<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549


                                    FORM 10-Q


                     QUARTERLY REPORT PURSUANT TO SECTION 13
                 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                    For the quarter ended September 30, 1999

                         Commission file number 1-12193

                               ARDEN REALTY, INC.
             (Exact name of registrant as specified in its charter)

            MARYLAND                                    95-04578533
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

                            11601 WILSHIRE BOULEVARD,
                                    4TH FLOOR
                       LOS ANGELES, CALIFORNIA 90025-1740
              (Address and zip code of principal executive offices)

Registrant's telephone number, including area code: (310) 966-2600

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports); and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X]   No [ ]

As of November 4, 1999, there were 63,349,977 shares of the registrant's Common
Stock, $.01 par value, issued and outstanding.

<PAGE>   2

                               ARDEN REALTY, INC.
                                    FORM 10-Q

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                 PAGE NO.
                                                                                                 --------
<S>                                                                                              <C>
PART I.  FINANCIAL INFORMATION

         Item 1.  Financial Statements

                  Consolidated Balance Sheets as of September 30, 1999 (Unaudited) and
                      December 31, 1998.............................................................3

                  Consolidated Statements of Income for the three and nine months ended
                     September 30, 1999 and 1998 (Unaudited)........................................4

                  Consolidated Statements of Cash Flows for the nine months ended

                     September 30, 1999 and 1998 (Unaudited)........................................5

                  Notes to Consolidated Financial Statements........................................6

         Item 2.  Management's Discussion and Analysis of Financial

                     Condition and Results of Operations............................................9

         Item 3.  Quantitative and Qualitative Disclosures about Market Risk.......................23

PART II. OTHER INFORMATION.........................................................................24

         SIGNATURES................................................................................25
</TABLE>


                                       2
<PAGE>   3

PART I -- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                               ARDEN REALTY, INC.
                           CONSOLIDATED BALANCE SHEETS
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                                    SEPTEMBER 30,        DECEMBER 31,
                                                                                        1999                 1998
                                                                                    -------------        ------------
                                                                                     (UNAUDITED)
<S>                                                                                 <C>                  <C>
ASSETS
Investment in real estate:
   Land .........................................................................     $  465,349          $  447,339
   Buildings and improvements ...................................................      1,798,844           1,673,149
   Tenant improvements ..........................................................         86,210              52,706
                                                                                      ----------          ----------
                                                                                       2,350,403           2,173,194
   Less:  accumulated depreciation ..............................................       (130,229)            (84,312)
                                                                                      ----------          ----------
                                                                                       2,220,174           2,088,882
   Properties under development .................................................        170,413             150,716
                                                                                      ----------          ----------
     Net investment in real estate ..............................................      2,390,587           2,239,598

Cash and cash equivalents .......................................................          3,651               4,578
Restricted cash .................................................................         20,496              12,409
Rent and other receivables ......................................................         10,806               9,024
Mortgage notes receivable, net of discount ......................................         13,996              14,329
Deferred rent ...................................................................         22,561              17,004
Prepaid financing and leasing costs, net of accumulated amortization ............         44,611              31,230
Prepaid expenses and other assets ...............................................          7,150               3,747
                                                                                      ----------          ----------
     Total assets ...............................................................     $2,513,858          $2,331,919
                                                                                      ==========          ==========

LIABILITIES
Mortgage loans payable ..........................................................     $  733,238          $  544,027
Unsecured lines of credit .......................................................        243,850             296,450
Accounts payable and accrued expenses ...........................................         26,285              21,687
Security deposits ...............................................................         15,360              13,933
Dividends payable ...............................................................         28,190              26,210
                                                                                      ----------          ----------
     Total liabilities ..........................................................      1,046,923             902,307
                                                                                      ----------          ----------
Minority interests ..............................................................         85,787              56,222

STOCKHOLDERS' EQUITY
   Preferred stock, $.01 par value, 20,000,000 shares authorized, none issued ...             --                  --
   Common stock, $.01 par value, 100,000,000 shares authorized,
     63,349,977 and 62,404,737 issued and outstanding, respectively .............            633                 624
   Additional paid-in capital ...................................................      1,382,652           1,374,813
     Notes receivable from officers-shareholders for purchase of common stock ...         (2,137)             (2,047)
                                                                                      ----------          ----------
       Total stockholders' equity ...............................................      1,381,148           1,373,390
                                                                                      ----------          ----------
       Total liabilities and stockholders' equity ...............................     $2,513,858          $2,331,919
                                                                                      ==========          ==========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       3
<PAGE>   4

                               ARDEN REALTY, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                      THREE MONTHS ENDED                 NINE MONTHS ENDED
                                                         SEPTEMBER 30,                     SEPTEMBER  30,
                                                    ------------------------          --------------------------
                                                      1999             1998             1999              1998
                                                    -------          -------          --------          --------
<S>                                                 <C>              <C>              <C>               <C>
Revenue ........................................    $86,723          $76,738          $248,771          $202,000
Property operating expenses ....................     26,744           24,072            74,698            62,353
                                                    -------          -------          --------          --------
                                                     59,979           52,666           174,073           139,647

General and administrative expenses ............      1,832            1,564             5,015             4,587
Interest expense ...............................     16,047           11,988            43,685            31,139
Depreciation and amortization ..................     17,810           12,954            51,198            37,180
Interest and other income ......................       (751)            (680)           (2,092)           (2,833)
                                                    -------          -------          --------          --------
Income before minority interest ................     25,041           26,840            76,267            69,574
Minority interests .............................     (1,120)          (1,253)           (3,302)           (4,188)
                                                    -------          -------          --------          --------
Net income .....................................    $23,921          $25,587          $ 72,965          $ 65,386
                                                    =======          =======          ========          ========

Net income per common share:
     Basic .....................................    $  0.38          $  0.41          $   1.16          $   1.14
                                                    =======          =======          ========          ========
     Diluted ...................................    $  0.38          $  0.41          $   1.16          $   1.14
                                                    =======          =======          ========          ========

Weighted average common shares outstanding:
     Basic .....................................     63,316           62,364            62,906            57,398
                                                    =======          =======          ========          ========
     Diluted ...................................     63,417           62,470            63,022            57,576
                                                    =======          =======          ========          ========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       4
<PAGE>   5

                               ARDEN REALTY, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                    NINE MONTHS ENDED
                                                                                      SEPTEMBER 30,
                                                                              ------------------------------
                                                                                1999                 1998
                                                                              ---------          -----------
<S>                                                                           <C>                <C>
OPERATING ACTIVITIES:
  Net income .............................................................    $  72,965          $    65,386
  Adjustments to reconcile net income to net cash
    provided by operating activities:
    Minority interests ...................................................        3,302                3,613
    Depreciation and amortization ........................................       51,198               37,180
    Amortization of loan costs ...........................................        2,036                1,342
    Changes in operating assets and liabilities:
       Rent and other receivables ........................................       (1,539)              (1,468)
       Deferred rent .....................................................       (5,557)              (5,593)
       Prepaid financing and leasing costs ...............................      (19,997)             (18,421)
       Prepaid expenses and other assets .................................       (3,910)                  68
       Accounts payable and accrued expenses .............................        4,598               13,591
       Security deposits .................................................        1,427                6,762
                                                                              ---------          -----------
  Net cash provided by operating activities ..............................      104,523              102,460
                                                                              ---------          -----------
INVESTING ACTIVITIES:
  Acquisitions and improvements to investment in real estate .............     (197,100)          (1,073,817)
  Escrow deposit .........................................................           --               20,000
                                                                              ---------          -----------
  Net cash used in investing activities ..................................     (197,100)          (1,053,817)
                                                                              ---------          -----------
FINANCING ACTIVITIES:
  Proceeds from mortgage loans ...........................................      301,802              666,919
  Repayments of mortgage loans ...........................................     (112,591)            (370,498)
  Proceeds from unsecured lines of credit ................................      159,461              380,550
  Repayments of unsecured lines of credit ................................     (212,061)            (335,500)
  Proceeds from issuance of Preferred Operating Partnership Units,
      net of offering costs ..............................................       49,000                   --
  Redemption of Operating Partnership Units ..............................           --              (16,305)
  Proceeds from issuance of common stock, net of offering costs ..........           --              706,950
  Increase in restricted cash ............................................       (8,087)              (9,341)
  Distributions to minority interests ....................................       (3,668)              (3,833)
  Dividends paid .........................................................      (82,206)             (66,059)
                                                                              ---------          -----------
  Net cash provided by financing activities ..............................       91,650              952,883
                                                                              ---------          -----------
  Net (decrease) increase in cash and cash equivalents ...................         (927)               1,526
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .........................        4,578                5,300
                                                                              ---------          -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ...............................    $   3,651          $     6,826
                                                                              =========          ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid during the period for interest, net of amount capitalized ....    $  47,842          $    23,118
                                                                              =========          ===========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       5
<PAGE>   6

                               ARDEN REALTY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1999
                                   (UNAUDITED)

1. DESCRIPTION OF BUSINESS

        The terms "Arden Realty", "us", "we" and "our" as used in this report
refer to Arden Realty, Inc. Through our controlling interest in Arden Realty
Limited Partnership (the "Operating Partnership") and our other subsidiaries, we
are engaged in owning, acquiring, developing, renovating, leasing and managing
commercial properties located in Southern California. As of September 30, 1999,
our portfolio was comprised of 142 primarily office properties (the
"Properties") with approximately 18.5 million rentable square feet.

