EOP OPERATING LTD PARTNERSHIP - 10-K Annual Report

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO

SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2002

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 1-13625

EOP OPERATING LIMITED PARTNERSHIP

(Exact name of registrant as specified in its charter)


Delaware		36-4156801
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
Two North Riverside Plaza, Suite 2100, Chicago, Illinois (Address of principal executive offices)		60606 (Zip Code)

(Registrant’s telephone number, including area code) (312) 466-3300

Securities registered pursuant to Section 12(b) of the Act:


Title of each class		Name of each exchange on which registered

None		None

Securities registered pursuant to Section 12(g) of the Act:

Units of Limited Partnership Interest (“Units”)

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 o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

The aggregate market value of the Units held by non-affiliates of the registrant as of June 28, 2002 (the last business day of the registrant’s most recently completed second fiscal quarter) was $983,453,538.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Equity Office Properties Trust’s proxy statement for the annual shareholders’ meeting to be held in 2003 are incorporated by reference into Part III. Equity Office Properties Trust expects to file its proxy statement by April 30, 2003.

EOP OPERATING LIMITED PARTNERSHIP

TABLE OF CONTENTS


		Page

PART I.
	Forward-Looking Statements		3
Item 1.	Business		4
Item 2.	Properties		12
Item 3.	Legal Proceedings		16
Item 4.	Submission of Matters to a Vote of Security Holders		16
PART II.
Item 5.	Market for Registrant’s Common Equity and Related Stockholder Matters		17
Item 6.	Selected Financial Data		18
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		21
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		52
Item 8.	Financial Statements and Supplementary Data		53
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		100
PART III.
Item 10.	Directors and Executive Officers of the Registrant		101
Item 11.	Executive Compensation		101
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		101
Item 13.	Certain Relationships and Related Transactions		101
Item 14.	Controls and Procedures		101
PART IV.
Item 15.	Exhibits, Financial Statement Schedules, and Reports on Form 8-K		102

PART I

FORWARD — LOOKING STATEMENTS

Statements contained in this Form 10-K which are not historical fact may be forward-looking statements. Such statements (none of which is intended as a guarantee of performance) are subject to certain risks and uncertainties, which could cause actual results to differ materially from those projected or anticipated. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements, including, but not limited to, the risks described in our current reports on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on February 12, 2002 and June 27, 2002, as the same may be supplemented from time to time. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this Form 10-K is filed with the SEC. Among the factors about which EOP Partnership has made assumptions are the following:

• changes in general economic conditions, including those affecting industries in which EOP Partnership’s principal tenants compete;

• the extent of any white-collar job growth in markets in which we have a presence;

• the extent, duration and strength of any economic recovery, including its effect on the demand for office space and the creation of new office development;

• the domestic effect of any heightened geopolitical risks;

• the extent of tenant bankruptcies, financial difficulties and defaults;

• the amount of lease termination fees received, if any;

• the availability of new competitive supply, which may become available by way of sublease rather than new construction;

• the extent of future demand for high-rise and other office space in markets in which EOP Partnership has a presence;

• EOP Partnership’s ability to complete and lease current and future development projects on schedule, on budget and in accordance with expectations;

• EOP Partnership’s ability to maintain occupancy and to timely lease or re-lease space at current or anticipated rents;

• future demand for EOP Partnership’s debt and Equity Office’s equity securities;

• EOP Partnership’s ability to refinance its debt at reasonable terms upon maturity;

• EOP Partnership’s ability to achieve economies of scale over time and to realize anticipated cost savings from the implementation of its EOPlus initiatives;

• EOP Partnership’s ability to attract and retain high quality personnel at a reasonable cost;

• changes in interest rates;

• changes in operating costs, including real estate taxes, utilities, insurance and security costs;

• EOP Partnership’s ability to pay amounts due to its noteholders and preferred unitholders before any distribution to holders of Units; and

• EOP Partnership’s ability to obtain, at a reasonable cost, adequate insurance coverage for catastrophic events, such as earthquakes and terrorist acts.

Item 1. Business.

EOP PARTNERSHIP

As used herein, “EOP Partnership”, “we”, “us” and “our” refer to EOP Operating Limited Partnership, a Delaware limited partnership, together with its consolidated subsidiaries, and the predecessors thereof, except where the context otherwise requires. EOP Partnership is a subsidiary of Equity Office Properties Trust (“Equity Office”), a Maryland real estate investment trust. EOP Partnership was organized in 1996 and began operations in 1997. EOP Partnership is principally engaged through its various subsidiaries in owning, managing, leasing, acquiring and developing office properties. Equity Office’s assets are owned and substantially all of its operations are conducted through EOP Partnership and its subsidiaries. Equity Office is our sole general partner and owned an approximate 89.1% interest in us, at December 31, 2002. Equity Office has elected to be taxed as a real estate investment trust (“REIT”) for federal income tax purposes, and generally will not be subject to federal income tax if 100% of its taxable income is distributed and it complies with a number of organizational and operational requirements.

At December 31, 2002, we had a portfolio of 734 office properties comprising approximately 125.7 million square feet of commercial office space in 20 states and the District of Columbia (the “Office Properties”), 77 industrial properties comprising approximately 6.0 million square feet (the “Industrial Properties” and, together with the Office Properties, the “Properties”) and approximately 1.5 million square feet of office properties under development.

Our executive offices are located at Two North Riverside Plaza, Suite 2100, Chicago, Illinois 60606, and our telephone number is (312) 466-3300.

EOP Partnership’s internet site is at http://www.equityoffice.com. EOP Partnership will provide to the public on its website, free of charge, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) of the Exchange Act as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC.

DEVELOPMENT OF OUR BUSINESS IN 2002

During the year ended December 31, 2002, we completed the following key transactions:

• redeemed the 7,994,000 outstanding 8.98% Series A Cumulative Redeemable Preferred Units from Equity Office for $201.9 million, including accrued distributions, and, in turn, Equity Office used the proceeds to redeem its 7,994,000 outstanding 8.98% Series A Cumulative Redeemable Preferred Shares;

• issued 8,500,000 7.75% Series G Cumulative Redeemable Preferred Units to Equity Office in exchange for Equity Office’s contribution of the proceeds of approximately $206.1 million from its issuance and sale of 8,500,000 7.75% Series G Cumulative Redeemable Preferred Shares;

• Equity Office repurchased 7,901,900 common shares of beneficial interest (“Common Shares”) at an average price of $24.92 per share for a total of $196.9 million in the aggregate as part of a Common Share repurchase program for up to $400 million of Equity Office’s Common Shares. In connection with the repurchases, EOP Partnership purchased from Equity Office and retired a corresponding number of Units for an aggregate purchase price equal to the aggregate purchase price for all Common Share repurchases;

• redeemed 3,727,925 units of limited partnership interest (“Units”) for cash at an average price of $28.62 per Unit for a total of approximately $106.7 million;

• recognized approximately $105.5 million from lease termination fees, including approximately $46.1 million and 5,000,000 common shares (which were initially valued at zero and subsequently sold and recognized in March 2003 for a gain on sale of securities of approximately $8.1 million) from one tenant. In addition, we recognized approximately $46.4 million from lease terminations at our unconsolidated joint ventures, including approximately $40 million from one tenant; and

• received approximately $20.1 million from CT Convertible Trust I in connection with the redemption of its non-convertible preferred securities.

BUSINESS AND GROWTH STRATEGIES

Our primary business objective is to achieve sustainable long-term growth in cash flow and portfolio value in order to maximize unitholder value. We intend to achieve this objective by owning and operating high-quality office buildings and providing a superior level of service to customers across the United States.

Internal Growth

We believe that our future internal growth will come from:

• increasing occupancy by leasing up vacant space, retaining tenants, reducing the lease cycle time and improving customer service;

• recycling of capital through selective disposition of certain assets and reinvestment in properties or other assets more consistent with our desire to focus on core assets in core markets;

• our ability to achieve economies of scale over time, including anticipated cost savings from the implementation of our EOPlus initiatives; and

• completion and lease-up of development properties.

At December 31, 2002, approximately 12.7 million rentable square feet, or 10.1%, of our office space, was vacant. During the period from December 31, 2002 through December 31, 2007, there is approximately 71.6 million square feet, or 64.2%, of currently occupied office space scheduled to become vacant. As of December 31, 2002, the average annual total rent, including base rent and estimated expense reimbursements from tenants per occupied square foot for this space was $28.95 per square foot (see Item 2. Properties). The actual rental rates at which available space will be relet will depend on prevailing market factors at the time.

At December 31, 2002, approximately 1.5 million square feet of projects were under development. Our policy is to prudently pursue projects where customer need is evident and market conditions warrant.

In addition to our current development pipeline, we own various undeveloped land parcels on which approximately 12 million square feet of office space could be developed, assuming our receipt of necessary permits, licenses and approvals. Our policy is to develop land only when market conditions warrant. Although we may develop some properties ourselves, a portion of this activity may also be conducted with joint venture partners. If we develop a property with a joint venture partner, we may not have the same degree of control over the property as if we owned it ourselves. In addition, if we develop a property with a joint venture partner, we will be required to share a portion of the economic benefits from such property with our joint venture partner.

EOPlus

In 2001, we initiated a comprehensive analysis of our operating structure with the help of a management consulting firm and our employees. The goal of the analysis was to significantly reduce operating expenses, improve customer service, reduce lease cycle time, increase occupancy and retain tenants. The analysis resulted in a significant reengineering effort called EOPlus. As part of this effort, most of the activities that occurred at the property level will eventually be centralized into core regional offices with a view towards allowing property managers to spend more time building customer relationships. The centralization of each region’s operations is designed to permit us to manage our Properties with fewer people. By the end of 2003, we expect to have 16% fewer employees than at the end of 2001 as a result of staff reductions and attrition. We expect the related severance expenses to be immaterial. By consolidating our property management offices, we expect to make available between 130,000 square feet and 160,000 square feet of office space for leasing. We anticipate this new model will be fully implemented in all of our markets by the end of 2003. We have also created a central purchasing function to review and analyze our goods and services expenditures. The goal of the central purchasing function is to obtain preferred pricing, reduce the number of our vendors and reduce the number of invoices we process. Beginning in 2004, after the new model is fully implemented, we expect annual cost savings of $75 million to $100 million. Since a significant portion of these savings will be passed on to our tenants, we expect to benefit from an ability to offer our tenants a lower cost of occupancy than our competition.

External Growth

As part of our long-term growth strategy, assuming that capital is available to us on reasonable terms, we intend to continue to acquire additional office properties. Properties may be acquired separately or as part of a portfolio and may be acquired for cash and/or in exchange for our debt or equity securities. These acquisitions may be individual asset transactions, joint ventures, mergers or other business combinations.

ACQUISITION ACTIVITY

Over the past five years, we have invested approximately $15.3 billion, calculated on a cost basis, in acquisitions of institutional quality office properties, industrial properties and parking facilities throughout the United States.

Management of Equity Office considers various factors when evaluating potential property acquisitions. These factors include:

• the attractiveness of the property to existing and potential tenants;

• the likelihood and relative attractiveness of competitive supply;

• the anticipated demand for space in the local market;

• the creditworthiness and diversity of risk in the current tenants occupying the property;

• the ability to acquire the asset at an attractive going-in yield, as well as the potential to increase operating income over time by renewing leases for increasing rents;

• the physical condition of the property, including the extent of funds required for its maintenance and for physical upgrades needed in order to establish or sustain its market competitiveness;

• the ability to operate the property with a competitive cost structure; and

• the property’s location in one of our target markets.

In determining whether to enter into a new development, the foregoing factors are considered as well as the additional risks of development, including the following:

• the extent of lease-up risk in the context of the demand/supply characteristics of the local market;

• the ability to minimize construction risks; and

• the quality of local development partners, if relevant.

DISPOSITION ACTIVITY

Over the past five years, we have disposed of approximately $2.4 billion, calculated based on the sales price, of office properties, industrial properties and parking facilities throughout the United States. Management of Equity Office considers various factors when evaluating potential property dispositions. These factors include but are not limited to:

• our ability to recycle capital into markets consistent with our long-term strategy;

• exiting markets that are not core markets;

• whether the property is strategically located;

• tenant composition and lease rollover for the asset;

• general economic conditions, including job growth in the local market;

• the general quality of the asset; and

• the long-term outlook for the market for which the asset is located.

FINANCING POLICIES

Equity Office conducts substantially all of its investment and debt-financing activities through us. To date, we have financed our investments through a combination of equity, which may be issued by either Equity Office or us, as well as secured and unsecured debt (which would be issued by us). The terms of our line of credit and unsecured notes contain various financial covenants which require satisfaction of certain total debt-to-asset ratios, secured debt-to-total-asset ratios, debt service coverage ratios, and unsecured debt-to-unencumbered-asset ratios, as well as other limitations. In addition, we have obtained investment grade credit ratings on our unsecured debt from each of Standard & Poors, Fitch and Moodys rating agencies. A primary objective of our financing policy is to manage our financial position to allow us to raise capital at competitive rates. As of December 31, 2002, approximately 97.9% of our outstanding debt had a fixed interest rate which limits the risk of fluctuating interest rates. In addition, we utilize certain derivative financial instruments at times to limit interest rate risk. Derivatives are used for hedging purposes rather than speculation.

To the extent that the Board of Trustees of Equity Office decides to obtain additional capital, Equity Office may elect to issue equity securities, cause us to issue additional Units or debt securities, retain our earnings (subject to the provisions of the Internal Revenue Code requiring distributions of taxable income to maintain REIT status), or dispose of some of our properties or utilize a combination of these methods. Under the terms of our partnership agreement, the proceeds of all equity capital raised by Equity Office are contributed to us in exchange for additional interests in us.

INDUSTRY SEGMENTS

Our primary business is the ownership and operation of office properties. Our long-term tenants are in a variety of businesses, and no single tenant is significant to our business. Information related to this segment for the years ended December 31, 2002, 2001 and 2000 is set forth in Item 8. Financial Statements and Supplementary Data — Note 20 — Segment Information.

COMPETITION

The leasing of real estate is highly competitive. We compete for tenants in our markets primarily on the basis of property location, rent charged, services provided and the design and condition of improvements. We also experience competition when attempting to acquire or divest ownership of desirable real estate, building sites or redevelopment opportunities, including competition from domestic and foreign financial institutions, other REITs, life insurance companies, pension trusts, trust funds, partnerships and individual investors.

ENVIRONMENTAL EXPOSURE

As an owner of real estate, we are subject to various environmental laws of federal, state and local governments. Compliance with existing laws has not had a material adverse effect on our financial condition and results of operations, and management does not believe it will have such an impact in the future. However, we cannot predict the impact of unforeseen environmental contingencies or new or changed laws or regulations on our Properties, properties that we have sold or on properties that may be acquired in the future.

EMPLOYEES

As of December 31, 2002, Equity Office had approximately 2,500 employees providing in-house expertise in leasing, property management, investments and dispositions, finance, tax, property development, marketing, accounting, information systems and law.

The nine executive officers of Equity Office have an average tenure of nine years with Equity Office or its affiliates or predecessors and an average of 19 years experience in the real estate industry.

EXECUTIVE AND SENIOR OFFICERS OF EQUITY OFFICE

As of March 14, 2003, the following executive and senior officers of Equity Office held the offices indicated:


Name	Age		Office Held

Samuel Zell		61	Interim Chief Executive Officer
Richard D. Kincaid		41	President (and Chief Executive Officer as of April 1, 2003)
Peter H. Adams		56	Executive Vice President — Strategic Planning and Operations
David A. Helfand		38	Executive Vice President and Chief Investment Officer
Lawrence J. Krema		42	Executive Vice President — Human Resources and Communications
Christopher P. Mundy		41	Executive Vice President — Strategic Planning and Operations
Stanley M. Stevens		54	Executive Vice President, Chief Legal Counsel and Secretary
Marsha C. Williams		51	Executive Vice President and Chief Financial Officer


Name	Age		Office Held

Robert J. Winter, Jr.		57	Executive Vice President — Development and Portfolio Management
Thomas Q. Bakke		48	Senior Vice President — New York/ Washington D.C. Region
Stephen M. Briggs		44	Senior Vice President — Chief Accounting Officer
M. Patrick Callahan		41	Senior Vice President — Seattle Region
Robert E. Dezzutti		42	Senior Vice President — Los Angeles Region
Maureen O. Fear		46	Senior Vice President and Treasurer
Debra L. Ferruzzi		42	Senior Vice President and Executive Advisor
Frank Frankini		48	Senior Vice President — Development and Energy Operations
Mark P. Geisreiter		41	Senior Vice President — San Francisco Region
Matthew T. Gworek		42	Senior Vice President — Investments
Donald J. Huffner, Jr.		45	Senior Vice President — Atlanta Region
Peter D. Johnston		46	Senior Vice President — Houston Region
Kim J. Koehn		47	Senior Vice President — Denver Region
Diane M. Morefield		44	Senior Vice President — Investor Relations
Scott T. Morey		38	Senior Vice President — Chief Information Officer
John W. Peterson		39	Senior Vice President — San Jose Region
Arvid A. Povilaitis		42	Senior Vice President — Chicago Region
Ross G. Satterwhite		43	Senior Vice President — Investments
John C. Schneider		44	Senior Vice President — Legal and Associate General Counsel for Property Operations
Mark E. Scully		44	Senior Vice President — National Leasing
Maryann Gilligan Suydam		53	Senior Vice President — Boston Region

Set forth below is biographical information for each of the executive officers:

Samuel Zell has been a trustee and Chairman of the Board of Equity Office since October 1996 and has been interim Chief Executive Officer of Equity Office since April 2002. He also has been chairman of Equity Group Investments, L.L.C., an owner and financier of real estate and corporate investments, since January 1999 and chief executive officer of Danielson Holding Corporation, an insurance holding company, since July 2002. Additionally, Mr. Zell currently serves as a director and chairman of the board of a number of public companies and also has held the following executive positions:

• Interim President of Equity Office from April 2002 until November 2002; and

• Chairman of Equity Group Investments, Inc., a related entity of Equity Group Investments, L.L.C., for more than five years until December 1998.

Richard D. Kincaid has been a trustee and President of Equity Office since November 2002 and will become Chief Executive Officer of Equity Office effective April 1, 2003. Mr. Kincaid also has held the following positions:

• Executive Vice President of Equity Office from March 1997 until November 2002;

• Chief Operating Officer of Equity Office from September 2001 until November 2002;

• Chief Financial Officer of Equity Office from March 1997 until August 2002;

• Senior Vice President of Equity Office from October 1996 until March 1997;

• Senior Vice President and Chief Financial Officer of Equity Office Holdings, L.L.C., a predecessor of Equity Office, from July 1995 until October 1997;

• Senior Vice President of Equity Group Investments, Inc. from February 1995 until July 1995;

• Senior Vice President of the Yarmouth Group, a real estate investment company in New York, New York, from August 1994 until February 1995;

• Senior Vice President — Finance of Equity Group Investments, Inc. from December 1993 until July 1994; and

• Vice President — Finance of Equity Group Investments, Inc. from August 1990 until December 1993.

Peter H. Adams has been Executive Vice President — Strategic Planning and Operations of Equity Office since September 2001. Mr. Adams also has held the following positions:

• Senior Vice President — Strategic Planning and Operations of Equity Office from May 2000 until September 2001;

• Senior Vice President — Pacific Region of Equity Office from March 1998 until May 2000;

• Regional Vice President — Pacific of Equity Office from July 1997 until March 1998;

• Vice President/ Regional Manager of Equity Office Holdings, L.L.C. from March 1997 until October 1997;

• Vice President/ Regional Manager of Equity Office Properties, L.L.C., a predecessor of Equity Office, from July 1995 until October 1997; and

• Vice President/ Group Manager of Equity Office Properties, Inc., a provider of real estate property management services and a former subsidiary of Equity Group Investments, Inc., from July 1994 until January 1998.

David A. Helfand has been Executive Vice President and Chief Investment Officer of Equity Office since September 2001. Mr. Helfand also has held the following positions:

• Executive Vice President — Business Development of Equity Office from February 2000 until September 2001;

• Senior Vice President — New Business Development of Equity Office from July 1998 until February 2000; and

• Managing Director of Equity International Properties, Ltd., a real estate investment company, from December 1997 until July 1998.

Lawrence J. Krema has been Executive Vice President — Human Resources and Communications of Equity Office since November 2002. Mr. Krema also has held the following positions:

• Senior Vice President — Human Resources of Equity Office from March 2001 until November 2002 and

• Vice President of NEC Technologies, Inc., a leading supplier of presentation systems, computing and other empowering technologies for the North American market, from April 1995 until October 2000 (in this capacity, Mr. Krema managed the human resources division of the company in North America and was responsible for corporate services, which included real estate, travel and office services).

Christopher P. Mundy has been Executive Vice President — Strategic Planning and Operations of Equity Office since September 2001. Mr. Mundy also has held the following positions:

• Senior Vice President — Strategic Planning and Operations of Equity Office from May 2000 until September 2001;

• Senior Vice President — Northeast Region of Equity Office from March 1998 until May 2000;

• Regional Vice President — Northeast of Equity Office from July 1997 until March 1998;

• Vice President/ Regional Manager of Equity Office Holdings, L.L.C. from March 1997 until October 1997;

• Vice President/ Regional Leasing Director of Equity Office Properties, L.L.C. from July 1995 until October 1997; and

• Vice President/ Regional Leasing Director of Equity Office Properties, Inc. from September 1993 until January 1998.

Stanley M. Stevens has been Executive Vice President of Equity Office since September 1996 and Chief Legal Counsel and Secretary of Equity Office since October 1996. Mr. Stevens also has held the following position:

• Executive Vice President and General Counsel of Equity Office Holdings, L.L.C. from September 1996 until October 1997.

Marsha C. Williams has been Executive Vice President and Chief Financial Officer of Equity Office since August 2002. Ms. Williams also has held the following positions:

• Chief Administrative Officer of Crate and Barrel, a national Chicago-based leading retailer of contemporary home furnishings and accessories (Crate and Barrel is the trade name of Euromarket Designs Inc., which is an indirect majority owned subsidiary of Otto Versand Gmbh & Co., a German mail-order company), from May 1998 until August 2002 (in this capacity, Ms. Williams participated in the planning and execution of Crate and Barrel’s growth strategy and managed its finance, accounting, information technology, warehousing, distribution and logistics, loss prevention, strategic planning, direct marketing operations and purchasing departments); and

• Vice President of Amoco Corporation, a worldwide energy and chemical company, from December 1997 until April 1998 and Treasurer of Amoco Corporation from October 1993 until April 1998, as well as other capacities and positions from May 1989 until October 1993.

