    
    
    113,448
    
    
    
    87,939
    
    
    $
    1.29Dilutive units for long-term
compensation plans
    
    
    
    
    
    
    1,458
    
    
    
    
    
    
    
    
    
    
    
    1,487Diluted income from continuing operationsIncome from continuing operations available
to common unitholders and assumed
conversions
    
    
    113,066
    
    
    
    91,695
    
    
    $
    1.23
    
    
    
    113,448
    
    
    
    89,426
    
    
    $
    1.27Basic income from discontinued operationsDiscontinued operations
    
    
    34,709
    
    
    
    90,237
    
    
    $
    0.38
    
    
    
    7,051
    
    
    
    87,939
    
    
    $
    0.08Dilutive units for long-term compensation
plans
    
    
    
    
    
    
    1,458
    
    
    
    
    
    
    
    
    
    
    
    1,487Diluted income from discontinued operationsDiscontinued operations
    
    
    34,709
    
    
    
    91,695
    
    
    $
    0.38
    
    
    
    7,051
    
    
    
    89,426
    
    
    $
    0.08Basic income per common unitIncome available to common unitholders
    
    
    147,775
    
    
    
    90,237
    
    
    $
    1.64
    
    
    
    120,499
    
    
    
    87,939
    
    
    $
    1.37Dilutive units for long-term compensation
plans
    
    
    
    
    
    
    1,458
    
    
    
    
    
    
    
    
    
    
    
    1,487Diluted income per common unitIncome available to common unitholders
and assumed conversions
    
    $
    147,775
    
    
    
    91,695
    
    
    $
    1.61
    
    
    $
    120,499
    
    
    
    89,426
    
    
    $
    1.35
 Foreign Operations
  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; TexasUnited Kingdom
    
    County of Kent
 18




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##### Table of Contents



For the Three Months Ended September 30, 2005Delaware Valley
    
    
    MidwestSoutheastern
    
    
    
    
    
    
    Lehigh
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    UnitedPennsylvania
    
    
    Other
    
    
    Valley
    
    
    Other
    
    
    Mid-Atlantic
    
    
    Florida
    
    
    Kingdom
    
    
    TotalOperating revenue
    
    $
    47,525
    
    
    $
    9,957
    
    
    $
    22,779
    
    
    $
    30,875
    
    
    $
    31,532
    
    
    $
    25,240
    
    
    $
    4,546
    
    
    $
    172,454Rental property expenses,
real estate taxes and
utilities
    
    
    14,716
    
    
    
    3,579
    
    
    
    6,029
    
    
    
    11,795
    
    
    
    10,215
    
    
    
    8,871
    
    
    
    768
    
    
    
    55,973Property level operating
income
    
    $
    32,809
    
    
    $
    6,378
    
    
    $
    16,750
    
    
    $
    19,080
    
    
    $
    21,317
    
    
    $
    16,369
    
    
    $
    3,778
    
    
    $
    116,481Interest and other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,165Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33,317
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,175
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37,410
    )Income before property dispositions, income taxes, minority interest
and equity in earnings (loss) of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38,744Gain on property dispositions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (796
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15
    )Equity in earnings (loss) of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    231Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,121Preferred unit distributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,353
    )Income available to common unitholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    53,953
 For the Three Months Ended September 30, 2004Delaware Valley
    
    
    MidwestSoutheastern
    
    
    
    
    
    
    Lehigh
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    UnitedPennsylvania
    
    
    Other
    
    
    Valley
    
    
    Other
    
    
    Mid-Atlantic
    
    
    Florida
    
    
    Kingdom
    
    
    TotalOperating revenue
    
    $
    45,934
    
    
    $
    8,725
    
    
    $
    18,699
    
    
    $
    29,492
    
    
    $
    30,298
    
    
    $
    22,827
    
    
    $
    5,051
    
    
    $
    161,026Rental property expenses,
real estate taxes and
utilities
    
    
    14,029
    
    
    
    3,025
    
    
    
    4,918
    
    
    
    10,821
    
    
    
    9,338
    
    
    