        The accompanying consolidated financial statements include our accounts,
and the accounts of the Operating Partnership and our other subsidiaries. All
significant intercompany balances and transactions have been eliminated in
consolidation.

        Minority interests for the nine-month periods ended September 30, 1999
and 1998 include limited partnership interests in the Operating Partnership of
approximately 4.2% and 5.3%, respectively.

2. INTERIM FINANCIAL DATA

        The accompanying consolidated financial statements should be read in
conjunction with our 1998 Annual Report on Form 10-K/A as filed with the
Securities and Exchange Commission. The accompanying financial information
reflects all adjustments, which are, in our opinion, of a normal recurring
nature and necessary for a fair presentation of our financial position, results
of operations and cash flows for the interim periods. Interim results of
operations are not necessarily indicative of the results to be expected for the
full year.

        Certain prior period amounts have been reclassified to conform with the
current period presentation.

3. ACQUISITIONS

        The following table sets forth certain information regarding our
acquisition of office properties for the nine months ended September 30, 1999.

<TABLE>
<CAPTION>
                                                                                                        TOTAL
                                                           APPROXIMATE            MONTH              ACQUISITION
                                                           NET RENTABLE             OF                   COST
        PROPERTY NAME                   LOCATION           SQUARE FEET          ACQUISITION         (IN MILLIONS)
-------------------------------    -------------------    ---------------    ------------------    -----------------
<S>                                <C>                    <C>                <C>                   <C>
Hillside Corporate Center          Thousand Oaks              59,876           February 1999            $ 9.6
Westlake Gardens II                Westlake                   48,874           April 1999                 7.3
Howard Hughes Tower                Los Angeles               313,833           May 1999                  53.0
2001 Wilshire Boulevard            Santa Monica              101,125           September 1999            19.9
                                                             -------                                    -----
                                                             523,708                                    $89.8
                                                             =======                                    =====
</TABLE>

4. LOANS PAYABLE

        On January 20, 1999, our Lehman Bridge Loan I was expanded from $81.4
million to $111.4 million. The Lehman Bridge Loan I was secured by seven of our
properties, bore interest at LIBOR plus 2.25% per annum and required monthly
payments of interest only. On May 5, 1999, the Lehman Bridge Loan I was
refinanced; see discussion below.

        On April 5, 1999, we closed a $115 million loan with Mass Mutual Life
Insurance Company (the "Mortgage Financing V Loan"). The Mortgage Financing V
Loan is secured by 12 Properties, has a ten year term, bears interest at a fixed
rate of 6.94%, requires monthly payments of principal and interest and is
amortized over a 25 year period. Proceeds from this loan were used to repay
$76.4 million of our Lehman Bridge Loan I and to repay a portion of our lines of
credit.

        On April 30, 1999 we closed a $22.5 million loan with Lehman Brothers,
Inc. (the "Mortgage Financing VI Loan"). The Mortgage Financing VI Loan is
secured by 3 properties, has a ten year term and bears interest at a fixed


                                       6
<PAGE>   7

rate of 7.54%, requires monthly payments of principal and interest and is
amortized over a 30 year period. Proceeds from this loan were used to repay a
portion of our lines of credit.

        On May 5, 1999, we refinanced the remaining $35 million outstanding
under the Lehman Bridge Loan I with one secured note payable totaling $62.5
million to Lehman Brothers, Inc. (the "Lehman Bridge Loan III"). The Lehman
Bridge Loan III is secured by 3 properties, bears interest at LIBOR plus 2.25%
per annum (effective rate of 7.62% at September 30, 1999), requires monthly
payments of interest only and matures on November 1, 2000. The remaining
proceeds from this loan were used to repay a portion of our lines of credit.

        On July 23, 1999, we entered into a construction loan with a total
commitment of $50 million (the "Construction Loan") related to our development
of the 240,724 square foot 6060 Center Drive office building in the Howard
Hughes Center. The Construction Loan is secured by certain property and
construction improvements, bears interest at LIBOR plus 2.0% per annum
(effective rate of 7.43% at September 30, 1999), requires monthly payments of
interest, and matures December 30, 2000, with two one year extension options.
Subject to meeting certain construction completion and leasing benchmarks, as
defined, the interest rate on the Construction Loan may be reduced to LIBOR plus
1.75%, then to LIBOR plus 1.5%. As of September 30, 1999, there was $13.8
million outstanding on the Construction Loan and $36.2 million was available for
additional borrowing.

        On July 27, 1999, we closed a $58 million loan with Lehman Brothers,
Inc. (the "Lehman Bridge Loan IV"). The Lehman Bridge Loan IV is secured by 6
properties, bears interest at LIBOR plus 2.25% per annum (effective rate of
7.62% at September 30, 1999), requires monthly payments of interest only and
matures on November 1, 2000. Proceeds from this loan were used to repay a
portion of our floating rate debt and to fund certain capital expenditures.

5. STOCKHOLDERS' EQUITY

        On March 9, 1999, we declared a quarterly dividend of $.445 per share to
shareholders of record at the close of business on March 31, 1999, which was
paid on April 23, 1999.

        On June 16, 1999, we declared a quarterly dividend of $.445 per share to
shareholders of record at the close of business on June 30, 1999, which was paid
on July 29, 1999.

        On September 7, 1999, the Operating Partnership completed a $50 million
private placement of 8-5/8% Series B Cumulative Redeemable Perpetual Preferred
Operating Partnership Units (the "Preferred OP Units") to an institutional
investor. The Preferred OP Units are callable by the Operating Partnership after
five years and are exchangeable after 10 years by the holder into 8-5/8% Series
B Cumulative Redeemable Preferred Stock of Arden Realty Inc., on a one-for-one
basis. The Preferred OP Units have no stated maturity or mandatory redemption
and are subordinate to all debt. We used the net proceeds from this private
placement to repay a portion of our lines of credit.

        On September 16, 1999, we declared a quarterly dividend of $.445 per
share to shareholders of record at the close of business on September 30, 1999,
which was paid on October 28, 1999.


                                       7
<PAGE>   8

6. REVENUE FROM RENTAL OPERATIONS AND PROPERTY OPERATING EXPENSES

        Revenue from rental operations and property operating expenses are
summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                             THREE MONTHS                       NINE MONTHS
                                          ENDED SEPTEMBER 30,                ENDED SEPTEMBER 30,
                                        -----------------------          -------------------------
                                          1999            1998             1999             1998
                                        -------         -------          --------         --------
                                                               (UNAUDITED)
<S>                                     <C>             <C>              <C>              <C>
Revenue from Rental Operations:
   Rental ..........................    $74,193         $68,609          $216,034         $180,820
   Tenant reimbursements ...........      4,554           2,211            10,890            6,268
   Parking, net of expenses ........      3,826           3,252            10,583            8,784
   Other rental operations .........      4,150           2,666            11,264            6,128
                                        -------         -------          --------         --------
                                         86,723          76,738           248,771          202,000
                                        -------         -------          --------         --------
Property Operating Expenses:
   Repairs and maintenance .........      8,255           7,251            24,180           19,401
   Utilities .......................      8,608           8,663            21,487           19,261
   Real estate taxes ...............      5,765           4,580            17,181           14,052
   Insurance .......................        992           1,096             2,962            2,978
   Ground rent .....................        199             178               693              534
   Marketing and other .............      2,925           2,304             8,195            6,127
                                        -------         -------          --------         --------
                                         26,744          24,072            74,698           62,353
                                        -------         -------          --------         --------
                                        $59,979         $52,666          $174,073         $139,647
                                        =======         =======          ========         ========
</TABLE>


                                       8
<PAGE>   9

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

OVERVIEW

        The following discussion relates to our consolidated financial
statements and should be read in conjunction with the financial statements and
related notes thereto included in our 1998 Annual Report on Form 10-K/A.

