##### Table of Contents



UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the transition period from ____________ to ____________
 Commission file numbers:
    
    1-13130 (Liberty Property Trust)1-13132 (Liberty Property Limited Partnership)
 
 LIBERTY PROPERTY TRUST
 LIBERTY PROPERTY LIMITED PARTNERSHIP
 
 (Exact name of registrants as specified in their governing documents)
 MARYLAND(Liberty Property Trust)
    
    23-7768996PENNSYLVANIA(Liberty Property Limited Partnership)
    
    23-2766549(State or other jurisdiction
of incorporation or organization)
    
    (I.R.S. Employer
Identification Number)
 500 Chesterfield Parkway
Malvern, Pennsylvania
    
    19355(Address of Principal Executive Offices)
    
    (Zip Code)
 Registrants Telephone Number, Including Area Code
    
    (610) 648-1700
 þ o
  þ o o
 o þ




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##### 



Liberty Property Trust/Liberty Property Limited Partnership
Form 10-Q for the period ended June 30, 2006
 Index
    
    
    
    PagePart I.
    
    Financial InformationItem 1.
    
    Financial Statements (unaudited)Condensed consolidated balance sheets of Liberty Property Trust at June 30, 2006 and December 31, 2005
    
    
    3Condensed consolidated statements of operations of Liberty Property Trust for the three months ended June 30, 2006 and June 30, 2005
    
    
    4Condensed consolidated statements of operations of Liberty Property Trust for the six months ended June 30, 2006 and June 30, 2005
    
    
    5Condensed consolidated statements of cash flows of Liberty Property Trust for the six months ended June 30, 2006 and June 30, 2005
    
    
    6Notes to condensed consolidated financial statements of Liberty Property Trust
    
    
    7Condensed consolidated balance sheets of Liberty Property Limited Partnership at June 30, 2006 and December 31, 2005
    
    
    15Condensed consolidated statements of operations of Liberty Property Limited Partnership for the three months ended June 30, 2006 and June 30, 2005
    
    
    16Condensed consolidated statements of operations of Liberty Property Limited Partnership for the six months ended June 30, 2006 and June 30, 2005
    
    
    17Condensed consolidated statements of cash flows of Liberty Property Limited Partnership for the six months ended June 30, 2006 and June 30, 2005
    
    
    18Notes to condensed consolidated financial statements of Liberty Property Limited Partnership
    
    
    19Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    24Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    33Item 4.
    
    Controls and Procedures
    
    
    33Part II.
    
    Other Information
    
    
    34Signatures for Liberty Property Trust
    
    
    37Signatures for Liberty Property Limited Partnership
    
    
    38Exhibit Index
    
    
    
    
    39Amended and Restated Limited Partnership Agreement of Liberty/Commerz 1701 JFK Boulevard Limited PartnershipNOI Support AgreementCompletion and Payment Agreement and GuarantyCertifications of the Chief Executive OfficerCertifications of the Chief Financial OfficerCertifications of the Chief Executive Officer, required by Rule 13a-14(a)Certifications of the Chief Financial Officer, required by Rule 13a-14(a)Certifications of the Chief Executive Officer, required by Rule 13a-14(b)Certifications of the Chief Financial Officer, required by Rule 13a-14(b)Certifications of the Chief Executive Officer, required by Rule 13a-14(b)Certifications of the Chief Financial Officer, 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)
 June 30, 2006
    
    
    December 31, 2005(Unaudited)ASSETSReal estate:Land and land improvements
    
    $
    636,896
    
    
    
    $
    627,914Building and improvements
    
    
    3,640,731
    
    
    
    
    3,716,958Less accumulated depreciation
    
    
    (767,632
    )
    
    
    
    (743,346
    )Operating real estate
    
    
    3,509,995
    
    
    
    
    3,601,526Development in progress
    
    
    405,921
    
    
    
    
    324,924Land held for development
    
    
    166,429
    
    
    
    
    158,653Net real estate
    
    
    4,082,345
    
    
    
    
    4,085,103Cash and cash equivalents
    
    
    37,762
    
    
    
    
    61,629Restricted cash
    
    
    17,728
    
    
    
    
    29,085Accounts receivable
    
    
    29,034
    
    
    
    
    14,761Deferred rent receivable
    
    
    69,787
    
    
    
    
    72,818Deferred financing and leasing costs, net of accumulated
amortization (2006, $116,701; 2005, $106,752)
    
    
    119,184
    
    
    
    
    120,904Investments in unconsolidated joint ventures
    
    
    44,663
    
    
    
    
    33,522Assets held for sale
    
    
    10,080
    
    
    
    
    22,934Prepaid expenses and other assets
    
    
    146,977
    
    
    
    
    56,773Total assets
    
    $
    4,557,560
    
    
    
    $
    4,497,529LIABILITIESMortgage loans
    
    $
    210,057
    
    
    
    $
    238,728Unsecured notes
    
    
    1,755,000
    
    
    
    
    1,755,000Credit facility
    
    
    214,480
    
    
    
    
    255,450Accounts payable
    
    
    37,695
    
    
    
    
    32,919Accrued interest
    
    
    35,312
    
    
    
    
    34,892Dividend payable
    
    
    57,313
    
    
    
    
    56,490Other liabilities
    
    
    154,566
    
    
    
    
    161,735Total liabilities
    
    
    2,464,423
    
    
    
    
    2,535,214Minority interest
    
    
    270,601
    
    
    
    
    253,133SHAREHOLDERS EQUITYCommon shares of beneficial interest, $.001 par value, 191,200,000
shares authorized, 89,610,011 (includes 59,100 in treasury) and
88,415,764 (includes 59,100 in treasury) shares issued and
outstanding as of June 30, 2006 and December 31, 2005, respectively
    
    
    89
    
    
    
    
    88Additional paid-in capital
    
    
    1,857,672
    
    
    
    
    1,799,068Accumulated other comprehensive income
    
    
    15,458
    
    
    
    
    9,906Distributions in excess of net income
    
    
    (49,356
    )
    
    
    
    (98,553
    )Common shares in treasury, at cost, 59,100 shares as of June 30, 2006
and December 31, 2005
    
    
    (1,327
    )
    
    
    
    (1,327
    )Total shareholders equity
    
    
    1,822,536
    
    
    
    
    1,709,182Total liabilities and shareholders equity
    
    $
    4,557,560
    
    
    
    $
    4,497,529
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS OF LIBERTY PROPERTY TRUST
 (Unaudited and in thousands, except per share amounts)
 Three Months EndedJune 30, 2006
    
    
    June 30, 2005OPERATING REVENUERental
    
    $
    119,519
    
    
    $
    122,623Operating expense reimbursement
    
    
    49,446
    
    
    
    45,168Total operating revenue
    
    
    168,965
    
    
    
    167,791OPERATING EXPENSERental property
    
    
    34,694
    
    
    
    32,037Real estate taxes
    
    
    18,152
    
    
    
    16,254General and administrative
    
    
    11,501
    
    
    
    9,559Depreciation and amortization
    
    
    37,323
    
    
    
    35,226Total operating expenses
    
    
    101,670
    
    
    
    93,076Operating income
    
    
    67,295
    
    
    
    74,715OTHER INCOME (EXPENSE)Interest and other income
    
    
    2,222
    
    
    
    2,616Interest expense
    
    
    (29,628
    )
    
    
    (31,095
    )Total other income (expense)
    
    
    (27,406
    )
    
    
    (28,479
    )Income before property dispositions, income taxes, minority interest
and equity in earnings of unconsolidated joint ventures
    
    
    39,889
    
    
    
    46,236Gain on property dispositions, including impairment
    
    
    17,438
    
    
    
    (4,524
    )Income taxes
    
    
    (235
    )
    
    
    (911
    )Minority interest
    
    
    (5,839
    )
    
    
    (4,995
    )Equity in earnings of unconsolidated joint ventures
    
    
    741
    
    
    
    182Income from continuing operations
    
    
    51,994
    
    
    
    35,988Discontinued operations, net of minority interest (including net gain on
property dispositions of $16,550 and $7,244 for the three months ended
June 30, 2006 and 2005)
    
    
    16,456
    
    
    
    8,569Net income
    
    $
    68,450
    
    
    $
    44,557Earnings per common shareBasic:Income from continuing operations
    
    $
    0.58
    
    
    $
    0.41Income from discontinued operations
    
    
    0.19
    
    
    
    0.10Income per
common share  basic
    
    $
    0.77
    
    
    $
    0.51Diluted:Income from continuing operations
    
    $
    0.58
    
    
    $
    0.41Income from discontinued operations
    
    
    0.18
    
    
    
    0.10Income per
common share  diluted
    
    $
    0.76
    
    
    $
    0.51Distributions per common share
    
    $
    0.615
    
    
    $
    0.61Weighted average number of common shares outstandingBasic
    
    
    88,934
    
    
    
    86,685Diluted
    
    
    90,324
    
    
    
    88,134
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS OF LIBERTY PROPERTY TRUST
 (Unaudited and in thousands, except per share amounts)
 Six Months EndedJune 30, 2006
    
    
    June 30, 2005OPERATING REVENUERental
    
    $
    235,096
    
    
    $
    233,871Operating expense reimbursement
    
    
    99,113
    
    
    
    91,200Total operating revenue
    
    
    334,209
    
    
    
    325,071OPERATING EXPENSERental property
    
    
    70,786
    
    
    
    67,147Real estate taxes
    
    
    35,338
    
    
    
    31,384General and administrative
    
    
    21,517
    
    
    
    18,001Depreciation and amortization
    
    
    73,041
    
    
    
    67,553Total operating expenses
    
    
    200,682
    
    
    
    184,085Operating income
    
    
    133,527
    
    
    
    140,986OTHER INCOME (EXPENSE)Interest and other income
    
    
    4,418
    
    
    
    4,745Interest expense
    
    
    (60,449
    )
    
    
    (60,572
    )Total other income (expense)
    
    
    (56,031
    )
    