    7,062
    
    
    
    935
    
    
    
    50,128Property level operating
income
    
    $
    31,905
    
    
    $
    5,700
    
    
    $
    13,781
    
    
    $
    18,671
    
    
    $
    20,960
    
    
    $
    15,765
    
    
    $
    4,116
    
    
    $
    110,898Interest and other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,264Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29,905
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,529
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (32,957)Income before property dispositions, income taxes, minority interest
and equity in earnings (loss) of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,771Gain on property dispositions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    128Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (532
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    164Equity in earnings (loss) of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (143
    )Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,740Preferred unit distributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,960
    )Income available to common unitholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    41,168
 19




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##### Table of Contents



For the Nine Months Ended September 30, 2005Delaware Valley
    
    
    MidwestSoutheastern
    
    
    
    
    
    
    Lehigh
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    UnitedPennsylvania
    
    
    Other
    
    
    Valley
    
    
    Other
    
    
    Mid-Atlantic
    
    
    Florida
    
    
    Kingdom
    
    
    TotalOperating revenue
    
    $
    149,551
    
    
    $
    28,868
    
    
    $
    66,238
    
    
    $
    90,792
    
    
    $
    92,544
    
    
    $
    73,970
    
    
    $
    16,273
    
    
    $
    518,236Rental property expenses,
real estate taxes and
utilities
    
    
    44,100
    
    
    
    10,283
    
    
    
    17,790
    
    
    
    33,703
    
    
    
    28,681
    
    
    
    23,993
    
    
    
    3,158
    
    
    
    161,708Property level operating
income
    
    $
    105,451
    
    
    $
    18,585
    
    
    $
    48,448
    
    
    $
    57,089
    
    
    $
    63,863
    
    
    $
    49,977
    
    
    $
    13,115
    
    
    $
    356,528Interest and other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,073Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (99,260
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (26,861
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (109,136
    )Income before property dispositions, income taxes, minority interest
and equity in earnings (loss) of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    127,344Loss on property dispositions and impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,908
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,241
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (370
    )Equity in earnings (loss) of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,433Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34,709Preferred unit distributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,692
    )Excess of preferred unit redemption over carrying amount
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (500
    )Income available to common unitholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    147,775
 For the Nine Months Ended September 30, 2004Delaware Valley
    
    
    MidwestSoutheastern
    
    
    
    
    
    
    Lehigh
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    UnitedPennsylvania
    
    
    Other
    
    
    Valley
    
    
    Other
    
    
    Mid-Atlantic
    
    
    Florida
    
    
    Kingdom
    
    
    TotalOperating revenue
    
    $
    140,406
    
    
    $
    25,230
    
    
    $
    55,159
    
    
    $
    87,964
    
    
    $
    87,267
    
    
    $
    67,842
    
    
    $
    14,568
    
    
    $
    478,436Rental property expenses,
real estate taxes and
utilities
    
    
    41,426
    
    
    
    8,889
    
    
    
    15,816
    
    
    
    31,776
    
    
    
    25,782
    
    
    
    20,608
    
    
    
    2,884
    
    
    
    147,181Property level operating
income
    
    $
    98,980
    
    
    $
    16,341
    
    
    $
    39,343
    
    
    $
    56,188
    
    
    $
    61,485
    
    
    $
    47,234
    
    
    $
    11,684
    
    
    $
    331,255Interest and other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,734Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (89,172
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24,988
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (97,342
    )Income before property dispositions, income taxes, minority interest
and equity in earnings (loss) of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    124,487Loss on property dispositions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (280
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,379
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    461Equity in earnings (loss) of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (673
    )Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,051Preferred unit distributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,168
    )Income available to common unitholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    120,499
 Note 3: SFAS No. 144, Accounting For The Impairment Or Disposal Of Long-Lived Assets
  20




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSept. 30, 2005
    
    
    Sept. 30, 2004
    
    
    Sept. 30, 2005
    
    
    Sept. 30, 2004Revenues
    
    $
    507
    
    
    $
    5,034
    
    
    $
    6,070
    
    
    $
    13,157Operating expenses
    
    
    (162
    )
    