        Our primary business strategy is to actively manage our portfolio of
commercial properties located in Southern California to achieve gains in
occupancy and rental rates and to reduce operating expenses. When market
conditions permit, we may also acquire underperforming office and industrial
properties, properties in need of renovation or properties that provide
attractive yields with stable cash flow in submarkets where we can utilize our
local market expertise and extensive real estate experience. We may also
continue to develop new properties, when market conditions permit, in submarkets
where we have extensive local market expertise. As of September 30, 1999, our
portfolio was comprised of 142 primarily office properties with approximately
18.5 million square feet. In particular, during the nine months ended September
30, 1999, we have:

-    Commenced construction on 6060 Center Drive, a 240,724 square foot office
     building located at the Howard Hughes Center in Los Angeles. Total
     estimated costs, including purchase and closing costs, capital
     expenditures, tenant improvements, leasing commissions and carrying costs
     during construction are approximately $56 million. Construction on 6060
     Center Drive is expected to be complete during the second quarter of 2000.

-    Acquired four office properties, all located in Southern California, with
     approximately 524,000 rentable square feet. One of these properties, Howard
     Hughes Tower, is a 313,833 square foot building located in the Howard
     Hughes Center. With this purchase, we now own two of the three existing
     office buildings in the Howard Hughes Center, as well as the building
     housing the Spectrum Executive Health Club.


                                       9
<PAGE>   10

RESULTS OF OPERATIONS

        Our financial position and operating results are primarily comprised of
our portfolio of commercial properties and income derived therefrom. Therefore,
financial data from period to period will be affected by the timing of
significant property acquisitions.

        Comparison of the nine months ended September 30, 1999 to the nine
months ended September 30, 1998 (in thousands, except number of properties):

<TABLE>
<CAPTION>
                                                    NINE MONTHS ENDED
                                                       SEPTEMBER 30,
                                                 -------------------------         DOLLAR           PERCENT
                                                   1999             1998           CHANGE           CHANGE
                                                 --------         --------         -------          -------
<S>                                              <C>              <C>              <C>              <C>
REVENUE
  Revenue from rental operations:
    Rental ..................................    $216,034         $180,820         $35,214             20%
    Tenant reimbursements ...................      10,890            6,268           4,622             74%
    Parking, net of expenses ................      10,583            8,784           1,799             20%
    Other rental operations .................      11,264            6,128           5,136             84%
                                                 --------         --------         -------            ---
                                                  248,771          202,000          46,771             23%
  Interest and other income .................       2,092            2,833            (741)           (26%)
                                                 --------         --------         -------            ---
    Total revenue ...........................    $250,863         $204,833         $46,030             22%
                                                 ========         ========         =======            ===

EXPENSES
  Property operating expenses:
    Repairs and maintenance .................    $ 24,180         $ 19,401         $ 4,779             25%
    Utilities ...............................      21,487           19,261           2,226             12%
    Real estate taxes .......................      17,181           14,052           3,129             22%
    Insurance ...............................       2,962            2,978             (16)             0%
    Ground rent .............................         693              534             159             30%
    Marketing and other .....................       8,195            6,127           2,068             34%
                                                 --------         --------         -------            ---
       Total property operating expenses ....      74,698           62,353          12,345             20%
  General and administrative ................       5,015            4,587             428              9%
  Interest ..................................      43,685           31,139          12,546             40%
  Depreciation and amortization .............      51,198           37,180          14,018             38%
                                                 --------         --------         -------            ---
    Total expenses ..........................    $174,596         $135,259         $39,337             29%
                                                 ========         ========         =======            ===

OTHER DATA:
NUMBER OF PROPERTIES
  Acquired during period ....................           4               66             N/A            N/A
  Owned at end of period ....................         142              138             N/A            N/A

SQUARE FEET:
  Acquired during period ....................         524            7,646             N/A            N/A
  Owned at end of period ....................      18,492           17,968             N/A            N/A
</TABLE>


                                       10
<PAGE>   11

        The increase in revenue from rental operations and property operating
expenses for the nine months ended September 30, 1999 as compared to the same
period in 1998 is primarily from the 70 properties we acquired after December
31, 1997.

        Following is a summary of the increase in revenue from rental operations
and property operating expenses that relates to the 70 properties we acquired
after December 31, 1997 and for the 72 properties we owned for all of the nine
month periods ended September 30, 1998 and 1999 (in thousands, except number of
properties).

<TABLE>
<CAPTION>
                                                                                  PROPERTIES OWNED
                                                                                   FOR ALL OF THE
                                                            PROPERTIES ACQUIRED   NINE MONTHS ENDED
                                                                  AFTER            SEPTEMBER 30,
                                         TOTAL VARIANCE      DECEMBER 31, 1997    1998 AND 1999(1)
                                         --------------     -------------------   -----------------
<S>                                      <C>                <C>                   <C>
REVENUE FROM RENTAL OPERATIONS:
   Rental ..........................        $35,214               $28,344             $ 6,870
   Tenant reimbursements ...........          4,622                 3,759                 863
   Parking, net of operations ......          1,799                 1,161                 638
   Other rental operations .........          5,136                 1,932               3,204
                                            -------               -------             -------
                                            $46,771               $35,196             $11,575
                                            =======               =======             =======

PROPERTY OPERATING EXPENSES:
   Repairs and maintenance .........        $ 4,779               $ 3,295             $ 1,484
   Utilities .......................          2,226                 2,047                 179
   Real estate taxes ...............          3,129                 2,491                 638
   Insurance .......................            (16)                  224                (240)
   Ground rent .....................            159                    --                 159
   Marketing and other .............          2,068                 1,282                 786
                                            -------               -------             -------
                                            $12,345               $ 9,339             $ 3,006
                                            =======               =======             =======

OTHER DATA:
   Number of Properties ............            N/A                    70                  72
   Square feet .....................            N/A                 8,192              10,300
</TABLE>

(1) See the Same Properties analysis below.

        Interest and other income decreased by approximately $700,000 during the
nine months ended September 30, 1999 as compared to the same period in 1998,
primarily due to higher interest income earned in 1998 on $20 million held in
escrow pursuant to the purchase of a portfolio of 50 properties in March 1998.

        General and administrative expenses were approximately $5.0 million or
2.0% of total revenues during the nine months ended September 30, 1999 as
compared to $4.6 million or 2.2% of total revenues during the same period in
1998. This decrease as a percentage of total revenues was primarily due to
benefits achieved from economies of scale and concentration over a larger
property portfolio.

        Interest expense increased approximately $12.5 million during the nine
months ended September 30, 1999 as compared to the same period in 1998. This
increase was due to higher outstanding debt balances in 1999, primarily used to
fund property acquisitions, capital expenditures and tenant improvements.

        Depreciation and amortization expense increased by approximately $14.0
million during the nine months ended September 30, 1999, primarily from
depreciation related to the addition of approximately $1.3 billion in commercial
properties, capital expenditures and tenant improvements since January 1, 1998.


                                       11
<PAGE>   12

SAME PROPERTIES

        Following is a comparison of property operating data computed under
generally accepted accounting principles ("GAAP Basis") and excluding the
straight-line rent adjustment ("Cash Basis") for the 72 properties we owned for
the entire nine month periods ended September 30, 1999 and 1998 (in thousands,
except number of properties):

<TABLE>
<CAPTION>
                                           NINE MONTHS ENDED
                                             SEPTEMBER 30,
                                       --------------------------          DOLLAR         PERCENT
                                         1999              1998            CHANGE         CHANGE
                                       --------          --------          -------        -------
<S>                                    <C>               <C>               <C>            <C>
GAAP BASIS:
Revenue from rental operations ....    $154,901          $143,326          $11,575            8%
Property operating expenses .......      47,832            44,826            3,006            7%
                                       --------          --------          -------            --
       Net ........................    $107,069          $ 98,500          $ 8,569            9%
                                       ========          ========          =======            ==

CASH BASIS (1):
Revenue from rental operations ....    $152,562          $140,805          $11,757            8%
Property operating expenses .......      47,832            44,826            3,006            7%
                                       --------          --------          -------            --
       Net ........................    $104,730          $ 95,979          $ 8,751            9%
                                       ========          ========          =======            ==

Number of properties ..............          72                72              N/A           N/A
Average occupancy .................        88.2%             84.2%             N/A           N/A
Square feet .......................      10,300            10,300              N/A           N/A
Percentage of total portfolio .....        55.7%             57.3%             N/A           N/A
</TABLE>

(1) Excludes straight-line rent adjustments.