    
    (55,827
    )Income before property dispositions, income taxes, minority interest
and equity in earnings of unconsolidated joint ventures
    
    
    77,496
    
    
    
    85,159Gain on property dispositions, including impairment
    
    
    17,483
    
    
    
    (4,929
    )Income taxes
    
    
    (610
    )
    
    
    (1,445
    )Minority interest
    
    
    (10,396
    )
    
    
    (9,118
    )Equity in earnings of unconsolidated joint ventures
    
    
    916
    
    
    
    2,202Income from continuing operations
    
    
    84,889
    
    
    
    71,869Discontinued operations, net of minority interest (including net gain on
property dispositions of $76,080 and $14,420 for the six months ended
June 30, 2006 and 2005)
    
    
    73,988
    
    
    
    18,289Net income
    
    $
    158,877
    
    
    $
    90,158Earnings per common shareBasic:Income from continuing operations
    
    $
    0.95
    
    
    $
    0.83Income from discontinued operations
    
    
    0.84
    
    
    
    0.21Income per
common share  basic
    
    $
    1.79
    
    
    $
    1.04Diluted:Income from continuing operations
    
    $
    0.94
    
    
    $
    0.82Income from discontinued operations
    
    
    0.82
    
    
    
    0.21Income per
common share  diluted
    
    $
    1.76
    
    
    $
    1.03Distributions per common share
    
    $
    1.23
    
    
    $
    1.22Weighted average number of common shares outstandingBasic
    
    
    88,587
    
    
    
    86,278Diluted
    
    
    90,101
    
    
    
    87,716
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 OF LIBERTY PROPERTY TRUST
 (Unaudited and in thousands)
 Six Months EndedJune 30, 2006
    
    
    June 30, 2005OPERATING ACTIVITIESNet income
    
    $
    158,877
    
    
    $
    90,158Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    75,928
    
    
    
    73,155Amortization of deferred financing costs
    
    
    2,134
    
    
    
    2,344Equity in earnings of unconsolidated joint ventures
    
    
    (916
    )
    
    
    (2,202
    )Distributions from unconsolidated joint ventures
    
    
    2,937
    
    
    
    4,391Minority interest in net income
    
    
    13,594
    
    
    
    9,858Gain on property dispositions, including impairment
    
    
    (93,563
    )
    
    
    (9,491
    )Noncash compensation
    
    
    3,775
    
    
    
    2,214Changes in operating assets and liabilities:Restricted cash
    
    
    13,967
    
    
    
    8,519Accounts receivable
    
    
    (13,308
    )
    
    
    5,017Deferred rent receivable
    
    
    3,031
    
    
    
    (3,555
    )Prepaid expenses and other assets
    
    
    (91,558
    )
    
    
    4,268Accounts payable
    
    
    4,401
    
    
    
    3,084Accrued interest
    
    
    420
    
    
    
    582Other liabilities
    
    
    (9,581
    )
    
    
    5,817Net cash provided by operating activities
    
    
    70,138
    
    
    
    194,159INVESTING ACTIVITIESInvestment in properties
    
    
    (79,454
    )
    
    
    (190,006
    )Investment in unconsolidated joint ventures
    
    
    (1,939
    )
    
    
    (13,034
    )Proceeds from disposition of properties/land
    
    
    352,658
    
    
    
    89,749Investment in development in progress
    
    
    (176,263
    )
    
    
    (72,975
    )Investment in land held for development
    
    
    (27,817
    )
    
    
    (58,774
    )Increase in deferred leasing costs
    
    
    (11,311
    )
    
    
    (24,232
    )Net cash provided by (used in) investing activities
    
    
    55,874
    
    
    
    (269,272
    )FINANCING ACTIVITIESNet proceeds from issuance of common shares
    
    
    40,151
    
    
    
    49,281Net proceeds from the issuance of preferred units
    
    
    
    
    
    
    42,889Net proceeds from issuance of unsecured notes
    
    
    
    
    
    
    296,424Repayments of mortgage loans
    
    
    (29,185
    )
    
    
    (96,656
    )Proceeds from credit facility
    
    
    234,445
    
    
    
    339,550Repayments on credit facility
    
    
    (275,415
    )
    
    
    (419,550
    )(Decrease) increase in deferred financing costs
    
    
    (1,813
    )
    
    
    1,823Distributions to minority interests
    
    
    
    
    
    
    (3,710
    )Distributions paid on common shares
    
    
    (108,935
    )
    
    
    (105,035
    )Distributions paid on units
    
    
    (11,369
    )
    
    
    (9,866
    )Net cash (used in) provided by financing activities
    
    
    (152,121
    )
    
    
    95,150(Decrease) increase in cash and cash equivalents
    
    
    (26,109
    )
    
    
    20,037Increase (decrease) in cash and cash equivalents related to foreign currency translation
    
    
    2,242
    
    
    
    (2,713
    )Cash and cash equivalents at beginning of period
    
    
    61,629
    
    
    
    33,667Cash and cash equivalents at end of period
    
    $
    37,762
    
    
    $
    50,991SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONSWrite-off of fully depreciated property and deferred costs
    
    $
    42,691
    
    
    $
    19,959Acquisition of properties
    
    
    
    
    
    
    (17,183
    )Assumption of mortgage loans
    
    
    
    
    
    
    17,183Issuance of operating partnership units
    
    
    30,000
    
    
    
    
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Liberty Property Trust
 
 Notes to Condensed Consolidated Financial Statements (Unaudited)
 June 30, 2006
 Note 1: Organization and Basis of Presentation
 Organization
 Basis of Presentation
 Income per Common Share
 For the Three Months Ended June 30, 2006
    
    
    For the Three Months Ended June 30, 2005Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    
    
    
    
    AverageIncome
    
    
    Shares
    
    
    Per
    
    
    Income
    
    
    Shares
    
    
    Per(Numerator)
    
    
    (Denominator)
    
    
    Share
    
    
    (Numerator)
    
    
    (Denominator)
    
    
    ShareBasic income from continuing operationsIncome from continuing operations
    
    $
    51,994
    
    
    
    88,934
    
    
    $
    0.58
    
    
    $
    35,988
    
    
    
    86,685
    
    
    $
    0.41Dilutive shares for long-term
compensation plans
    
    
    
    
    
    
    1,390
    
    
    
    
    
    
    
    
    
    
    
    1,449Diluted income from continuing operationsIncome from continuing operations and
assumed conversions
    
    
    51,994
    
    
    
    90,324
    
    
    $
    0.58
    
    
    
    35,988
    
    
    
    88,134
    
    
    $
    0.41Basic income from discontinued operationsDiscontinued operations net of minority interest
    
    
    16,456
    
    
    
    88,934
    
    
    $
    0.19
    
    
    
    8,569
    
    
    
    86,685
    
    
    $
    0.10Dilutive shares for long-term compensation
plans
    
    
    
    
    
    
    1,390
    
    
    
    
    
    
    
    
    
    
    
    1,449Diluted income from discontinued operationsDiscontinued operations net of minority interest
    
    
    16,456
    
    
    
    90,324
    
    
    $
    0.18
    
    
    
    8,569
    
    
    
    88,134
    
    
    $
    0.10Basic income per common shareNet income
    
    
    68,450
    
    
    
    88,934
    
    
    $
    0.77
    
    
    
    44,557
    
    
    
    86,685
    
    
    $
    0.51Dilutive shares for long-term compensation
plans
    
    
    
    
    
    
    1,390
    
    
    
    
    
    
    
    
    
    
    
    1,449Diluted income per common shareNet income and assumed conversions
    
    $
    68,450
    
    
    
    90,324
    
    
    $
    0.76
    
    
    $
    44,557
    
    
    
    88,134
    
    
    $
    0.51
 7




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##### Table of Contents



For the Six Months Ended June 30, 2006
    
    
    For the Six Months Ended June 30, 2005Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    
    
    
    
    AverageIncome
    
    
    Shares
    
    
    Per
    
    
    Income
    
    
    Shares
    
    
    Per(Numerator)
    
    
    (Denominator)
    
    
    Share
    
    
    (Numerator)
    
    
    (Denominator)
    
    
    ShareBasic income from continuing operationsIncome from continuing operations
    
    $
    84,889
    
    
    
    88,587
    
    
    $
    0.95
    
    
    $
    71,869
    
    
    
    86,278
    
    
    $
    0.83Dilutive shares for long-term
compensation plans
    
    
    
    
    
    
    1,514
    
    
    
    
    
    
    
    
    
    
    
    1,438Diluted income from continuing operationsIncome from continuing operations and
assumed conversions
    
    
    84,889
    
    
    
    90,101
    
    
    $
    0.94
    
    
    
    71,869
    
    
    
    87,716
    
    
    $
    0.82Basic income from discontinued operationsDiscontinued operations net of minority interest
    
    
    73,988
    
    
    
    88,587
    
    
    $
    0.84
    
    
    
    18,289
    
    
    
    86,278
    
    
    $
    0.21Dilutive shares for long-term compensation
plans
    
    
    
    
    
    
    1,514
    
    
    
    
    
    
    
    
    
    
    
    1,438Diluted income from discontinued operationsDiscontinued operations net of minority interest
    
    
    73,988
    
    
    
    90,101
    
    
    $
    0.82
    
    
    
    18,289
    
    
    
    87,716
    
    
    $
    0.21Basic income per common shareNet income
    
    
    158,877
    
    
    
    88,587
    
    
    $
    1.79
    
    
    
    90,158
    
    
    
    86,278
    
    
    $
    1.04Dilutive shares for long-term compensation
plans
    
    
    
    
    
    
    1,514
    
    
    
    
    
    
    
    
    
    
    
    1,438Diluted income per common shareNet income and assumed conversions
    
    $
    158,877
    
    
    
    90,101
    
    
    $
    1.76
    
    
    $
    90,158
    
    
    