    
    (1,339
    )
    
    
    (1,525
    )
    
    
    (3,802
    )Interest expense
    
    
    (531
    )
    
    
    (980
    )
    
    
    (2,239
    )
    
    
    (2,886
    )Depreciation and amortization
    
    
    (222
    )
    
    
    (1,141
    )
    
    
    (1,546
    )
    
    
    (3,681
    )Income before minority interest
    
    $
    (408
    )
    
    $
    1,574
    
    
    $
    760
    
    
    $
    2,788
   Note 4: Preferred Units
  Note 5: Impact of Recently Issued Accounting Standards
  21




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##### Table of Contents



Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
        22




---



##### Table of Contents



th 1 2
  Net RentPer Square Foot
    
    
    Total Square Feet
    
    
    Percent OccupiedSeptember 30,
    
    
    September 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Industrial-Distribution
    
    $
    4.11
    
    
    $
    4.39
    
    
    
    29,386
    
    
    
    27,782
    
    
    
    94.9
    %
    
    
    91.5
    %Industrial-Flex
    
    $
    8.62
    
    
    $
    8.75
    
    
    
    13,152
    
    
    
    13,316
    
    
    
    91.9
    %
    
    
    91.1
    %Office
    
    $
    14.28
    
    
    $
    14.10
    
    
    
    20,050
    
    
    
    19,223
    
    
    
    87.6
    %
    
    
    90.9
    %$
    8.16
    
    
    $
    8.43
    
    
    
    62,588
    
    
    
    60,321
    
    
    
    91.9
    %
    
    
    91.2
    %
  Forward-Looking Statements
  Critical Accounting Policies and Estimates
  23




---



##### Table of Contents



Results of Operations
   Comparison of Three and Nine Months Ended September 30, 2005 to Three and Nine Months Ended
September 30, 2004.
     Three Months Ended
    
    
    
    
    
    
    Nine Months EndedSept. 30, 2005
    
    
    Sept. 30, 2004
    
    
    % inc (dec)
    
    
    
    
    
    
    Sept. 30, 2005
    
    
    Sept. 30, 2004
    
    
    % inc (dec)Delaware Valley SE Pennsylvania
    
    $
    32,809
    
    
    $
    31,905
    
    
    
    2.8
    %
    
    
    
    
    
    $
    105,451
    
    
    $
    98,980
    
    
    
    6.5
    % Other
    
    
    6,378
    
    
    
    5,700
    
    
    
    11.9
    %
    
    
    (1
    )
    
    
    18,585
    
    
    
    16,341
    
    
    
    13.7
    %
    
    
    (1
    )Midwest Lehigh Valley
    
    
    16,750
    
    
    
    13,781
    
    
    
    21.5
    %
    
    
    (2
    )
    
    
    48,448
    
    
    
    39,343
    
    
    
    23.1
    %
    
    
    (2
    ) Other
    
    
    19,080
    
    
    
    18,671
    
    
    
    2.2
    %
    
    
    
    
    
    
    57,089
    
    
    
    56,188
    
    
    
    1.6
    %Mid-Atlantic
    
    
    21,317
    
    
    
    20,960
    
    
    
    1.7
    %
    
    
    
    
    
    
    63,863
    
    
    
    61,485
    
    
    
    3.9
    %Florida
    
    
    16,369
    
    
    
    15,765
    
    
    
    3.8
    %
    
    
    
    
    
    
    49,977
    
    
    
    47,234
    
    
    
    5.8
    %United Kingdom
    
    
    3,778
    
    
    
    4,116
    
    
    
    (8.2
    %)
    
    
    (3
    )
    
    
    13,115
    
    
    
    11,684
    
    
    
    12.2
    %
    
    
    (4
    )Totals
    
    $
    116,481
    
    
    $
    110,898
    
    
    
    5.0
    %
    
    
    
    
    
    $
    356,528
    
    
    $
    331,255
    
    
    
    7.6
    %
 (1)
    