        Revenue from rental operations for these properties, computed on a GAAP
basis, increased by approximately $11.6 million during the nine months ended
September 30, 1999 compared to the same period in 1998, primarily due to a 4.0%
increase in average occupancy and an approximate 2.0% increase in average rental
rates.

        Excluding only the straight-line rent adjustments for these properties,
revenue from rental operations for the nine months ended September 30, 1999,
computed on a Cash Basis, increased by approximately $11.8 million or 8.3%.

        Property operating expenses for these properties increased by
approximately $3.0 million during the nine months ended September 30, 1999
compared to the same period in 1998, primarily due to higher repair and
maintenance, real estate tax, marketing and other expenses in 1999. Increases in
certain repair and maintenance expense items (i.e. janitorial and building
engineering costs) were primarily due to the approximate 4.0% increase in
average occupancy for these properties in 1999. The remaining increase in repair
and maintenance expenses was primarily related to the timing of certain
maintenance items (i.e. window cleanings and tree trimming) and expenses
associated with monitoring and testing equipment and systems in connection with
our Year 2000 readiness program. The increase in real estate tax expense in 1999
was primarily related to lower than normal expense in the third quarter of 1998
due to favorable tax assessment appeals received for certain properties. Due to
an increased focus on raising our portfolio-wide occupancy, certain marketing
and tenant retention related expenses were also higher in 1999.


                                       12
<PAGE>   13

        Comparison of the three months ended September 30, 1999 to the three
months ended September 30, 1998 (in thousands, except number of properties).

<TABLE>
<CAPTION>
                                             THREE MONTHS ENDED
                                                SEPTEMBER 30,
                                          -----------------------         DOLLAR            PERCENT
                                            1999            1998          CHANGE            CHANGE
                                          -------         -------         -------           -------
<S>                                       <C>             <C>             <C>               <C>
REVENUE
  Revenue from rental operations:
    Rental ...........................    $74,193         $68,609         $ 5,584              8%
    Tenant reimbursements ............      4,554           2,211           2,343            106%
    Parking, net of expenses .........      3,826           3,252             574             18%
    Other rental operations ..........      4,150           2,666           1,484             56%
                                          -------         -------         -------            ---
                                           86,723          76,738           9,985             13%
  Interest and other income ..........        751             680              71            (10%)
                                          -------         -------         -------            ---
    Total revenue ....................    $87,474         $77,418         $10,056             13%
                                          =======         =======         =======            ===

EXPENSES
  Property operating expenses:
    Repairs and maintenance ..........    $ 8,255         $ 7,251         $ 1,004             14%
    Utilities ........................      8,608           8,663             (55)             0%
    Real estate taxes ................      5,765           4,580           1,185             26%
    Insurance ........................        992           1,096            (104)            (9%)
    Ground rent ......................        199             178              21             12%
    Marketing and other ..............      2,925           2,304             621             27%
                                          -------         -------         -------            ---
       Total property expenses .......     26,744          24,072           2,672             11%
  General and administrative .........      1,832           1,564             268             17%
  Interest ...........................     16,047          11,988           4,059             34%
  Depreciation and amortization ......     17,810          12,954           4,856             37%
                                          -------         -------         -------            ---
    Total expenses ...................    $62,433         $50,578         $11,855             23%
                                          =======         =======         =======            ===

OTHER DATA:
NUMBER OF PROPERTIES
  Acquired during period .............          1               4             N/A            N/A
  Owned at end of period .............        142             138             N/A            N/A

SQUARE FEET:
  Acquired during period .............        101             511             N/A            N/A
  Owned at end of period .............     18,492          17,968             N/A            N/A
</TABLE>


                                       13
<PAGE>   14

        The increase in revenue from rental operations and property operating
expenses for the three months ended September 30, 1999 as compared to the same
period in 1998 is partially from the 8 properties we acquired after June 30,
1998 and partially from operations for the 134 properties we owned for all of
the entire three month periods ended September 30, 1998 and 1999.

        Following is a summary of the increase in revenue from rental operations
and property operating expenses that relates to the 8 properties we acquired
after June 30, 1998 and for the 134 properties we owned for all of the three
months ended September 30, 1998 and 1999 (in thousands, except number of
properties).

<TABLE>
<CAPTION>
                                                                                        PROPERTIES OWNED
                                                                                         FOR ALL OF THE
                                                                PROPERTIES ACQUIRED    THREE MONTHS ENDED
                                                                       AFTER             SEPTEMBER 30,
                                              TOTAL VARIANCE       JUNE 30, 1998        1998 AND 1999(1)
                                              --------------    -------------------    ------------------
<S>                                           <C>               <C>                    <C>
REVENUE FROM RENTAL OPERATIONS:
   Rental ..........................              $5,584               $2,531               $ 3,053
   Tenant reimbursements ...........               2,343                  386                 1,957
   Parking, net of operations ......                 574                  194                   380
   Other rental operations .........               1,484                  (85)                1,569
                                                  ------               ------               -------
                                                  $9,985               $3,026               $ 6,959
                                                  ======               ======               =======

PROPERTY OPERATING EXPENSES:
   Repairs and maintenance .........              $1,004               $  289               $   715
   Utilities .......................                 (55)                 251                  (306)
   Real estate taxes ...............               1,185                  172                 1,013
   Insurance .......................                (104)                  25                  (129)
   Ground rent .....................                  21                    1                    20
   Marketing and other .............                 621                  135                   486
                                                  ------               ------               -------
                                                  $2,672               $  873               $ 1,799
                                                  ======               ======               =======

OTHER DATA:
   Number of Properties ............                 N/A                    8                   134
   Square feet .....................                 N/A                1,038                17,454
</TABLE>

(1) See the Same Properties analysis below.

        General and administrative expenses were approximately $1.8 million or
2.1% of total revenues during the three months ended September 30, 1999 as
compared to $1.6 million or 2.0% of total revenues during the same period in
1998.

        Interest expense increased approximately $4.0 million during the three
months ended September 30, 1999 as compared to the same period in 1998. This
increase was due to higher outstanding debt balances in 1999, primarily used to
fund property acquisitions, capital expenditures and tenant improvements.

        Depreciation and amortization expense increased by approximately $4.9
million during the three months ended September 30, 1999, primarily from
depreciation related to the addition of approximately $314 million in commercial
properties, capital expenditures and tenant improvements since June 30, 1998.


                                       14
<PAGE>   15

SAME PROPERTIES

        Following is a comparison of property operating data computed on a GAAP
and Cash Basis for the 134 properties we owned for the entire three month
periods ended September 30, 1999 and 1998 (in thousands, except number of
properties and occupancy):

<TABLE>
<CAPTION>
                                          THREE MONTHS ENDED
                                             SEPTEMBER 30,
                                       ------------------------          DOLLAR        PERCENT
                                         1999             1998           CHANGE        CHANGE
                                       -------          -------          ------        ------
<S>                                    <C>              <C>              <C>             <C>
GAAP BASIS:
Revenue from rental operations ....    $82,804          $75,845          $6,959          9%
Property operating expenses .......     25,498           23,699           1,799          8%
                                       -------          -------          ------         ---
       Net ........................    $57,306          $52,146          $5,160         10%
                                       =======          =======          ======         ===

CASH BASIS (1):
Revenue from rental operations ....    $80,895          $73,290          $7,605         10%
Property operating expenses .......     25,498           23,699           1,799          8%
                                       -------          -------          ------         ---
       Net ........................    $55,397          $49,591          $5,806         12%
                                       =======          =======          ======         ===

Number of properties ..............        134              134             N/A         N/A
Average occupancy .................       88.4%            86.4%            N/A         N/A
Square feet .......................     17,454           17,454             N/A         N/A
Percentage of total portfolio .....       94.4%            97.1%            N/A         N/A
</TABLE>

(1) Excludes straight-line rent adjustments.