    87,716
    
    
    $
    1.03
 Share Based Compensation  Share-Based Payment Accounting for Stock Issued to Employees, Accounting for Stock-Based Compensation,
 SFAS No. 123(R).
  Options:
  8




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 30, 2005
    
    
    June 30, 2005Income available to common shareholders
    
    $
    44,557
    
    
    $
    90,158Add:     Share-based compensation expense
included in reported net income available to
common shareholders
    
    
    156
    
    
    
    258Deduct: Total share-based employee
compensation
expense determined under fair value based
method for all awards
    
    
    (163
    )
    
    
    (388
    )Pro forma income available to common shareholders
    
    $
    44,550
    
    
    $
    90,028Income per common share:Basic  as reported
    
    $
    0.51
    
    
    $
    1.04Basic  pro forma
    
    $
    0.51
    
    
    $
    1.04Diluted  as reported
    
    $
    0.51
    
    
    $
    1.03Diluted  pro forma
    
    $
    0.51
    
    
    $
    1.03
  Six Months Ended
    
    Six Months EndedJune 30, 2006
    
    June 30, 2005Risk-free interest rate
    
    
    4.8
    %
    
    
    4.4
    %Dividend yield
    
    
    5.8
    %
    
    
    5.9
    %Volatility factor
    
    
    0.188
    
    
    
    0.183Weighted-average expected life
    
    7 years
    
    8 years
  WeightedAverageOptions
    
    
    Exercise(000s)
    
    
    PriceOutstanding at January 1, 2006
    
    
    3,521
    
    
    $
    29.31Granted
    
    
    175
    
    
    
    46.94Exercised
    
    
    (439
    )
    
    
    27.65Outstanding at June 30, 2006
    
    
    3,257
    
    
    $
    30.48Exercisable at June 30, 2006
    
    
    2,758
    
    
    $
    28.07
  9




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##### Table of Contents



Long Term Incentive Shares (LTI):
   Weighted AvgShares
    
    
    Grant Date(000s)
    
    
    Fair valueNonvested at January 1, 2006
    
    
    253
    
    
    $
    39.10Granted
    
    
    76
    
    
    
    48.13Vested
    
    
    (50
    )
    
    
    37.12Nonvested at June 30, 2006
    
    
    279
    
    
    $
    41.92
  Bonus Shares:
 Profit Sharing Plan:
 Employee Share Purchase Plan:
 Foreign Currency Translation
 10




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##### Table of Contents



Note 2: Segment Information
  Reportable Segments
    
    MarketsDelaware Valley
    
    Southeastern Pennsylvania; New JerseyMidwest
    
    Lehigh Valley, Pennsylvania; Michigan; Minnesota; Milwaukee; ChicagoMid-Atlantic
    
    Maryland; Piedmont Triad, NC; Greenville, SC; Richmond; Virginia BeachFlorida
    
    Jacksonville; Orlando; Boca Raton; Tampa; TexasUnited Kingdom
    
    County of Kent
   For the Three Months Ended June 30, 2006Delaware Valley
    
    
    MidwestSoutheastern
    
    
    
    
    
    
    Lehigh
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    UnitedPennsylvania
    
    
    Other
    
    
    Valley
    
    
    Other
    
    
    Mid-Atlantic
    
    
    Florida
    
    
    Kingdom
    
    
    TotalOperating revenue
    
    $
    47,531
    
    
    $
    9,720
    
    
    $
    24,205
    
    
    $
    30,757
    
    
    $
    29,664
    
    
    $
    26,124
    
    
    $
    964
    
    
    $
    168,965Rental property expenses
and real estate taxes
    
    
    14,021
    
    
    
    2,876
    
    
    
    6,494
    
    
    
    11,143
    
    
    
    8,860
    
    
    
    8,800
    
    
    
    652
    
    
    
    52,846Property level operating
income
    
    $
    33,510
    
    
    $
    6,844
    
    
    $
    17,711
    
    
    $
    19,614
    
    
    $
    20,804
    
    
    $
    17,324
    
    
    $
    312
    
    
    
    116,119Interest and other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,222Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29,628
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,501
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37,323
    )Income before property dispositions, income taxes, minority interest
and equity in earnings of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,889Gain on property dispositions, including impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,438Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (235
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,839
    )Equity in earnings of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    741Discontinued operations, net of minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,456Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    68,450
 11




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##### Table of Contents



For the Three Months Ended June 30, 2005Delaware Valley
    
    
    MidwestSoutheastern
    
    
    
    
    
    
    Lehigh
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    UnitedPennsylvania
    
    
    Other
    
    
    Valley
    
    
    Other
    
    
    Mid-Atlantic
    
    
    Florida
    
    
    Kingdom
    
    
    TotalOperating revenue
    
    $
    52,016
    
    
    $
    9,148
    
    
    $
    22,031
    
    
    $
    28,918
    
    
    $
    25,367
    
    
    $
    23,768
    
    
    $
    6,543
    
    
    $
    167,791Rental property expenses
and real estate taxes
    
    
    13,142
    
    
    
    2,908
    
    
    
    5,853
    
    
    
    10,433
    
    
    
    7,418
    
    
    
    7,456
    
    
    
    1,081
    
    
    
    48,291Property level operating
income
    
    $
    38,874
    
    
    $
    6,240
    
    
    $
    16,178
    
    
    $
    18,485
    
    
    $
    17,949
    
    
    $
    16,312
    
    
    $
    5,462
    
    
    
    119,500Interest and other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,616Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (31,095
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,559
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (35,226
    )Income before property dispositions, income taxes, minority interest
and equity in earnings of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,236Gain on property dispositions, including impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,524
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (911
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,995
    )Equity in earnings of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    182Discontinued operations, net of minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,569Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    44,557
 For the Six Months Ended June 30, 2006Delaware Valley
    
    
    MidwestSoutheastern
    
    
    
    
    
    
    Lehigh
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    UnitedPennsylvania
    
    
    Other
    
    
    Valley
    
    
    Other
    
    
    Mid-Atlantic
    
    
    Florida
    
    
    Kingdom
    
    
    TotalOperating revenue
    
    $
    92,652
    
    
    $
    19,143
    
    
    $
    49,007
    
    
    $
    62,638
    
    
    $
    57,746
    
    
    $
    51,194
    
    
    $
    1,829
    
    
    $
    334,209Rental property expenses
and real estate taxes
    
    
    28,434
    
    
    
    5,932
    
    
    
    12,598
    
    
    
    23,020
    
    
    
    17,894
    
    
    
    16,843
    
    
    
    1,403
    
    
    
    106,124Property level operating
income
    
    $
    64,218
    
    
    $
    13,211
    
    
    $
    36,409
    
    
    $
    39,618
    
    
    $
    39,852
    
    
    $
    34,351
    
    
    $
    426
    
    
    
    228,085Interest and other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,418Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (60,449
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21,517
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (73,041
    )Income before property dispositions, income taxes, minority interest
and equity in earnings of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    77,496Gain on property dispositions, including impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,483Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (610
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,396
    )Equity in earnings of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    916Discontinued operations, net of minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73,988Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    158,877
 12




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##### Table of Contents



For the Six Months Ended June 30, 2005Delaware Valley
    
    
    MidwestSoutheastern
    
    
    
    
    
    
    Lehigh
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    UnitedPennsylvania
    
    
    Other
    
    
    Valley
    
    
    Other
    
    
    Mid-Atlantic
    
    
    Florida
    
    
    Kingdom
    
    
    TotalOperating revenue
    
    $
    97,359
    
    
    $
    18,165
    
    
    $
    43,212
    
    
    $
    57,347
    
    
    $
    50,593
    
    
    $
    46,669
    
    
    $
    11,726
    
    
    $
    325,071Rental property expenses
and real estate taxes
    
    
    28,035
    
    
    
    6,261
    
    
    
    11,513
    
    
    
    20,966
    
    
    
    15,268
    
    
    
    14,436
    
    
    
    2,052
    
    
    
    98,531Property level operating
income
    
    $
    69,324
    
    
    $
    11,904
    
    
    $
    31,699
    
    
    $
    36,381
    
    
    $
    35,325
    
    
    $
    32,233
    
    
    $
    9,674
    
    
    
    226,540Interest and other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,745Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (60,572
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,001
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (67,553
    )Income before property dispositions, income taxes, minority interest
and equity in earnings of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    85,159Gain on property dispositions, including impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,929
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,445
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,118
    )Equity in earnings of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,202Discontinued operations, net of minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,289Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    90,158
 Note 3: SFAS No. 144, Accounting For The Impairment Or Disposal Of Long-Lived Assets"
  Three Months Ended
    
    
    Six Months EndedJune 30, 2006
    
    
    June 30, 2005
    
    
    June 30, 2006
    
    
    June 30, 2005Revenues
    
    $
    3,300
    
    
    $
    9,727
    
    
    $
    8,313
    
    
    $
    22,889Operating expenses
    
    
    (1,201
    )
    
    
    (2,459
    )
    
    
    (2,731
    )
    
    
    (5,704
    )Interest expense
    
    
    (359
    )
    
    
    (3,109
    )
    
    
    (1,953
    )
    
    
    (7,079
    )Depreciation and amortization
    
    
    (1,062
    )
    
    
    (2,489
    )
    
    
    (2,523
    )
    
    
    (5,497
    )Income before property dispositions and minority interest
    
    $
    678
    
    
    $
    1,670
    
    
    $
    1,106
    
    
    $
    4,609
   Allocation of Interest to Discontinued Operations
 13




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##### Table of Contents



Note 4: Joint Ventures
 Comcast Center
  Accounting for the Sale of Real
Estate
 Chicago Joint Venture
 Note 5: Recently Issued Accounting Standards
 SFAS No. 153  Accounting for Non-monetary Transactions
 EITF Issue 04-5  Determining Whether a General
Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When
the Limited Partners Have Certain Rights
 14




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##### Table of Contents



CONDENSED CONSOLIDATED BALANCE SHEETS OF
LIBERTY PROPERTY LIMITED PARTNERSHIP
(In thousands)
 June 30, 2006
    
    
    December 31, 2005(Unaudited)ASSETSReal estate:Land and land improvements
    
    $
    636,896
    
    
    