    The increases for both the three and nine month periods ended September 30, 2005 versus the three and nine months ended September 30, 2004
are primarily due to an increase in occupancy and increased investment in operating real estate for the respective periods.(2)
    
    The increases for both the three and nine month periods ended September 30, 2005 versus the three and nine months ended September 30, 2004
are due to increased investment in operating real estate for the respective periods.(3)
    
    The decrease for the three month period ended September 30, 2005 versus the three month period ended September 30, 2004 is primarily due to
the decrease in occupancy related to the Termination Fees accepted during the six months ended June 30, 2005.(4)
    
    The increase for the nine month period ended September 30, 2005 versus the nine month period ended September 30, 2004 is primarily due to
Termination Fees accepted during the nine month period ended September 30, 2005 of $1.6 million versus $0 for the same period of 2004. 24




---



##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSept. 30, 2005
    
    
    Sept. 30, 2004
    
    
    Sept. 30, 2005
    
    
    Sept. 30, 2004Same Store:Rental revenue
    
    $
    106,782
    
    
    $
    109,816
    
    
    $
    323,926
    
    
    $
    330,292Operating expenses:Rental property expense
    
    
    35,126
    
    
    
    32,352
    
    
    
    104,629
    
    
    
    97,970Real estate taxes
    
    
    15,772
    
    
    
    16,216
    
    
    
    46,225
    
    
    
    46,125Operating expense recovery
    
    
    (47,535
    )
    
    
    (45,548
    )
    
    
    (140,437
    )
    
    
    (133,256
    )Unrecovered operating expenses
    
    
    3,363
    
    
    
    3,020
    
    
    
    10,417
    
    
    
    10,839Property level operating income
    
    
    103,419
    
    
    
    106,796
    
    
    
    313,509
    
    
    
    319,453Less straight line rent
    
    
    1,307
    
    
    
    2,431
    
    
    
    4,441
    
    
    
    8,034Cash basis property level operating income
    
    $
    102,112
    
    
    $
    104,365
    
    
    $
    309,068
    
    
    $
    311,419Reconciliation of non-GAAP financial measure:Property level operating income  Same Store
    
    $
    103,419
    
    
    $
    106,796
    
    
    $
    313,509
    
    
    $
    319,453Property level operating income  properties purchased
or developed subsequent to January 1, 2004
    
    
    11,256
    
    
    
    1,387
    
    
    
    27,468
    
    
    
    2,844Termination fees
    
    
    1,806
    
    
    
    2,715
    
    
    
    15,551
    
    
    
    8,958General and administrative expense
    
    
    (9,175
    )
    
    
    (8,529
    )
    
    
    (26,861
    )
    
    
    (24,988
    )Depreciation and amortization expense
    
    
    (37,410
    )
    
    
    (32,957
    )
    
    
    (109,136
    )
    
    
    (97,342
    )Other income (expense)
    
    
    (31,152
    )
    
    
    (28,641
    )
    
    
    (93,187
    )
    
    
    (84,438
    )Gain (loss) on property dispositions and impairment
    
    
    21
    
    
    
    128
    
    
    
    (4,908
    )
    
    
    (280
    )Income taxes
    
    
    (796
    )
    
    
    (532
    )
    
    
    (2,241
    )
    
    
    (1,379
    )Minority interest
    
    
    (4,710
    )
    
    
    (4,331
    )
    
    
    (13,959
    )
    
    
    (13,407
    )Equity in earnings (loss) of unconsolidated joint ventures
    
    
    231
    
    
    
    (143
    )
    
    
    2,433
    
    
    
    (673
    )Discontinued operations, net of minority interest
    
    
    18,385
    
    
    
    3,586
    
    
    
    33,364
    
    
    
    6,758Net income
    
    $
    51,875
    
    
    $
    39,479
    
    
    $
    142,033
    
    
    $
    115,506
 25




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##### Table of Contents



Liquidity and Capital Resources
    26




---



##### Table of Contents



MORTGAGES
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    WEIGHTEDPRINCIPAL
    