        Revenue from rental operations for these properties, computed on a GAAP
basis, increased by approximately $7.0 million during the three months ended
September 30, 1999, compared to the same period in 1998, primarily due to a 2.0%
increase in average occupancy and an approximate 4.2% increase in average rental
rates.

        Excluding the straight-line rent adjustments for these properties,
revenue from rental operations for the three months ended September 30, 1999,
computed on a Cash Basis, increased by approximately $7.6 million or 10.4%.

        Property operating expenses for these properties increased by
approximately $1.8 million during the three months ended September 30, 1999
compared to the same period in 1998, primarily due to higher repair and
maintenance, real estate tax, marketing and other expenses in 1999. Increases in
certain repair and maintenance expense items (i.e. janitorial and building
engineering costs) were primarily due to the approximate 2.0% increase in
average occupancy for these properties in 1999. The remaining increase in repair
and maintenance expenses was primarily related to the timing of certain
maintenance items (i.e. window cleanings and tree trimming) and expenses
associated with monitoring and testing equipment and systems in connection with
our Year 2000 readiness program. The increase in real estate tax expense in 1999
was primarily related to lower than normal expense in the third quarter of 1998
due to favorable tax assessment appeals received for certain properties. Due to
an increased focus on raising our portfolio-wide occupancy, certain marketing
and tenant retention related expenses were also higher in 1999.

LIQUIDITY AND CAPITAL RESOURCES

CASH FLOWS

        Cash provided by operating activities increased by approximately $2.1
million to $104.5 million for the nine months ended September 30, 1999, as
compared to $102.4 million for the same period in 1998, primarily due to
operating results from the 70 properties acquired in 1998 and 1999. Cash used in
investing activities decreased by approximately $856.7 million, to approximately
$197.1 million for the nine months ended September 30, 1999 compared to
approximately $1.1 billion for the same period in 1998, primarily due to the
acquisition of 66 properties during the nine months ended September 30, 1998.
Cash provided by financing activities decreased by approximately $861.2 million
to $91.7 million for the nine months ended September 30, 1999 as compared to
$952.9 for the same period in 1998. Cash provided by financing activities for
the nine months ended September 30, 1998 consisted primarily of net proceeds
from mortgage loans and the issuance of 26,296,047 shares of common stock. Cash
provided by financing activities for the nine months ended September 30, 1999
consisted primarily of net proceeds from mortgage loans and unsecured lines of
credit and approximately $49.0 million from the issuance of 2,000,000 Preferred
Operating Partnership Units, partially offset by dividend payments.


                                       15
<PAGE>   16

AVAILABLE BORROWINGS, CASH BALANCE AND CAPITAL RESOURCES

        We have a $300 million unsecured line of credit (the "Amended Credit
Facility") from a group of banks led by Wells Fargo. The Amended Credit Facility
bears interest at a rate ranging between LIBOR plus 1.2% and LIBOR plus 1.45%
(effective rate of 6.72% at September 30, 1999) depending on our leverage ratio,
as defined by the Amended Credit Facility. If we achieve an investment grade
unsecured debt rating, the interest rate may be lowered to between LIBOR plus
0.9% and LIBOR plus 1.15% depending on the debt rating. Under certain
circumstances, we have the option to convert the interest rate from LIBOR to the
prime rate plus 0.5%. In addition, the Amended Credit Facility has a commitment
fee ranging from 0.125% to 0.25% on the unused balance. The Amended Credit
Facility matures on June 1, 2000. As of September 30, 1999, the aggregate
outstanding balance on the Amended Credit Facility was $241.9 million, and $58.1
million was available for additional borrowing.

        We also have an unsecured line of credit with a total commitment of $10
million from City National Bank (the "City National Bank Credit Facility"). The
City National Bank Credit Facility accrues interest at the City National Bank
Prime Rate less 0.875% (effective rate of 7.37% at September 30, 1999) and is
scheduled to mature on August 1, 2000. Proceeds from the City National Bank
Credit Facility will be used, among other things, to provide funds for tenant
improvements and capital expenditures and provide for working capital and other
corporate purposes. As of September 30, 1999, the outstanding balance on the
City National Bank Credit Facility was $2.0 million, and $8.0 million was
available for additional borrowing.

        On January 20, 1999, our Lehman Bridge Loan I was expanded from $81.4
million to $111.4 million. The Lehman Bridge Loan I was secured by seven of our
properties, bore interest at LIBOR plus 2.25% per annum and required monthly
payments of interest only. On May 5, 1999, the Lehman Bridge Loan I was
refinanced; see discussion below.

        On April 5, 1999, we closed a $115 million loan with Mass Mutual Life
Insurance Company (the "Mortgage Financing V Loan"). The Mortgage Financing V
Loan is secured by 12 Properties, has a ten year term, bears interest at a fixed
rate of 6.94%, requires monthly payments of principal and interest and is
amortized over a 25 year period. Proceeds from this loan were used to repay
$76.4 million of our Lehman Bridge Loan I and to repay a portion of our lines of
credit.

        On April 30, 1999 we closed a $22.5 million loan with Lehman Brothers,
Inc. (the "Mortgage Financing VI Loan"). The Mortgage Financing VI Loan is
secured by 3 properties, has a ten year term and bears interest at a fixed rate
of 7.54%, requires monthly payments of principal and interest and is amortized
over a 30 year period. Proceeds from this loan were used to repay a portion of
our lines of credit.

        On May 5, 1999, we refinanced the remaining $35 million outstanding
under the Lehman Bridge Loan I with one secured note payable totaling $62.5
million to Lehman Brothers, Inc. (the "Lehman Bridge Loan III"). The Lehman
Bridge Loan III is secured by 3 properties, bears interest at LIBOR plus 2.25%
per annum (effective rate of 7.62% at September 30, 1999), requires monthly
payments of interest only and matures on November 1, 2000. The remaining
proceeds from this loan were used to repay a portion of our lines of credit.

        On July 23, 1999, we entered into a construction loan with a total
commitment of $50 million (the "Construction Loan") related to our development
of the 240,724 square foot 6060 Center Drive office building in the Howard
Hughes Center. The Construction Loan is secured by certain property and
construction improvements, bears interest at LIBOR plus 2.0% per annum
(effective rate of 7.43% at September 30, 1999), requires monthly payments of
interest, and matures December 30, 2000, with two one year extension options.
Subject to meeting certain construction completion and leasing benchmarks, as
defined, the interest rate on the Construction Loan may be reduced to LIBOR plus
1.75%, then to LIBOR plus 1.5%. As of September 30, 1999, there was $13.8
million outstanding on the Construction Loan and $36.2 million was available for
additional borrowing.

        On July 27, 1999, we closed a $58 million loan with Lehman Brothers,
Inc. (the "Lehman Bridge Loan IV"). The Lehman Bridge Loan IV is secured by 6
properties, bears interest at LIBOR plus 2.25% per annum (effective rate of
7.62% at September 30, 1999), requires monthly payments of interest only and
matures on November 1, 2000. Proceeds from this loan were used to repay a
portion of our floating rate debt and to fund certain capital expenditures.


                                       16
<PAGE>   17

        Following is a summary of scheduled principal payments for our mortgage
loans as of September 30, 1999 (in thousands):

<TABLE>
<CAPTION>
                           YEAR                         AMOUNT
                       -------------                   --------
                       <S>                             <C>
                       1999........................    $  1,029
                       2000........................     137,018
                       2001........................       3,023
                       2002........................       8,255
                       2003........................      16,696
                       Thereafter..................     567,217
                                                       --------
                         Total.....................    $733,238
                                                       ========
</TABLE>

        Following is certain other information related to our indebtedness as of
September 30, 1999 (in thousands, except percentage data):

        UNSECURED AND SECURED DEBT ANALYSIS:

<TABLE>
<CAPTION>
                                                               WEIGHTED
                                                               AVERAGE
                                    BALANCE       PERCENT   INTEREST RATE(1)
                                   --------       -------   ----------------
<S>                                <C>            <C>       <C>
        Unsecured Debt ........    $243,850          25%         7.02%
        Secured Debt ..........     733,238          75%         7.51%
                                   --------         ---          ----
        Total Debt ............    $977,088         100%         7.39%
                                   ========         ===          ====
</TABLE>

         FLOATING AND FIXED RATE DEBT ANALYSIS:

<TABLE>
<CAPTION>
                                                               WEIGHTED
                                                               AVERAGE
                                    BALANCE       PERCENT   INTEREST RATE(1)
                                   --------       -------   ----------------
<S>                                <C>            <C>       <C>
        Floating Rate Debt ....    $378,127          39%         7.40%
        Fixed Rate Debt .......     598,961          61%         7.38%
                                   --------         ---          ----
        Total Debt ............    $977,088         100%         7.39%
                                   ========         ===          ====
</TABLE>

        (1) Includes amortization of prepaid financing costs.