Robert J. Winter, Jr. has been Executive Vice President — Development and Portfolio Management of Equity Office since November 2002. Mr. Winter also has held the following positions:

• Senior Vice President — Development of Equity Office from June 2002 until November 2002;

• Senior Vice President — Development Investments of Equity Office from July 2001 until June 2002;

• President and Chief Executive Officer of Amli Commercial Properties Trust, a private real estate investment trust with office and industrial properties in the suburban Chicago market, from August 1998 until July 2001 (in this capacity, Mr. Winter was responsible for all aspects of the company’s business, including the development, management and ownership of its properties); and

• President and Chief Executive Officer of Amli Commercial Properties, LLC, a limited liability company and predecessor of Amli Commercial Properties Trust, from November 1996 until July 1998

(in this capacity, along with developing the business, Mr. Winter was responsible for forming Amli Commercial Properties Trust, the future growth vehicle for the business).

Item 2. Properties.

All capitalized terms used herein and not otherwise defined shall have the meaning given in the financial statements and notes thereto set forth in Item 8. For information regarding encumbrances on our properties, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Debt Financing — Mortgage Debt” and “Item 15. Exhibits, Financial Statements, Schedules and Reports on Form 8-K — Schedule III — Real Estate and Accumulated Depreciation as of December 31, 2002”. All of our consolidated properties are held in fee simple interest, except for approximately 80 properties in which we have leasehold interests and do not own the land or a portion thereof and one property in which we are the mortgage holder.

General

We are the largest publicly-held owner and operator of office properties in the United States based upon equity market capitalization and square footage. At December 31, 2002, we had a portfolio of 734 Office Properties comprising approximately 125.7 million square feet of commercial office space in 20 states and the District of Columbia, 77 Industrial Properties comprising approximately 6.0 million square feet and approximately 1.5 million square feet of office properties under development. Approximately 41.1% of the total square feet of our office properties is located in central business districts (“CBDs”) and approximately 58.9% is located in suburban markets. At December 31, 2002, our Office Properties were approximately 88.6% occupied on a weighted average basis. No single tenant accounts for more than 1.6% of the aggregate annualized rent or 1.9% of the aggregate occupied square feet.

For segment reporting purposes, the Office Properties are included in the “Office Properties” segment and the Industrial Properties are included in the “Corporate and Other” segment.

All property data presented below are as of December 31, 2002.

Property Statistics

Office Properties

The following table sets forth certain data relating to our Office Properties, including those we own in joint ventures with other partners.


																Average Annual
											Annualized Rent,					Total Rent,
											including Base					including Base
					Percent of						Rent and Tenant		Percent of			Rent and
					Office						Reimbursements,		Office			Tenant
					Portfolio						for Occupied		Portfolio			Reimbursements,
	Number of		Rentable		Rentable			Percent			Square Feet		Annualized			Per Occupied
Primary Market	Buildings		Square Feet		Square Feet			Occupied			(in thousands)(a)		Rent			Square Foot(a)

San Francisco		95		10,642,718		8.5	%		76.6	%	$	363,532		10.7	%	$	44.57
San Jose		128		8,577,382		6.8	%		86.6	%		306,026		9.0	%		41.18
Boston		55		13,017,977		10.4	%		91.4	%		460,009		13.5	%		38.67
Seattle		57		10,071,078		8.0	%		91.4	%		261,410		7.7	%		28.40
New York		6		4,986,407		4.0	%		98.9	%		245,887		7.2	%		49.86
Chicago		30		11,190,188		8.9	%		91.7	%		286,164		8.4	%		27.88
Los Angeles		48		7,130,081		5.7	%		92.7	%		194,512		5.7	%		29.42
Washington, D.C.		25		6,041,210		4.8	%		89.1	%		178,072		5.2	%		33.10
Atlanta		44		7,783,233		6.2	%		85.6	%		162,561		4.8	%		24.41
Orange County		38		6,227,769		5.0	%		88.6	%		137,474		4.0	%		24.91
All others		208		40,057,356		31.9	%		88.3	%		808,426		23.7	%		22.85

Total/ Weighted Average		734		125,725,399		100.0	%		88.6	%	$	3,404,073		100.0	%	$	30.55

Industrial Properties

The following table sets forth certain data relating to our Industrial Properties.


																Average Annual
											Annualized Rent,					Total Rent,
											including Base					including Base
					Percent of						Rent and Tenant		Percent of			Rent and
					Industrial						Reimbursements,		Industrial			Tenant
					Portfolio						for Occupied		Portfolio			Reimbursements,
	Number of		Rentable		Rentable			Percent			Square Feet		Annualized			Per Occupied
Primary Market	Buildings		Square Feet		Square Feet			Occupied			(in thousands)(a)		Rent			Square Foot(a)

Los Angeles		1		130,600		2.2	%		100.0	%	$	470		0.9	%	$	3.60
Oakland-East Bay		48		3,981,486		66.7	%		91.2	%		28,326		56.5	%		7.80
San Jose		28		1,855,673		31.1	%		84.5	%		21,299		42.5	%		13.58

Total/ Weighted Average		77		5,967,759		100.0	%		89.3	%	$	50,095		100.0	%	$	9.40

Lease Distribution

The following table sets forth information relating to the distribution of the Office Property leases, based on occupied square feet.


											Average Annual
						Annualized Rent,					Total Rent,
						including Base					including Base
			Percent of			Rent and Tenant		Percent of			Rent and
			Office			Reimbursements,		Office			Tenant
	Total Occupied		Portfolio			for Occupied		Portfolio			Reimbursements,
	Square		Occupied			Square Feet		Annualized			Per Occupied
Square Feet	Feet(b)		Square Feet			(in thousands)(a)		Rent			Square Foot(a)

2,500 or less		4,944,536		4.5	%	$	141,333		4.2	%	$	28.58
2,501 – 5,000		7,706,519		7.0	%		223,635		6.6	%		29.02
5,001 – 7,500		6,525,283		5.9	%		195,098		5.7	%		29.90
7,501 – 10,000		5,100,552		4.6	%		151,248		4.4	%		29.65
10,001 – 20,000		15,540,957		14.1	%		453,149		13.3	%		29.16
20,001 – 40,000		17,970,492		16.3	%		549,604		16.1	%		30.58
40,001 – 60,000		10,622,046		9.6	%		331,418		9.7	%		31.20
60,001 – 100,000		11,460,829		10.4	%		352,985		10.4	%		30.80
100,001 or greater		30,419,554		27.6	%		1,005,603		29.5	%		33.06

Total/Weighted Average		110,290,768		100.0	%	$	3,404,073		100.0	%	$	30.55


(a)		Annualized rent is the monthly contractual rent under existing leases as of December 31, 2002, multiplied by 12 months. Annualized rent per occupied square foot is annualized rent divided by occupied square feet at December 31, 2002. This amount reflects total base rent and estimated expense reimbursements from tenants, as of December 31, 2002 without regard to any rent abatements and contractual increases or decreases in rent subsequent to December 31, 2002.

(b)		Reconciliation for total net rentable square feet for Office Properties is as follows:


			Percent of
	Square Footage		Total

Square footage occupied by tenants		110,290,768		87.7	%
Square footage used for management offices and building use		1,134,125		0.9	%

Total occupied square feet		111,424,893		88.6	%
Leased and unoccupied square feet		1,590,061		1.3	%
Unleased square feet		12,710,445		10.1	%

Total rentable square feet		125,725,399		100.0	%

Lease Expiration

The following table sets forth information relating to expiration patterns of our Office Property leases. (Dollars in thousands, except per square foot amounts)


	2003 and
	month to
	month(4)		2004		2005		2006		2007		2008		2009		2010		2011		2012		Thereafter(5)		Totals

*San Francisco*
Square Feet(1)		1,206,121		1,071,923		1,318,646		1,227,354		1,403,898		659,496		265,106		620,159		170,530		27,428		186,347		8,157,008
% Square Feet(2)		11.3%		10.1%		12.4%		11.5%		13.2%		6.2%		2.5%		5.8%		1.6%		0.3%		1.8%		76.6%
Annualized Rent, including Base Rent and Tenant Reimbursements, for Occupied Square Feet(3)	$	42,572	$	42,368	$	55,844	$	56,824	$	62,305	$	31,413	$	13,007	$	36,478	$	10,659	$	880	$	11,182	$	363,532
Average Annual Total Rent, including Base Rent and Tenant Reimbursements, Per Occupied Square Foot(3)	$	35.30	$	39.53	$	42.35	$	46.30	$	44.38	$	47.63	$	49.06	$	58.82	$	62.50	$	32.09	$	60.00	$	44.57
*San Jose*
Square Feet(1)		885,051		921,446		1,808,152		720,303		594,031		205,098		142,860		816,075		809,261		122,882		405,373		7,430,532
% Square Feet(2)		10.3%		10.7%		21.1%		8.4%		6.9%		2.4%		1.7%		9.5%		9.4%		1.4%		4.7%		86.6%
Annualized Rent, including Base Rent and Tenant Reimbursements, for Occupied Square Feet(3)	$	33,258	$	32,638	$	57,244	$	29,868	$	23,875	$	10,392	$	4,703	$	37,273	$	53,864	$	4,308	$	18,603	$	306,026
Average Annual Total Rent, including Base Rent and Tenant Reimbursements, Per Occupied Square Foot(3)	$	37.58	$	35.42	$	31.66	$	41.47	$	40.19	$	50.67	$	32.92	$	45.67	$	66.56	$	35.06	$	45.89	$	41.18
*Boston*
Square Feet(1)		1,212,711		1,090,810		1,286,479		799,574		1,353,468		1,106,438		977,179		1,054,190		402,917		1,037,289		1,574,211		11,895,266
% Square Feet(2)		9.3%		8.4%		9.9%		6.1%		10.4%		8.5%		7.5%		8.1%		3.1%		8.0%		12.1%		91.4%
Annualized Rent, including Base Rent and Tenant Reimbursements, for Occupied Square Feet(3)	$	44,486	$	38,788	$	47,835	$	27,810	$	54,281	$	43,307	$	37,742	$	41,571	$	20,371	$	37,809	$	66,009	$	460,009
Average Annual Total Rent, including Base Rent and Tenant Reimbursements, Per Occupied Square Foot(3)	$	36.68	$	35.56	$	37.18	$	34.78	$	40.11	$	39.14	$	38.62	$	39.43	$	50.56	$	36.45	$	41.93	$	38.67
*Seattle*
Square Feet(1)		2,090,698		1,431,085		1,271,546		1,034,519		628,705		900,987		561,976		683,539		350,030		128,507		122,499		9,204,091
% Square Feet(2)		20.8%		14.2%		12.6%		10.3%		6.2%		8.9%		5.6%		6.8%		3.5%		1.3%		1.2%		91.4%
Annualized Rent, including Base Rent and Tenant Reimbursements, for Occupied Square Feet(3)	$	58,117	$	40,894	$	37,333	$	29,433	$	17,476	$	25,881	$	15,484	$	20,997	$	11,513	$	3,209	$	1,073	$	261,410
Average Annual Total Rent, including Base Rent and Tenant Reimbursements, Per Occupied Square Foot(3)	$	27.80	$	28.58	$	29.36	$	28.45	$	27.80	$	28.72	$	27.55	$	30.72	$	32.89	$	24.97	$	8.76	$	28.40
*New York*
Square Feet(1)		235,205		111,569		99,719		191,651		164,762		73,759		1,146,667		1,255,241		531,252		139,383		982,732		4,931,940
% Square Feet(2)		4.7%		2.2%		2.0%		3.8%		3.3%		1.5%		23.0%		25.2%		10.7%		2.8%		19.7%		98.9%
Annualized Rent, including Base Rent and Tenant Reimbursements, for Occupied Square Feet(3)	$	8,895	$	6,742	$	5,298	$	11,360	$	7,477	$	4,201	$	60,173	$	60,634	$	20,974	$	8,082	$	52,051	$	245,887
Average Annual Total Rent, including Base Rent and Tenant Reimbursements, Per Occupied Square Foot(3)	$	37.82	$	60.43	$	53.13	$	59.28	$	45.38	$	56.96	$	52.48	$	48.30	$	39.48	$	57.99	$	52.97	$	49.86
*Chicago*
Square Feet(1)		1,502,466		1,079,853		1,193,749		1,152,488		744,096		1,404,236		761,037		980,253		261,248		584,807		599,525		10,263,758
% Square Feet(2)		13.4%		9.6%		10.7%		10.3%		6.6%		12.5%		6.8%		8.8%		2.3%		5.2%		5.4%		91.7%
Annualized Rent, including Base Rent and Tenant Reimbursements, for Occupied Square Feet(3)	$	43,877	$	30,067	$	30,502	$	31,509	$	19,514	$	42,032	$	23,486	$	23,776	$	7,625	$	16,289	$	17,487	$	286,164
Average Annual Total Rent, including Base Rent and Tenant Reimbursements, Per Occupied Square Foot(3)	$	29.20	$	27.84	$	25.55	$	27.34	$	26.23	$	29.93	$	30.86	$	24.25	$	29.19	$	27.85	$	29.17	$	27.88


	2003 and
	month to
	month(4)		2004		2005		2006		2007		2008		2009		2010		2011		2012		Thereafter(5)		Totals

*Los Angeles*
Square Feet(1)		811,720		633,408		824,092		885,217		1,004,972		288,585		384,854		362,000		211,874		561,216		643,969		6,611,907
% Square Feet(2)		11.4%		8.9%		11.6%		12.4%		14.1%		4.0%		5.4%		5.1%		3.0%		7.9%		9.0%		92.7%
Annualized Rent, including Base Rent and Tenant Reimbursements, for Occupied Square Feet(3)	$	21,576	$	18,255	$	25,571	$	28,256	$	34,190	$	8,310	$	9,909	$	10,047	$	5,969	$	17,266	$	15,163	$	194,512
Average Annual Total Rent, including Base Rent and Tenant Reimbursements, Per Occupied Square Foot(3)	$	26.58	$	28.82	$	31.03	$	31.92	$	34.02	$	28.80	$	25.75	$	27.75	$	28.17	$	30.77	$	23.55	$	29.42
*Washington D.C.*
Square Feet(1)		994,998		425,044		947,042		529,170		520,796		354,996		179,316		545,607		271,979		344,233		266,629		5,379,810
% Square Feet(2)		16.5%		7.0%		15.7%		8.8%		8.6%		5.9%		3.0%		9.0%		4.5%		5.7%		4.4%		89.1%
Annualized Rent, including Base Rent and Tenant Reimbursements, for Occupied Square Feet(3)	$	29,668	$	15,031	$	34,884	$	17,102	$	13,984	$	11,726	$	6,641	$	19,371	$	11,184	$	10,766	$	7,715	$	178,072
Average Annual Total Rent, including Base Rent and Tenant Reimbursements, Per Occupied Square Foot(3)	$	29.82	$	35.36	$	36.83	$	32.32	$	26.85	$	33.03	$	37.03	$	35.50	$	41.12	$	31.28	$	28.94	$	33.10
*Atlanta*
Square Feet(1)		1,276,604		412,848		568,292		1,779,139		542,806		499,903		464,114		759,310		195,983		72,533		87,204		6,658,736
% Square Feet(2)		16.4%		5.3%		7.3%		22.9%		7.0%		6.4%		6.0%		9.8%		2.5%		0.9%		1.1%		85.6%
Annualized Rent, including Base Rent and Tenant Reimbursements, for Occupied Square Feet(3)	$	25,350	$	9,765	$	13,472	$	50,038	$	11,685	$	15,741	$	11,374	$	19,068	$	4,940	$	1,128	$	—	$	162,561
Average Annual Total Rent, including Base Rent and Tenant Reimbursements, Per Occupied Square Foot(3)	$	19.86	$	23.65	$	23.71	$	28.12	$	21.53	$	31.49	$	24.51	$	25.11	$	25.21	$	15.54	$	—	$	24.41
*Orange County*
Square Feet(1)		920,380		839,426		1,073,040		716,814		805,986		754,492		102,728		39,292		72,786		114,571		79,667		5,519,182
% Square Feet(2)		14.8%		13.5%		17.2%		11.5%		12.9%		12.1%		1.6%		0.6%		1.2%		1.8%		1.3%		88.6%
Annualized Rent, including Base Rent and Tenant Reimbursements, for Occupied Square Feet(3)	$	24,004	$	21,526	$	27,463	$	18,638	$	20,658	$	16,455	$	2,772	$	1,068	$	1,832	$	2,698	$	360	$	137,474
Average Annual Total Rent, including Base Rent and Tenant Reimbursements, Per Occupied Square Foot(3)	$	26.08	$	25.64	$	25.59	$	26.00	$	25.63	$	21.81	$	26.98	$	27.17	$	25.17	$	23.55	$	4.52	$	24.91
*All Others*
Square Feet(1)		5,135,321		5,452,909		4,981,526		5,282,247		4,381,334		2,950,723		1,933,710		977,085		636,952		897,050		2,743,806		35,372,663
% Square Feet(2)		12.8%		13.6%		12.4%		13.2%		10.9%		7.4%		4.8%		2.4%		1.6%		2.2%		6.8%		88.3%
Annualized Rent, including Base Rent and Tenant Reimbursements, for Occupied Square Feet(3)	$	116,618	$	118,722	$	117,221	$	128,222	$	101,455	$	66,042	$	44,699	$	26,414	$	16,493	$	19,183	$	53,357	$	808,426
Average Annual Total Rent, including Base Rent and Tenant Reimbursements, Per Occupied Square Foot(3)	$	22.71	$	21.77	$	23.53	$	24.27	$	23.16	$	22.38	$	23.12	$	27.03	$	25.89	$	21.39	$	19.45	$	22.85
*Total Portfolio*
Square Feet(1)		16,271,275		13,470,321		15,372,283		14,318,476		12,144,854		9,198,713		6,919,547		8,092,751		3,914,812		4,029,899		7,691,962		111,424,893
% Square Feet(2)		12.9%		10.7%		12.2%		11.4%		9.7%		7.3%		5.5%		6.4%		3.1%		3.2%		6.1%		88.6%
Annualized Rent, including Base Rent and Tenant Reimbursements, for Occupied Square Feet(3)	$	448,421	$	374,796	$	452,667	$	429,060	$	366,900	$	275,500	$	229,990	$	296,697	$	165,424	$	121,618	$	243,000	$	3,404,073
Average Annual Total Rent, including Base Rent and Tenant Reimbursements, Per Occupied Square Foot(3)	$	27.56	$	27.82	$	29.45	$	29.97	$	30.21	$	29.95	$	33.24	$	36.66	$	42.26	$	30.18	$	31.59	$	30.55

(1) Total net rentable square feet represented by expiring leases.

(2) Percentage of total net rentable feet represented by expiring leases.

(3) Annualized rent is the monthly contractual rent under existing leases as of December 31, 2002, multiplied by 12 months. Annualized rent per occupied square foot is annualized rent divided by occupied square feet at December 31, 2002. This amount reflects total base rent and estimated expense reimbursements from tenants as of December 31, 2002 without regard to any rent abatements and contractual increases or decreases in rent subsequent to December 31, 2002.

(4) Total square feet on month to month leases is 1,389,831.

(5) Management offices and building use square footage is included with no rent per square foot.

Item 3. Legal Proceedings.

EOP Partnership is not presently subject to material litigation nor, to EOP Partnership’s knowledge, is any litigation threatened against EOP Partnership, other than routine actions for negligence and other claims and administrative proceedings arising in the ordinary course of business, some of which are expected to be covered by liability insurance and all of which collectively are not expected to have a material adverse effect on the liquidity, results of operations, business or financial condition of EOP Partnership.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

PART II

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters.

There is no established public trading market for the Units. Equity Office’s Common Shares are traded on the New York Stock Exchange (“NYSE”) under the symbol “EOP.” On March 13, 2003, there were approximately 531 holders of record and 459,814,694 Units outstanding, 409,798,304 of which were held by Equity Office. The high and low sales prices and closing sales prices on the NYSE and distributions for the Common Shares during 2002 and 2001 are set forth in the table below. We paid an equivalent distribution on our Units to the distributions paid by Equity Office on its Common Shares during each of the periods presented.


Year	Quarter	High		Low		Close		Distributions

2002	Fourth	$	26.25	$	22.96	$	24.98	$	0.50
	Third	$	29.93	$	22.78	$	25.82	$	0.50
	Second	$	31.36	$	27.96	$	30.10	$	0.50
	First	$	30.60	$	27.18	$	29.99	$	0.50
2001	Fourth	$	32.55	$	27.00	$	30.08	$	0.50
	Third	$	33.08	$	29.50	$	32.00	$	0.50
	Second	$	31.75	$	26.20	$	31.63	$	0.45
	First	$	32.63	$	27.75	$	28.00	$	0.45

Item 6. Selected Financial Data.

The following sets forth selected consolidated financial and operating information on a historical basis for EOP Partnership. The selected financial data has been derived from the historical consolidated financial statements of EOP Partnership audited by Ernst & Young LLP, independent auditors. The following information should be read together with the consolidated financial statements and notes thereto of EOP Partnership included in “Item 8. Financial Statements and Supplementary Data.”


		2002(1)			2001(2)			2000(3)			1999			1998


		(Dollars in thousands, except per Unit data)
Operating Data:
Rental, tenant reimbursements, parking and other property revenues		$	3,467,848		$	3,025,664		$	2,185,055		$	1,890,430		$	1,632,366
Income from continuing operations		$	821,216		$	674,510		$	517,498		$	468,637		$	374,765
Net income available for Units		$	796,847		$	640,045		$	484,312		$	430,264		$	353,053
Funds from Operations(4)		$	1,504,544		$	1,176,983		$	909,157		$	739,093		$	654,139
Earnings before interest, taxes depreciation and amortization(5)		$	2,467,445		$	2,202,139		$	1,549,468		$	1,230,894		$	1,051,693
Property net operating income(6)		$	2,377,001		$	2,088,198		$	1,463,151		$	1,256,180		$	1,065,714
Cash flows:
	Operating activities	$	1,390,949		$	1,241,601		$	907,343		$	720,711		$	759,151
	Investing activities	$	85,173		$	(1,348,203	)	$	(1,311,778	)	$	(67,138	)	$	(2,231,712	)
	Financing activities	$	(1,478,772	)	$	114,467		$	455,353		$	(718,315	)	$	1,310,788
Ratio of earnings to combined fixed charges and preferred share distributions			1.9			1.7			1.7			1.7			1.8
Income from continuing operations per Unit-basic		$	1.76		$	1.65		$	1.64		$	1.63		$	1.33
Income from continuing operations per Unit-diluted		$	1.75		$	1.64		$	1.62		$	1.61		$	1.32
Net income available for Units-basic		$	1.71		$	1.57		$	1.53		$	1.49		$	1.25
Net income available for Units-diluted		$	1.70		$	1.55		$	1.52		$	1.48		$	1.24
Cash distributions declared per Unit		$	2.00		$	1.90		$	1.74		$	1.58		$	1.38
Balance Sheet Data (at end of period):
Total assets		$	25,246,783		$	25,808,422		$	18,794,253		$	14,046,058		$	14,261,291
Total liabilities		$	12,728,959		$	12,895,706		$	9,504,662		$	6,334,985		$	6,472,613
Other Data (at end of period):
Number of Office Properties			734			774			381			294			284
Number of Industrial Properties			77			79			—			—			—
Rentable square feet of Office Properties (in millions)			125.7			128.2			99.0			77.0			75.1
Occupancy of Office Properties			88.6	%		91.8	%		94.6	%		93.7	%		95.0	%

(1) In 2002, we recognized approximately $105.5 million in lease termination fees from consolidated properties and an additional $46.4 million in lease termination fees from unconsolidated joint ventures.

See Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations — Comparison of Year Ended December 31, 2002 to December 31, 2001.

(2) On July 2, 2001, EOP Partnership completed its acquisition by merger (the “Spieker Merger”) of Spieker Properties, L.P. (“Spieker Partnership”) at a cost of approximately $7.2 billion. As a result of the Spieker Merger, EOP Partnership acquired an interest in 391 office properties containing approximately 28.3 million square feet and 98 industrial properties containing approximately 10.1 million square feet.

(3) On June 19, 2000, EOP Partnership completed its acquisition by merger (the “Cornerstone Merger”) of Cornerstone Properties Limited Partnership (“Cornerstone Partnership”) at a cost of approximately $4.5 billion. As a result of the Cornerstone Merger, EOP Partnership acquired an interest in 82 office properties containing approximately 18.9 million square feet.

(4) Refer to Item 7. Management’s Discussion and Analysis of Financial Condition — Funds from Operations for information regarding why EOP Partnership presents funds from operations and for a reconciliation of this non-GAAP financial measure to net income available for units.

(5) Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is a non-GAAP financial measure and is presented because EOP Partnership considers EBITDA to be an indicative measure of its operating performance due to the significance of EOP Partnership’s long-lived assets and because this data can be used to measure EOP Partnership’s ability to service debt, fund capital expenditures and expand its business. However, this data should not be considered as an alternative to net income, operating profit, cash flow from operations or any other operating or liquidity performance measure prescribed by generally accepted accounting principles (“GAAP”). In addition, EBITDA as calculated by EOP Partnership may not be comparable to similarly titled measures reported by other companies. Interest expense, taxes, depreciation and amortization, impairment on securities and other investments, impairment on assets held for sale, minority interests, net gain on sales of real estate, extraordinary items, preferred distributions, put option settlements and cumulative effect of a change in accounting principle for consolidated properties and unconsolidated joint ventures which are not reflected in the presentation of EBITDA, have been, and will or may be, incurred by EOP Partnership. Investors are cautioned that these excluded items are significant components in understanding and assessing EOP Partnership’s financial performance.

EOP Partnership calculates EBITDA as follows:



	For the Years Ended December 31,

	2002			2001			2000			1999			1998


	(Dollars in thousands)
Net income available for Units	$	796,847		$	640,045		$	484,312		$	430,264		$	353,053
Add back (deduct):
Interest expense		810,129			726,930			523,860			412,170			336,153
Interest expense included in discontinued operations		(25	)		1,322			1,927			1,825			2,458
Loan amortization		4,886			14,996			11,493			15,204			13,928
Loan amortization included in discontinued operations		—			188			55			37			(18	)
Depreciation and lease amortization		684,192			566,596			421,195			349,081			295,679
Depreciation and lease amortization included in discontinued operations		6,812			8,434			5,476			5,215			3,899
Impairment on securities and other investments		—			132,684			—			—			—
Impairment on assets held for sale		—			2,536			—			—			—
Income taxes		9,394			8,814			2,719			656			1,666
Income taxes included in discontinued operations		101			23			—			—			—
Minority interest — partially owned properties		7,200			8,685			6,843			1,981			2,114
Income from investment in unconsolidated joint ventures		(106,852	)		(69,203	)		(56,251	)		(13,824	)		(11,267	)
EOP Partnership’s share of EBITDA from its investment in unconsolidated joint ventures		210,114			185,223			137,928			38,685			34,259
Gain on sales of real estate		—			(81,662	)		(36,013	)		(59,661	)		(12,433	)
Gain on sales of real estate included in discontinued operations		(17,926	)		—			—			—			—
Extraordinary item		—			1,000			—			—			—
Cumulative effect of change in accounting principle		—			1,142			—			—			—
Put option settlement		—			(2,655	)		2,576			5,658			—
Preferred distributions, net		62,573			57,041			43,348			43,603			32,202

Earnings before interest, taxes, depreciation and amortization	$	2,467,445		$	2,202,139		$	1,549,468		$	1,230,894		$	1,051,693

(6) Calculated as property operating revenue less property operating expense from continuing operations and discontinued operations. For more information, refer to Item 8. Financial Statements and Supplementary Data — Note 20 — Segment Information.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview

The following discussion and analysis is based primarily on the consolidated financial statements of EOP Partnership for the years presented and should be read together with the notes thereto contained in this Form 10-K. Terms employed herein as defined terms, but without definition, shall have the meaning set forth in the notes to the financial statements.

Key Transactions of 2002

During the year ended December 31, 2002, we completed the following key transactions:

• disposed of 45 office properties, four parking facilities, two industrial properties and three land parcels in various transactions to unaffiliated parties for approximately $508.3 million. The sold office properties consisted of approximately 3,113,189 square feet, the industrial properties consisted of approximately 77,072 square feet, and the parking facilities consisted of approximately 7,464 parking spaces;

• acquired two office buildings for approximately $92.3 million. The properties are located in Washington, D.C., and consist of approximately 327,550 square feet, of which approximately 260,372 square feet is office space;

• placed two developments into service consisting of three buildings and approximately 330,646 square feet;

• commenced two developments consisting of approximately 292,000 square feet;

• exchanged our equity interest in a land parcel under option and operating business in exchange for Wilson/Equity Office’s equity interest in several developments and land parcels;

• issued $500 million of unsecured notes due February 2012 at an all-in cost of 7.0%, which are guaranteed by Equity Office, and exchanged approximately $260.0 million of these notes for the previously outstanding $250.0 million MandatOry Par Put Remarketed Securities^SM which were subject to mandatory redemption; repaid $310 million of unsecured notes upon maturity and repaid approximately $156.1 million of mortgage debt;

• redeemed the 7,994,000 outstanding 8.98% Series A Cumulative Redeemable Preferred Units from Equity Office for $201.9 million, including accrued distributions, and, in turn, Equity Office used the proceeds to redeem its 7,994,000 outstanding 8.98% Series A Cumulative Redeemable Preferred Shares;

• issued 8,500,000 7.75% Series G Cumulative Redeemable Preferred Units to Equity Office in exchange for Equity Office’s contribution of the proceeds of approximately $206.1 million from its issuance and sale of 8,500,000 7.75% Series G Cumulative Redeemable Preferred Shares;

• Equity Office repurchased 7,901,900 Common Shares at an average price of $24.92 per share for a total of $196.9 million in the aggregate as part of a Common Share repurchase program for up to $400 million of Equity Office’s Common Shares. In connection with the repurchases, EOP Partnership purchased from Equity Office and retired a corresponding number of Units for an aggregate purchase price equal to the aggregate purchase price for all Common Share repurchases;

• redeemed 3,727,925 Units for cash at an average price of $28.62 per Unit for a total of approximately $106.7 million;

• recognized approximately $105.5 million from lease termination fees, including approximately $46.1 million and 5,000,000 common shares (which were initially valued at zero and subsequently sold and recognized in March 2003 for a gain on sale of securities of approximately $8.1 million) from one tenant. In addition, we recognized approximately $46.4 million from lease terminations at our unconsolidated joint ventures, including approximately $40 million from one tenant; and

• received approximately $20.1 million from CT Convertible Trust I in connection with the redemption of its non-convertible preferred securities.

Critical Accounting Policies and Estimates

Our significant accounting policies are described in Note 2 to the consolidated financial statements included in Item 8 of this Form 10-K. We believe our most critical accounting policies include revenue recognition, allowance for doubtful accounts, impairment of long-lived assets, depreciation and the fair value of financial instruments including derivative instruments, each of which we discuss below.

Revenue Recognition and Allowance for Doubtful Accounts

Rental revenue from our tenants is our principal source of revenue and is recognized in accordance with GAAP based on the contractual terms of the leases. We monitor the liquidity and creditworthiness of our tenants on an on-going basis. Based on this analysis, historical experiences and the current economic environment, we establish provisions, and maintain an allowance for doubtful accounts for estimated losses resulting from the possible inability of our tenants to make required rent payments to us. An allowance for doubtful accounts is recorded during each period and the bad debt expense is netted against rental revenue in our consolidated statements of operations. The allowance for doubtful accounts, which represents the cumulative allowances less write-offs of uncollectible rent, is netted against tenant and other receivables and deferred rent receivable on our consolidated balance sheets.

As a result of the slow down in economic activity, we have experienced over the past two years an increase in the amount of uncollectible receivables relating to tenants in bankruptcy and tenants in financial distress and have increased our bad debt expense and allowance for doubtful accounts accordingly. Although our historical bad debt expense has been based on the factors described above, if we incorrectly estimate the required allowance for doubtful accounts, our financial condition and results of operations could be adversely affected. Below is our historical bad debt expense for each of the three years in the period ended December 31, 2002.



	For the years ended December 31,

	2002			2001			2000


	(Dollars in thousands)
Historical results:
Bad debt expense	$	27,995		$	26,124		$	6,349

Property operating revenues	$	3,467,848		$	3,025,664		$	2,185,055

Bad debt expense as a percentage of property revenues		0.81	%		0.86	%		0.29	%

Impairment of Long-Lived Assets

Under GAAP, we are required to record at fair value any of our long-lived assets that we have determined to be permanently impaired. Our long-lived assets consist primarily of our investments in real estate and unconsolidated joint ventures, but we also have investments in preferred securities and notes receivable. The fair value of our investments in real estate and unconsolidated joint ventures depends on the future cash flows from operations of the properties or joint ventures over our anticipated holding period. The fair value of our investments in preferred securities and notes receivable depends on the underlying fair value of the issuer. In assessing potential impairment for our investments, we consider these factors. If these factors result in a fair value that is less than our carrying value, an impairment may be recognized if we determine the loss to be permanent. There were no impairments in 2002. During 2001, we recognized an impairment of approximately $2.5 million on an investment in an unconsolidated joint venture that was subsequently sold. Also during 2001, we recognized an impairment of approximately $132.7 million on several investments in securities and other investments. Of this amount, securities and other investments with carrying values of $125.7 million were entirely written-off. If we do not recognize impairments at appropriate times and in appropriate amounts, our consolidated balance sheet may overstate the value of our long-lived assets.

Depreciation

We compute depreciation on our Properties using the straight-line method based on an estimated useful life of 40 years. A significant portion of the acquisition cost of each property is allocated to building (usually 85% to 90% unless the property is subject to a ground lease in which case 100% of the acquisition cost is allocated to building). The allocation of the acquisition cost to building and the determination of the useful life are based on management’s estimates. If we do not allocate appropriately to building or we incorrectly estimate the useful life of our Properties, our computation of depreciation will not appropriately reflect the allocation of our capital expenditures over future periods.

Fair Value of Financial Instruments

We are required to determine periodically the fair value of our mortgage debt and unsecured notes for disclosure purposes. In determining the fair value of these financial instruments, we use internally developed models that are based on current market conditions. For example, in determining the fair value of our mortgage debt and unsecured notes, we discount the spread between the future contractual interest payments and future interest payments based on a current market rate. In determining the current market rate, we add a credit spread to the quoted yields on federal government debt securities with similar maturity dates to our own debt. The credit spread estimate is based on our historical experience in obtaining either secured or unsecured financing and also is affected by current market conditions.

We are also required periodically to adjust the carrying values of interest rate swaps and caps, as well as the underlying hedged liability, if applicable, to its fair value. In determining the fair value of interest rate swaps and caps, we rely on third party quotations to adjust these instruments, as well as the hedged liability, if applicable, to its fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives either will be offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative’s change in fair value will be immediately recognized in earnings.

Because our valuations of our financial instruments are based on these types of estimates, the fair value of our financial instruments may change if our estimates are inaccurate. For the effect of hypothetical changes in market rates of interest on interest expense for variable rate debt, the fair value of total outstanding debt and our forward-starting interest rate swaps, see the Market Risk section.

New Accounting Policies Adopted in 2002

Effective January 1, 2002, we adopted the provisions of Statement of Financial Accounting Standards No. 144 (“SFAS No. 144”) Accounting for the Impairment or Disposal of Long-Lived Assets, which is effective for financial statements issued for fiscal years beginning after December 15, 2001. SFAS No. 144 addresses the financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 extends the reporting requirements of discontinued operations to include components of an entity that have either been disposed of or are classified as held for sale. During 2002, we disposed of 47 properties in various geographical regions consisting of approximately 3,190,261 square feet. The operating results of these properties have been reclassified as discontinued operations in the consolidated statements of operations for each of the three years in the period ended December 31, 2002 included herein.

In accordance with Statement of Financial Accounting Standards No. 145 (“SFAS No. 145”), Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections, effective for financial statements issued for fiscal years beginning after May 15, 2002, any gain or loss on extinguishment of debt that was classified as an extraordinary item in prior periods shall be reclassified. As a result of the adoption, extraordinary losses of $9,374 and $1,802, for each of the two years in the period ended December 31, 2001, were reclassified to “amortization of deferred financing costs and prepayment expenses”.

Accounting Policy Adopted in 2003

Effective January 1, 2003, we adopted Statement of Financial Accounting Standards No. 123 (“SFAS No. 123”) Accounting for Stock Based Compensation, which requires a fair value based accounting method for determining compensation expense associated with the issuance of stock options and other equity awards. We decided to adopt the accounting provisions of SFAS No. 123 to reflect the cost to the company of issuing stock options and other equity awards to certain individuals in the consolidated financial statements. We will employ the prospective method for adopting SFAS No. 123 which requires the recognition of compensation expense for stock options and other equity compensation granted on or after January 1, 2003 and to record compensation expense for modifications of stock options and other equity awards that were outstanding as of December 31, 2002. We anticipate recognizing compensation expense of approximately $6.0 million, $12.0 million and $18.0 million for the years ending December 31, 2003, 2004 and 2005, respectively, for both Option and Share Award grants accounted for under SFAS No. 123. These anticipated compensation expense amounts are based on the existing compensation structure for 2003 and assumes a similar level of Option and Share Award compensation in future years. Future Option and Share Award compensation is subject to change based on actual Option and Share Award grants in future years and their respective fair values.

Compensation expense related to Share Award grants were previously recognized in accordance with APB No. 25. The adoption of SFAS No. 123 does not significantly change the amount of compensation expense recognized for Share Awards.

Mergers

Spieker Merger

On July 2, 2001, Spieker merged into Equity Office and Spieker Partnership merged into EOP Partnership. The transaction, which was accounted for by the purchase method, valued Spieker (including the outside interests in Spieker Partnership) at approximately $7.2 billion, which included transaction costs, the assumption of approximately $2.1 billion in debt and the issuance of 14.25 million of our preferred units valued at approximately $356.3 million. We paid approximately $1.1 billion in cash and Equity Office issued approximately 101.5 million Common Shares and we issued approximately 16.7 million Units to third parties, each valued at $29.29 per Common Share/Unit. We financed the $1.1 billion cash portion of the purchase price using a combination of available cash and a new $1.0 billion bridge loan facility that was entered into before the closing of the Spieker Merger. The $1.0 billion bridge loan facility had a term of 364 days and an interest rate based on LIBOR plus 80 basis points. The $1.0 billion bridge loan facility was repaid in full with the net proceeds from the issuance of $1.4 billion of unsecured notes in July 2001 and terminated upon repayment. Through the Spieker Merger, we acquired 391 office properties comprising approximately 28.3 million square feet, 98 industrial properties comprising approximately 10.1 million square feet and several development properties which added to our ownership in key markets across the western United States.

Cornerstone Merger

On June 19, 2000, Cornerstone merged into Equity Office and Cornerstone Partnership merged into EOP Partnership. The transaction, which was accounted for by the purchase method, valued Cornerstone (including the outside interests in Cornerstone Partnership) at approximately $4.5 billion, which included transaction costs, the assumption of approximately $1.7 billion in debt, the redemption of 3.0 million shares of Cornerstone preferred stock valued at $18.00 per share, including accrued but unpaid dividends for a total of approximately $57.6 million, the redemption of approximately 58.5 million shares of Cornerstone common stock valued at $18.00 per share for a total of approximately $1.1 billion, the issuance of approximately 51.2 million Common Shares by Equity Office and the issuance of approximately 12.4 million Units each valued at $24.68 per Common Share/ Unit. We financed the $1.2 billion in cash from credit facilities available to us when the Cornerstone Merger closed.

Results of Operations

Trends in Property Operating Revenues

Income is received primarily from rental revenue from the Office Properties, including reimbursements from tenants for certain operating costs and from parking revenue from Office Properties. As a result of the current slowdown in economic activity, there has been a decrease in our occupancy rates and a general decline in overall market rental rates for our Office Properties. Below is a summary of our leasing activity for leases commencing in 2002 in our top 5 markets, top 10 markets and our total portfolio for our Office Properties. Our top 10 markets in terms of square footage in order from greatest to least are Boston, Chicago, San Francisco, Seattle, San Jose, Atlanta, Los Angeles, Orange County, Washington, D.C. and New York.


Office Property Data:		Top 5 Markets		Top 10 Markets		Total Portfolio

For the year ended December 31, 2002:
	Portion of total portfolio based on square feet at end of year		42.6%		68.1%		100.0%
	Occupancy at end of year		87.8%		88.8%		88.6%
	Gross square footage leased during the year		8,436,133		12,814,407		20,620,427
	Weighted average annual base rent per square foot leased during the year calculated in accordance with GAAP but without regard to estimated expense reimbursements from tenants(a)		$33.47		$31.48		$28.48
For the year ended December 31, 2001:
	Portion of total portfolio based on square feet at end of year		42.0%		66.9%		100.0%
	Occupancy at end of year		92.5%		92.7%		91.8%
	Gross square footage leased during the year		5,288,539		8,944,907		14,711,018
	Weighted average annual base rent per square foot leased during the year calculated in accordance with GAAP but without regard to estimated expense reimbursements from tenants(a)		$46.36		$41.48		$34.17

(a) Average annual rent per square foot for new office leases for which the tenants have occupied the space during the relevant period may lag behind market because leasing decisions typically are made anywhere from one month to 12 or more months prior to taking occupancy.

One of the main factors contributing to the decline in occupancy for our Office Properties was the increased level of early lease terminations. For the year ended December 31, 2002, we had approximately 6.1 million square feet of early lease terminations and received lease termination fees on a portion of the terminations of approximately $151.9 million. Future rental income may be affected by future lease terminations as we may be unable to collect the full amount that was due under the lease and would incur additional cost in re-leasing the space. Although there is no way of predicting future lease terminations, we currently anticipate they will be significantly lower in 2003.

As mentioned above, there has been a general decline in the overall market rates for our Office Properties. As of December 31, 2002, the average annual total rent, including base rent and estimated expense reimbursements from tenants, per occupied square foot under existing leases for our Office Properties was approximately $30.55 (See Item 2. Properties — Property Statistics). The weighted average annual base rent per square foot calculated in accordance with GAAP but without regard to estimated expense reimbursements from tenants, on leases executed during 2002 was approximately $28.48. If this declining trend in market rates continues, we would experience a decrease in rental revenues if the average annual contractual rent per square foot on leases expiring is greater than the average annual market rent per square foot on new leases executed.

As of December 31, 2002, approximately 71,577,209 occupied square feet (approximately 64.2% of the occupied office square feet) is expiring through 2007. The average annual rent per square foot for these leases is presented in the table below.


				Average Annual Total Rent,
				including Base Rent and
		Square Feet of		Tenant Reimbursements, per
Year		Expiring Leases		Occupied Square Foot(a)

2003			16,271,275	$	27.56
2004			13,470,321	$	27.82
2005			15,372,283	$	29.45
2006			14,318,476	$	29.97
2007			12,144,854	$	30.21

	Total		71,577,209	$	28.95

(a) See Item 2. Properties for an explanation of how these amounts are calculated.

We believe that it is not currently possible to draw any conclusions about where occupancy levels or market rents ultimately will stabilize. Further decreases in occupancy rates and/or declines in rents could adversely affect our revenues and results of operations in subsequent periods. We estimate that each one percent change in weighted average occupancy for our Office Properties can equate to a $30 million to $35 million change in rental revenue.

In addition to the downward trends in occupancy and market rents, we have experienced an increase in the amount of uncollectible receivables relating to tenants in bankruptcy and tenants that are having financial difficulties. For the years ended December 31, 2002, 2001 and 2000, bad debt expense was approximately $28.0 million, $26.1 million and $6.3 million, respectively. Although we have collateral from many of our tenants, we anticipate additional write-offs to occur in subsequent periods.

Trends in Property Operating Expenses


	Increased Costs Due to Terrorism Threat

As a result of the terrorist acts on September 11, 2001, we have realized increased costs for property insurance and safety and security. We believe that these increased costs will remain higher than similar costs incurred in previous periods for the foreseeable future.

Substantially all of the office leases require the tenant to pay, as additional rent, a portion of any increases in these operating expenses over a base amount. We believe a significant portion of any increase in these operating expenses will be offset by expense reimbursements from tenants.

In addition to the increased cost for property insurance described above, the insurance coverage provided through third-party insurance carriers is subject to coverage limitations. Should an uninsured or underinsured loss occur, we could lose all or a portion of our investment in, and anticipated cash flows from, one or more of the Properties. In addition, there can be no assurance that third-party insurance carriers will be able to maintain reinsurance sufficient to cover any losses that may be incurred. A description of our insurance coverage is described in “Item 8. Financial Statements and Supplementary Data — Note 25 — Commitments and Contingencies” and “Note 26 — Subsequent Events”.