    
    PRINCIPAL
    
    
    UNSECURED
    
    
    CREDIT
    
    
    
    
    
    
    AVERAGEAMORTIZATION
    
    
    MATURITIES
    
    
    NOTES
    
    
    FACILITY
    
    
    TOTAL
    
    
    INTEREST RATE2005 (3 months)
    
    $
    2,129
    
    
    $
    27,929
    
    
    $
    
    
    
    $
    
    
    
    $
    30,058
    
    
    
    6.76
    %2006
    
    
    7,360
    
    
    
    66,288
    
    
    
    100,000
    
    
    
    289,000
    
    
    
    462,648
    
    
    
    5.29
    %2007
    
    
    6,504
    
    
    
    1,553
    
    
    
    100,000
    
    
    
    
    
    
    
    108,057
    
    
    
    7.24
    %2008
    
    
    5,664
    
    
    
    45,330
    
    
    
    
    
    
    
    
    
    
    
    50,994
    
    
    
    6.62
    %2009
    
    
    3,110
    
    
    
    46,165
    
    
    
    270,000
    
    
    
    
    
    
    
    319,275
    
    
    
    7.78
    %2010
    
    
    2,120
    
    
    
    4,747
    
    
    
    200,000
    
    
    
    
    
    
    
    206,867
    
    
    
    8.41
    %2011
    
    
    1,713
    
    
    
    3,533
    
    
    
    250,000
    
    
    
    
    
    
    
    255,246
    
    
    
    7.26
    %2012
    
    
    684
    
    
    
    32,936
    
    
    
    235,000
    
    
    
    
    
    
    
    268,620
    
    
    
    6.47
    %2014
    
    
    
    
    
    
    
    
    
    
    200,000
    
    
    
    
    
    
    
    200,000
    
    
    
    5.65
    %2015
    
    
    
    
    
    
    
    
    
    
    300,000
    
    
    
    
    
    
    
    300,000
    
    
    
    5.13
    %2018
    
    
    
    
    
    
    
    
    
    
    100,000
    
    
    
    
    
    
    
    100,000
    
    
    
    7.50
    %$
    29,284
    
    
    $
    228,481
    
    
    $
    1,755,000
    
    
    $
    289,000
    
    
    $
    2,301,765
    
    
    
    6.52
    %
  27




---



##### Table of Contents



General
   Industrial-
    
    
    Industrial-Distribution
    
    
    Flex
    
    
    Office
    
    
    TotalSquare
    
    
    Annual
    
    
    Square
    
    
    Annual
    
    
    Square
    
    
    Annual
    
    
    Square
    
    
    AnnualFeet
    
    
    Net Rent
    
    
    Feet
    
    
    Net Rent
    
    
    Feet
    
    
    Net Rent
    
    
    Feet
    
    
    Net Rent2005 (3 months)
    
    
    524
    
    
    $
    2,444
    
    
    
    378
    
    
    $
    2,755
    
    
    
    476
    
    
    $
    6,177
    
    
    
    1,378
    
    
    $
    11,3762006
    
    
    3,027
    
    
    
    11,053
    
    
    
    1,856
    
    
    
    16,412
    
    
    
    1,496
    
    
    
    21,257
    
    
    
    6,379
    
    
    
    48,7222007
    
    
    3,767
    
    
    
    16,555
    
    
    
    2,141
    
    
    
    20,336
    
    
    
    2,180
    
    
    
    31,231
    
    
    
    8,088
    
    
    
    68,1222008
    
    
    4,691
    
    
    
    19,495
    
    
    
    2,151
    
    
    
    20,179
    
    
    
    2,702
    
    
    
    40,296
    
    
    
    9,544
    
    
    
    79,9702009
    
    
    3,591
    
    
    
    16,899
    
    
    
    1,636
    
    
    
    15,197
    
    
    
    2,864
    
    
    
    45,389
    
    
    
    8,091
    
    
    
    77,4852010
    
    
    2,165
    
    
    
    10,900
    
    
    
    1,471
    
    
    