    $
    627,914Building and improvements
    
    
    3,640,731
    
    
    
    
    3,716,958Less accumulated depreciation
    
    
    (767,632
    )
    
    
    
    (743,346
    )Operating real estate
    
    
    3,509,995
    
    
    
    
    3,601,526Development in progress
    
    
    405,921
    
    
    
    
    324,924Land held for development
    
    
    166,429
    
    
    
    
    158,653Net real estate
    
    
    4,082,345
    
    
    
    
    4,085,103Cash and cash equivalents
    
    
    37,762
    
    
    
    
    61,629Restricted cash
    
    
    17,728
    
    
    
    
    29,085Accounts receivable
    
    
    29,034
    
    
    
    
    14,761Deferred rent receivable
    
    
    69,787
    
    
    
    
    72,818Deferred financing and leasing costs, net of accumulated amortization

(2006, $116,701; 2005, $106,752)
    
    
    119,184
    
    
    
    
    120,904Investments in unconsolidated joint ventures
    
    
    44,663
    
    
    
    
    33,522Assets held for sale
    
    
    10,080
    
    
    
    
    22,934Prepaid expenses and other assets
    
    
    146,977
    
    
    
    
    56,773Total assets
    
    $
    4,557,560
    
    
    
    $
    4,497,529LIABILITIESMortgage loans
    
    $
    210,057
    
    
    
    $
    238,728Unsecured notes
    
    
    1,755,000
    
    
    
    
    1,755,000Credit facility
    
    
    214,480
    
    
    
    
    255,450Accounts payable
    
    
    37,695
    
    
    
    
    32,919Accrued interest
    
    
    35,312
    
    
    
    
    34,892Distribution payable
    
    
    57,313
    
    
    
    
    56,490Other liabilities
    
    
    154,566
    
    
    
    
    161,735Total liabilities
    
    
    2,464,423
    
    
    
    
    2,535,214Minority interest
    
    
    393
    
    
    
    
    407OWNERS EQUITYGeneral
partners equity  common units
    
    
    1,822,536
    
    
    
    
    1,709,182Limited
partners equity  preferred units
    
    
    184,657
    
    
    
    
    184,657 common units
    
    
    85,551
    
    
    
    
    68,069Total owners equity
    
    
    2,092,744
    
    
    
    
    1,961,908Total liabilities and owners equity
    
    $
    4,557,560
    
    
    
    $
    4,497,529
  15




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##### Table of Contents



CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS OF
LIBERTY PROPERTY LIMITED PARTNERSHIP
(Unaudited and in thousands, except per unit amounts)
 Three Months EndedJune 30, 2006
    
    
    June 30, 2005OPERATING REVENUERental
    
    $
    119,519
    
    
    $
    122,623Operating expense reimbursement
    
    
    49,446
    
    
    
    45,168Total operating revenue
    
    
    168,965
    
    
    
    167,791OPERATING EXPENSERental property
    
    
    34,694
    
    
    
    32,037Real estate taxes
    
    
    18,152
    
    
    
    16,254General and administrative
    
    
    11,501
    
    
    
    9,559Depreciation and amortization
    
    
    37,323
    
    
    
    35,226Total operating expenses
    
    
    101,670
    
    
    
    93,076Operating income
    
    
    67,295
    
    
    
    74,715OTHER INCOME (EXPENSE)Interest and other income
    
    
    2,222
    
    
    
    2,616Interest expense
    
    
    (29,628
    )
    
    
    (31,095
    )Total other income (expense)
    
    
    (27,406
    )
    
    
    (28,479
    )Income before property dispositions, income taxes, minority interest

and equity in earnings of unconsolidated joint ventures
    
    
    39,889
    
    
    
    46,236Gain on property dispositions, including impairment
    
    
    17,438
    
    
    
    (4,524
    )Income taxes
    
    
    (235
    )
    
    
    (911
    )Minority interest
    
    
    
    
    
    
    (368
    )Equity in earnings of unconsolidated joint ventures
    
    
    741
    
    
    
    182Income from continuing operations
    
    
    57,833
    
    
    
    40,615Discontinued operations (including net gain on property dispositions of

$16,550 and $7,244 for the three months ended June 30, 2006 and 2005)
    
    
    17,228
    
    
    
    8,914Net income
    
    
    75,061
    
    
    
    49,529Preferred unit distributions
    
    
    (3,401
    )
    
    
    (2,663
    )Excess of preferred unit redemption over carrying amount
    
    
    
    
    
    
    (500
    )Income available to common unitholders
    
    $
    71,660
    
    
    $
    46,366Earnings per common unitBasic:Income from continuing operations
    
    $
    0.58
    
    
    $
    0.41Income from discontinued operations
    
    
    0.19
    
    
    
    0.10Income per
common unit  basic
    
    $
    0.77
    
    
    $
    0.51Diluted:Income from continuing operations
    
    $
    0.58
    
    
    $
    0.41Income from discontinued operations
    
    
    0.18
    
    
    
    0.10Income per
common unit  diluted
    
    $
    0.76
    
    
    $
    0.51Distributions per common unit
    
    $
    0.615
    
    
    $
    0.61Weighted average number of common units outstandingBasic
    
    
    92,587
    
    
    
    90,203Diluted
    
    
    93,977
    
    
    
    91,651
  16




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##### Table of Contents



CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS OF
LIBERTY PROPERTY LIMITED PARTNERSHIP
(Unaudited and in thousands, except per unit amounts)
 Six Months EndedJune 30, 2006
    
    
    June 30, 2005OPERATING REVENUERental
    
    $
    235,096
    
    
    $
    233,871Operating expense reimbursement
    
    
    99,113
    
    
    
    91,200Total operating revenue
    
    
    334,209
    
    
    
    325,071OPERATING EXPENSERental property
    
    
    70,786
    
    
    
    67,147Real estate taxes
    
    
    35,338
    
    
    
    31,384General and administrative
    
    
    21,517
    
    
    
    18,001Depreciation and amortization
    
    
    73,041
    
    
    
    67,553Total operating expenses
    
    
    200,682
    
    
    
    184,085Operating income
    
    
    133,527
    
    
    
    140,986OTHER INCOME (EXPENSE)Interest and other income
    
    
    4,418
    
    
    
    4,745Interest expense
    
    
    (60,449
    )
    
    
    (60,572
    )Total other income (expense)
    
    
    (56,031
    )
    
    
    (55,827
    )Income before property dispositions, income taxes, minority interest

and equity in earnings of unconsolidated joint ventures
    
    
    77,496
    
    
    
    85,159Gain on property dispositions, including impairment
    
    
    17,483
    
    
    
    (4,929
    )Income taxes
    
    
    (610
    )
    
    
    (1,445
    )Minority interest
    
    
    
    
    
    
    (355
    )Equity in earnings of unconsolidated joint ventures
    
    
    916
    
    
    
    2,202Income from continuing operations
    
    
    95,285
    
    
    
    80,632Discontinued operations (including net gain on property dispositions of

$76,080 and $14,420 for the six months ended June 30, 2006 and 2005)
    
    
    77,186
    
    
    
    19,029Net income
    
    
    172,471
    
    
    
    99,661Preferred unit distributions
    
    
    (6,802
    )
    
    
    (5,339
    )Excess of preferred unit redemption over carrying amount
    
    
    
    
    
    
    (500
    )Income available to common unitholders
    
    $
    165,669
    
    
    $
    93,822Earnings per common unitBasic:Income from continuing operations
    
    $
    0.95
    
    
    $
    0.83Income from discontinued operations
    
    
    0.84
    
    
    
    0.21Income per
common unit  basic
    
    $
    1.79
    
    
    $
    1.04Diluted:Income from continuing operations
    
    $
    0.94
    
    
    $
    0.82Income from discontinued operations
    
    
    0.82
    
    
    
    0.21Income per
common unit  diluted
    
    $
    1.76
    
    
    $
    1.03Distributions per common unit
    
    $
    1.23
    
    
    $
    1.22Weighted average number of common units outstandingBasic
    
    
    92,173
    
    
    
    89,869Diluted
    
    
    93,687
    
    
    
    91,308
  17




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##### Table of Contents



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS OF
LIBERTY PROPERTY LIMITED PARTNERSHIP
(Unaudited and in thousands)
 Six Months EndedJune 30, 2006
    
    
    June 30, 2005OPERATING ACTIVITIESNet income
    
    $
    172,471
    
    
    $
    99,661Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    75,928
    
    
    
    73,155Amortization of deferred financing costs
    
    
    2,134
    
    
    
    2,344Equity in earnings of unconsolidated joint ventures
    
    
    (916
    )
    
    
    (2,202
    )Distributions from unconsolidated joint ventures
    
    
    2,937
    
    
    
    4,391Minority interest in net income
    
    
    
    
    
    
    355Gain on property dispositions, including impairment
    
    
    (93,563
    )
    
    
    (9,491
    )Noncash compensation
    
    
    3,775
    
    
    
    2,214Changes in operating assets and liabilities:Restricted cash
    
    
    13,967
    
    
    
    8,519Accounts receivable
    
    
    (13,308
    )
    
    
    5,017Deferred rent receivable
    
    
    3,031
    
    
    
    (3,555
    )Prepaid expenses and other assets
    
    
    (91,558
    )
    
    
    4,268Accounts payable
    
    
    4,401
    
    
    
    3,084Accrued interest
    
    
    420
    
    
    
    582Other liabilities
    
    
    (9,581
    )
    
    
    5,817Net cash provided by operating activities
    
    
    70,138
    
    
    
    194,159INVESTING ACTIVITIESInvestment in properties
    
    
    (79,454
    )
    
    
    (190,006
    )Investment in unconsolidated joint ventures
    
    
    (1,939
    )
    
    
    (13,034
    )Proceeds from disposition of properties/land
    
    
    352,658
    
    
    