EOPlus

property managers to spend more time building customer relationships. The centralization of each region’s operations is designed to permit us to manage our buildings with fewer people. By the end of 2003, we expect to have 16% fewer employees than at the end of 2001 as a result of staff reductions and attrition. We expect the related severance expenses to be immaterial. By consolidating our property management offices, we expect to make available between 130,000 square feet and 160,000 square feet of office space for leasing. We anticipate this new model will be fully implemented in all of our markets by the end of 2003. We have also created a central purchasing function to review and analyze our goods and services expenditures. The goal of the central purchasing function is to obtain preferred pricing, reduce the number of our vendors and reduce the number of invoices we process. Beginning in 2004, after the new model is fully implemented, we expect annual cost savings of $75 million to $100 million. Since a significant portion of these savings will be passed on to our tenants, we expect to benefit from an ability to offer our tenants a lower cost of occupancy than our competition.

Acquisition and Disposition Activity

Below is a summary of our acquisition and disposition activity since January 1, 2001. The buildings and total square feet shown include properties we own in joint ventures with other partners and reflect the total square feet of the properties. Excluding the joint venture partners’ share of the square feet of these properties, we effectively owned 119,563,201 square feet of office space as of December 31, 2002.



		Office Properties						Industrial Properties						Parking Facilities

					Total						Total
		Buildings			Square Feet			Buildings			Square Feet			Garages			Spaces

Properties owned as of:
January 1, 2001			381			98,995,994			—			—			9			14,244
	Spieker Merger		293			26,080,670			100			12,306,053			—			—
	Acquisitions		1			259,441			—			—			—			—
	Developments placed in service		9			1,497,014			—			—			—			—
	Dispositions		(8	)		(879,388	)		(19	)		(4,052,476	)		(4	)		(3,721	)
	Reclass from industrial to office		44			2,208,837			(44	)		(2,208,837	)		—			—
	Building remeasurements(a)		54			71,419			42			91			—			242

December 31, 2001			774			128,233,987			79			6,044,831			5			10,765
	Acquisitions		2			260,372			—			—			—			—
	Developments placed in service		3			330,646			—			—			—			—
	Dispositions		(45	)		(3,113,189	)		(2	)		(77,072	)		(4	)		(7,464	)
	Building remeasurements		—			13,583			—			—			—			—

December 31, 2002			734			125,725,399			77			5,967,759			1			3,301

(a) Building remeasurements during 2001 relate to the office properties and industrial properties acquired in the Spieker Merger. The initial property count was based on a count prepared prior to the Spieker Merger by the former management of Spieker. We count our properties based on the actual number of buildings at the property, which is different than the method used by the former management of Spieker.

Primarily as a result of the Spieker Merger in July 2001, the Cornerstone Merger in June 2000, and the acquisition and disposition of certain properties, the financial data presented show significant changes in revenues and expenses from period-to-period. Therefore, we do not believe our period-to-period financial data are necessarily comparable. The following analysis shows changes attributable to the Properties that were held during the entire period for the periods being compared (the “Core Portfolio”) and the changes in our aggregate total portfolio of Properties (the “Total Portfolio”).

As reflected in the tables below, property revenues include rental revenues, reimbursements from tenants for certain expenses, parking revenue and other property operating revenues, which includes lease termination income. Property operating expenses include real estate taxes, insurance, repairs and maintenance and other property operating expenses.

Comparison of year ended December 31, 2002 to December 31, 2001

The table below represents selected operating information for the Total Portfolio and for the Core Portfolio consisting of 378 Office Properties acquired or placed in service on or prior to January 1, 2001.



		Total Portfolio												Core Portfolio

								Increase/			%									Increase/			%
		2002			2001			(Decrease)			Change			2002			2001			(Decrease)			Change

(Dollars in thousands)
Property revenues		$	3,467,848		$	3,025,664		$	442,184			14.6	%	$	2,508,762		$	2,567,558		$	(58,796	)		(2.3	)%
Fee income			15,907			15,085			822			5.4			—			—			—			—
Interest/dividend income			22,327			40,214			(17,887	)		(44.5	)		3,913			4,940			(1,027	)		(20.8	)

	Total revenues		3,506,082			3,080,963			425,119			13.8			2,512,675			2,572,498			(59,823	)		(2.3	)

Interest expense(a)			810,129			726,930			83,199			11.4			195,575			211,148			(15,573	)		(7.4	)
Depreciation and amortization			689,078			581,592			107,486			18.5			507,995			499,190			8,805			1.8
Property operating expenses			1,118,003			969,593			148,410			15.3			866,908			840,669			26,239			3.1
Ground rent			20,446			16,812			3,634			21.6			11,571			12,632			(1,061	)		(8.4	)
General and administrative			137,468			109,672			27,796			25.3			—			—			—			—
Impairment on securities and other investments			—			132,684			(132,684	)		(100.0	)		—			—			—			—
Impairment on assets held for sale			—			2,536			(2,536	)		(100.0	)		—			—			—			—

	Total expenses		2,775,124			2,539,819			235,305			9.3			1,582,049			1,563,639			18,410			1.2

Income before income taxes, allocation to minority interests, income from investment in unconsolidated joint ventures and net gain on sales of real estate			730,958			541,144			189,814			35.1			930,626			1,008,859			(78,233	)		(7.8	)
Income taxes			(9,394	)		(8,814	)		(580	)		6.6			(1,027	)		(1,535	)		508			(33.1	)
Minority interests			(7,200	)		(8,685	)		1,485			(17.1	)		(7,146	)		(8,685	)		1,539			(17.7	)
Income from investment in unconsolidated joint ventures			106,852			69,203			37,649			54.4			71,792			64,504			7,288			11.3
Net gain on sales of real estate			—			81,662			(81,662	)		(100.0	)		—			8,000			(8,000	)		(100.0	)

Income from continuing operations			821,216			674,510			146,706			21.8			994,245			1,071,143			(76,898	)		(7.2	)
Discontinued operations (including net gain on sales of real estate of $17,926 in 2002)			38,204			22,063			16,141			73.2			—			—			—			—

Income before extraordinary item and cumulative effect of a change in accounting principle			859,420			696,573			162,847			23.4			994,245			1,071,143			(76,898	)		(7.2	)
Extraordinary items			—			(1,000	)		1,000			(100.0	)		—			(268	)		268			(100.0	)
Cumulative effect of a change in accounting principle			—			(1,142	)		1,142			(100.0	)		—			—			—			—

Net income		$	859,420		$	694,431		$	164,989			23.8	%	$	994,245		$	1,070,875		$	(76,630	)		(7.2	)%

Property net operating income(b)		$	2,377,001		$	2,088,198		$	288,803			13.8	%	$	1,641,854		$	1,726,889		$	(85,035	)		(4.9	)%

Deferred rental revenue(b)		$	72,891		$	69,149		$	3,742			5.4	%	$	31,811		$	49,951		$	(18,140	)		(36.3	)%

Lease termination fees(b)		$	105,543		$	40,193		$	65,350			162.6	%	$	46,497		$	34,732		$	11,765			33.9	%

(a) Interest expense on unsecured notes and the line of credit are not allocated to the Core Portfolio.

(b) For the Total Portfolio, these amounts include amounts from discontinued operations and exclude amounts from unconsolidated joint ventures.

Property Revenues

The increase in property revenues in the Total Portfolio is primarily due to the Spieker Merger in July 2001, which was partially offset by a decrease in occupancy in the Core Portfolio as described below. In addition, lease termination fees were $105.5 million in 2002 as compared to $40.2 million in 2001. Included in the lease termination fees of $105.5 million in 2002 is approximately $46.1 million from one tenant. The primary reason for the increase in the lease termination fees and the decrease in occupancy is a result of the continued slowdown in economic activity. Lease termination fees relate to specific tenants, each of whom has paid a fee to terminate its lease obligations before the end of the contractual term of the lease. Although there is no way of predicting the precise timing or amounts of future lease termination fees, we currently anticipate that lease termination fees will be significantly lower in 2003.

The decrease in property revenues in the Core Portfolio is primarily due to a decrease in occupancy from 94.5% at January 1, 2001 to 89.2% at December 31, 2002. Occupancy decreased primarily due to tenant rollover and early lease terminations where the space was not re-leased. The decrease in property revenues was partially offset by lease termination fees of $46.5 million in 2002 as compared to $34.7 million in 2001.

Interest/ Dividend Income

Interest/dividend income decreased for the Total Portfolio as a result of a $8.5 million decrease in dividends and discount amortization from our $90.6 million investment in HQ Global Workplaces, Inc. (“HQ Global”) Series A Convertible Cumulative Preferred Stock (“HQ Preferred Stock”) which was written-off in 2001 and a reduction in interest income on notes receivable of approximately $6.6 million. In addition, CT Convertible Trust I redeemed its non-convertible preferred securities that earned a 13% annual dividend for approximately $20.1 million, including accrued dividends, in September 2002.

Interest Expense

Total Portfolio interest expense increased from the prior year as a result of having more debt outstanding during 2002, mainly as a result of the Spieker Merger. This increase was partially offset by interest rate swap agreements in effect during 2002 and 2001 which effectively reduced interest expense by approximately $21.3 million by converting the fixed interest rates to variable rates for a portion of the unsecured notes. The swap agreements were all terminated in 2001 and 2002. Total proceeds resulting from the termination of approximately $90.2 million are being amortized ratably over the remaining terms of the respective unsecured notes as a reduction to interest expense. Core Portfolio interest expense decreased from the prior year as a result of the repayment and refinancing of certain mortgage notes.

Depreciation and Amortization

Total Portfolio depreciation and amortization expense increased primarily due to the Spieker Merger and capital and tenant improvements made during each year. Core Portfolio depreciation and amortization expense increased as a result of capital and tenant improvements made during each year.

Property Operating Expenses

Total Portfolio property operating expenses increased primarily due to the Spieker Merger. Core Portfolio property operating expenses increased primarily due to an increase of approximately $4.5 million for safety and security expense and approximately $8.4 million in insurance expense due to higher premiums both primarily due to the terrorist attacks on September 11, 2001, an increase of approximately $10.6 million for repairs and maintenance and an increase in real estate taxes of approximately $5.2 million. The increase in property operating expenses was partially offset by a decrease of approximately $8.2 million in utilities expense.

Ground Rent

Ground rent for the Total Portfolio increased from the prior period primarily due to the Spieker Merger as several Properties acquired in the Spieker Merger are subject to ground leases.

General and Administrative Expenses

General and administrative expenses increased primarily due to professional and consulting fees related to the EOPlus initiative of $15.7 million in 2002 and severance expense of approximately $7.3 million in 2002. The total severance consists of severance payments and the accelerated vesting of share options and restricted shares.

Beginning in fiscal 2003, we will be reclassifying regional operating expenses and other costs directly associated with property operations from general and administrative expenses to property operating expenses. The regional offices exist to provide oversight for the management and leasing of the Properties. Accordingly, these expenses will be classified as property operating expenses and all prior periods will be reclassified to provide for comparability. This reclassification will not change the prior period results or partner’s capital.

Impairment on Securities and Other Investments and Assets Held for Sale

For information on this item refer to “Item 8. Financial Statements and Supplementary Data — Note 7 — Impairment on Securities, Other Investments and Assets Held for Sale”.

Income from Investment in Unconsolidated Joint Ventures

Income from investment in unconsolidated joint ventures increased for the Total Portfolio primarily due to lease termination fees of $46.4 million in 2002 as compared to $1.0 million in 2001. Included in the lease termination fees of $46.4 million in 2002 is approximately $40 million from one tenant.

Income from investment in unconsolidated joint ventures increased for the Core Portfolio primarily due to lease termination fees of $6.4 million in 2002 as compared to $1.0 million in 2001 and also increased due to a $7.6 million decrease in interest expense as a result of lower interest rates on variable rate mortgage notes and the repayment of a mortgage note. The increase in income from unconsolidated joint ventures was partially offset by a decrease in property revenues as a result of a decrease in occupancy.

Net Gain on Sales of Real Estate and Discontinued Operations

Net gain on sales of real estate for the Total Portfolio decreased from the prior period as a result of a presentation change for sold properties in accordance with SFAS No. 144. Gains and losses from properties sold prior to 2002 are reflected as “net gain on sales of real estate” and gains and losses from properties sold in 2002 are reflected in “discontinued operations”. The increase in discontinued operations is primarily due to the gain on the sale of the properties sold in 2002. The gain on sale of real estate in 2001 from the Core Portfolio represents income received from an unaffiliated party for an easement allowing highway access under an Office Property.

Extraordinary Items

The extraordinary item relates to repair costs to certain Office Properties located in Seattle, Washington that were incurred as a result of damage from an earthquake in February 2001.

Comparison of year ended December 31, 2001 to December 31, 2000

The table below represents selected operating information for the Total Portfolio and for the Core Portfolio consisting of 287 Office Properties and five parking facilities acquired or placed in service on or prior to January 1, 2000.



		Total Portfolio												Core Portfolio

								Increase/			%									Increase/			%
		2001			2000			(Decrease)			Change			2001			2000			(Decrease)			Change

(Dollars in thousands)
Property revenues		$	3,025,664		$	2,185,055		$	840,609			38.5	%	$	1,879,868		$	1,790,716		$	89,152			5.0	%
Fee income			15,085			10,931			4,154			38.0			—			—			—			—
Interest/dividend income			40,214			36,076			4,138			11.5			2,973			3,758			(785	)		(20.9	)

	Total revenues		3,080,963			2,232,062			848,901			38.0			1,882,841			1,794,474			88,367			4.9

Interest expense(a)			726,930			523,860			203,070			38.8			124,712			127,561			(2,849	)		(2.2	)
Depreciation and amortization			581,592			432,688			148,904			34.4			375,482			346,419			29,063			8.4
Property operating expenses			969,593			742,126			227,467			30.7			631,862			613,033			18,829			3.1
Ground rent			16,812			9,896			6,916			69.9			11,292			9,236			2,056			22.3
General and administrative			109,672			88,696			20,976			23.6			—			—			—			—
Impairment on securities and other investments			132,684			—			132,684			—			—			—			—			—
Impairment on assets held for sale			2,536			—			2,536			—			—			—			—			—

	Total expenses		2,539,819			1,797,266			742,553			41.3			1,143,348			1,096,249			47,099			4.3

Income before income taxes, allocation to minority interests, income from investment in unconsolidated joint ventures and net gain on sales of real estate			541,144			434,796			106,348			24.5			739,493			698,225			41,268			5.9
Income taxes			(8,814	)		(2,719	)		(6,095	)		224.2			(1,018	)		(1,612	)		594			(36.8	)
Minority interests			(8,685	)		(6,843	)		(1,842	)		26.9			(2,324	)		(2,340	)		16			(0.7	)
Income from investment in unconsolidated joint ventures			69,203			56,251			12,952			23.0			49,356			44,667			4,689			10.5
Net gain on sales of real estate			81,662			36,013			45,649			126.8			8,000			—			8,000			—

Income from continuing operations			674,510			517,498			157,012			30.3			793,507			738,940			54,567			7.4
Discontinued operations			22,063			12,738			9,325			73.2			—			—			—			—

Income before extraordinary items and cumulative effect of a change in accounting principle			696,573			530,236			166,337			31.4			793,507			738,940			54,567			7.4
Extraordinary items			(1,000	)		—			(1,000	)		—			—			—			—			—
Cumulative effect of a change in accounting principle			(1,142	)		—			(1,142	)		—			—			—			—			—

Net income		$	694,431		$	530,236		$	164,195			31.0	%	$	793,507		$	738,940		$	54,567			7.4	%

Property net operating income(b)		$	2,088,198		$	1,463,151		$	625,047			42.7	%	$	1,248,006		$	1,177,683		$	70,323			6.0	%

Deferred rental revenue(b)		$	69,149		$	69,822		$	(673	)		(1.0	)%	$	26,744		$	53,760		$	(27,016	)		(50.3	)%

Lease termination fees(b)		$	40,193		$	19,542		$	20,651			105.7	%	$	22,611		$	16,306		$	6,305			38.7	%

(a) Interest expense on unsecured notes and the line of credit are not allocated to the Core Portfolio.

(b) These amounts include amounts from discontinued operations and exclude amounts from unconsolidated joint ventures.

Property Revenues

The increase in property revenues in the Total Portfolio is primarily due to the properties acquired in the Spieker Merger in 2001 and the Cornerstone Merger in 2000. The increase in property revenues in the Core Portfolio resulted primarily from an increase in rental rates and an increase in lease termination fees partially offset by the write-off of uncollectible receivables and a decrease in occupancy. The weighted average

occupancy of the Core Portfolio decreased from 93.7% at January 1, 2000 to 91.3% at December 31, 2001, mainly due to tenant rollover at various properties where the space was not re-leased due to the slowdown in economic activity. As a result of the slowdown in economic activity, we also experienced an increase in the amount of uncollectible receivables relating to tenants in bankruptcy and tenants that are having financial difficulties. The amount of bad debts written off for the year ended December 31, 2001 was approximately $26.1 million as compared to $6.3 million for the prior period.

Interest Expense

Total Portfolio interest expense increased from the prior period as a result of having a higher average outstanding debt balance as compared to the prior period, mainly as a result of the Spieker Merger and the Cornerstone Merger, partially offset by a reduction to interest expense of approximately $10.6 million from interest rate swap agreements which converted the fixed interest rate to a variable interest rate for a portion of our unsecured notes.

Depreciation and Amortization

Total Portfolio depreciation and amortization expense increased from the prior period primarily as a result of the Spieker Merger in July 2001, the Cornerstone Merger in June 2000 and capital and tenant improvements made during the periods. In addition, there was approximately $9.4 million of prepayment expenses in 2001 which consisted of a $5.0 million prepayment penalty and the write-off of approximately $4.4 million of unamortized mark-to-market adjustments relating to the prepayment of $185 million of mortgage debt (See “Item 8. — Financial Statements and Supplementary Data — Note 23 — Related Party Transactions, subfootnote (1)”) and the repayment of approximately $32.6 million of mortgage debt on parking facilities sold. In 2000, there were prepayment expenses of approximately $1.8 million related to the write-off of unamortized deferred loan costs and unamortized discounts and premiums and pre-payment penalties.

Core Portfolio depreciation and amortization expense increased as a result of capital and tenant improvements made during the periods.

Property Operating Expenses

Total Portfolio property operating expenses increased mainly as a result of the Spieker Merger in 2001 and the Cornerstone Merger in 2000. Core Portfolio property operating expenses increased mainly as a result of increases in utilities of $8.3 million consisting primarily of electricity expense, increases in repairs and maintenance of approximately $6.4 million primarily due to higher wages and increases in contract services, increases in insurance expenses of approximately $1.1 million due to higher premiums and an increase in real estate taxes of approximately $4.6 million.

General and Administrative Expenses

General and administrative expenses increased due to an increase in the number of employees at the corporate and regional offices as a result of the Spieker Merger and the Cornerstone Merger.

Impairment on Securities and Other Investments and Assets Held for Sale

For information on this item refer to “Item 8. Financial Statements and Supplementary Data — Note 7 — Impairment on Securities, Other Investments and Assets Held for Sale”.

Income from Investment in Unconsolidated Joint Ventures

Income from investment in unconsolidated joint ventures increased for the Total Portfolio due to an increase in property revenues at several Office Properties and the acquisition of an interest in 1301 Avenue of the Americas office property in August 2000.

Net Gain on Sales of Real Estate and Discontinued Operations

Net gain on sales of real estate increased due to the combined gross sales price in excess of book value at the time of disposition for the real estate assets sold in 2001 being more than the combined gross sales price in excess of book value at the time of disposition for the real estate assets sold in 2000.

The gain on sale of real estate in 2001 from the Core Portfolio represents income received from an unaffiliated party for an easement allowing highway access under an Office Property.

Please see “New Accounting Policies Adopted in 2002” related to SFAS No. 144 for an explanation of discontinued operations.

Extraordinary Items

The extraordinary item relates to repair costs to certain Office Properties located in Seattle, Washington that were incurred as a result of damage from an earthquake in February 2001.

Property Dispositions

2002

During 2002, we disposed of 45 office properties, four parking facilities, two industrial properties and three land parcels in separate transactions to various unaffiliated parties for approximately $508.3 million. The total gain on the sale of these properties was approximately $17.9 million. The sold office properties consisted of approximately 3,113,189 square feet, the industrial properties consisted of approximately 77,072 square feet, and the parking facilities consisted of approximately 7,464 parking spaces. The net income, including the gain on sale, of the properties is reflected in “discontinued operations” for each year presented in the consolidated statements of operations.

2001

During 2001, we disposed of eight office properties, four parking facilities, a land parcel and an apartment property in separate transactions to various unaffiliated parties for approximately $327.8 million. The total gain on the sale of these properties was approximately $81.7 million. The sold office properties consisted of approximately 879,388 square feet, the parking facilities contained approximately 3,721 parking spaces and the apartment property contained approximately 161 units.

We disposed of 19 industrial properties that were acquired in the Spieker Merger for approximately $213.4 million. There was no gain or loss on the sale of these properties. The sold industrial properties are located in California and Oregon and consist of approximately 4.1 million square feet.

2000

During 2000, we disposed of seven office properties totaling approximately 964,136 square feet, 11 parking facilities and a partial interest in two Office Properties for approximately $536.0 million and recognized a total net gain on sale of real estate of approximately $36.0 million.

Segment Reporting

For segment reporting purposes, the office properties, the apartment property and the land parcels that were sold are included in the “Office Properties” segment and the industrial properties and parking facilities that were sold are included in the “Corporate and Other” segment.

Below is a summary of the results of operations of these properties through their respective disposition dates:



		For the year ended								For the year ended
		December 31,								December 31,

		2002			2001			2000		2001		2000


										Properties Sold Prior
		Properties Sold in 2002								to 2002


(Dollars in thousands)
Property revenues		$	40,436		$	49,167		$	32,091	$	37,787	$	71,582
Interest income			54			18			90		—		288

	Total revenues		40,490			49,185			32,181		37,787		71,870

Interest expense			(24	)		1,321			1,927		2,390		2,718
Depreciation and amortization			6,812			8,622			5,531		5,526		11,936
Property operating expenses			13,280			17,040			11,869		10,991		22,596
Ground rent			43			116			116		—		—
General and administrative			—			—			—		355		156

	Total expenses		20,111			27,099			19,443		19,262		37,406

Income before income taxes, allocation to minority interests and net gain on sales of real estate			20,379			22,086			12,738		18,525		34,464
Income taxes			(101	)		(23	)		—		—		—
Minority interest — partially owned properties			—			—			—		—		(1,457	)
Net gain on sales of real estate			17,926			—			—		81,662		36,013

Net income		$	38,204		$	22,063		$	12,738	$	100,187	$	69,020

Property net operating income		$	27,156		$	32,127		$	20,222	$	26,796	$	48,986

Liquidity and Capital Resources

Liquidity

Net cash flow from operations represents the primary source of liquidity to fund distributions, debt service, capital improvements and tenant improvements. We expect that our $1.0 billion line of credit will provide for funding of working capital and unanticipated cash needs as well as acquisitions and development costs.