    13,809
    
    
    
    2,147
    
    
    
    34,448
    
    
    
    5,783
    
    
    
    59,157Thereafter
    
    
    10,124
    
    
    
    53,948
    
    
    
    2,454
    
    
    
    27,211
    
    
    
    5,689
    
    
    
    98,982
    
    
    
    18,267
    
    
    
    180,141TOTAL
    
    
    27,889
    
    
    $
    131,294
    
    
    
    12,087
    
    
    $
    115,899
    
    
    
    17,554
    
    
    $
    277,780
    
    
    
    57,530
    
    
    $
    524,973
  Square FeetScheduled
    
    Industrial-
    
    
    Industrial-
    
    
    
    
    
    
    
    
    
    
    Percent
    
    
    TotalIn-Service Date
    
    Distribution
    
    
    Flex
    
    
    Office
    
    
    Total
    
    
    Leased
    
    
    Investment4th Quarter 2005
    
    
    1,149,600
    
    
    
    45,600
    
    
    
    100,000
    
    
    
    1,295,200
    
    
    
    98.3
    %
    
    $
    89,7371st Quarter 2006
    
    
    607,752
    
    
    
    
    
    
    
    102,000
    
    
    
    709,752
    
    
    
    90.9
    %
    
    
    38,2112nd Quarter 2006
    
    
    
    
    
    
    134,400
    
    
    
    123,340
    
    
    
    257,740
    
    
    
    72.7
    %
    
    
    38,4123rd Quarter 2006
    
    
    130,000
    
    
    
    83,200
    
    
    
    187,600
    
    
    
    400,800
    
    
    
    65.1
    %
    
    
    42,5934th Quarter 2006
    
    
    
    
    
    
    48,000
    
    
    
    169,770
    
    
    
    217,770
    
    
    
    22.2
    %
    
    
    35,0481st Quarter 2007
    
    
    
    
    
    
    79,600
    
    
    
    76,700
    
    
    
    156,300
    
    
    
    33.9
    %
    
    
    17,6272nd Quarter 2007
    
    
    726,000
    
    
    
    
    
    
    
    207,338
    
    
    
    933,338
    
    
    
    
    
    
    
    81,1903rd Quarter 2007
    
    
    800,000
    
    
    
    
    
    
    
    110,000
    
    
    
    910,000
    
    
    
    
    
    
    
    56,302Thereafter
    
    
    
    
    
    
    
    
    
    
    1,247,845
    
    
    
    1,247,845
    
    
    
    71.8
    %
    
    
    459,566TOTAL
    
    
    3,413,352
    
    
    
    390,800
    
    
    
    2,324,593
    
    
    
    6,128,745
    
    
    
    54.9
    %
    
    $
    858,686
   Calculation of Funds from Operations
  28




---



##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Basic  Income available to common shareholders
    
    $
    51,875
    
    
    $
    39,479
    
    
    $
    142,033
    
    
    $
    115,506Basic  income available to common shareholders per weighted
average share
    
    $
    .59
    
    
    $
    .47
    
    
    $
    1.64
    
    
    $
    1.37Adjustments:Depreciation and amortization of unconsolidated joint ventures
    
    
    291
    
    
    
    567
    
    
    
    943
    
    
    
    2,011Depreciation and amortization
    
    
    36,997
    
    
    
    33,411
    
    
    
    108,780
    
    
    
    98,897Gain on property dispositions
    
    
    (19,550
    )
    
    
    (2,294
    )
    
    
    (35,157
    )
    
    
    (3,983
    )Minority interest share in addback for depreciation and amortization
and gain on property dispositions
    
    
    (683
    )
    
    
    (1,305
    )
    
    
    (2,894
    )
    
    
    (4,032
    )Funds from operations available to common shareholders   basic
    
    $
    68,930
    
    
    $
    69,858
    
    
    $
    213,705
    
    
    $
    208,399Basic Funds from operations available to common shareholders per
weighted average share
    
    $
    .79
    
    
    $
    .82
    
    
    $
    2.47
    
    
    $
    2.47Reconciliation of net income to FFO  diluted:Diluted  income available to common shareholders
    