    89,749Investment in development in progress
    
    
    (176,263
    )
    
    
    (72,975
    )Investment in land held for development
    
    
    (27,817
    )
    
    
    (58,774
    )Increase in deferred leasing costs
    
    
    (11,311
    )
    
    
    (24,232
    )Net cash provided by (used in) investing activities
    
    
    55,874
    
    
    
    (269,272
    )FINANCING ACTIVITIESNet proceeds from the issuance of preferred units
    
    
    
    
    
    
    42,889Net proceeds from issuance of unsecured notes
    
    
    
    
    
    
    296,424Repayments of mortgage loans
    
    
    (29,185
    )
    
    
    (96,656
    )Proceeds from credit facility
    
    
    234,445
    
    
    
    339,550Repayments on credit facility
    
    
    (275,415
    )
    
    
    (419,550
    )(Decrease) increase in deferred financing costs
    
    
    (1,813
    )
    
    
    1,823Capital contributions
    
    
    40,151
    
    
    
    49,281Distributions to partners
    
    
    (120,304
    )
    
    
    (118,611
    )Net cash (used in) provided by financing activities
    
    
    (152,121
    )
    
    
    95,150(Decrease) increase in cash and cash equivalents
    
    
    (26,109
    )
    
    
    20,037Increase (decrease) in cash and cash equivalents related to foreign currency translation
    
    
    2,242
    
    
    
    (2,713
    )Cash and cash equivalents at beginning of period
    
    
    61,629
    
    
    
    33,667Cash and cash equivalents at end of period
    
    $
    37,762
    
    
    $
    50,991SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONSWrite-off of fully depreciated property and deferred costs
    
    $
    42,691
    
    
    $
    19,959Acquisition of properties
    
    
    
    
    
    
    (17,183
    )Assumption of mortgage loans
    
    
    
    
    
    
    17,183Issuance of operating partnership units
    
    
    30,000
    
    
    
    
  18




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##### Table of Contents



Liberty Property Limited Partnership
 
 Notes to Condensed Consolidated Financial Statements (Unaudited)
 June 30, 2006
 Note
1: Organization and Basis of Presentation
 Organization
 Basis of Presentation
 Income per Common Unit
 For the Three Months Ended June 30, 2006
    
    
    For the Three Months Ended June 30, 2005Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    
    
    
    
    AverageIncome
    
    
    Units
    
    
    Per
    
    
    Income
    
    
    Units
    
    
    Per(Numerator)
    
    
    (Denominator)
    
    
    Unit
    
    
    (Numerator)
    
    
    (Denominator)
    
    
    UnitIncome from continuing operations
    
    $
    57,833
    
    
    
    
    
    
    
    
    
    
    $
    40,615Less: Preferred unit distributions
    
    
    (3,401
    )
    
    
    
    
    
    
    
    
    
    
    (2,663
    )Excess of preferred unit redemption
over carrying amount
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (500
    )Basic income from continuing operationsIncome from continuing operations
available to common unitholders
    
    
    54,432
    
    
    
    92,587
    
    
    $
    0.58
    
    
    
    37,452
    
    
    
    90,203
    
    
    $
    0.41Dilutive units for long-term
compensation plans
    
    
    
    
    
    
    1,390
    
    
    
    
    
    
    
    
    
    
    
    1,448Diluted income from continuing operationsIncome from continuing operations available
to common unitholders and assumed
conversions
    
    
    54,432
    
    
    
    93,977
    
    
    $
    0.58
    
    
    
    37,452
    
    
    
    91,651
    
    
    $
    0.41Basic income from discontinued operationsDiscontinued operations
    
    
    17,228
    
    
    
    92,587
    
    
    $
    0.19
    
    
    
    8,914
    
    
    
    90,203
    
    
    $
    0.10Dilutive units for long-term compensation
plans
    
    
    
    
    
    
    1,390
    
    
    
    
    
    
    
    
    
    
    
    1,448Diluted income from discontinued operationsDiscontinued operations
    
    
    17,228
    
    
    
    93,977
    
    
    $
    0.18
    
    
    
    8,914
    
    
    
    91,651
    
    
    $
    0.10Basic income per common unitIncome available to common unitholders
    
    
    71,660
    
    
    
    92,587
    
    
    $
    0.77
    
    
    
    46,366
    
    
    
    90,203
    
    
    $
    0.51Dilutive units for long-term compensation
plans
    
    
    
    
    
    
    1,390
    
    
    
    
    
    
    
    
    
    
    
    1,448Diluted income per common unitIncome available to common unitholders
and assumed conversions
    
    $
    71,660
    
    
    
    93,977
    
    
    $
    0.76
    
    
    $
    46,366
    
    
    
    91,651
    
    
    $
    0.51
 19




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##### Table of Contents



For the Six Months Ended June 30, 2006
    
    
    For the Six Months Ended June 30, 2005Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    
    
    
    
    AverageIncome
    
    
    Units
    
    
    Per
    
    
    Income
    
    
    Units
    
    
    Per(Numerator)
    
    
    (Denominator)
    
    
    Unit
    
    
    (Numerator)
    
    
    (Denominator)
    
    
    UnitIncome from continuing operations
    
    $
    95,285
    
    
    
    
    
    
    
    
    
    
    $
    80,632Less: Preferred unit distributions
    
    
    (6,802
    )
    
    
    
    
    
    
    
    
    
    
    (5,339
    )Excess of preferred unit redemption
over carrying amount
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (500
    )Basic income from continuing operationsIncome from continuing operations
available to common unitholders
    
    
    88,483
    
    
    
    92,173
    
    
    $
    0.95
    
    
    
    74,793
    
    
    
    89,869
    
    
    $
    0.83Dilutive units for long-term
compensation plans
    
    
    
    
    
    
    1,514
    
    
    
    
    
    
    
    
    
    
    
    1,439Diluted income from continuing operationsIncome from continuing operations available
to common unitholders and assumed
conversions
    
    
    88,483
    
    
    
    93,687
    
    
    $
    0.94
    
    
    
    74,793
    
    
    
    91,308
    
    
    $
    0.82Basic income from discontinued operationsDiscontinued operations
    
    
    77,186
    
    
    
    92,173
    
    
    $
    0.84
    
    
    
    19,029
    
    
    
    89,869
    
    
    $
    0.21Dilutive units for long-term compensation
plans
    
    
    
    
    
    
    1,514
    
    
    
    
    
    
    
    
    
    
    
    1,439Diluted income from discontinued operationsDiscontinued operations
    
    
    77,186
    
    
    
    93,687
    
    
    $
    0.82
    
    
    
    19,029
    
    
    
    91,308
    
    
    $
    0.21Basic income per common unitIncome available to common unitholders
    
    
    165,669
    
    
    
    92,173
    
    
    $
    1.79
    
    
    
    93,822
    
    
    
    89,869
    
    
    $
    1.04Dilutive units for long-term compensation
plans
    
    
    
    
    
    
    1,514
    
    
    
    
    
    
    
    
    
    
    
    1,439Diluted income per common unitIncome available to common unitholders
and assumed conversions
    
    $
    165,669
    
    
    
    93,687
    
    
    $
    1.76
    
    
    $
    93,822
    
    
    
    91,308
    
    
    $
    1.03
 Foreign Currency Translation
 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
 20




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##### Table of Contents



For the Three Months Ended June 30, 2006Delaware Valley
    
    
    MidwestSoutheastern
    
    
    
    
    
    
    Lehigh
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    UnitedPennsylvania
    
    
    Other
    
    
    Valley
    
    
    Other
    
    
    Mid-Atlantic
    
    
    Florida
    
    
    Kingdom
    
    
    TotalOperating revenue
    
    $
    47,531
    
    
    $
    9,720
    
    
    $
    24,205
    
    
    $
    30,757
    
    
    $
    29,664
    
    
    $
    26,124
    
    
    $
    964
    
    
    $
    168,965Rental property expenses
and real estate taxes
    
    
    14,021
    
    
    
    2,876
    
    
    
    6,494
    
    
    
    11,143
    
    
    
    8,860
    
    
    
    8,800
    
    
    
    652
    
    
    
    52,846Property level operating
income
    
    $
    33,510
    
    
    $
    6,844
    
    
    $
    17,711
    
    
    $
    19,614
    
    
    $
    20,804
    
    
    $
    17,324
    
    
    $
    312
    
    
    
    116,119Interest and other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,222Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29,628
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,501
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37,323
    )Income before property dispositions, income taxes, minority interest
and equity in earnings of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,889Gain on property dispositions, including impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,438Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (235
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity in earnings of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    741Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,228Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    75,061For the Three Months Ended June 30, 2005Delaware Valley
    
    
    MidwestSoutheastern
    
    
    
    
    
    
    Lehigh
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    UnitedPennsylvania
    
    
    Other
    
    
    Valley
    
    
    Other
    
    
    Mid-Atlantic
    
    
    Florida
    
    
    Kingdom
    
    
    TotalOperating revenue
    
    $
    52,016
    
    
    $
    9,148
    
    
    $
    22,031
    
    
    $
    28,918
    
    
    $
    25,367
    
    
    $
    23,768
    
    
    $
    6,543
    
    
    $
    167,791Rental property expenses
and real estate taxes
    
    
    13,142
    
    
    
    2,908
    
    
    
    5,853
    
    
    
    10,433
    
    
    
    7,418
    
    
    
    7,456
    
    
    
    1,081
    
    
    
    48,291Property level operating
income
    
    $
    38,874
    
    
    $
    6,240
    
    
    $
    16,178
    
    
    $
    18,485
    
    
    $
    17,949
    
    
    $
    16,312
    
    
    $
    5,462
    
    
    
    119,500Interest and other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,616Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (31,095
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,559
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (35,226
    )Income before property dispositions, income taxes, minority interest
and equity in earnings of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,236Gain on property dispositions, including impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,524
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (911
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (368
    )Equity in earnings of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    182Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,914Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    49,529
 21