Our net cash flow from operations is dependent upon the occupancy level of our properties, the rental rates on our leases, the collectibility of rent from our tenants, the level of operating and other expenses, and other factors. Material changes in these factors may adversely affect our net cash flow from operations. Such changes, in turn, would adversely affect our ability to fund distributions, debt service, capital improvements and tenant improvements. In addition, a material adverse change in our net cash flow from operations may affect the financial performance covenants under our line of credit and unsecured notes. If we fail to meet any of our financial performance covenants our line of credit may become unavailable to us, or the interest charged on the line of credit may increase. Either of these circumstances could adversely affect our ability to fund working capital and unanticipated cash needs, acquisitions and development costs.

In order to qualify as a REIT for federal income tax purposes, Equity Office must distribute at least 90% of its REIT taxable income (excluding capital gains). Our partnership agreement generally requires us to distribute substantially all of the net cash from operations each quarter and to make reasonable efforts to distribute to Equity Office enough cash for it to meet the 90% distribution requirement. Accordingly, we currently intend to continue to make regular quarterly distributions to holders of Units and preferred units.

Subject to the foregoing, we have established quarterly distribution rates which, if annualized, would be as follows:


		Annualized Distribution
Security		Per Unit

Common Units		$	2.00
Preferred Units Series:
	A	$	2.245	(a)
	B	$	2.625
	C	$	2.15625
	E	$	1.96875
	F	$	2.00
	G	$	1.9375	(a)

(a) On July 29, 2002, EOP Partnership issued 8,500,000 7.75% Series G Cumulative Redeemable Preferred Units to Equity Office in exchange for Equity Office’s contribution of the proceeds of its issuance and sale of 8,500,000 7.75% Series G Cumulative Redeemable Preferred Shares in an offering that closed July 29, 2002. On that same date, substantially all of the net proceeds from the issuance of the Series G Preferred Units, totaling approximately $206.1 million were used to redeem the Series A Preferred Units from Equity Office and, in turn, Equity Office used the proceeds to redeem its 7,994,000 outstanding 8.98% Series A Cumulative Redeemable Preferred Shares.

Since our anticipated distributions will not allow us to retain sufficient cash to repay all of our debt as it comes due using only cash from operations, we will be required to repay maturing debt with proceeds from debt and/or equity offerings. There can be no assurance that such financing will be available on acceptable terms or at all.

Contractual Obligations

As of December 31, 2002, we were subject to certain contractual payment obligations as described in the table below. We are not subject to capital lease obligations or unconditional purchase obligations as of December 31, 2002.



						Payments due by Period

Contractual Obligations		Total		2003		2004		2005		2006		2007		Thereafter


		(Dollars in thousands)
Long-term debt:
	Mortgage debt(1)	$	2,520,474	$	102,230	$	448,664	$	584,595	$	343,941	$	237,024	$	804,020
	Unsecured notes(2)		9,016,500		700,000		880,000		675,000		650,000		976,500		5,135,000
Line of Credit			205,700		205,700		—		—		—		—		—
Share of mortgage debt of unconsolidated joint ventures			818,975		109,006		117,023		466,410		51,182		1,454		73,900
Ground leases			1,149,914		18,088		15,588		15,263		15,118		15,008		1,070,849

Total Contractual Obligations		$	13,711,563	$	1,135,024	$	1,461,275	$	1,741,268	$	1,060,241	$	1,229,986	$	7,083,769

Weighted Average Interest Rates on Maturing Debt:
Long-term debt:
	Mortgage debt		7.62%		7.73%		7.14%		7.88%		7.15%		7.88%		7.79%
	Unsecured notes		7.03%		7.21%		5.42%		5.67%		7.52%		7.52%		7.30%
Line of credit			2.44%		2.44%		—		—		—		—		—
Share of mortgage debt of unconsolidated joint ventures			5.94%		2.41%		2.58%		7.38%		7.67%		—		5.42%

Total Weighted Average Interest Rates			7.00%		5.91%		5.72%		6.88%		7.41%		7.58%		7.34%

(1) Balance excludes net discount of $(12.6) million, net of accumulated amortization of approximately $(6.4) million.

(2) Balance excludes net premium of $41.2 million, net of accumulated amortization of approximately ($15.4) million.

Forward-Starting Interest Rate Swaps

In October 2002, we entered into $1.1 billion of forward-starting interest rate swaps to effectively fix the 10-year Treasury rate at approximately 3.7% for future note offerings that occurred in 2003 and are anticipated to occur in 2004. The forward-starting interest rate swaps were entered into at current market rates and, therefore, had no initial cost. The terms of the forward-starting interest rate swaps require us to pay a fixed-interest rate to the counterparties and to receive a variable rate from the counterparties. The swaps settle at six-month intervals beginning in 2003 and 2004 and are scheduled to terminate in 2004. The market value of the forward-starting swaps at December 31, 2002 was a liability of approximately $18.6 million which is included in other liabilities and in other comprehensive income. In January 2003, we settled one of the forward-starting swaps that had a notional amount of $300 million and received approximately $0.8 million. The forward-starting swap was settled in connection with $500 million of unsecured notes that were issued in February 2003. We are obligated to settle the remaining swap agreements no later than the commencement of their term in early 2004. Upon settlement of the swaps, we may be obligated to pay the counterparties a settlement payment, or alternatively to receive settlement proceeds from the counterparties. Any monies paid or received will be amortized to interest expense over the term of the respective note offering.

Off-Balance Sheet Arrangements

Commitments

In accordance with the agreement governing the investment in Wright Runstad Associates Limited Partnership (“WRALP”) made in 1997, we agreed, for a period generally continuing until December 31, 2007, to make available to WRALP up to $20.0 million in additional financing or credit support for future development. As of December 31, 2002, no amounts have been funded pursuant to this agreement. However, we have unconditionally guaranteed payment of WRALP’s $19.5 million revolving line of credit, which has an outstanding balance of approximately $12.9 million as of December 31, 2002, in the event of WRALP’s non-payment. WRALP’s current line of credit matures in July 2003. We do not have a liability accrued related to this guarantee. In the event we make payment on WRALP’s line of credit and WRALP does not repay us, we are entitled to (i) terminate the credit facility provided to WRALP from us and (ii) declare all amounts borrowed by WRALP due and payable. We believe the risk of an unrecovered loss is minimal at this time.

Letters of Credit

As of December 31, 2002, we had provided approximately $3.3 million in letters of credit. The letters of credit were required to be issued under the provisions of our worker’s compensation insurance policies and certain utility contracts.

Debt Financing

The table below summarizes our consolidated mortgage debt, unsecured notes and line of credit indebtedness at December 31, 2002 and 2001, including a net unamortized discount on mortgage debt of $(12.6) million and $(11.8) million, respectively, and a net unamortized premium on unsecured notes of $41.2 million and $17.5 million, respectively, recorded in connection with property acquisitions, mergers, issuance of unsecured notes and interest rate swap terminations.



			December 31,

			2002		2001
(Dollars in thousands)
Balance
	Fixed rate		$	11,529,541	$	10,891,325
	Variable rate(1)			241,700		1,097,300

		Total	$	11,771,241	$	11,988,625

Percent of total debt:
	Fixed rate			97.9%		90.8%
	Variable rate(1)			2.1%		9.2%

		Total		100.0%		100.0%

Effective interest rate at end of period:
	Fixed rate			7.17%		7.37%
	Variable rate(1)(2)			2.37%		3.31%

		Effective interest rate		7.08%		7.00%

(1) The variable rate debt as of December 31, 2001 included $817 million of fixed rate unsecured notes that were converted to a variable rate based on various spreads over LIBOR through several interest rate swap agreements. During 2002, the interest rate swap agreements were terminated.

(2) The variable rate debt bears interest at a rate based on various spreads over LIBOR.

Mortgage Debt

As of December 31, 2002, total mortgage debt (excluding our share of unconsolidated debt of approximately $819.0 million) consisted of approximately $2.5 billion of fixed rate debt with a weighted average interest rate of approximately 7.70% and $36.0 million of variable rate debt based on LIBOR plus 55

basis points (as of December 31, 2002, the variable rate was approximately 1.98%). See “Liquidity and Capital Resources — Contractual Obligations” for annual payment of obligations under our mortgage debt.

The instruments encumbering the properties restrict transfer of the respective properties subject to the terms of the mortgage, prohibit additional liens, require payment of real estate taxes on the properties, maintenance of the properties in good condition, maintenance of insurance on the properties and a requirement to obtain lender consent to enter into material tenant leases.

Line of Credit

We have a $1.0 billion revolving credit facility that was obtained in May 2000. As of December 31, 2002, $205.7 million was outstanding under this facility. The line of credit bears interest at LIBOR plus 60 basis points and matures on May 12, 2003 (as of December 31, 2002, the variable rate was approximately 2.44%). There is also an annual facility fee of $2.0 million payable quarterly. In addition, a competitive bid option, whereby the lenders participating in the credit facility bid on the interest to be charged, is available for up to $350 million of the borrowings under the credit facility. Equity Office has guaranteed outstanding obligations under the line of credit.

Unsecured Notes

Unsecured notes decreased to approximately $9,057.7 million at December 31, 2002 compared to approximately $9,094.0 million at December 31, 2001, as a result of the following transactions:


		Coupon/			All – in
		Stated			Effective			Principal			Maturity
Original Term (in years)		Rate			Rate(a)			Amount			Date


		(Dollars in thousands)
Issuance
10			6.75	%		7.02	%	$	500,000			2/15/12

Repayments
3			6.38	%		6.62	%		(200,000	)		1/15/02
4			6.38	%		6.30	%		(250,000	)		2/15/02
7			6.95	%		5.37	%		(110,000	)		12/15/02

	Total repayments								(560,000	)

Reversal of mark to market of swaps outstanding at December 31, 2001									8,117
Net discount on notes issuance in February 2002									(10,873	)
Proceeds from terminated interest rate swaps									42,810
Amortization of discounts and premiums									(16,390	)

Total									23,664

Net activity								$	(36,336	)

The table below summarizes the unsecured notes outstanding as of December 31, 2002:


	Coupon/			All – in
	Stated			Effective			Principal		Maturity
Original Term (in years)	Rate			Rate(a)			Amount		Date


	(Dollars in thousands)
Fixed interest rate notes payable:
5 Year Unsecured Notes		6.38	%		6.76	%	$	300,000		02/15/03
3 Year Unsecured Notes		7.38	%		7.55	%		400,000		11/15/03
5 Year Unsecured Notes		6.50	%		4.59	%		300,000		01/15/04
9 Year Unsecured Notes		6.90	%		6.27	%		100,000		01/15/04
5 Year Unsecured Notes		6.80	%		6.10	%		200,000		05/01/04


			Coupon/			All – in
			Stated			Effective			Principal		Maturity
Original Term (in years)			Rate			Rate(a)			Amount		Date


			(Dollars in thousands)
6 Year Unsecured Notes				6.50	%		5.31	%		250,000		06/15/04
7 Year Unsecured Notes				7.24	%		7.26	%		30,000		09/01/04
8 Year Unsecured Notes				6.88	%		6.40	%		125,000		02/01/05
7 Year Unsecured Notes				6.63	%		4.99	%		400,000		02/15/05
7 Year Unsecured Notes				8.00	%		6.49	%		100,000		07/19/05
8 Year Unsecured Notes				7.36	%		7.69	%		50,000		09/01/05
6 Year Unsecured Notes				8.38	%		7.65	%		500,000		03/15/06
9 Year Unsecured Notes				7.44	%		7.74	%		50,000		09/01/06
10 Year Unsecured Notes				7.13	%		6.74	%		100,000		12/01/06
9 Year Unsecured Notes				7.00	%		6.80	%		1,500		02/02/07
9 Year Unsecured Notes				6.88	%		6.83	%		25,000		04/30/07
9 Year Unsecured Notes				6.76	%		6.76	%		300,000		06/15/07
10 Year Unsecured Notes				7.41	%		7.70	%		50,000		09/01/07
7 Year Unsecured Notes				7.75	%		7.91	%		600,000		11/15/07
10 Year Unsecured Notes				6.75	%		6.97	%		150,000		01/15/08
10 Year Unsecured Notes				6.75	%		7.01	%		300,000		02/15/08
8 Year Unsecured Notes(b)				7.25	%		7.64	%		325,000		11/15/08
10 Year Unsecured Notes				6.80	%		6.94	%		500,000		01/15/09
10 Year Unsecured Notes				7.25	%		7.14	%		200,000		05/01/09
11 Year Unsecured Notes				7.13	%		6.97	%		150,000		07/01/09
10 Year Unsecured Notes				8.10	%		8.22	%		360,000		08/01/10
10 Year Unsecured Notes				7.65	%		7.20	%		200,000		12/15/10
10 Year Unsecured Notes				7.00	%		6.83	%		1,100,000		07/15/11
10 Year Unsecured Notes				6.75	%		7.02	%		500,000		02/15/12
20 Year Unsecured Notes				7.88	%		8.08	%		25,000		12/01/16
20 Year Unsecured Notes				7.35	%		8.08	%		200,000		12/01/17
20 Year Unsecured Notes				7.25	%		7.54	%		250,000		02/15/18
30 Year Unsecured Notes				7.50	%		8.24	%		150,000		10/01/27
30 Year Unsecured Notes				7.25	%		7.31	%		225,000		06/15/28
30 Year Unsecured Notes				7.50	%		7.55	%		200,000		04/19/29
30 Year Unsecured Notes				7.88	%		7.94	%		300,000		07/15/31

	Weighted Average/ Subtotal			7.19	%		7.03	%		9,016,500

Net premium (net of accumulated amortization of approximately $15.4 million)										41,151

		Total							$	9,057,651


(a)		Includes the effect of terminated interest rate protection and swap agreements, offering and transaction costs and premiums and discounts on certain unsecured notes.
(b)		The notes are exchangeable into Equity Office Common Shares at an exchange rate of $34.00 per share. If the closing price at the time a holder exercises its exchange right is less than the exchange price of $34.00, the holder will receive, in lieu of Common Shares, cash in an amount equal to 97% of the product of the number of Common Shares into which the principal amount of notes subject to such exercise would otherwise be exchangeable and the current market price per Common Share. Upon exchange of a

$1,000 note for Common Shares of Equity Office, we would issue a corresponding number of Units to Equity Office on a one-for-one basis.

As of March 13, 2003, $1.6 billion of capacity was available for issuance, under a shelf registration statement.

Restrictions and Covenants under Unsecured Indebtedness

Agreements or instruments relating to our unsecured notes and the line of credit contain certain financial restrictions and requirements described below. As of December 31, 2002, we were in compliance with each of these financial restrictions and requirements.

Set forth below are the financial restrictions and requirements to which we are subject under our line of credit agreement:

• total liabilities to total asset value may not exceed 0.55:1 at any time;

• earnings before interest, taxes, depreciation and amortization to interest expense may not be less than 2.00:1;

• cash flow to fixed charges may not be less than 1.5:1;

• secured debt to total asset value may not exceed 0.40:1;

• unsecured debt to unencumbered asset value may not exceed 0.55:1;

• unencumbered net operating income to unsecured debt service may not be less than 2.0:1;

• consolidated tangible net worth may not be less than the sum of $7.8 billion and 70% of all net offering proceeds received by Equity Office or EOP Partnership after February 29, 2000;

• we may not pay any distributions on Common Shares and Units in excess of 90% of annual funds from operations (“FFO”); and

• our investments in unimproved assets, interest in taxable REIT subsidiaries, developments, unconsolidated joint ventures, mortgages and securities, in the aggregate, may not exceed 25% of our total asset value.

Set forth below are the financial restrictions and requirements to which we are subject under our unsecured note indentures and our performance under each covenant as of December 31, 2002:


	Actual
Covenant	Performance

Debt to adjusted total assets may not exceed 0.60:1		0.47:1
Secured debt to adjusted total assets may not exceed 0.40:1		0.13:1
Consolidated income available for debt service to annual debt service charge may not be less than 1.50:1		2.73:1
Total unencumbered assets to unsecured debt may not be less than 1.50:1		2.22:1

Equity Securities

A summary of the activity of our Equity Office’s Common Shares and EOP Partnership’s Units (exclusive of Units owned by Equity Office) during the year ended 2002 is as follows:


		Common
		Shares			Units			Total

Outstanding at December 31, 2001			414,548,673			56,490,302			471,038,975
	Share options exercised		1,739,863			—			1,739,863
	Common Shares repurchased/ retired(a)		(7,920,854	)		—			(7,920,854	)
	Units redeemed for Common Shares		2,555,646			(2,555,646	)		—
	Units redeemed for cash(b)		—			(3,727,925	)		(3,727,925	)
	Restricted shares and share awards issued/ cancelled, net		214,291			—			214,291
	Common Shares issued through Equity Office’s Dividend Reinvestment Program		63,379			—			63,379

Outstanding at December 31, 2002			411,200,998			50,206,731			461,407,729


(a)		In July 2002, Equity Office announced a Common Share repurchase program allowing for the repurchase of up to $200 million of Common Shares, which was later increased to $400 million in November 2002, over the next 12 months at the discretion of management. The Common Shares may be repurchased in the open market or privately negotiated transactions. During 2002, 7,901,900 Common Shares were repurchased at an average price of $24.92 for approximately $196.9 million in the aggregate. From January 1, 2003 through March 13, 2003, 2,518,100 Common Shares were repurchased at an average price of $23.82 for approximately $60.0 million in the aggregate. In connection with the repurchases, EOP Partnership purchased from Equity Office and retired a corresponding number of Units for an aggregate purchase price equal to the aggregate price for all Common Shares repurchases.

(b)		During 2002, EOP Partnership redeemed 3,727,925 Units for cash at an average price of $28.62 for a total of approximately $106.7 million.

Cash Flows

The following summary discussion of our cash flows is based on the consolidated statements of cash flows in “Item 8. — Financial Statements and Supplementary Data” and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below.

Years Ended December 31, 2002 and 2001

Cash and cash equivalents decreased by approximately $2.7 million to approximately $58.5 million at December 31, 2002, compared to $61.1 million at December 31, 2001. This decrease was the net result of approximately $1,390.9 million provided by operating activities, approximately $85.2 million provided by investing activities (consisting primarily of approximately $377.2 million provided by property dispositions and approximately $167.0 million released from escrows partially offset by approximately $433.6 million used for capital and tenant improvements and lease acquisition costs) and approximately $1,478.8 million used for financing activities.

Years Ended December 31, 2001 and 2000

Cash and cash equivalents increased by approximately $7.9 million to approximately $61.1 million at December 31, 2001, compared to $53.3 million at December 31, 2000. This increase was the net result of approximately $1,241.6 million provided by operating activities, approximately $1,348.2 million used for investing activities (consisting primarily of approximately $1,077.0 million used for the acquisition of Spieker and approximately $437.7 million used for capital and tenant improvements and lease acquisition costs) and approximately $114.5 million provided by financing activities.

Additional Items

Tenant and Other Receivables

Tenant and other receivables decreased from approximately $120.4 million at December 31, 2001 to approximately $77.6 million at December 31, 2002 primarily due to the collection of receivables from tenants during 2002 relating to reimbursable expenses. In the fourth quarter 2001, receivables from tenants for reimbursable expenses were increased based on an analysis of actual reimbursable expenses compared to the amount billed to the tenants during 2001.

Deferred Rent Receivables

Certain leases provide for tenant occupancy during periods for which no rent is due or where minimum rent payments increase during the term of the lease. We record rental income for the full term of each lease on a straight-line basis. Accordingly, a receivable is recorded from tenants for the current difference between the straight-line rent and the rent that is actually due from the tenant. This receivable amount is included in the consolidated balance sheets as “deferred rent receivable”. The deferred rent receivable increased approximately $62.1 million to $331.9 million at December 31, 2002, from $269.8 million at December 31, 2001. The increase was due to a net increase in the difference between the straight-line rent and the rent that is actually due from tenants primarily from the acquisition of the Properties acquired in the Spieker Merger on July 2, 2001 and certain development properties that were placed in service.

Escrow Deposits and Restricted Cash

Escrow deposits primarily consist of amounts held by lenders to provide for future real estate tax expenditures and tenant improvements, earnest money deposits on acquisitions and net proceeds from tax-deferred dispositions. Restricted cash represents amounts committed for various utility deposits and security deposits. Certain of these amounts may be reduced upon the fulfillment of certain obligations. The escrow deposits and restricted cash decreased approximately $167.1 million to $29.2 million at December 31, 2002, from $196.3 million at December 31, 2001. The decrease was primarily due to the disbursement of approximately $162.0 million of proceeds from the sale of certain parking facilities in 2001 that were deposited into a tax-deferred escrow account.

Investment in Unconsolidated Joint Ventures

Investments in unconsolidated joint ventures decreased to approximately $1,087.8 million at December 31, 2002 from $1,321.1 million at December 31, 2001 primarily due to the consolidation of several properties that were previously accounted for under the equity method. See Developments — subfootnote (b) for additional information.

Other Liabilities

Other liabilities increased from approximately $330.3 million at December 31, 2001 to approximately $392.0 million at December 31, 2002 primarily due to an increase in prepaid rents and other accruals.

Market Risk

Qualitative Information About Market Risk

Our future earnings, cash flows and fair values relevant to financial instruments are dependent upon prevalent market rates for those financial instruments. Market risk is the risk of loss from adverse changes in market prices and interest rates. We manage our market risk by matching projected cash inflows from operating, investing and financing activities with projected cash outflows to fund debt service, acquisitions, capital expenditures, distributions to unitholders and other cash requirements. The majority of our outstanding debt obligations (maturing at various times through 2031) have fixed interest rates which limit the risk of fluctuating interest rates. We utilize certain derivative financial instruments at times to further reduce interest rate risk. Interest rate protection and swap agreements are used to convert some variable rate debt to a fixed

rate basis, fixed rate debt to a variable rate basis, or to hedge anticipated financing transactions. Derivatives are used for hedging purposes rather than speculation. We do not enter into financial instruments for trading purposes.