        Total interest incurred and the amount capitalized was as follows (in
thousands):

<TABLE>
<CAPTION>
                                        FOR THE THREE MONTHS ENDED SEPTEMBER 30,   FOR THE NINE MONTHS ENDED SEPTEMBER 30,
                                        ----------------------------------------   ---------------------------------------
                                                1999                1998                    1999               1998
                                              --------            --------                --------          ---------
<S>                                           <C>                 <C>                     <C>               <C>
Total interest incurred...............        $18,372             $14,628                 $50,718           $ 37,373
Amount capitalized....................         (2,325)             (2,640)                 (7,033)            (6,234)
                                              -------             -------                 -------           --------
Amount expensed.......................        $16,047             $11,988                 $43,685           $ 31,139
                                              =======             =======                 =======           ========
</TABLE>

        As of September 30, 1999, we had $24.1 million in cash and cash
equivalents, including $20.5 million in restricted cash representing interest
bearing cash deposits required by five of our mortgage loans payable. Also
included in cash and cash equivalents were $6.8 million in cash impound accounts
for real estate taxes and insurance as required by several of our mortgage loans
payable.

        As of September 30, 1999, we had $66.1 million available under our lines
of credit and the capacity to issue up to $255.3 million of our common stock
pursuant to a Registration Statement filed with the Securities and Exchange
Commission in January 1998.

        We expect to continue meeting our short-term liquidity and capital
requirements generally through net cash provided by operating activities and
proceeds from our lines of credit. We believe that the net cash provided by
operating activities will continue to be sufficient to pay any distributions
necessary to enable us to continue qualifying as a real estate investment trust
("REIT"). We also believe the foregoing sources of liquidity will be sufficient
to fund our short-term liquidity needs for the foreseeable future, including
recurring non-revenue enhancing capital expenditures, tenant improvements and
leasing commissions.


                                       17
<PAGE>   18

        We expect to meet our long-term liquidity and capital requirements such
as scheduled principal repayments, renovation costs, property acquisitions and
other non-recurring capital expenditures through the refinancing of existing
indebtedness and/or the issuance of long-term debt and equity securities.

FUNDS FROM OPERATIONS

        We consider Funds from Operations, as defined by the National
Association of Real Estate Investment Trusts ("NAREIT"), to be a useful
financial measure of the operating performance for an equity REIT. We believe
that Funds from Operations provides investors with an additional basis to
evaluate the ability of a REIT to service debt and to fund acquisitions and
other capital expenditures. Funds from Operations should not be considered an
alternative to net income (determined in accordance with GAAP), as an indicator
of our financial performance, or as a substitute for cash flow from operating
activities (determined in accordance with GAAP) as a measure of our liquidity.
Funds from Operations also is not indicative of funds available to fund our cash
needs, including our ability to make distributions.

        The following table reflects the calculation of our Funds from
Operations for the three and nine month periods ended September 30, 1999 and
1998 (in thousands):

<TABLE>
<CAPTION>
                                                                        THREE MONTHS ENDED                  NINE MONTHS ENDED
                                                                           SEPTEMBER 30,                      SEPTEMBER 30,
                                                                     -------------------------         --------------------------
                                                                      1999              1998             1999             1998
                                                                     -------           -------         --------          --------
<S>                                                                  <C>               <C>             <C>               <C>
FUNDS FROM OPERATIONS:
  Net income ................................................        $23,921           $25,587           72,965          $ 65,386
  Depreciation and amortization of real estate assets .......         17,810            12,954           51,198            37,180
  Minority interest .........................................          1,120             1,253            3,302             3,613(a)
  Distributions on Preferred Operating Partnership Units ....           (276)               --             (276)               --
                                                                     -------           -------         --------          --------
     Funds From Operations ..................................        $42,575           $39,794         $127,189          $106,179
                                                                     =======           =======         ========          ========
</TABLE>


        (a) Excludes $575,000 in distributions made to the former minority
partner in the World Savings Center office property.

        The White Paper on Funds from Operations approved by the Board of
Governors of NAREIT in October 1999 (the "White Paper") defines Funds from
Operations as net income (loss) computed in accordance with GAAP, excluding
gains (or losses) from extraordinary items, as defined by GAAP, and gains and
losses from sales of depreciable operating property plus real estate related
depreciation and amortization and after adjustments for unconsolidated
partnerships and joint ventures. We compute Funds from Operations in accordance
with standards established by the White Paper which may differ from the
methodology for calculating Funds from Operations utilized by other equity REITs
and, accordingly, may not be comparable to such other REITs.

IMPACT OF YEAR 2000

        Any of our computer programs that have date-sensitive software may not
be able to distinguish the year 2000 from the year 1900 if those programs use
two digits rather than four digits to define the year. This could result in a
system failure or miscalculations causing disruption of operations, including,
among other things, a temporary inability to process transactions, send tenant
invoices, provide services to our Properties and tenants, or engage in similar
normal business activities.

        We have recently installed a Year 2000 ready version of our accounting
software. The hardware used to run our accounting software is Year 2000 ready.

        We have completed an inventory of the computer hardware and software
(collectively, the "System Components") used to run the operating systems (i.e.
security, energy, elevator and safety) at our Properties. This process included
determining which System Components are date-sensitive. Our inventory identified
approximately 900 System Components in operation at our Properties that are
date-sensitive. After completing this inventory, we contacted the manufacturers
of the date-sensitive System Components to determine if they were Year 2000
ready. System Components not identified as Year 2000 ready were either
reprogrammed, upgraded or replaced. We have also completed testing all 900
date-sensitive System Components in operation at our Properties and found
approximately 92% to be Year 2000 ready. The remaining System Components that
were found not to be Year 2000 ready have been reprogrammed, upgraded or
replaced and retested. We estimate the total costs associated with this phase of
our Year 2000 readiness program to be between $400,000 and $500,000.

        We believe our principal risks associated with the Year 2000 issue
include the risk of interruption of our operations due to operational failures
of third parties, including our tenants and vendors (i.e. utility and service
providers and financial institutions). Such interruption could result in an
inability to provide our tenants with access to their leased


                                       18
<PAGE>   19

spaces, thereby affecting our ability to collect rent and pay our obligations
which could result in a material adverse affect on our results of operation. We
have surveyed all of our tenants and material vendors regarding their Year 2000
readiness. Based on the responses from these surveys, we do not believe there is
a significant risk that our operations will be materially disrupted due to
operational failures of our tenants and vendors. However, there can be no
assurance that all suppliers of critical goods and services will be Year 2000
ready. There is also no assurance that if such suppliers are not Year 2000
ready, that alternative suppliers who are Year 2000 ready will be able to
provide such goods and services without significant interruption of our
operations.

        We have developed a Year 2000 contingency plan to mitigate any
unforeseen adverse affects associated with the Year 2000 issue. Our contingency
plan outlines our Year 2000 readiness communication and response procedures,
plans to deploy teams of facility managers and engineers to all our Properties
to monitor and manually override systems, if necessary, to secure back-up vendor
services and supplies and to maintain the integrity of our systems in the event
of utility failures.

        We cannot assure you that governmental agencies, companies, utilities,
third-party service providers and others outside our control will be Year 2000
ready. The failure of these or other entities to be Year 2000 ready could result
in operations failures beyond our control. A temporary inability to operate our
business in the ordinary course for a period of time after January 1, 2000 could
materially and adversely affect our business and results of operations. We
believe, however, that our Year 2000 readiness efforts and our contingency
planning should reduce the extent of any significant disruptions.