    $
    51,875
    
    
    $
    39,479
    
    
    $
    142,033
    
    
    $
    115,506Diluted  income available to common shareholders per weighted
average share
    
    $
    .58
    
    
    $
    .46
    
    
    $
    1.61
    
    
    $
    1.35Adjustments:Depreciation and amortization of unconsolidated joint ventures
    
    
    291
    
    
    
    567
    
    
    
    943
    
    
    
    2,011Depreciation and amortization
    
    
    36,997
    
    
    
    33,411
    
    
    
    108,780
    
    
    
    98,897Gain on property dispositions
    
    
    (19,550
    )
    
    
    (2,294
    )
    
    
    (35,157
    )
    
    
    (3,983
    )Minority interest less preferred share distributions
    
    
    2,093
    
    
    
    1,689
    
    
    
    5,745
    
    
    
    4,993Funds from operations available to common shareholders  diluted
    
    $
    71,706
    
    
    $
    72,852
    
    
    $
    222,344
    
    
    $
    217,424Diluted Funds from operations available to common shareholders per
weighted average share
    
    $
    .78
    
    
    $
    .81
    
    
    $
    2.42
    
    
    $
    2.43Reconciliation of weighted average shares:Weighted average common shares  all basic calculations
    
    
    87,443
    
    
    
    84,877
    
    
    
    86,670
    
    
    
    84,260Dilutive shares for long term compensation plans
    
    
    1,479
    
    
    
    1,450
    
    
    
    1,458
    
    
    
    1,487Diluted shares for net income calculations
    
    
    88,922
    
    
    
    86,327
    
    
    
    88,128
    
    
    
    85,747Weighted average common units
    
    
    3,518
    
    
    
    3,668
    
    
    
    3,567
    
    
    
    3,679Diluted shares for Funds from operations calculations
    
    
    92,440
    
    
    
    89,995
    
    
    
    91,695
    
    
    
    89,426
 Inflation
  29




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##### Table of Contents



Item 3: Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4: Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   Changes in Internal Controls
  30




---



##### Table of Contents



Part II: Other Information
 Item 1.
    
    
    Legal ProceedingsNone.Item 2.
    
    
    Unregistered Sales of Equity Securities and Use of ProceedsOn August 23, 2005, the Operating Partnership issued an additional 120,000 6.65% Series F
Cumulative Redeemable Preferred Units of Limited Partnership Interest (the Series F
Units). The aggregate sale price of the Series F Units was $6 million. The Series F
Units were sold to an institutional investor in a private placement in reliance on the
exemption from registration under Section 4(2) of the Securities Act of 1933, as amended.
The Series F Units are convertible after ten years (or, under limited circumstances, a
shorter period of time), on a one-for-one basis, into the 6.65% Series F Cumulative
Redeemable Preferred Shares of Beneficial Interest of the Trust (the Preferred Shares),
which were authorized for issuance by the Trust in connection with this transaction. The
Series F Units have identical rights, preferences and privileges as the Preferred Shares.
The Series F Units do not include any mandatory redemption or sinking fund provisions. The
holders of the Series F Units have certain rights to cause the Trust to register the
Preferred Shares pursuant to the terms of a registration rights agreement entered into in
connection with this private placement.The net proceeds of the sale of the Units were used
to repay the borrowings under the Credit Facility and for general corporate purposes.In connection with the sale of the Series F Units, the Operating Partnership amended its
Second Restated and Amended Agreement of Limited Partnership, as amended, pursuant to
Amendment No. 1 to Sixth Amendment thereto filed as Exhibit 10.1 and filed Articles
Supplementary to the Amended and Restated Declaration of Trust of the Trust creating the
Series F Preferred Shares. The Articles Supplementary are filed as Exhibit 4.1 to this
Report.Item 3.
    
    
    Defaults upon Senior SecuritiesNone.Item 4.
    
    
    Submission of Matters to a Vote of Security HoldersNone.Item 5.
    