Quantitative Information About Market Risk

Interest Rate Risk — Debt

The tables below disclose the effect of hypothetical changes in market rates of interest on interest expense for variable rate debt and the fair value of total outstanding debt. Interest risk amounts were determined by considering the impact of hypothetical interest rates on our debt. This analysis does not reflect the impact that a changing interest rate environment could have on the overall level of economic activity. Further, in the event of a changing interest rate environment, management would likely take actions to further mitigate its exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, this analysis assumes no change in our financial structure.



		As of December 31, 2002					As of December 31, 2001

				Percent of					Percent of
		Amount		Total Debt			Amount		Total Debt

Total fixed rate debt		$	11,529,541		97.9	%	$	10,891,325		90.8	%
Total variable rate debt(a)			241,700		2.1	%		1,097,300		9.2	%

	Total	$	11,771,241		100.0	%	$	11,988,625		100.0	%


(a)	The variable rate debt as of December 31, 2001 includes $817 million of fixed rate unsecured notes that were converted to a variable rate based on various spreads over LIBOR through several interest rate swap agreements.

Hypothetical change in

Effect on Interest

Effect on Net

Effect on Fair Value

As of

market rates of interest

Expense

Income

of Total Debt(b)

December 31, 2002

+10% or 14 basis points

$0.3 million

$(0.3) million

$(190) million

-10% or 14 basis points

$(0.3) million

$0.3 million

$197 million

December 31, 2001

+10% or 20 basis points

$2.2 million

$(2.2) million

$(272) million

-10% or 20 basis points

$(2.2) million

$2.2 million

$292 million


(b)	As of December 31, 2002, the fair value of our fixed-rate debt was approximately $1.0 billion higher than the book value of approximately $11.5 billion primarily due to the general decrease in market interest rates on secured and unsecured debt. As of December 31, 2001, the fair value of our fixed-rate debt approximated book value.

Interest Rate Risk — Derivatives

Interest Rate Swaps

During 2002 and 2001, we entered into and terminated several interest rate swap agreements that hedged certain unsecured notes. In each case, we were the variable interest rate payer and the counterparty was the fixed rate payer. The variable interest rates were based on various spreads over LIBOR. The settlement dates correspond to the interest payment dates of the respective unsecured notes being hedged. Each of the interest rate swap agreements were to terminate on the maturity date of the respective unsecured notes being hedged. The interest rate swap agreements were designated as fair value hedges. As of December 31, 2001, approximately $1.4 million was included in other assets and approximately $9.5 million was included in other liabilities which represented the fair value of the interest rate swaps. A corresponding amount is included in discounts/ premium on unsecured notes. As of December 31, 2002, all of the interest rate swaps in the table

below had been terminated. The table below summarizes the interest rate swap agreements that were effective during 2002 and 2001.

Total Proceeds

Fixed

Maturity Date of

Swap Effective

Swap Termination

from Swap

Interest

Unsecured Notes/

Date

Termination(a)

Amount Hedged

Rate

Swaps

May 2002

September 2002

$7.1 million

$150 million

8.38%

March 15, 2006

May 2002

September 2002

$9.3 million

$200 million

8.38%

March 15, 2006

March 2002

September 2002

$4.3 million

$150 million

6.50%

January 15, 2004

March 2002

September 2002

$4.2 million

$150 million

6.50%

January 15, 2004

December 2001

February 2002

$3.2 million

$267 million

7.00%

July 15, 2011

October 2001

September 2002

$8.7 million

$300 million

6.63%

February 15, 2005

October 2001

September 2002

$3.6 million

$150 million

6.50%

June 15, 2004

October 2001

September 2002

$2.4 million

$100 million

6.50%

June 15, 2004

July 2001

September 2001

$31.6 million

$500 million

7.00%

July 15, 2011

June 2001

September 2001

$15.8 million

$400 million

6.63%

February 15, 2005

(a) The proceeds from the swap terminations were recorded as additional premium on the respective unsecured note that was hedged by the terminated swap. The amount recorded as additional premium is being amortized over the remaining term of the unsecured notes.

Forward-Starting Interest Rate Swaps

In October 2002, we entered into $1.1 billion of forward-starting interest rate swaps to effectively fix the 10-year Treasury rate at approximately 3.7% for note offerings that occurred in 2003 and are anticipated to occur in 2004. The forward-starting interest rate swaps were entered into at current market rates and, therefore, had no initial cost. The terms of the forward-starting interest rate swaps require us to pay a fixed-interest rate to the counterparties and to receive a variable rate from the counterparties. The swaps settle at six-month intervals beginning in 2003 and 2004 and are scheduled to terminate in 2004. The market value of the forward-starting swaps at December 31, 2002 was a liability of approximately $18.6 million which is included in other liabilities and in other comprehensive income. If the market interest rates were 10 basis points higher, our liability under the swaps would have been approximately $3.0 million at December 31, 2002. If the market interest rates were 10 basis points lower, our liability under these swaps would have been approximately $21.8 million at December 31, 2002. In January 2003, we settled one of the forward-starting swaps that had a notional amount of $300 million and received approximately $0.8 million. The forward-starting swap was settled in connection with $500 million of unsecured notes that were issued in February 2003. We are obligated to settle the remaining swap agreements no later than the commencement of their term in early 2004. Upon settlement of the swaps, we may be obligated to pay the counterparties a settlement payment, or alternatively to receive settlement proceeds from the counterparties. Any monies paid or received will be amortized to interest expense over the term of the respective note offering.

Market Rate Risk

During 2002, we sold our investments in marketable securities that were owned as of December 31, 2001, and realized a gain of approximately $0.1 million. In addition, we received marketable securities from a tenant in connection with a lease termination and from the buyout of another company in which we owned common stock. Our cost basis in these investments is zero and the market value of approximately $0.4 million is included in other assets and other comprehensive income as of December 31, 2002.

In August 2001, we had put option agreements outstanding in connection with the acquisition of certain properties in 1997. We paid approximately $1.4 million in settlement of these put options. We previously recognized approximately $4.1 million as a total potential payment for the put option exercise between the period from August 1999 to August 2000. The difference of approximately $2.7 million between the $4.1 million previously recognized and the $1.4 million actually paid was recognized as a put option settlement during the third quarter 2001.

During 2001, we recorded a permanent impairment on our investment in marketable securities and reduced the carrying value to a nominal amount, which approximates the current market value. A 10% increase or decrease in the market price of these securities would increase or decrease our investment in these securities by approximately $0.01 million. Changes in the market prices of these securities are required to be reflected as a corresponding adjustment to accumulated other comprehensive income. At December 31, 2001, we had an unrealized holding loss on these investments totaling approximately $0.1 million, which is reflected as accumulated other comprehensive (loss). There will be no impact on earnings or cash flows from market price fluctuations unless we dispose of these investments or write-down the investments upon the determination that these investments have suffered a permanent impairment.

Capital Improvements, Tenant Improvements and Leasing Commissions

Capital Improvements

Significant renovations and improvements which improve or extend the useful life of our Properties are capitalized. We categorize these capital expenditures as follows:

• Capital Improvements — improvements that enhance the value of the property such as lobby renovations, roof replacement, significant renovations for Americans with Disabilities Act compliance, chiller replacement and elevator upgrades.

• Development and Redevelopment Costs — include costs associated with the development or redevelopment of a property including tenant improvements, leasing commissions, capitalized interest and operating costs incurred during completion of the property and incurred while the property is made ready for its intended use.

The table below details the costs incurred for each type of improvement.



			For the years ended December 31,


			2002				2001				2000

					Unconsolidated				Unconsolidated				Unconsolidated
					Properties (EOP				Properties (EOP				Properties (EOP
			Consolidated		Partnership’s		Consolidated		Partnership’s		Consolidated		Partnership’s
			Properties		share)		Properties		share)		Properties		share)


			(Dollars in thousands)
Capital Improvements
	Capital improvements		$	46,662	$	4,544	$	67,536	$	4,577	$	47,858	$	4,736
	Development costs			92,214		110,244		141,776		105,370		132,509		77,789
	Redevelopment costs(a)			32,976		—		17,308		—		—		—

		Total capital improvements	$	171,852	$	114,788	$	226,620	$	109,947	$	180,367	$	82,525

(a) Properties included in redevelopment for 2002 are Tabor Center, Polk and Taylor Buildings, Worldwide Plaza and 500-600 City Parkway. Redevelopments in 2001 are US Bancorp, 100 Summer and Tabor Center.

Tenant Improvements and Leasing Commissions

Costs related to the renovation, alteration or build-out of existing second-generation space, as well as related leasing commissions, are capitalized. These tenant improvements may include, but are not limited to, floor coverings, ceilings, walls, HVAC, mechanical, electrical, plumbing and fire protection systems. We categorize tenant improvements and leasing commissions as follows:

• Revenue enhancing — costs incurred on space which is vacant at the time of acquisition or has been vacant for nine months or more.

• Non-revenue enhancing — costs incurred in connection with the renewal or retenanting of currently leased space to maintain the revenue being generated by such space.

The amounts shown below represent the total tenant improvement and leasing commissions for leases which commenced during the period, regardless of when such costs were actually paid, which is a more useful measure of the total tenant improvement and leasing commission costs for the periods presented.



		For the years ended December 31,


		2002				2001				2000

				Total Cost				Total Cost				Total Cost
				per Square				per Square				per Square
		Total Costs		Foot Leased		Total Costs		Foot Leased		Total Costs		Foot Leased

Consolidated Properties:
Office Properties:
Revenue enhancing		$	58,262	$	22.82	$	24,574	$	21.24	$	42,106	$	27.80

Non-revenue enhancing:
	Renewals	$	69,710	$	8.14	$	34,729	$	6.71	$	33,739	$	6.18
	Retenanted		124,969		16.91		102,271		15.92		84,009		13.48

Total/ Weighted Average Non-revenue enhancing		$	194,679	$	12.20	$	137,000	$	11.81	$	117,748	$	10.07

Industrial Properties:
Revenue enhancing		$	467	$	9.65		—		—		—		—

Non-revenue enhancing:
	Renewals	$	2,540	$	2.13		—		—		—		—
	Retenanted		686		2.57		110		8.31		—		—

Total/ Weighted Average Non-revenue enhancing		$	3,226	$	2.21	$	110	$	8.31		—		—

Unconsolidated Joint Ventures(a):
Revenue enhancing		$	2,038	$	21.91	$	1,250	$	25.77	$	1,267	$	21.98

Non-revenue enhancing:
	Renewals	$	2,203	$	7.80	$	1,398	$	5.42	$	1,682	$	4.87
	Retenanted		2,227		10.60		4,047		11.41		8,376		21.99

Total/ Weighted Average Non-revenue enhancing		$	4,430	$	8.99	$	5,445	$	8.89	$	10,058	$	13.85

(a) Represents EOP Partnership’s share of unconsolidated joint venture tenant improvement and leasing costs. All joint ventures are office properties.

The above information includes actual capital improvements incurred and tenant improvements and leasing commissions for leases which commenced during the years shown. The amounts included in the consolidated statements of cash flows represent the cash expenditures made during each of these years. The differences between these amounts represent timing differences between the lease commencement dates and the actual cash expenditures as well as expenditures for corporate furniture, fixtures and equipment, software,

leasehold improvements and other. The reconciliation between the amounts above for the consolidated properties and the amounts disclosed in the consolidated statements of cash flows are as follows:



	For the years ended December 31,

	2002			2001		2000


	(Dollars in thousands)
Total capital improvements, tenant improvements and leasing commissions	$	428,486		$	388,304	$	340,221
Timing differences		(93	)		15,106		12,219
Expenditures for corporate furniture, fixtures and equipment, software, leasehold improvements and other		5,251			34,294		20,711

Total capital improvements, tenant improvements and leasing commissions on the consolidated statements of cash flows	$	433,644		$	437,704	$	373,151

Developments

Consolidated Developments:

We currently own directly and through joint ventures several properties in various stages of development or pre-development. These developments are funded by working capital and the line of credit. Specifically identifiable direct acquisition, development and construction costs are capitalized, including, where applicable, salaries and related costs, real estate taxes and interest essential to the development of a property. The properties under development and all figures stated below are as of December 31, 2002.



									EOP Partnership’s

	Estimated								Effective							Total
	Placed								Ownership			Costs		Total		Project		Current
	in Service				Number of		Square		Percentage			Incurred		Estimated		Estimated		Percentage
	Date(a)		Location		Buildings		Feet		(a)			(a)		Costs(a)		Costs(a)		Leased


	(Dollars in thousands)
Wholly-Owned

Kruse Woods V		3Q/2003		Lake Oswego, OR		1		184,000		100	%	$	10,651	$	33,900	$	33,900		6	%
Douglas Corporate Center II		3Q/2003		Roseville, CA		1		108,000		100	%		5,047		16,800		16,800		0	%

						2		292,000					15,698		50,700		50,700		4	%

Joint Venture

Ferry Building(b),(c)		3Q/2002		San Francisco, CA		1		242,000			(c)		59,932		83,600		107,100		51	%
Water’s Edge Phase I		3Q/2002		Los Angeles, CA		2		240,000		87.5	%		55,988		74,300		76,500		0	%
Foundry Square II(b)		3Q/2002		San Francisco, CA		1		502,200		87.5	%		121,688		155,500		177,700		23	%

						4		984,200					237,608		313,400		361,300		24	%

Unconsolidated Developments:


Wilson/ Equity Office
Developments(b)

Foundry Square IV	1Q/2003	San Francisco, CA	1	232,600	40	%		19,853		31,400		77,400	96	%

			1	232,600				19,853		31,400		77,400	96	%

Grand Total/Weighted Average			7	1,508,800			$	273,159	$	395,500	$	489,400	31	%


*Balance Sheet Reconciliation of Developments:*
Consolidated developments — costs incurred as reflected above:
	Wholly-owned	$	15,698
	Joint venture		237,608
Minority interests portion of consolidated developments			31,431

Total developments in process on the consolidated balance sheet		$	284,737

(a) The Estimated Placed in Service Date represents the date the certificate of occupancy was or is currently anticipated to be obtained. Subsequent to obtaining the certificate of occupancy, the property is expected to undergo a lease-up period.

     For consolidated developments, EOP Partnership’s Costs Incurred and the Total Estimated Costs are based on EOP Partnership’s Effective Ownership Percentage, and include, for Foundry Square II, EOP Partnership’s portion of the first mortgage financing described in footnote (b). The Total Project Estimated Costs represent 100% of the development’s estimated costs including EOP Partnership’s and any unaffiliated parties’ portions.

     For unconsolidated developments, the Effective Ownership Percentage represents EOP Partnership’s direct interest in the development and its indirect interest through its 49.9% interest in Wilson/ Equity Office (“W/EO”). EOP Partnership’s Costs Incurred and Total Estimated Costs are based on EOP Partnership’s Effective Ownership Percentage and include EOP Partnership’s portion of the first mortgage financing described in footnote (b). The Total Project Estimated Costs represent 100% of the development’s estimated costs including EOP Partnership’s, Wilson Investors’ (“WI”) and any third parties’ portions.

     The Total Estimated Costs and the Total Project Estimated Costs are subject to change upon, or prior to, the completion of the development and include amounts required to lease the property.

(b) EOP Partnership and WI previously entered into a joint venture agreement to form W/EO for the purpose of developing, constructing, leasing and managing developments in northern California. W/EO is owned 49.9% by Equity Office and 50.1% by WI. William Wilson III, a trustee of Equity Office, through his ownership of WI, owns approximately 22% of W/EO and approximately 30% of any promote to which WI is entitled under the joint venture agreement. EOP Partnership had agreed to loan up to $25 million to WI for its required contribution to W/EO at a 15% interest rate per annum. All amounts outstanding have been repaid and as a result of the recent transactions with WI described below, the loan commitment has been terminated.

     EOP Partnership created joint ventures with W/EO and, in certain cases, unaffiliated parties for the development of various office properties. EOP Partnership has agreed to provide first mortgage financing to the ownership entities of each of these developments at the greater of 6.5% or LIBOR plus 3.25%, generally maturing 36 months after initial funding or earlier at the option of EOP Partnership in the event alternative financing sources are available on terms reasonably acceptable to WI and any unaffiliated party. The aggregate amount of any such financing would generally be capped at 70% of budgeted construction costs (76% in the case of Concar which, at December 31, 2002 had been completed and leased and as such is no longer included in the Developments summary above). At December 31, 2002, EOP Partnership had committed to make mortgage loans for Foundry Square IV and Concar totaling approximately $96 million, of which approximately $74 million in principal and approximately $.4 million in accrued interest was outstanding. In addition, the mortgage loan commitment on Foundry Square II is approximately $117 million of which approximately $77 million of principal and $.4 million in accrued interest was outstanding as of December 31, 2002.

     In December 2002, EOP Partnership, W/EO and WI completed a transaction pursuant to which EOP Partnership acquired W/EO’s interests in various projects known as Foundry Square II, Foundry Square III (a land parcel under option), the Ferry Building, San Rafael Corporate Center I and San Rafael Corporate Center II (a land parcel). WI acquired W/EO’s interest in a project known as Larkspur (a land parcel under option) and WI acquired the operating business and all assets of W/EO other than its ownership interests in the development projects known as Foundry Square IV and Concar. In accordance with the W/EO operating agreement, EOP Partnership may, but is not required to, purchase the W/EO interest in Foundry Square IV and Concar, subsequent to project stabilization. A WI subsidiary will continue providing the development management services to Foundry Square II, the Ferry Building and Concar also engaged a subsidiary of WI to provide leasing brokerage services for Foundry Square II and the Ferry Building. EOP Partnership’s and W/EO’s interests in Foundry Square IV and Concar remain unchanged as a result of this transaction. Joint ventures with other unaffiliated parties on the projects in which EOP Partnership acquired W/EO’s interest also remain unchanged as a result of this transaction.

(c) A joint venture between EOP Partnership and other unaffiliated parties leased the Ferry Building from the City and County of San Francisco, through its Port Commission (the “Port”). Under this lease, the

Port is paid a stated base rent. In addition, once the lessee has received from the project a cumulative preferred return of 8% (prior to stabilization) and 11% (after stabilization), then 50% of the proceeds from the operation and ownership of the project are paid to the Port as percentage rent.

The joint venture is redeveloping the Ferry Building in a manner to permit the use of federal rehabilitation tax credits (“Historic Tax Credits”). Since the original members of the joint venture could not take full advantage of the Historic Tax Credits, the joint venture admitted a new member who could do so. This investor member will contribute approximately $23.5 million in equity to fund a portion of the Total Project Estimated Costs for the project, and will be entitled to a preferred return with an effective annual rate of approximately 3% on its capital investment. The investor member’s interest in the joint venture is subject to put/call rights during the sixth and seventh years after the Ferry Building is placed in service. Upon the purchase of the investor member’s interest pursuant to the put/call, it is estimated that the joint venture will retain approximately $11 million of the capital contributed by the investor member, based on a formula to determine the purchase price for the investor member’s interest and after taking into account the preferred return that will have been paid to the investor member by such time. Through the creation of a master lease, EOP Partnership’s Effective Ownership Percentage in the net cash flow of the Ferry Building project is effectively 100%, after the payment to the Port of the percentage rent described above and the distribution of preferred returns to the investor member.

In addition to the developments described above, we own or have under option various land parcels available for development. These sites represent possible future development of up to approximately 12 million square feet of office space. The development of these sites will be impacted by the timing and likelihood of success of the entitlement process, both of which are uncertain. These various sites include, among others: Russia Wharf, Boston, MA; Reston Town Center, Reston, VA; Prominence in Buckhead, Atlanta, GA; Perimeter Center, Atlanta, GA; Tabor Center, Denver, CO; Bridge Pointe, San Diego, CA; La Jolla Centre, San Diego, CA; Orange Center, Orange, CA; Water’s Edge, Los Angeles, CA; Skyport Plaza, San Jose, CA; Foundry Square, San Francisco, CA; San Rafael Corporate Center, San Rafael, CA; Station Oaks, Walnut Creek, CA; Parkshore Plaza, Folsom, CA; City Center Bellevue; Bellevue, WA; and 8th Street, Bellevue, WA.

Consolidated developments in process increased to approximately $284.7 million at December 31, 2002 compared to $165.0 million at December 31, 2001, primarily due to the consolidation of the Ferry Building and Foundry Square II in 2002 (see Item 8. Financial Statements and Supplementary Data — Note 8 — Investment in Unconsolidated Joint Venture-subfootnote (6)), the commencement of two developments and additional expenditures made during 2002, partially offset by two developments that were placed in service.

Subsequent Events

The following transactions occurred subsequent to December 31, 2002 through March 13, 2003:

In January 2003, we issued $500 million of 5.875% unsecured notes due January 15, 2013. Including all offering expenses, the all-in effective rate of the unsecured notes is 5.98%. The notes are guaranteed by Equity Office. Total cash proceeds net of selling commissions and other expenses were approximately $494.9 million. The net proceeds were used to repay $300 million of unsecured notes that matured in February 2003. The remaining net proceeds were used to repay outstanding balances on the line of credit and for general business purposes, including working capital.

In January 2003, we sold the ABAM Building, Washington Park and the Federal Way office buildings to an unaffiliated party for approximately $13.5 million. The properties comprised three office properties, approximately 114,527 square feet and are located in Seattle, Washington.

In February 2003, we sold the U.S. West Dex Center office building to an unaffiliated party for approximately $11.6 million. The property comprised one office building, approximately 136,176 square feet and is located in Salt Lake City, Utah.

In February 2003, we sold the Commerce Park office building to an unaffiliated party for approximately $16.1 million. The property comprised one office building, approximately 94,367 square feet and is located in Santa Monica, CA.

Effective in February 2003, we amended our third-party insurance coverage for acts of terrorism as a result of the Terrorism Risk Insurance Act of 2002 (“TRIA”) enacted by Congress and signed into law by President Bush on November 26, 2002. We canceled the terrorism insurance program that provided a limit of $270 million in the aggregate per year and replaced it with a limit of $825 million in the current property insurance program which provides coverage for chemical and biological exposure, whereas the previous insurance coverage excluded this exposure. Under TRIA, we have a per occurrence deductible of $750,000 and retain 10% of each and every loss up to a maximum of $33.25 million per occurrence, inclusive of the deductible. The federal government is obligated to cover the remaining 90% of the loss above the deductible up to $100 billion in the aggregate annually.