                                       19
<PAGE>   20

BUILDING AND LEASE INFORMATION

        The following tables set forth certain information regarding our
Properties as of September 30, 1999.

                                PORTFOLIO SUMMARY

<TABLE>
<CAPTION>
                                                                    APPROXIMATE NET RENTABLE SQUARE FEET
          LOCATION                     NUMBER OF PROPERTIES                   (IN THOUSANDS)
          --------               -------------------------------    ------------------------------------
                                            Industrial                                      Industrial
                                 Office     and Retail     Total     Office     and Retail     Total
                                 ------     ----------     -----     ------     ----------  ----------
<S>                              <C>        <C>            <C>       <C>        <C>         <C>
Los Angeles County

  West......................       28           1            29       4,684         37         4,721
  North.....................       31          --            31       2,767         --         2,767
  South.....................       16          --            16       2,202         --         2,202
  Central...................        3          --             3         609         --           609
Orange County...............       20          --            20       3,202         --         3,202
San Diego County............       21          --            21       2,487         --         2,487
Ventura County..............        4          --             4         562         --           562
Riverside/San
  Bernardino Counties.......        8           4            12         554        415           969
Kern County.................        2          --             2         216         --           216
                                  ---          ---          ---      ------        ---        ------
  Subtotal..................      133           5           138      17,283        452        17,735
Renovation Properties.......        4           -             4         757         --           757
                                  ---          ---          ---      ------        ---        ------
  Total.....................      137           5           142      18,040        452        18,492
                                  ===          ===          ===      ======        ===        ======
</TABLE>

                           PORTFOLIO OCCUPANCY SUMMARY

<TABLE>
<CAPTION>
                                     PERCENT OCCUPIED               PERCENT LEASED                  ANNUALIZED BASE RENT
          LOCATION                AT SEPTEMBER 30, 1999         AT SEPTEMBER 30, 1999            PER LEASED SQUARE FOOT (1)
          --------             ---------------------------   ---------------------------   ---------------------------------------
                                                                                                                           Full
                                        Industrial                    Industrial                    Industrial            Service
                                           and                           and                           and                 Gross
                               Office    Retail      Total   Office     Retail     Total   Office     Retail     Total   Leases(1)
                               ------   ----------   -----   ------   ----------   -----   ------   ----------   -----   ---------
<S>                            <C>      <C>          <C>     <C>      <C>          <C>     <C>      <C>          <C>     <C>
Los Angeles County:
  West......................    90.3%    100.0%      90.4%    92.9%     100.0%     93.0%   $22.47    $24.60     $22.49    $22.47
  North.....................    92.3%       --       92.3%    94.0%        --      94.0%   $19.34        --     $19.34    $20.88
  South.....................    88.4%       --       88.4%    89.4%        --      89.4%   $17.43        --     $17.43    $19.09
  Central...................    89.0%       --       89.0%    90.7%        --      90.7%   $19.62        --     $19.62    $19.62
Orange County...............    94.9%       --       94.9%    95.8%        --      95.8%   $15.96        --     $15.96    $18.33
San Diego County............    94.3%       --       94.3%    95.6%        --      95.6%   $15.59        --     $15.59    $18.46
Ventura County..............    96.3%       --       96.3%    97.6%        --      97.6%   $16.67        --     $16.67    $16.67
Riverside/San
  Bernardino Counties.......    82.8%                87.5%    85.3%      94.1%     89.1%   $14.22    $ 8.36     $11.57    $16.98
                                          93.8%
Kern County.................    97.7%       --       97.7%    97.7%        --      97.7%   $21.87        --     $21.87        --
                                -----     ----       ----     ----      -----      ----    ------    ------     ------    -------
   SUBTOTAL/ WEIGHTED AVG...    91.9%     94.3%      92.0%    93.4%      94.6%     93.5%   $18.56    $ 9.77     $18.33    $20.27
Renovation Properties.......    22.9%       --       22.9%    30.4%        --      30.4%   $15.74        --     $15.74    $18.40
                                -----     ----       ----     ----      -----      ----    ------    ------     ------    -------
   TOTAL/ WEIGHTED AVG......    88.9%     94.3%      89.0%    90.8%      94.6%     90.9%   $18.52    $ 9.77     $18.30    $20.26
                                =====     ====       ====     ====      =====      ====    ======    ======     ======    ======
</TABLE>

(1) Excludes 48 properties and 4,722,281 square feet under triple net and
modified gross leases.


                                       20
<PAGE>   21

                                LEASE EXPIRATIONS

                            As of September 30, 1999

<TABLE>
<CAPTION>
                                         SQUARE FOOTAGE         PERCENTAGE OF                                   ESTIMATED MARKET
                          NUMBER OF        OF EXPIRING            AGGREGATE          ANNUALIZED BASE RENT           RENT OF
  YEAR OF LEASE            LEASES            LEASES           PORTFOLIO LEASED        OF EXPIRING LEASES        EXPIRING LEASES
   EXPIRATION             EXPIRING       (IN THOUSANDS)          SQUARE FEET          (PER SQUARE FOOT)        (PER SQUARE FOOT)(1)
  -------------           ---------      --------------       ----------------       --------------------      --------------------
<S>                       <C>            <C>                  <C>                    <C>                       <C>
Month-to-Month              191                430                   2.56%                  $18.44                   $20.77
      1999(2).......        127                505                   3.00%                  $18.26                   $20.49
      2000..........        647              2,486                  14.79%                  $18.70                   $22.38
      2001..........        577              2,268                  13.49%                  $18.25                   $22.22
      2002..........        535              2,556                  15.21%                  $18.64                   $23.37
      2003..........        389              2,785                  16.57%                  $20.77                   $25.02
</TABLE>

(1) Calculation based on our estimate of current market rental rates and annual
    increases in such rates of 8%, 6%, 3%, 3% and 3%, in 1999, 2000, 2001, 2002
    and 2003, respectively. Our estimates are based on current trends which
    could change or reverse at any time as a result of future events. Our
    ability to rent vacant space at estimated levels is highly dependent upon
    many factors over which we have no control. We undertake no obligation to
    update or correct these estimates if future events prove them to be
    inaccurate.

(2) Represents leases expiring between October 1, 1999 and December 31, 1999.

                                LEASING ACTIVITY

                               Third Quarter 1999

<TABLE>
<CAPTION>
                                                                                     LEASES SIGNED DURING NINE MONTHS
                                                                                         ENDED SEPTEMBER 30, 1999
                                                                                  --------------------------------------
                              NET ABSORPTION                                      WEIGHTED AVERAGE   TENANT IMPROVEMENTS
                              (SQUARE FEET)                                          LEASE TERM         AND COMMISSIONS
   PROPERTY TYPE             (IN THOUSANDS)               RETENTION RATE(2)          (IN MONTHS)     (PER SQUARE FOOT)(1)
   -------------        --------------------------   --------------------------   ----------------   --------------------
                        Three Months   Nine Months   Three Months   Nine Months
                           Ended         Ended          Ended         Ended
                          9/30/99       9/30/99        9/30/99       9/30/99            New             New      Renewal
                        ------------   -----------   ------------   -----------        ----           ------     -------
<S>                     <C>            <C>           <C>            <C>                <C>            <C>        <C>
Office...............       188           379           73.7%         63.3%            56.6           $16.60      $7.84
Industrial/Retail....        (1)           (4)         100.0%         88.1%            40.3           $ 3.17      $2.78
                            ---           ---          -----          ----
   Total/Wtd.Avg.....       187           375           73.9%         64.4%
                            ===           ===          =====          ====
</TABLE>

(1) Excludes four renovation properties.

(2) Percentage of leases in which tenants were retained at lease expiration.