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##### Table of Contents



For the Six Months Ended June 30, 2006Delaware Valley
    
    
    MidwestSoutheastern
    
    
    
    
    
    
    Lehigh
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    UnitedPennsylvania
    
    
    Other
    
    
    Valley
    
    
    Other
    
    
    Mid-Atlantic
    
    
    Florida
    
    
    Kingdom
    
    
    TotalOperating revenue
    
    $
    92,652
    
    
    $
    19,143
    
    
    $
    49,007
    
    
    $
    62,638
    
    
    $
    57,746
    
    
    $
    51,194
    
    
    $
    1,829
    
    
    $
    334,209Rental property expenses
and real estate taxes
    
    
    28,434
    
    
    
    5,932
    
    
    
    12,598
    
    
    
    23,020
    
    
    
    17,894
    
    
    
    16,843
    
    
    
    1,403
    
    
    
    106,124Property level operating
income
    
    $
    64,218
    
    
    $
    13,211
    
    
    $
    36,409
    
    
    $
    39,618
    
    
    $
    39,852
    
    
    $
    34,351
    
    
    $
    426
    
    
    
    228,085Interest and other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,418Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (60,449
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21,517
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (73,041
    )Income before property dispositions, income taxes, minority interest
and equity in earnings of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    77,496Gain on property dispositions, including impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,483Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (610
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity in earnings of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    916Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    77,186Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    172,471For the Six Months Ended June 30, 2005Delaware Valley
    
    
    MidwestSoutheastern
    
    
    
    
    
    
    Lehigh
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    UnitedPennsylvania
    
    
    Other
    
    
    Valley
    
    
    Other
    
    
    Mid-Atlantic
    
    
    Florida
    
    
    Kingdom
    
    
    TotalOperating revenue
    
    $
    97,359
    
    
    $
    18,165
    
    
    $
    43,212
    
    
    $
    57,347
    
    
    $
    50,593
    
    
    $
    46,669
    
    
    $
    11,726
    
    
    $
    325,071Rental property expenses
and real estate taxes
    
    
    28,035
    
    
    
    6,261
    
    
    
    11,513
    
    
    
    20,966
    
    
    
    15,268
    
    
    
    14,436
    
    
    
    2,052
    
    
    
    98,531Property level operating
income
    
    $
    69,324
    
    
    $
    11,904
    
    
    $
    31,699
    
    
    $
    36,381
    
    
    $
    35,325
    
    
    $
    32,233
    
    
    $
    9,674
    
    
    
    226,540Interest and other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,745Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (60,572
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,001
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (67,553
    )Income before property dispositions, income taxes, minority interest
and equity in earnings of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    85,159Gain on property dispositions, including impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,929
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,445
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (355
    )Equity in earnings of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,202Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,029Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    99,661
 Note 3: SFAS No. 144, Accounting For The Impairment Or Disposal Of Long-Lived Assets
  Three Months Ended
    
    
    Six Months EndedJune 30, 2006
    
    
    June 30, 2005
    
    
    June 30, 2006
    
    
    June 30, 2005Revenues
    
    $
    3,300
    
    
    $
    9,727
    
    
    $
    8,313
    
    
    $
    22,889Operating expenses
    
    
    (1,201
    )
    
    
    (2,459
    )
    
    
    (2,731
    )
    
    
    (5,704
    )Interest expense
    
    
    (359
    )
    
    
    (3,109
    )
    
    
    (1,953
    )
    
    
    (7,079
    )Depreciation and amortization
    
    
    (1,062
    )
    
    
    (2,489
    )
    
    
    (2,523
    )
    
    
    (5,497
    )Income before property dispositions
    
    $
    678
    
    
    $
    1,670
    
    
    $
    1,106
    
    
    $
    4,609
 22




---



##### Table of Contents



Allocation of Interest to Discontinued Operations
 Note 4: Joint Ventures
 Comcast Center
  Accounting for the Sale of Real
Estate
 Chicago Joint Venture
 Note 5: Recently Issued Accounting Standards
 SFAS No. 153  Accounting for Non-monetary Transactions
 EITF Issue 04-5  Determining Whether a General
Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When
the Limited Partners Have Certain Rights
 23




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##### Table of Contents



Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
        24




---



##### Table of Contents



Net RentPer Square Foot
    
    
    Total Square Feet
    
    
    Percent OccupiedJune 30,
    
    
    June 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Industrial-Distribution
    
    $
    4.23
    
    
    $
    4.27
    
    
    
    30,852
    
    
    
    29,802
    
    
    
    93.9
    %
    
    
    91.1
    %Industrial-Flex
    
    $
    9.02
    
    
    $
    8.71
    
    
    
    12,503
    
    
    
    13,330
    
    
    
    93.6
    %
    
    
    90.8
    %Office
    
    $
    14.16
    
    
    $
    14.11
    
    
    
    20,234
    
    
    
    20,001
    
    
    
    90.6
    %
    
    
    87.6
    %$
    8.26
    
    
    $
    8.25
    
    
    
    63,589
    
    
    
    63,133
    
    
    
    92.8
    %
    
    
    89.9
    %
  Forward-Looking Statements
  Critical Accounting Policies and Estimates
  Results of Operations
  25




---



##### Table of Contents



Comparison of Three and Six Months Ended June 30, 2006 to Three and Six Months Ended June 30, 2005.
    Three Months Ended
    
    
    
    Six Months EndedJune 30, 2006
    
    
    June 30, 2005
    
    
    % inc (dec)
    
    
    
    June 30, 2006
    
    
    June 30, 2005
    
    
    % inc (dec)Delaware Valley SE Pennsylvania
    
    $
    33,510
    
    
    $
    38,874
    
    
    
    (13.8
    %)
    (1)
    
    $
    64,218
    
    
    $
    69,324
    
    
    
    (7.4
    %)
    (1) Other
    
    
    6,844
    
    
    
    6,240
    
    
    
    9.7
    %
    (2)
    
    
    13,211
    
    
    
    11,904
    
    
    
    11.0
    %
    (2)Midwest Lehigh Valley
    
    
    17,711
    
    
    
    16,178
    
    
    
    9.5
    %
    (3)
    
    
    36,409
    
    
    
    31,699
    
    
    
    14.9
    %
    (3) Other
    
    
    19,614
    
    
    
    18,485
    
    
    
    6.1
    %
    
    
    
    39,618
    
    
    
    36,381
    
    
    
    8.9
    %Mid-Atlantic
    
    
    20,804
    
    
    
    17,949
    
    
    
    15.9
    %
    (4)
    
    
    39,852
    
    
    
    35,325
    
    
    
    12.8
    %
    (4)Florida
    
    
    17,324
    
    
    
    16,312
    
    
    
    6.2
    %
    
    
    
    34,351
    
    
    
    32,233
    
    
    
    6.6
    %United Kingdom
    
    
    312
    
    
    
    5,462
    
    
    
    (94.3
    %)
    (5)
    
    
    426
    
    
    
    9,674
    
    
    
    (95.6
    %)
    (5)Totals
    
    $
    116,119
    
    
    $
    119,500
    
    
    
    (2.8
    %)
    
    
    $
    228,085
    
    
    $
    226,540
    
    
    
    0.7
    %
 
 (1)
    
    The decreases for both the three and six month periods ended June 30, 2006 versus the three
and six months ended June 30, 2005 are primarily due to a decrease in Termination Fees
accepted from $8.9 million in the three months ended June 30, 2005 to $2.8 million for the
same period in 2006.(2)
    
    The increases for both the three and six month periods ended June 30, 2006 versus the three
and six months ended June 30, 2005 are partially due to greater Termination Fees accepted
during the respective periods and also due to an increase in average gross investment in
operating real estate during the respective periods.(3)
    
    The increases for both the three and six month periods ended June 30, 2006 versus the three
and six months ended June 30, 2005 are primarily due to increased occupancy and also due to an
increase in average gross investment in operating real estate during the respective periods.(4)
    
    The increases for both the three and six month periods ended June 30, 2006 versus the three
and six months ended June 30, 2005 are primarily due to an increase in average gross
investment in operating real estate during the respective periods.(5)
    
    The decreases for both the three and six month periods ended June 30, 2006 versus the three
and six months ended June 30, 2005 are primarily due to sales of 15 operating properties to a
joint venture in December 2005.  26




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 30, 2006
    
    
    June 30, 2005
    
    
    June 30, 2006
    
    
    June 30, 2005Same Store:Rental revenue
    
    $
    104,497
    
    
    $
    103,511
    
    
    $
    208,473
    
    
    $
    207,648Operating expenses:Rental property expense
    
    
    31,229
    
    
    
    29,669
    
    
    
    63,392
    
    
    
    62,960Real estate taxes
    
    
    16,528
    
    
    
    15,551
    
    
    
    31,897
    
    
    
    30,208Operating expense recovery
    
    
    (45,194
    )
    
    
    (43,299
    )
    
    
    (90,291
    )
    
    
    (87,778
    )Unrecovered operating expenses
    
    
    2,563
    
    
    
    1,921
    
    
    
    4,998
    
    
    
    5,390Property level operating income
    
    
    101,934
    
    
    
    101,590
    
    
    
    203,475
    
    
    
    202,258Less straight line rent
    
    
    1,219
    
    
    
    1,899
    
    
    
    2,747
    
    
    
    3,590Cash basis property level operating income
    
    $
    100,715
    
    
    $
    99,691
    
    
    $
    200,728
    
    
    $
    198,668Reconciliation of non-GAAP financial measure:Property level operating income  Same Store
    
    $
    101,934
    
    
    $
    101,590
    
    
    $
    203,475
    
    
    $
    202,258Property level operating income  properties purchased
or developed subsequent to January 1, 2005
    
    
    10,418
    
    
    
    6,164
    
    
    
    19,755
    
    
    
    10,537Termination fees
    
    
    3,767
    
    
    
    11,746
    
    
    
    4,855
    
    
    
    13,745General and administrative expense
    
    
    (11,501
    )
    