In March 2003, we sold the Janss Court office building to an unaffiliated party for approximately $35.5 million. The property comprised one office building, approximately 92,403 square feet, 32 residential units and is located in Santa Monica, CA.

Inflation

Substantially all of our office leases require the tenant to pay, as additional rent, a portion of any increases in real estate taxes (except in the case of certain California leases, which limit the ability of the landlord to pass through to the tenants the effect of increased real estate taxes attributable to a sale of real property interests) and operating expenses over a base amount. In addition, many of our office leases provide for fixed increases in base rent or indexed escalations (based on the Consumer Price Index or other measures). We believe that the majority of inflationary increases in expenses will be offset, in part, by the expense reimbursements and contractual rent increases described above.

Funds From Operations

Funds from Operation (“FFO”) is a non-GAAP financial measure. We believe FFO, as defined by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”), to be an appropriate measure of performance for a real estate company. While FFO is a relevant and widely used measure of operating performance of real estate companies, it does not represent cash flow from operations or net income as defined by GAAP, and it should not be considered as an alternative to these indicators in evaluating liquidity or operating performance.

The following table reflects the reconciliation of FFO to net income available for Units, the most directly comparable GAAP measure, for the five years ended December 31, 2002:



		For the year ended December 31,

		2002			2001			2000			1999			1998


		(Dollars in thousands)
Net income available for Units		$	796,847		$	640,045		$	484,312		$	430,264		$	353,053
Add back (deduct):
	Real estate related depreciation and amortization (including EOP Partnership’s share of unconsolidated joint ventures)		719,240			605,488			453,909			363,275			309,620
	Real estate related depreciation and amortization and net gain on sales of real estate included in discontinued operations		(11,114	)		8,434			5,476			5,215			3,899
	Impairment on assets held for sale		—			2,536			—			—			—
	Net gain on sales of real estate (excluding allocation of gain on sale of real estate of $1,473 in 2000 to minority interests)		—			(81,662	)		(34,540	)		(59,661	)		(12,433	)
	Net gain on sale of unconsolidated joint venture		(429	)		—			—			—			—
	Extraordinary item		—			1,000			—			—			—
	Cumulative effect of a change in accounting principle		—			1,142			—			—			—

Funds from Operations		$	1,504,544		$	1,176,983		$	909,157		$	739,093		$	654,139

Cash flow provided by (used for):
	Operating Activities	$	1,390,949		$	1,241,601		$	907,343		$	720,711		$	759,151
	Investing Activities	$	85,173		$	(1,348,203	)	$	(1,311,778	)	$	(67,138	)	$	(2,231,712	)
	Financing Activities	$	(1,478,772	)	$	114,467		$	455,353		$	(718,315	)	$	1,310,788
Ratio of earnings to combined fixed charges and preferred share distributions			1.9			1.7			1.7			1.7			1.8



	For the years ended December 31,

	2002			2001			2000			1999			1998

Reconciliation of diluted earnings per unit to diluted funds from operations per unit:
Net income available for Units	$	1.70		$	1.55		$	1.52		$	1.48		$	1.24
Add real estate related depreciation and amortization (including EOP Partnership’s share of unconsolidated joint ventures)		1.53			1.47			1.42			1.25			1.09
Add / deduct real estate related depreciation and amortization and net gain on sales of real estate included in discontinued operations		(0.02	)		0.02			0.02			0.02			0.01
Add impairment on assets held for sale		—			0.01			—			—			—
Less gain on sales of real estate		—			(0.20	)		(0.11	)		(0.20	)		(0.04	)

Funds from operations available for Units	$	3.21		$	2.86		$	2.85		$	2.54		$	2.30

FFO is defined as net income, computed in accordance with GAAP, excluding gains (or losses) from sales of properties (which we believe includes impairments on properties held for sale), plus real estate related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. We believe that FFO is helpful to investors as a measure of the performance of a real estate company because, along with cash flow from operating activities, investing activities and financing activities, it provides investors with an indication of the ability of a company to incur and service debt, to make capital expenditures and to fund other cash needs. EOP Partnership computes FFO in accordance with standards established by NAREIT, which may not be comparable to FFO reported by other real estate companies that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition

differently than EOP Partnership. FFO does not represent cash generated from operating activities in accordance with GAAP, nor does it represent cash available to pay distributions and should not be considered as an alternative to net income, determined in accordance with GAAP, as an indication of EOP Partnership’s financial performance or to cash flow from operating activities, determined in accordance with GAAP, as a measure of EOP Partnership’s liquidity, nor is it indicative of funds available to fund EOP Partnership’s cash needs, including its ability to make cash distributions.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Quantitative and qualitative disclosures about market risk are incorporated herein by reference from “Item 7. — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Market Risk.”

Item 8. Financial Statements and Supplementary Data.

REPORT OF INDEPENDENT AUDITORS

The Partners of EOP Operating Limited Partnership

We have audited the accompanying consolidated balance sheets of EOP Operating Limited Partnership (“EOP Partnership”) as of December 31, 2002 and 2001, and the related consolidated statements of operations, partners’ capital, net comprehensive income and cash flows for each of the three years in the period ended December 31, 2002. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and the schedule are the responsibility of EOP Partnership’s management. Our responsibility is to express an opinion on these financial statements and the schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of EOP Partnership at December 31, 2002 and 2001, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

ERNST & YOUNG LLP

Chicago, Illinois

February 5, 2003, except for Note 26

as to which the date is March 13, 2003

EOP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED BALANCE SHEETS



				December 31,

				2002			2001


				(Dollars in thousands,
				except per unit amounts)
Assets:
	Investment in real estate			$	24,625,927		$	24,399,658
	Developments in process				284,737			164,997
	Land available for development				252,852			251,696
	Accumulated depreciation				(2,077,613	)		(1,494,301	)

		Investment in real estate, net of accumulated depreciation			23,085,903			23,322,050
	Cash and cash equivalents				58,471			61,121
	Tenant and other receivables (net of allowance for doubtful accounts of $11,695 and $7,794, respectively)				77,597			120,425
	Deferred rent receivable				331,932			269,796
	Escrow deposits and restricted cash				29,185			196,289
	Investments in unconsolidated joint ventures				1,087,815			1,321,127
	Deferred financing costs (net of accumulated amortization of $48,801 and $36,198, respectively)				67,151			77,880
	Deferred leasing costs (net of accumulated amortization of $115,710 and $78,600, respectively)				235,002			187,336
	Prepaid expenses and other assets (net of discounts of $66,557 and $67,413, respectively)				273,727			252,398

		Total Assets		$	25,246,783		$	25,808,422

Liabilities, Minority Interests and Partners’ Capital:
	Mortgage debt (including a net discount of $(12,584) and $(11,761), respectively)			$	2,507,890		$	2,650,338
	Unsecured notes (including a net premium of $41,151 and $17,487, respectively)				9,057,651			9,093,987
	Line of credit				205,700			244,300
	Accounts payable and accrued expenses				560,101			570,744
	Distribution payable				5,654			6,060
	Other liabilities				391,963			330,277

		Total Liabilities			12,728,959			12,895,706

	Commitments and contingencies				—			—
		Minority interests — partially owned properties			185,809			181,017

		Preferred Units, 100,000,000 authorized:
			8.98% Series A Cumulative Redeemable Preferred Units, liquidation preference $25.00 per unit, 0 and 7,994,000 issued and outstanding		—			199,850
			5.25% Series B Convertible, Cumulative Redeemable Preferred Units, liquidation preference $50.00 per unit, 5,990,000 issued and outstanding		299,500			299,500
			8.625% Series C Cumulative Redeemable Preferred Units, liquidation preference $25.00 per unit, 4,562,900 issued and outstanding		114,073			114,073
			7.875% Series E Cumulative Redeemable Preferred Units, liquidation preference $25.00 per unit, 6,000,000 issued and outstanding		150,000			150,000
			8.0% Series F Cumulative Redeemable Preferred Units, liquidation preference $25.00 per unit, 4,000,000 issued and outstanding		100,000			100,000
			7.75% Series G Cumulative Redeemable Preferred Units, liquidation preference $25.00 per unit, 8,500,000 and 0 issued and outstanding		212,500			—
	General Partners Capital				89,650			93,010
	Limited Partners Capital				11,399,979			11,795,204
	Deferred compensation				(15,472	)		(19,822	)
	Accumulated other comprehensive (loss)				(18,215	)		(116	)

		Total Partners’ Capital			12,332,015			12,731,699

		Total Liabilities, Minority Interests and Partners’ Capital		$	25,246,783		$	25,808,422

See accompanying notes.

EOP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF OPERATIONS



				For the years ended December 31,

				2002			2001			2000


				(Dollars in thousands,
				except per unit amounts)
Revenues:
	Rental			$	2,714,705		$	2,384,187		$	1,705,353
	Tenant reimbursements				505,822			444,503			322,145
	Parking				115,664			125,284			109,769
	Other				131,657			71,690			47,788
	Fee income				15,907			15,085			10,931
	Interest / dividends				22,327			40,214			36,076

			Total revenues		3,506,082			3,080,963			2,232,062

Expenses:
	Interest:
		Expense incurred			810,129			726,930			523,860
		Amortization of deferred financing costs and prepayment expenses			4,886			14,996			11,493
	Depreciation				631,262			524,632			394,775
	Amortization				52,930			41,964			26,420
	Real estate taxes				373,787			341,550			265,591
	Insurance				44,341			21,840			12,002
	Repairs and maintenance				351,139			296,948			230,775
	Property operating				348,736			309,255			233,758
	Ground rent				20,446			16,812			9,896
	General and administrative				137,468			109,672			88,696
	Impairment on securities and other investments				—			132,684			—
	Impairment on assets held for sale				—			2,536			—

			Total expenses		2,775,124			2,539,819			1,797,266

Income before income taxes, allocation to minority interests, income from investment in unconsolidated joint ventures and net gain on sales of real estate					730,958			541,144			434,796
Income taxes					(9,394	)		(8,814	)		(2,719	)
Minority interests — partially owned properties					(7,200	)		(8,685	)		(6,843	)
Income from investment in unconsolidated joint ventures					106,852			69,203			56,251
Net gain on sales of real estate					—			81,662			36,013

Income from continuing operations					821,216			674,510			517,498
Discontinued operations (including net gain on sales of real estate of $17,926 in 2002)					38,204			22,063			12,738

Income before extraordinary item and cumulative effect of a change in accounting principle					859,420			696,573			530,236
Extraordinary item					—			(1,000	)		—
Cumulative effect of change in accounting principle					—			(1,142	)		—

Net income					859,420			694,431			530,236
Put option settlement					—			2,655			(2,576	)
Preferred distributions, net					(62,573	)		(57,041	)		(43,348	)

Net income available for Units				$	796,847		$	640,045		$	484,312

Earnings per unit — basic:
	Income from continuing operations			$	1.76		$	1.65		$	1.64

	Net income available for Units			$	1.71		$	1.57		$	1.53

	Weighted average Units outstanding				467,134,774			408,919,582			316,067,694

Earnings per unit — diluted:
	Income from continuing operations			$	1.75		$	1.64		$	1.62

	Net income available for Units			$	1.70		$	1.55		$	1.52

	Weighted average Units and unit equivalents outstanding				469,138,720			411,986,897			318,997,407

Distributions declared per Unit outstanding				$	2.00		$	1.90		$	1.74

See accompanying notes.

EOP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL



		For the years ended December 31,

		2002			2001			2000


		(Dollars in thousands)
Partners’ Capital:
Balance, beginning of period		$	12,751,521		$	7,680,942		$	6,788,293
	Issuance of Units for Spieker Merger		—			3,464,625			—
	Issuance of share options in the Spieker Merger		—			18,701			—
	Issuance of Units for Cornerstone Merger		—			—			1,574,625
	Redemption of Units for cash		(106,690	)		(1,245	)		(3,780	)
	Issuance of Units for acquisitions		—			—			9,685
	Issuance of Units through exercise of share options		40,015			72,359			81,956
	Offering costs		(7,042	)		(65	)		(28	)
	Units issued for restricted units, trustee fees and for the dividend reinvestment plan, net of restricted units retired		11,872			15,246			12,917
	Common Shares and Units repurchased by EOP Partnership		(196,882	)		—			(119,633	)
	Redemption of 8.98% Series A Cumulative Redeemable Preferred Units		(199,850	)		—			—
	9.45% Series D Cumulative Redeemable issued in the Spieker Merger		—			106,250			—
	7.875% Series E Cumulative Redeemable issued in the Spieker Merger		—			150,000			—
	8.0% Series F Cumulative Redeemable issued in the Spieker Merger		—			100,000			—
	Issuance of 7.75% Series G Cumulative Redeemable Preferred Units		212,500			—			—
	Preferred units repurchased		—			(106,250	)		(1,077	)
	Reclassification of redeemable units		—			1,426,359			—
	Adjustment to eliminate limited partners’ equity interest in redemption value		—			—			(529,966	)
	Put option settlement		—			(1,467	)		(2,576	)
	Preferred distributions		(62,573	)		(57,041	)		(43,348	)
	Distributions declared to partners		(936,705	)		(839,463	)		(577,169	)

	Total		11,506,166			12,028,951			7,189,899

Comprehensive Income:
Net income			859,420			694,431			530,236
Other comprehensive income (loss):
	Unrealized holding loss on forward starting interest rate swaps		(18,611	)		—			—
	Reclassification adjustment for realized gains included in net income		116			—			—
	Unrealized holding gains (losses) from investments		396			(2,699	)		(39,193	)
	Recognition of permanent impairment on marketable securities		—			30,838			—

Net comprehensive income			841,321			722,570			491,043

Balance, end of period		$	12,347,487		$	12,751,521		$	7,680,942

Deferred Compensation:
Balance, beginning of period		$	(19,822	)	$	(14,871	)	$	(10,064	)
	Units granted		(17,060	)		(17,519	)		(13,274	)
	Units retired		7,669			3,328			757
	Amortization of restricted units		13,741			9,240			7,710

Balance, end of period		$	(15,472	)	$	(19,822	)	$	(14,871	)

See accompanying notes.

EOP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS



					For the years ended December 31,

					2002			2001			2000


					(Dollars in thousands)
Operating Activities:
	Net income				$	859,420		$	694,431		$	530,236
	Adjustments to reconcile net income to net cash provided by operating activities:
		Interest/dividend income accrued but not received				—			(9,852	)		(5,934	)
		Amortization of discounts included in interest/dividend income				(856	)		(2,919	)		(958	)
		Amortization of deferred revenue included in other income				—			(3,073	)		(5,715	)
		Depreciation and amortization (including discontinued operations)				695,892			590,214			438,219
		Amortization of premiums/discounts on unsecured notes and terminated interest rate protection agreements included in interest expense				(7,183	)		3,167			3,980
		Impairment on securities and other investments				—			132,684			—
		Impairment on assets held for sale				—			2,536			—
		Compensation related to restricted shares issued to employees by Equity Office				14,961			9,240			7,710
		Income from unconsolidated joint ventures				(106,852	)		(69,203	)		(56,251	)
		Net gain on sales of real estate (including discontinued operations)				(17,926	)		(81,662	)		(36,013	)
		Extraordinary items				—			1,000			—
		Cumulative effect of a change in accounting principle				—			1,142			—
		Provision for doubtful accounts				27,995			26,124			6,349
		Income allocated to minority interests				7,200			8,685			6,843
		Changes in assets and liabilities:
			Decrease (increase) in rents receivable			30,236			(22,655	)		(41,517	)
			(Increase) in deferred rent receivables			(77,123	)		(75,555	)		(72,351	)
			(Increase) decrease in prepaid expenses and other assets			(27,861	)		(5,051	)		12,819
			(Decrease) increase in accounts payable and accrued expenses			(22,883	)		21,434			119,470
			Increase in other liabilities			15,929			20,914			456

				Net cash provided by operating activities		1,390,949			1,241,601			907,343

EOP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)



			For the years ended December 31,

			2002			2001			2000


			(Dollars in thousands)
Investing Activities:
	Property acquisitions			(53,067	)		(104,748	)		(69,914	)
	Acquisition of Spieker Partnership			—			(1,076,957	)		—
	Acquisition of Cornerstone Partnership			—			—			(1,159,440	)
	Property dispositions			377,150			361,353			352,375
	Capital and tenant improvements			(328,930	)		(360,065	)		(293,711	)
	Lease acquisition costs			(104,714	)		(77,639	)		(79,440	)
	Decrease in escrow deposits and restricted cash			167,026			28,064			118,386
	Distributions from unconsolidated joint ventures			199,665			131,983			174,817
	Investments in unconsolidated joint ventures			(198,040	)		(249,893	)		(228,924	)
	Redemption of CT Convertible Trust I Preferred Stock			20,086			—			—
	Investment in securities			—			(683	)		(87,075	)
	Repayments of (investment in) notes receivable			5,997			382			(39,056	)
	Contributions from minority interest partner in partially owned properties			—			—			204

		Net cash provided by (used for) investing activities		85,173			(1,348,203	)		(1,311,778	)

Financing Activities:
	Proceeds from mortgage debt			14,427			140,000			270,000
	Principal payments on mortgage debt			(156,052	)		(458,731	)		(460,111	)
	Prepayment penalties on early extinguishment of debt			—			(5,000	)		—
	Proceeds from unsecured notes			239,127			1,386,598			2,180,785
	Repayment of unsecured notes			(310,000	)		(100,000	)		—
	Proceeds from lines of credit			1,336,350			3,206,050			5,168,975
	Principal payments on lines of credit			(1,374,950	)		(3,152,036	)		(5,986,516	)
	Payments of loan costs			(4,296	)		(10,481	)		(39,245	)
	Settlement of interest rate swap agreements			42,810			47,369			—
	Distributions to minority interests in partially owned properties			(10,401	)		(5,878	)		(13,732	)
	Repurchase of preferred units			(199,850	)		(106,250	)		(890	)
	Issuance of preferred units			205,645			—			—
	Payment of offering costs			(187	)		(65	)		(28	)
	Proceeds from exercise of share options			40,015			71,835			81,956
	Distributions to unitholders			(935,083	)		(837,659	)		(578,893	)
	Repurchase of Units			(196,882	)		—			(119,633	)
	Redemption of Units			(106,690	)		(1,245	)		(3,780	)
	Put option settlement			—			(1,467	)		—
	Payment of preferred distributions			(62,755	)		(58,573	)		(43,535	)

		Net cash (used for) provided by financing activities		(1,478,772	)		114,467			455,353

	Net (decrease) increase in cash and cash equivalents			(2,650	)		7,865			50,918
	Cash and cash equivalents at the beginning of the year			61,121			53,256			2,338

	Cash and cash equivalents at the end of the year		$	58,471		$	61,121		$	53,256

Supplemental Information:
	Interest paid during the period, including capitalized interest of $21,447, $25,871 and $14,764, respectively		$	836,573		$	679,537		$	498,012

EOP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)



		For the years ended December 31,

		2002			2001			2000


		(Dollars in thousands)
Non-Cash Investing and Financing Activities:
	Issuance of unsecured notes at a discount of $10,048 in exchange for $250 million MandatOry Par Put Remarketed Securities^SM	$	(254,631	)	$	—		$	—

	Exchange of $250 million MandatOry Par Put Remarketed Securities^SM, including an unamortized premium of $4,631, for $264,679 notes due 2012 issued in February 2002	$	254,631		$	—		$	—

	Escrow deposits used for property acquisitions	$	70,030		$	—		$	37,105

	Escrow deposits provided by property dispositions	$	(70,025	)	$	(184,458	)	$	(167,922	)

	Mortgage loans, unsecured notes and line of credit assumed in the Spieker Merger	$	—		$	2,125,610		$	—

	Net liabilities assumed in the Spieker Merger	$	—		$	125,558		$	—

	Minority interest in partially owned properties assumed in the Spieker Merger	$	—		$	1,272		$	—

	Units and share options issued in the Spieker Merger	$	—		$	3,483,326		$	—

	Preferred units issued in the Spieker Merger	$	—		$	356,250		$	—

	Mortgage loans and line of credit assumed in the Cornerstone Merger	$	—		$	—		$	1,720,449

	Net liabilities assumed in the Cornerstone Merger	$	—		$	—		$	19,792

	Minority interest in partially owned properties assumed in the Cornerstone Merger	$	—		$	—		$	174,470

	Units and share options issued in connection with the Cornerstone Merger	$	—		$	—		$	1,574,625

	Units issued in connection with property acquisitions	$	—		$	—		$	9,685

	Mortgage loan assumed/ promissory notes issued in connection with property acquisitions	$	—		$	—		$	65,661

	Mortgage loan assumed by purchaser in connection with property disposition	$	—		$	—		$	(11,369	)

	Deferred revenue recorded in connection with receipt of securities	$	—		$	—		$	11,317

See accompanying notes.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — BUSINESS AND FORMATION OF EOP PARTNERSHIP

As used herein, “EOP Partnership” means EOP Operating Limited Partnership, a Delaware limited partnership, together with its subsidiaries, and the predecessors thereof (“EOP Partnership Predecessors”), except where the context otherwise requires. EOP Partnership is a subsidiary of Equity Office Properties Trust (“Equity Office”), a Maryland real estate investment trust. EOP Partnership was organized in 1996 to continue and expand the national office property business organized by Mr. Samuel Zell, Chairman of the Board of Trustees of Equity Office, and to complete the consolidation of the EOP Partnership Predecessors (the “Consolidation”). Equity Office completed its initial public offering (the “IPO”) on July 11, 1997, having sold its common shares of beneficial interest, $0.01 par value per share (“Common Shares”). The net proceeds from the IPO were contributed to EOP Partnership in exchange for units of partnership interest (“Units”). EOP Partnership is a fully integrated, self-administered and self-managed real estate company principally engaged, through its subsidiaries, in owning, managing, leasing, acquiring and developing office properties. Equity Office has elected to be taxed as a real estate investment trust (“REIT”) for federal income tax purposes and generally will not be subject to federal income tax if it distributes 100% of its taxable income and complies with a number of organizational and operational requirement. At December 31, 2002, EOP Partnership owned or had an interest in 734 office properties (the “Office Properties”) comprising approximately 125.7 million rentable square feet of office space and 77 industrial properties (the “Industrial Properties”) comprising approximately 6.0 million rentable square feet of industrial space (together with the Office Properties, the “Properties”). The Office Properties were, on a weighted average basis, 88.6% occupied at December 31, 2002, and are located in 138 submarkets in 32 markets in 20 states and the District of Columbia. The Office Properties, by rentable square feet, are located approximately 41.1% in central business districts (“CBDs”) and approximately 58.9% in suburban markets.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements represent the financial condition and results of EOP Partnership and its subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

The Consolidation and EOP Partnership’s mergers with Spieker Properties, L.P., Cornerstone Properties Limited Partnership and Beacon Partnership L.P. were accounted for using the purchase method in accordance with Accounting Principles Board Opinion No. 16 and Statement of Financial Accounting Standards No. 141, Business Combinations. The fair value of the consideration given in these transactions was used as the valuation basis for the transactions. The assets acquired and liabilities assumed in these transactions were recorded at their fair values as of the closing dates of the transactions. The results of operations of the companies acquired in the mergers for the period from their respective closing dates were included in the consolidated statements of operations.