                                       21
<PAGE>   22

                         RENOVATION/DEVELOPMENT SUMMARY

<TABLE>
<CAPTION>
                                                                            ANTICIPATED
                                              COSTS                          WEIGHTED        PERCENT     ESTIMATED
                                             INCURRED        ESTIMATED       AVERAGE        LEASED AT   CONSTRUCTION     ESTIMATED
                           SQUARE FEET       TO DATE       TOTAL COST(1)      ANNUAL        SEPTEMBER    COMPLETION    STABILIZATION
PROPERTY                  (IN THOUSANDS)  (IN THOUSANDS)  (IN THOUSANDS)   RENTAL RATE(2)   30, 1999        DATE           DATE
------------------------- --------------  --------------  --------------   --------------   --------    ------------   -------------
<S>                       <C>             <C>             <C>              <C>              <C>         <C>            <C>
Renovation:
1821 Dyer Boulevard......     115            $  9,557       $ 10,100          $18.33           89%        Complete     3rd Qtr 1999
535 Brand Boulevard......     109              19,824         20,750          $23.47           65%        Complete     4th Qtr 1999
Tourney Pointe...........     220              29,888         33,500          $21.03           26%        Complete     4th Qtr 1999
Westwood Center..........     313              62,412         83,000          $34.80            0       4th Qtr 1999   2nd Qtr 2001
                              ---             -------       --------
  Total Properties
    under Renovation.....     757             121,681        147,350

Development:
Howard Hughes Center
  Acquisition Costs......       --             16,663(3)      16,663            N/A           N/A           N/A            N/A
  6060 Center Drive......      241             21,457         56,000           33.00           0        2nd Qtr 2000   4th Qtr 2001
  Master Plan Costs(4)...       --             10,612         15,000            N/A           N/A           N/A            N/A
                               ---            -------        -------
    Total Development
         Costs...........      241             48,732         87,663
                               ---            -------         ------
  Total Properties
    under Renovation
       and Development...      998           $170,413       $235,013
                               ===           ========       ========
</TABLE>


(1) Estimated total cost includes purchase and closing costs, capital
    expenditures, tenant improvements, leasing commissions and carrying costs
    during renovation or development.

(2) Anticipated weighted average annual rental rate represents the weighted
    average of the in-place rental rates for occupied space and market rental
    rates for vacant space. Our estimates of the market rental rates are based
    on current trends which could change or reverse at any time as a result of
    future events. Our ability to rent vacant space at estimated levels is
    highly dependent upon many factors over which we have no control. We
    undertake no obligation to update or correct these estimates if future
    events prove them to be inaccurate.

(3) We acquired the undeveloped commercial property portions of the Howard
    Hughes Center for $28.5 million. In August 1999, subject to a sales
    agreement entered upon our initial acquisition, we sold for $7.5 million
    approximately 5.4 acres on which a third party will develop a 250,000 square
    foot retail and entertainment complex. Amount also excludes approximately
    $4.3 million allocated to the 6060 Center Drive building, currently under
    construction (Note 4).

(4) Master Plan costs include the costs of road and bridge construction and
    other Howard Hughes Center infrastructure and master planning costs. The
    Howard Hughes Center is fully entitled for the construction of 1.3 million
    square feet of office product, including 6060 Center Drive.

        Our ability to rent expiring lease space at estimated levels is highly
dependent upon many factors over which we have no control. These factors
include, the national economic climate, perceptions of prospective tenants of
the attractiveness of the Property, and our ability to maintain and manage the
Properties. We also have numerous competitors and some of the competing
properties may be newer, better located or owned by parties better capitalized
than us. As new commercial properties are developed and the number of
competitive commercial properties in a particular area increases, competitive
pressures will increase as well. Additionally, all of our properties are located
in Southern California. Our ability to charge estimated rents may be adversely
affected by the local economic climate (which could be adversely impacted by
business layoffs or downsizing, industry slowdowns, changing demographics and
other factors) and local real estate conditions (such as oversupply of or
reduced demand for office and other competing commercial properties). The
preceding discussion is not intended as an exhaustive list of the risks
associated with rent rate projections and should be read in conjunction with
"Risk Factors--Real Estate Ownership Risks," "--Risk that We May be Unable to
Retain Tenants or Rent Space Upon Lease Expirations," "--Restraints on Our
Flexibility to Liquidate Real Estate," "--Impact of Competition on Occupancy
Levels and Rents Charged," and "--Concentration of Properties in Southern
California" in our most recent Annual Report on Form 10-K/A.

        We undertake no obligation to update or correct these estimates if
future events prove them to be inaccurate.

        As a result of the foregoing, undue reliance should not be placed on
these estimated rental rates.


                                       22
<PAGE>   23

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

        Market risk is the exposure to loss resulting from changes in interest
rates, foreign currency exchange rates, commodity prices and equity prices. The
primary market risk to which we are exposed is interest rate risk, which is
sensitive to many factors, including governmental monetary and tax policies,
domestic and international economic and political considerations and other
factors that are beyond our control.

INTEREST RATE RISK

        Even though we currently have no such agreements, in order to modify and
manage the interest characteristics of our outstanding debt and limit the
effects of interest rates on our operations, we may utilize a variety of
financial instruments, including interest rate swaps, caps, floors, and other
interest rate exchange contracts. The use of these types of instruments to hedge
our exposure to changes in interest rates carries additional risks such as
counter-party credit risk and legal enforceability of hedging contracts. We do
not enter into any transactions for speculative or trading purposes.

        Certain of our future earnings, cash flows and fair values relating to
financial instruments are dependent upon prevailing market rates of interest,
such as LIBOR. Based on interest rates and outstanding balances at September 30,
1999, a one percentage point increase in interest rates on our $378.1 million of
floating rate debt would decrease annual future earnings and cash flows by
approximately $3.8 million and would not have an impact on the floating rate
debt fair value. A one percentage point decrease in interest rates on our $378.1
million of floating rate debt would increase annual future earnings and cash
flows by approximately $3.8 million and would not have an impact on the floating
rate debt fair value. A one percentage point increase or decrease in interest
rates on our secured note receivable would not have a material impact on annual
future earnings, cash flows and its fair value.

        These amounts are determined by considering the impact of the
hypothetical interest rates on our borrowing cost. These analyses do not
consider the effects of the reduced level of overall economic activity that
could exist in such an environment. Further, in the event of a change of such
magnitude, we would consider taking actions to further mitigate our exposure to
the change. However, due to the uncertainty of the specific actions that would
be taken and their possible effects, this sensitivity analysis assumes no
changes in our capital structure.


                                       23
<PAGE>   24

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS - NONE

ITEM 2. CHANGES IN SECURITIES

        On September 7, 1999, the Operating Partnership completed a $50 million
private placement of 8-5/8% Series B Cumulative Redeemable Perpetual Preferred
Operating Partnership Units (the "Preferred OP Units") to an institutional
investor. The Preferred OP Units are callable by the Operating Partnership after
five years and are exchangeable after 10 years by the holder into 8-5/8% Series
B Cumulative Redeemable Preferred Stock of Arden Realty Inc., on a one-for-one
basis. The Preferred OP Units have no stated maturity or mandatory redemption
and are subordinate to all debt.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES - NONE

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS - NONE

ITEM 5. OTHER INFORMATION - NONE

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NUMBER     DESCRIPTION
-------    -----------
<S>        <C>
 3.1       Amended and Restated Articles of Incorporation as filed as an exhibit
           to Registration Statement on Form S-11 (No. 333-8163) and
           incorporated herein by reference.

 3.2       Articles Supplementary of the Class A Junior Participating Preferred
           Stock as an exhibit to the current report on Form 8-K, dated August
           26, 1998, and incorporated herein by reference.

 3.3       bylaws of Registrant as filed as an exhibit to Registration Statement
           on Form S-11 (No. 333-8163) and incorporated herein by reference.

 3.4       Certificate of Amendment of the Bylaws of Arden Realty, Inc. dated
           July 14, 1998, filed as an exhibit to our quarterly report on Form
           10-Q filed with the Commission on August 14, 1998, and incorporated
           herein by reference.

 4.1       Rights Agreement, dated as of August 14, 1998, between Arden Realty,
           Inc. and the Bank of New York as filed as an exhibit to the current
           report on Form 8-K, dated August 26, 1998, and incorporated herein by
           reference.

10.1       Second Amended and Restated Agreement of Limited Partnership of the
           Arden Realty Limited Partnership dated as of September 7, 1999.

27         Financial Data Schedule, as filed herein.
</TABLE>

(b) Reports on Form 8-K

         None


                                       24
<PAGE>   25

                                   SIGNATURES

        Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                        ARDEN REALTY, INC.

Date: November 15, 1999                 By: /s/ Diana M. Laing
                                           --------------------------------
                                           Diana M. Laing
                                           Executive Vice President,
                                           Chief Financial Officer and Secretary


Date: November 15, 1999                 By: /s/ Richard S. Davis
                                           --------------------------------
                                           Richard S. Davis
                                           Senior Vice President and
                                           Chief Accounting Officer


                                       25