    
    (9,559
    )
    
    
    (21,517
    )
    
    
    (18,001
    )Depreciation and amortization expense
    
    
    (37,323
    )
    
    
    (35,226
    )
    
    
    (73,041
    )
    
    
    (67,553
    )Other income (expense)
    
    
    (27,406
    )
    
    
    (28,479
    )
    
    
    (56,031
    )
    
    
    (55,827
    )Gain on property dispositions, including impairment
    
    
    17,438
    
    
    
    (4,524
    )
    
    
    17,483
    
    
    
    (4,929
    )Income taxes
    
    
    (235
    )
    
    
    (911
    )
    
    
    (610
    )
    
    
    (1,445
    )Minority interest
    
    
    (5,839
    )
    
    
    (4,995
    )
    
    
    (10,396
    )
    
    
    (9,118
    )Equity in earnings of unconsolidated joint ventures
    
    
    741
    
    
    
    182
    
    
    
    916
    
    
    
    2,202Discontinued operations, net of minority interest
    
    
    16,456
    
    
    
    8,569
    
    
    
    73,988
    
    
    
    18,289Net income
    
    $
    68,450
    
    
    $
    44,557
    
    
    $
    158,877
    
    
    $
    90,158
 27




---



##### Table of Contents



General and Administrative
 Depreciation and Amortization
 Interest Expense
 Other
    28




---



##### Table of Contents



Liquidity and Capital Resources
        29




---



##### Table of Contents



MORTGAGES
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    WEIGHTEDPRINCIPAL
    
    PRINCIPAL
    
    UNSECURED
    
    CREDIT
    
    
    
    
    
    
    AVERAGEAMORTIZATION
    
    MATURITIES
    
    NOTES
    
    FACILITY
    
    
    TOTAL
    
    
    INTEREST RATE2006 (6 months)
    
    
    $
    4,663
    
    
    
    $
    22,707
    
    
    
    $
    100,000
    
    
    $
    
    
    
    $
    127,370
    
    
    
    
    7.11
    %2007
    
    
    
    8,551
    
    
    
    
    1,553
    
    
    
    
    100,000
    
    
    
    
    
    
    
    110,104
    
    
    
    
    7.22
    %2008
    
    
    
    7,932
    
    
    
    
    39,753
    
    
    
    
    
    
    
    
    76,480
    (1)
    
    
    124,165
    
    
    
    
    5.98
    %2009
    
    
    
    5,652
    
    
    
    
    46,148
    
    
    
    
    270,000
    
    
    
    
    
    
    
    321,800
    
    
    
    
    7.77
    %2010
    
    
    
    4,827
    
    
    
    
    4,738
    
    
    
    
    200,000
    
    
    
    138,000
    
    
    
    347,565
    
    
    
    
    7.26
    %2011
    
    
    
    4,101
    
    
    
    
    10,730
    
    
    
    
    250,000
    
    
    
    
    
    
    
    264,831
    
    
    
    
    7.26
    %2012
    
    
    
    3,219
    
    
    
    
    32,911
    
    
    
    
    235,000
    
    
    
    
    
    
    
    271,130
    
    
    
    
    6.47
    %2013
    
    
    
    2,691
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,691
    
    
    
    
    6.00
    %2014
    
    
    
    2,857
    
    
    
    
    
    
    
    
    
    200,000
    
    
    
    
    
    
    
    202,857
    
    
    
    
    5.65
    %2015
    
    
    
    3,033
    
    
    
    
    
    
    
    
    
    300,000
    
    
    
    
    
    
    
    303,033
    
    
    
    
    5.13
    %2016 & thereafter
    
    
    
    3,991
    
    
    
    
    
    
    
    
    
    100,000
    
    
    
    
    
    
    
    103,991
    
    
    
    
    7.44
    %$
    51,517
    
    
    
    $
    158,540
    
    
    
    $
    1,755,000
    
    
    $
    214,480
    
    
    $
    2,179,537
    
    
    
    
    6.72
    %
 
 (1)
    
    Represents a deposit by the joint venture partner in the Comcast Center (see Note 4 to
the Companys financial statements) which bears interest at the greater of 5% or the
current rate on the $600 million Credit Facility until development of the Comcast Center
building is completed.
  General
   Industrial-
    
    
    Industrial-Distribution
    
    
    Flex
    
    
    Office
    
    
    TotalSquare
    
    
    Annual
    
    
    Square
    
    
    Annual
    
    
    Square
    
    
    Annual
    
    
    Square
    
    
    AnnualFeet
    
    
    Net Rent
    
    
    Feet
    
    
    Net Rent
    
    
    Feet
    
    
    Net Rent
    
    
    Feet
    
    
    Net Rent2006 (6 months)
    
    
    1,399
    
    
    $
    5,219
    
    
    
    626
    
    
    $
    5,574
    
    
    
    644
    
    
    $
    8,131
    
    
    
    2,669
    
    
    $
    18,9242007
    
    
    4,050
    
    
    
    16,999
    
    
    
    2,067
    
    
    
    19,515
    
    
    
    2,049
    
    
    
    28,840
    
    
    
    8,166
    
    
    
    65,3542008
    
    
    4,610
    
    
    
    18,882
    
    
    
    2,242
    
    
    
    21,234
    
    
    
    2,642
    
    
    
    39,510
    
    
    
    9,494
    
    
    
    79,6262009
    
    
    4,334
    
    
    
    19,696
    
    
    
    1,949
    
    
    
    18,244
    
    
    
    2,890
    
    
    
    44,424
    
    
    
    9,173
    
    
    
    82,3642010
    
    
    2,076
    
    
    
    10,128
    
    
    
    1,533
    
    
    
    14,932
    
    
    
    2,602
    
    
    
    38,696
    
    
    
    6,211
    
    
    
    63,7562011
    
    
    2,974
    
    
    
    13,617
    
    
    
    915
    
    
    
    9,880
    
    
    
    2,193
    
    
    
    35,387
    
    
    
    6,082
    
    
    
    58,884Thereafter
    
    
    9,539
    
    
    
    51,389
    
    
    
    2,365
    
    
    
    25,645
    
    
    
    5,302
    
    
    
    96,283
    
    
    
    17,206
    
    
    
    173,317TOTAL
    
    
    28,982
    
    
    $
    135,930
    
    
    
    11,697
    
    
    $
    115,024
    
    
    
    18,322
    
    
    $
    291,271
    
    
    
    59,001
    
    
    $
    542,225
  Square FeetScheduled
    
    Industrial-
    
    
    Industrial-
    
    
    
    
    
    
    
    
    
    
    Percent
    
    
    TotalIn-Service Date
    
    Distribution
    
    
    Flex
    
    
    Office
    
    
    Total
    
    
    Leased
    
    
    Investment3rd Quarter 2006
    
    
    130,000
    
    
    
    46,500
    
    
    
    135,952
    
    
    
    312,452
    
    
    
    93.1
    %
    
    $
    34,7734th Quarter 2006
    
    
    
    
    
    
    48,000
    
    
    
    76,255
    
    
    
    124,255
    
    
    
    52.5
    %
    
    
    21,0171st Quarter 2007
    
    
    203,092
    
    
    
    79,600
    
    
    
    154,424
    
    
    
    437,116
    
    
    
    65.3
    %
    
    
    40,7302nd Quarter 2007
    
    
    150,000
    
    
    
    
    
    
    
    129,638
    
    
    
    279,638
    
    
    
    39.9
    %
    
    
    40,7383rd Quarter 2007
    
    
    1,950,320
    
    
    
    96,000
    
    
    
    230,000
    
    
    
    2,276,320
    
    
    
    15.1
    %
    
    
    139,8274th Quarter 2007
    
    
    168,000
    
    
    
    83,200
    
    
    
    450,000
    
    
    
    701,200
    
    
    
    64.2
    %
    
    
    104,4541st Quarter 2008
    
    
    592,672
    
    
    
    
    
    
    
    110,154
    
    
    
    702,826
    
    
    
    
    
    
    
    60,8942nd Quarter 2008
    
    
    
    
    
    
    
    
    
    
    75,816
    
    
    
    75,816
    
    
    
    
    
    
    
    10,4563rd Quarter 2008
    
    
    
    
    
    
    
    
    
    
    1,253,223
    
    
    
    1,253,223
    
    
    
    78.4
    %
    
    
    472,000TOTAL
    
    
    3,194,084
    
    
    
    353,300
    
    
    
    2,615,462
    
    
    
    6,162,846
    
    
    
    41.1
    %
    
    $
    924,889
 30




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##### Table of Contents



Investment in Unconsolidated Joint Ventures
  Calculation of Funds from Operations
 31




---



##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Reconciliation of net income to FFO  basicNet Income
    
    $
    68,450
    
    
    $
    44,557
    
    
    $
    158,877
    
    
    $
    90,158Basic
 Income available to common shareholders
    
    
    68,450
    
    
    
    44,557
    
    
    
    158,877
    
    
    
    90,158Basic  income available to common shareholders per weighted
average share
    
    $
    0.77
    
    
    $
    0.51
    
    
    $
    1.79
    
    
    $
    1.04Adjustments:Depreciation and amortization of unconsolidated joint ventures
    
    
    763
    
    
    
    286
    
    
    
    1,316
    
    
    
    652Depreciation and amortization
    
    
    37,809
    
    
    
    37,085
    
    
    
    74,400
    
    
    
    71,783Gain on property dispositions
    
    
    (34,649
    )
    
    
    (6,740
    )
    
    
    (94,295
    )
    
    
    (15,607
    )Minority interest share in addback for depreciation and amortization
and gain on property dispositions
    
    
    (176
    )
    
    
    (1,185
    )
    
    
    681
    
    
    
    (2,211
    )Funds
from operations available to common shareholders   basic
    
    $
    72,197
    
    
    $
    74,003
    
    
    $
    140,979
    
    
    $
    144,775Basic Funds from operations available to common shareholders per
weighted average share
    