    
    Other InformationNone.Item 6.
    
    
    Exhibits
 4.1
    
    Articles Supplementary, as filed with the State Department of
Assessments and Taxation of Maryland August 23, 2005.
(Incorporated by reference to Exhibit 3(i) to the Current Report on
Form 8-K of the Registrants, filed with the Securities and Exchange
Commission on August 24, 2005.)10.1
    
    Amendment No. 1 to the Sixth Amendment to the Second Amended and
Restated Agreement of Limited Partnership of Liberty Property
Limited Partnership. (Incorporated by reference to Exhibit 10 to
the Current Report on Form 8-K of the Registrants, filed with the
Securities and Exchange Commission on August 24, 2005.)31.1*
    
    Certifications of the Chief Executive Officer of Liberty Property
Trust required by Rule 13a-14(a) under the Securities Exchange Act
of 1934.
 31




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##### Table of Contents



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.)
 
 *
    
    Filed herewith. 32




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##### Table of Contents



SIGNATURES
  LIBERTY PROPERTY TRUST
 /s/ WILLIAM P. HANKOWSKY
    
    
    
    November 7, 2005William P. Hankowsky
    
    
    
    DatePresident and Chief Executive Officer/s/ GEORGE J. ALBURGER, JR.
    
    
    
    November 7, 2005George 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 Partner
 /s/ WILLIAM P. HANKOWSKY
    
    
    
    November 7, 2005William P. Hankowsky
    
    
    
    DatePresident and Chief Executive Officer/s/ GEORGE J. ALBURGER, JR.
    
    
    
    November 7, 2005George J. Alburger, Jr.
    
    
    
    DateExecutive Vice President and Chief
Financial Officer
 34




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##### Table of Contents



EXHIBIT INDEX
 EXHIBIT NO.
    
    DESCRIPTION31.1
    
    Certifications of the Chief Executive Officer of Liberty Property Trust required by Rule
13a-14(a) under the Securities Exchange Act of 1934.31.2
    
    Certifications of the Chief Financial Officer of Liberty Property Trust required by Rule
13a-14(a) under the Securities Exchange Act of 1934.31.3
    
    Certifications of the Chief Executive Officer of Liberty Property Trust, in its capacity as
the general partner of Liberty Property Limited Partnership, required by Rule 13a-14(a) under
the Securities Exchange Act of 1934.31.4
    
    Certifications of the Chief Financial Officer of Liberty Property Trust, in its capacity as
the general partner of Liberty Property Limited Partnership, required by Rule 13a-14(a) under
the Securities Exchange Act of 1934.32.1
    
    Certifications of the Chief Executive Officer of Liberty Property Trust required under Rule
13a-14(b) of the Securities Exchange Act of 1934, as amended. (This exhibit shall not be
deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended,
or otherwise subject to the liability of that section. Further, this exhibit shall not be
deemed to be incorporated by reference into any filing under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended.)32.2
    
    Certifications of the Chief Financial Officer of Liberty Property Trust required by Rule
13a-14(b) under the Securities Exchange Act of 1934, as amended. (This exhibit shall not be
deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended,
or otherwise subject to the liability of that section. Further, this exhibit shall not be
deemed to be incorporated by reference into any filing under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended.)32.3
    
    Certifications of the Chief Executive Officer of Liberty Property Trust, in its capacity as
the general partner of Liberty Property Limited Partnership, required by Rule 13a-14(b) under
the Securities Exchange Act of 1934, as amended. (This exhibit shall not be deemed filed
for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise
subject to the liability of that section. Further, this exhibit shall not be deemed to be
incorporated by reference into any filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended.)32.4
    
    Certifications of the Chief Financial Officer of Liberty Property Trust, in its capacity as
the general partner of Liberty Property Limited Partnership, required by Rule 13a-14(b) under
the Securities Exchange Act of 1934, as amended. (This exhibit shall not be deemed filed
for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise
subject to the liability of that section. Further, this exhibit shall not be deemed to be
incorporated by reference into any filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended.)
 35