    $
    0.81
    
    
    $
    0.85
    
    
    $
    1.59
    
    
    $
    1.68Reconciliation of net income to FFO  diluted:Net Income
    
    $
    68,450
    
    
    $
    44,557
    
    
    $
    158,877
    
    
    $
    90,158Diluted  income available to common shareholders
    
    
    68,450
    
    
    
    44,557
    
    
    
    158,877
    
    
    
    90,158Diluted  income available to common shareholders per weighted
average share
    
    $
    0.76
    
    
    $
    0.51
    
    
    $
    1.76
    
    
    $
    1.03Adjustments:Depreciation and amortization of unconsolidated joint ventures
    
    
    763
    
    
    
    286
    
    
    
    1,316
    
    
    
    652Depreciation and amortization
    
    
    37,809
    
    
    
    37,085
    
    
    
    74,400
    
    
    
    71,783Gain on property dispositions
    
    
    (34,649
    )
    
    
    (6,740
    )
    
    
    (94,295
    )
    
    
    (15,607
    )Minority interest less preferred share distributions
    
    
    3,210
    
    
    
    1,797
    
    
    
    6,792
    
    
    
    3,652Funds from operations available to common shareholders  diluted
    
    $
    75,583
    
    
    $
    76,985
    
    
    $
    147,090
    
    
    $
    150,638Diluted Funds from operations available to common shareholders per
weighted average share
    
    $
    0.80
    
    
    $
    0.84
    
    
    $
    1.57
    
    
    $
    1.65Reconciliation of weighted average shares:Weighted average common shares  all basic calculations
    
    
    88,934
    
    
    
    86,685
    
    
    
    88,587
    
    
    
    86,278Dilutive shares for long term compensation plans
    
    
    1,390
    
    
    
    1,449
    
    
    
    1,514
    
    
    
    1,438Diluted shares for net income calculations
    
    
    90,324
    
    
    
    88,134
    
    
    
    90,101
    
    
    
    87,716Weighted average common units
    
    
    3,653
    
    
    
    3,517
    
    
    
    3,586
    
    
    
    3,592Diluted shares for Funds from operations calculations
    
    
    93,977
    
    
    
    91,651
    
    
    
    93,687
    
    
    
    91,308
 Inflation
 32




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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
 33




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##### Table of Contents



Part II: Other Information
                34




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##### Table of Contents



3.1
    
    Liberty Property Trust First Amended and Restated Bylaws, as amended
on April 5, 2006 (Incorporated by reference to Exhibit 3.1 to the
Registrants Current Report on Form 8-K, filed with the Commission
on April 10, 2006).10.1
    
    Amendment, dated April 27, 2006, to the Amended and Restated Rights
Agreement, dated as of September 14, 2004, of the Registrant.
(Incorporated by reference to Exhibit 10.1 to the Registrants
Current Report on Form 8-K, filed with the Commission on May 1,
2006.)10.2
    
    Liberty Property Trust Amended and Restated Share Incentive Plan, as
amended effective May 18, 2006. (Incorporated by reference to
Appendix A to the Registrants Definitive Proxy Statement for the
Annual Meeting of Shareholders held on May 18, 2006, filed with the
Securities and Exchange Commission on April 18, 2006.)10.3*+
    
    Amended and Restated Limited Partnership Agreement of
Liberty/Commerz 1701 JFK Boulevard Limited Partnership, dated as of
April 11, 2006, by and among Liberty Property Philadelphia
Corporation IV East, as general partner, and the Operating
Partnership and 1701 JFK Boulevard Philadelphia, L.P. as limited
partners.10.4*+
    
    NOI Support Agreement, dated as of April 11, 2006, by Liberty
Property Limited Partnership in favor of Liberty/Commerz 1701 JFK
Boulevard, L.P. and 1701 JFK Boulevard Philadelphia, L.P.10.5*+
    
    Completion and Payment Agreement and Guaranty, dated as of April 11,
2006, by the Operating Partnership for the benefit of 1701 JFK
Boulevard Philadelphia, L.P. and Liberty/Commerz 1701 JFK Boulevard,
L.P.31.1*
    
    Certifications of the Chief Executive Officer of Liberty Property
Trust required by Rule 13a-14(a) under the Securities Exchange Act
of 1934.31.2*
    
    Certifications of the Chief Financial Officer of Liberty Property
Trust required by Rule 13a-14(a) under the Securities Exchange Act
of 1934.31.3*
    
    Certifications of the Chief Executive Officer of Liberty Property
Trust, in its capacity as the general partner of Liberty Property
Limited Partnership, required by Rule 13a-14(a) under the Securities
Exchange Act of 1934.31.4*
    
    Certifications of the Chief Financial Officer of Liberty Property
Trust, in its capacity as the general partner of Liberty Property
Limited Partnership, required by Rule 13a-14(a) under the Securities
Exchange Act of 1934.32.1*
    
    Certifications of the Chief Executive Officer of Liberty Property
Trust required under Rule 13a-14(b) of the Securities Exchange Act
of 1934, as amended. (This exhibit shall not be deemed filed for
purposes of Section 18 of the Securities Exchange Act of 1934, as
amended, or otherwise subject to the liability of that section.
Further, this exhibit shall not be deemed to be incorporated by
reference into any filing under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended.)
 35




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##### Table of Contents



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.+

Confidential treatment has been requested with respect to
portions of this exhibit pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended. 36




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##### Table of Contents



SIGNATURES
  LIBERTY PROPERTY TRUST
 /s/ WILLIAM P. HANKOWSKY
    
    
    
    August 7, 2006William P. Hankowsky
    
    
    
    DatePresident and Chief Executive Officer/s/ GEORGE J. ALBURGER, JR.
    
    
    
    August 7, 2006George J. Alburger, Jr.
    
    
    
    DateExecutive Vice President and Chief Financial Officer
 37




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##### Table of Contents



SIGNATURES
  LIBERTY PROPERTY LIMITED PARTNERSHIP
 BY:
    
    Liberty Property TrustGeneral Partner
 /s/ WILLIAM P. HANKOWSKY
    
    
    
    August 7, 2006William P. Hankowsky
    
    
    
    DatePresident and Chief Executive Officer/s/ GEORGE J. ALBURGER, JR.
    
    
    
    August 7, 2006George J. Alburger, Jr.
    
    
    
    DateExecutive Vice President and Chief Financial Officer
 38




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##### Table of Contents



EXHIBIT INDEX
 EXHIBIT NO.
    
    DESCRIPTION3.1
    
    Liberty Property Trust First Amended and Restated Bylaws, as amended
on April 5, 2006 (Incorporated by reference to Exhibit 3.1 to the
Registrants Current Report on Form 8-K, filed with the Commission
on April 10, 2006).10.1
    
    Amendment, dated April 27, 2006, to the Amended and Restated Rights Agreement, dated as of
September 14, 2004, of the Registrant. (Incorporated by reference to Exhibit 10.1 to the
Registrants Current Report on Form 8-K, filed with the Commission on May 1, 2006.)10.2
    
    Liberty Property Trust Amended and Restated Share Incentive Plan, as amended effective May
18, 2006. (Incorporated by reference to Appendix A to the Registrants Definitive Proxy
Statement for the Annual Meeting of Shareholders held on May 18, 2006, filed with the
Securities and Exchange Commission on April 18, 2006.)10.3*+
    
    Amended and Restated Limited Partnership Agreement of Liberty/Commerz 1701 JFK Boulevard
Limited Partnership, dated as of April 11, 2006, by and among Liberty Property Philadelphia
Corporation IV East, as general partner, and the Operating Partnership and 1701 JFK Boulevard
Philadelphia, L.P. as limited partners10.4*+
    
    NOI Support Agreement, dated as of April 11, 2006, by Liberty Property Limited Partnership in
favor of Liberty/Commerz 1701 JFK Boulevard, L.P. and 1701 JFK Boulevard Philadelphia, L.P.10.5*+
    
    Completion and Payment Agreement and Guaranty, dated as of April 11, 2006, by the Operating
Partnership for the benefit of 1701 JFK Boulevard Philadelphia, L.P. and Liberty/Commerz 1701
JFK Boulevard, L.P.31.1*
    
    Certifications of the Chief Executive Officer of Liberty Property Trust required by Rule
13a-14(a) under the Securities Exchange Act of 1934.31.2*
    
    Certifications of the Chief Financial Officer of Liberty Property Trust required by Rule
13a-14(a) under the Securities Exchange Act of 1934.31.3*
    
    Certifications of the Chief Executive Officer of Liberty Property Trust, in its capacity as
the general partner of Liberty Property Limited Partnership, required by Rule 13a-14(a) under
the Securities Exchange Act of 1934.31.4*
    
    Certifications of the Chief Financial Officer of Liberty Property Trust, in its capacity as
the general partner of Liberty Property Limited Partnership, required by Rule 13a-14(a) under
the Securities Exchange Act of 1934.32.1*
    
    Certifications of the Chief Executive Officer of Liberty Property Trust required under Rule
13a-14(b) of the Securities Exchange Act of 1934, as amended. (This exhibit shall not be
deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended,
or otherwise subject to the liability of that section. Further, this exhibit shall not be
deemed to be incorporated by reference into any filing under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended.)32.2*
    
    Certifications of the Chief Financial Officer of Liberty Property Trust required by Rule
13a-14(b) under the Securities Exchange Act of 1934, as amended. (This exhibit shall not be
deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended,
or otherwise subject to the liability of that section. Further, this exhibit shall not be
deemed to be incorporated by reference into any filing under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended.)32.3*
    
    Certifications of the Chief Executive Officer of Liberty Property Trust, in its capacity as
the general partner of Liberty Property Limited Partnership, required by Rule 13a-14(b) under
the Securities Exchange Act of 1934, as amended. (This exhibit shall not be deemed filed
for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise
subject to the liability of that
 39




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##### Table of Contents



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.+

Confidential treatment has been requested with respect to
portions of this exhibit pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended. 40