Investment in Real Estate

Rental property and improvements, including interest and other costs capitalized during construction, are included in investment in real estate and are stated at cost. Expenditures for ordinary maintenance and repairs are expensed to operations as they are incurred. Significant renovations and improvements, which improve or extend the useful life of the assets, are capitalized. Rental property and improvements, excluding land, are

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (continued)

depreciated over their estimated useful lives using the straight-line method. The estimated useful lives by asset category are:


Asset Category	Estimated Useful Life

Building		40 years
Building improvements		4-40 years
Tenant improvements		Term of lease
Furniture and fixtures		3-12 years

Rental properties are individually evaluated for impairment when conditions exist which may indicate that it is probable that the sum of expected future cash flows (on an undiscounted basis) from a rental property over the anticipated holding period is less than its historical net cost basis. Upon determination that a permanent impairment has occurred, rental properties are reduced to their fair value. For properties to be disposed of, an impairment loss is recognized when the fair value of the property, less the estimated cost to sell, is less than the carrying amount of the property measured at the time EOP Partnership has a commitment to sell the property and/or is actively marketing the property for sale. A property to be disposed of is reported at the lower of its carrying amount or its estimated fair value, less its cost to sell. Subsequent to the date that a property is held for disposition, depreciation expense is not recorded.

The FASB issued Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long Lived Assets. Statement 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The provisions of Statement 144 are effective for financial statements issued for fiscal years beginning after December 15, 2001, and interim periods within those fiscal years. We adopted the standard in 2002 and it did not have a material effect on our financial condition or results of operations.

Developments in process are carried at cost, which includes land acquisition cost, architectural fees, general contractor fees, capitalized interest, internal costs related directly to the development and other costs related directly to the construction of the property. Depreciation is not recorded until the property is placed in service, which occurs shortly after receipt of a certificate of occupancy.

Land available for development is carried at cost and is not depreciated. Land available for development includes various vacant land parcels that may have some improvements such as utility service.

Investments in Unconsolidated Joint Ventures

Investments in unconsolidated joint ventures are accounted for using the equity method of accounting because EOP Partnership does not have control over the activities of the investees. The net equity investment of EOP Partnership is reflected on the consolidated balance sheets, and the consolidated statements of operations include EOP Partnership’s share of net income or loss from the unconsolidated joint ventures. Any difference between the carrying amount of these investments on the consolidated balance sheet of EOP Partnership and the value of the underlying equity is depreciated as an adjustment to income from unconsolidated joint ventures over 40 years. In 2001, EOP Partnership adopted SFAS 142 “Goodwill and Other Intangible Assets” upon its effective date and it did not have an effect on the consolidated financial statements.

Deferred Leasing and Financing Costs

Deferred leasing and financing costs, which consist of, but are not limited to, commissions paid to third parties for new or renewal leases, and fees paid to third parties for unsecured note offerings, are recorded at cost. The deferred leasing costs are amortized over the terms of the respective leases and the deferred financing costs are amortized over the terms of the respective financings on a straight-line basis, which approximates the effective yield method.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (continued)

Revenue Recognition

Certain leases provide for tenant occupancy during periods for which no rent is due or where minimum rent payments increase during the term of the lease. EOP Partnership records rental income for the full term of each lease on a straight-line basis. Accordingly, a receivable is recorded from tenants for the current difference between the straight-line rent and the rent that is contractually due from the tenant (“Deferred Rent Receivable”). When a property is acquired, the term of existing leases is considered to commence as of the acquisition date for purposes of this calculation. The amounts included in rental income for the years ended December 31, 2002, 2001 and 2000, which had not yet been billed as of such dates, were approximately $72.9 million, $69.1 million and $69.8 million, respectively. Deferred rental revenue is not recognized for income tax purposes.

Cash Equivalents

Cash equivalents are considered to be all highly liquid investments purchased with a maturity of three months or less at the date of purchase.

Allowance for Doubtful Accounts

Allowance for doubtful accounts is maintained for estimated losses resulting from the inability of certain tenants to meet the contractual obligations under their lease agreements.

Escrow Deposits and Restricted Cash

Fair Value of Financial Instruments and Other Assets

Investments in notes receivable approximate their fair value and are included in other assets.

The fair value of the fixed-rate mortgage debt and unsecured notes as of December 31, 2002 was approximately $1.0 billion higher than the book value of approximately $11.5 billion primarily due to the general decrease in market interest rates on secured and unsecured debt. As of December 31, 2001, the fair value of our fixed-rate debt approximated book value. The fair value of the mortgage debt and the unsecured notes was determined by discounting the spread between the future contractual interest payments and the future interest payments based on a market rate. The fair value of the interest rate swap agreements was determined by third party quotations. In addition, management believes that the carrying values of cash equivalents, restricted cash, escrow deposits, tenant and other rents receivable, prepaid expenses and other assets, accounts payable and accrued expenses and other liabilities are reasonable estimates of their fair value.

Derivatives and Hedging Activities

EOP Partnership periodically enters into certain interest rate protection and swap agreements to effectively convert or cap floating rate debt to a fixed rate basis, fixed rate debt to a floating rate basis, as well as to hedge anticipated future financing transactions. Net amounts paid or received under these agreements are recognized as an adjustment to interest expense when such amounts are incurred or earned. Settlement amounts paid or received in connection with terminated interest rate protection agreements and interest rate swap agreements are deferred and amortized as an adjustment to interest expense over the remaining term of the related financing transaction on a straight-line basis, which approximates the effective yield method.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (continued)

In June 1998, the FASB issued Statement No. 133 “Accounting for Derivative Instruments and Hedging Activities” as amended by FASB Statement Nos. 137 and 138, which is effective for financial statements for all fiscal quarters of fiscal years beginning after June 15, 2000. The statement requires recording all derivative instruments as assets or liabilities, measured at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives either will be offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative’s change in fair value will be immediately recognized in earnings. EOP Partnership adopted the standard on January 1, 2001 and recorded a cumulative effect of a change in accounting principle resulting in a loss of approximately $1.1 million in the year ended December 31, 2001.

Deferred Revenue

During 2000 and 1999, EOP Partnership received common stock and/or warrants to purchase common stock for allowing companies that provide telecommunication and other services access to the Properties. The securities received from these companies were recorded as deferred revenue at fair value at the time such securities were earned and were included in other liabilities on the balance sheet. The deferred revenue was being amortized into other income over the terms of the respective license agreements. During 2001, it was determined that there was no remaining future benefit period for the unamortized deferred revenue. The unamortized deferred revenue balance as of December 31, 2001 and 2000 was $0 and $37.2 million, respectively. The amount of deferred revenue recognized in other income, net of the write-off of the related securities, for the years ended December 31, 2001 and 2000 was approximately $3.1 million and $5.7 million, respectively.

Income Taxes

EOP Partnership is generally not liable for federal taxes as the partners recognize their proportionate share of EOP Partnership’s income or loss on their tax returns. The Office Properties and Industrial Properties primarily are owned by limited partnerships or limited liability companies, which are substantially pass-through entities. However, various consolidated entities owned by EOP Partnership are individually subject to certain taxes. Some of the pass-through entities have corporate general partners or members, which are subject to federal and state income and franchise taxes. In addition, the property management business is owned by a corporation and is subject to federal and state income and franchise taxes.

Equity Office has elected to be taxed as a REIT, under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”). As a REIT, Equity Office generally will not be subject to federal income tax if it distributes 100% of its taxable income for each tax year to its shareholders. REITs are subject to a number of organizational and operational requirements. If Equity Office fails to qualify as a REIT in any taxable year, it will be subject to federal income tax (including any applicable alternative minimum tax) on its taxable income at regular corporate tax rates. Even if Equity Office qualifies for taxation as a REIT, Equity Office may be subject to state and local income taxes and to federal income tax and excise tax on its undistributed income. In addition, taxable income from non-REIT activities managed through taxable REIT subsidiaries is subject to federal, state and local income taxes. The aggregate cost of land and depreciable property for federal income tax purposes as of December 31, 2002 and 2001 was approximately $14.8 billion and $15.0 billion, respectively.


	Minority Interests — Partially Owned Properties

Minority interests in consolidated Properties are reflected in the consolidated balance sheets as “Minority interests — partially owned properties” and represents the minority interests’ share in the assets and liabilities

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (continued)

of the Properties. The earnings or losses from these properties attributable to the minority interests are reflected as “Minority interests — Partially owned properties” in the consolidated statements of operations.

Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Reclassifications

Certain reclassifications have been made to the previously reported 2001 and 2000 statements in order to provide comparability with the 2002 statements reported herein. These reclassifications have not changed the 2001 or 2000 results of operations or partners’ capital.

NOTE 3 — MERGERS

Spieker Merger

On July 2, 2001, Spieker Properties, Inc. (“Spieker”) merged into Equity Office and Spieker Properties, L.P. (“Spieker Partnership”), Spieker’s operating partnership subsidiary, merged into EOP Partnership (collectively, the “Spieker Merger”) which was accounted for using the purchase method. The transaction valued Spieker (including the outside interests in Spieker Partnership) at approximately $7.2 billion, which included transaction costs, the assumption of approximately $2.1 billion in debt and the issuance of 14.25 million of EOP Partnership preferred units valued at approximately $356.3 million. EOP Partnership paid approximately $1.1 billion in cash and Equity Office issued approximately 101.5 million Common Shares and EOP Partnership issued approximately 16.7 million Units to third parties, each valued at $29.29 per Common Share/ Unit. EOP Partnership financed the $1.1 billion cash portion of the purchase price using a combination of available cash and a new $1.0 billion bridge loan facility that was entered into before the closing of the Spieker Merger. The $1.0 billion bridge loan facility had a term of 364 days and an interest rate based on LIBOR plus 80 basis points. The $1.0 billion bridge loan facility was repaid in full with the net proceeds from the issuance of $1.4 billion of unsecured notes in July 2001 and terminated upon the repayment. Through the Spieker Merger, EOP Partnership acquired 391 Office Properties comprising approximately 28.3 million square feet, 98 Industrial Properties comprising approximately 10.1 million square feet and several development properties which added to EOP Partnership’s ownership in key markets across the western United States.

Shortly after completion of the Spieker Merger, Equity Office expanded its Board of Trustees from 13 to 16 members. The new members are Warren E. Spieker, Jr., previous chairman of Spieker, and Craig G. Vought and John A. Foster, previous Co-Chief Executive Officers of Spieker.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)


NOTE 3 —	MERGERS — (continued)

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:


		(Dollars in thousands)

Investment in real estate		$	7,168,973
Other assets			47,824

	Total assets acquired		7,216,797

Mortgage debt, unsecured notes and lines of credit			(2,125,610	)
Other liabilities			(173,382	)

	Total liabilities assumed		(2,298,992	)

Minority interest in partially owned properties			(1,272	)

Common Shares, Units and stock options issued			(3,483,326	)
Preferred units issued			(356,250	)

	Total equity issued		(3,839,576	)

Total cash used for Spieker Merger		$	(1,076,957	)

Cornerstone Merger

On June 19, 2000, Cornerstone Properties Inc. (“Cornerstone”) merged into Equity Office and Cornerstone Properties Limited Partnership (“Cornerstone Partnership”), Cornerstone’s operating partnership subsidiary, merged into EOP Partnership (collectively, the “Cornerstone Merger”). The transaction, which was accounted for by the purchase method, valued Cornerstone, including the outside interests in Cornerstone Partnership at approximately $4.5 billion, which included transaction costs, the assumption of approximately $1.7 billion in debt, the redemption of 3.0 million shares of Cornerstone preferred stock valued at $18.00 per share, including accrued but unpaid dividends for a total of approximately $57.6 million, the redemption of approximately 58.5 million of Cornerstone common stock valued at $18.00 per share for a total of approximately $1.1 billion, the issuance by Equity Office of approximately 51.2 million Common Shares and the issuance by EOP Partnership of approximately 12.4 million Units valued at $24.68 per Common Share/ Unit. We financed the $1.2 billion in cash from our credit facilities. As a result of the Cornerstone Merger, EOP Partnership acquired an interest in 82 Office Properties containing approximately 18.9 million square feet of office space.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 4 — INVESTMENT IN REAL ESTATE

Investment in real estate, including Office Properties, Industrial Properties, properties under development and vacant land, was as follows:



		December 31,

		2002			2001


		(Dollars in thousands)
Land		$	2,878,102		$	2,820,079
Land available for development			252,852			251,696
Building			20,545,623			20,392,703
Building improvements			446,808			574,744
Tenant improvements			683,142			552,090
Furniture and fixtures			72,252			60,042
Developments in process			284,737			164,997

	Gross investment in real estate		25,163,516			24,816,351
Accumulated depreciation			(2,077,613	)		(1,494,301	)

	Net investment in real estate	$	23,085,903		$	23,322,050

During 2002, the Army and Navy Club Building and Liberty Plaza were acquired for a total of approximately $92.3 million from an unaffiliated party. These properties are located in Washington, D.C. and comprise approximately 260,372 square feet of office space.

During 2001, in addition to the properties acquired in the Spieker Merger, the Three Lafayette Centre office building was acquired for a total cost of approximately $68.7 million from an unaffiliated party. The property is located in Washington, D.C. and comprises approximately 259,441 square feet.

During 2000, in addition to the Properties acquired in the Cornerstone Merger, several Properties, or the remaining interests therein, were acquired for a total cost of approximately $130.2 million. These Properties comprised approximately 317,616 square feet.

NOTE 5 — DISPOSITIONS

2002

During 2002, EOP Partnership disposed of 45 office properties, four parking facilities (see Note 8 subfootnote (4)), two industrial properties and three land parcels in separate transactions to various unaffiliated parties for approximately $508.3 million. The total gain on the sale of these properties was approximately $17.9 million. The sold office properties consisted of approximately 3,113,189 square feet, the industrial properties consisted of approximately 77,072 square feet, and the parking facilities consisted of approximately 7,464 parking spaces.

2001

During 2001, EOP Partnership disposed of eight office properties, four parking facilities, a land parcel and an apartment property in separate transactions to various unaffiliated parties for approximately $327.8 million. The total gain on the sale of these properties was approximately $81.7 million. The sold office properties consisted of approximately 879,388 square feet, the parking facilities contained approximately 3,721 parking spaces and the apartment property contained approximately 161 units.

EOP Partnership sold 19 industrial properties that were acquired in the Spieker Merger for approximately $213.4 million. There was no gain or loss on the sale of these properties. The sold industrial properties are located in California and Oregon and consist of approximately 4.1 million square feet.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 5 — DISPOSITIONS — (continued)

2000

During 2000, EOP Partnership disposed of seven office properties totaling approximately 964,136 square feet, 11 parking facilities and a partial interest in two Office Properties for approximately $536.0 million and recognized a total net gain on sale of real estate of approximately $36.0 million.

Segment Reporting

Below is a summary of the results of operations of these properties through their respective disposition dates:



		For the year ended								For the year ended
		December 31,								December 31,

		2002			2001			2000		2001		2000


										Properties Sold Prior
		Properties Sold in 2002								to 2002


(Dollars in thousands)
Property revenues		$	40,436		$	49,167		$	32,091	$	37,787	$	71,582
Interest income			54			18			90		—		288

	Total revenues		40,490			49,185			32,181		37,787		71,870

Interest expense			(24	)		1,321			1,927		2,390		2,718
Depreciation and amortization			6,812			8,622			5,531		5,526		11,936
Property operating expenses			13,280			17,040			11,869		10,991		22,596
Ground rent			43			116			116		—		—
General and administrative			—			—			—		355		156

	Total expenses		20,111			27,099			19,443		19,262		37,406

Income before income taxes, allocation to minority interests and net gain on sales of real estate			20,379			22,086			12,738		18,525		34,464
Income taxes			(101	)		(23	)		—		—		—
Minority interest — partially owned properties			—			—			—		—		(1,457	)
Net gain on sales of real estate			17,926			—			—		81,662		36,013

Net income		$	38,204		$	22,063		$	12,738	$	100,187	$	69,020

Property net operating income		$	27,156		$	32,127		$	20,222	$	26,796	$	48,986

NOTE 6 — INVESTMENT IN NOTES RECEIVABLE AND PREFERRED STOCK

The following investments are included in Prepaid Expenses and Other Assets:

During 1999, a 67% share of a $202.2 million mezzanine-level debt position was acquired for approximately $73.9 million as part of a debt restructuring related to the SunAmerica Center office property. The unamortized discount to the face amount of the note of approximately $62.9 million may be amortized to interest income based on the estimated yield of the investment. The note accrues interest at 7.25% per annum and matures in August 2014 and is payable based on cash flow, as defined in the respective loan agreement. EOP Partnership recognizes interest income on this investment based on actual cash receipts. In addition, EOP Partnership has the option to acquire 67% of the aggregate face amount of two other subordinate notes from the current holder, an affiliate of the property owner. The aggregate face amount of these notes is $15.0 million.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 6 — INVESTMENT IN NOTES RECEIVABLE AND PREFERRED STOCK — (continued)

In July 1998, 50,000 preferred shares of CT Convertible Trust I, an investment management and real estate finance company, were acquired for approximately $48.5 million. The preferred shares have a liquidation preference of $1,000 each. The discount of $1.5 million is being amortized as additional dividend income over the term of 20 years. The terms of the preferred shares are as follows:

(a) For 60% of the investment, or approximately $30 million of the preferred shares:

• the coupon rate of 8.25% per annum remains fixed through March 31, 2002. Thereafter, the rate will increase to the greater of:

• 10% per annum, increasing by 75 basis points per annum commencing October 1, 2004 and on each October 1 thereafter, or

• a rate equal to Capital Trust, Inc.’s then annual dividend per common share divided by $7.00;

• the conversion price is $7.00 per share;

• the common share equivalent is fixed at 4,285,714 shares; and

• the preferred shares are callable through September 30, 2004.

(b) For 40% of the investment, or approximately $20 million of the preferred shares:

• the coupon rate is 13.0% per annum and is fixed until October 1, 2004 when it will increase by 75 basis points per annum; and

• the preferred shares are callable at any time.

On September 30, 2002, CT Convertible Trust I redeemed the non-convertible amount of its preferred securities at par, including accrued dividends. EOP Partnership received approximately $20.1 million upon the redemption. EOP Partnership still has an approximate $29.2 million investment in the convertible portion of the preferred securities of CT Convertible Trust I.


NOTE 7 —	IMPAIRMENT ON SECURITIES, OTHER INVESTMENTS AND ASSETS HELD FOR SALE

During 2001, an impairment on securities and other investments of approximately $132.7 million was recognized in connection with various investments and other assets. The impairment is included in the statement of operations as “Impairment on securities and other investments.” The total impairment consisted of the investment in HQ Global Workplaces, Inc. preferred stock, including accrued but unpaid dividends, of approximately $90.6 million, the investments in several telecom, technology and advertising related companies, investments in two full-service business center joint ventures, and a portion of an investment in an internally developed software system.

During the latter part of 2001, HQ Global was in default with respect to certain covenant and payment obligations under its senior and mezzanine indebtedness, but received forbearance periods from both its senior and mezzanine lenders. HQ Global was unable to restructure its indebtedness during these forbearance periods. Based on these circumstances and other factors, EOP Partnership determined that its investment in HQ Global was not recoverable and, therefore, recorded a permanent impairment on 100% of its investment. Subsequently, in March 2002 HQ Global filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code.

EOP Partnership’s telecom, technology and advertising related investments and full-service business center joint venture investments have been experiencing operating losses due, in part, to the current economic environment. These investments were considered to be impaired based on their current fair value as compared to the carrying value. The fair value of the investments was based on internally prepared valuations considering current economic conditions. The impairments represent EOP Partnership’s entire investment in the respective assets, except for the internally developed software system, for which the impairment represented

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)


NOTE 7 —	IMPAIRMENT ON SECURITIES, OTHER INVESTMENTS AND ASSETS HELD FOR SALE — (continued)

approximately one-half of the investment. These investments and the related impairment are reported under the “Corporate and Other” segment for segment reporting purposes.

During 2001, an impairment on assets held for sale of approximately $2.5 million was recognized in connection with the sale of the St. Louis Parking Garage located in St. Louis, Missouri. The impairment is included in the statement of operations as “Impairment on assets held for sale.” The property was sold in January 2002. The sales price less costs to sell was less than the carrying amount of the property as of December 31, 2001. EOP Partnership had a 50% interest in the property and accounted for its investment using the equity method of accounting. EOP Partnership’s share of the net income from the property is included in “Income from Unconsolidated Joint Ventures” and was approximately $1.7 million and $2.0 million for the years ended December 31, 2001 and 2000, respectively. The asset and the related impairment are reported under the “Corporate and Other” segment for reporting purposes.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 8 — INVESTMENT IN UNCONSOLIDATED JOINT VENTURES

The following is a summary of EOP Partnership’s economic ownership in unconsolidated joint ventures. All of the properties are Office Properties except for the St. Louis parking garages and the entities included in the other category.



					Economic
					Interest(1)
					as of
					December 31,
			Total Rentable
Property	Location		Square Feet		2002			2001

One Post Office Square		Boston, MA		765,296		50	%		50	%
75-101 Federal Street		Boston, MA		813,195		51.61	%		51.61	%
Rowes Wharf(2)		Boston, MA		344,645		44	%		39	%
Four Oaks Place (square feet not included in Equity Office portfolio)		Houston, TX		1,753,281		2.55	%		2.55	%
10 & 30 South Wacker		Chicago, IL		2,003,288		75	%		75	%
Bank One Center		Indianapolis, IN		1,057,877		25	%		25	%
Pasadena Towers		Los Angeles, CA		439,366		25	%		25	%
Promenade II		Atlanta, GA		774,385		50	%		50	%
SunTrust Center		Orlando, FL		640,741		25	%		25	%
Preston Commons		Dallas, TX		418,604		50	%		50	%
Sterling Plaza		Dallas, TX		302,747		50	%		50	%
Bank of America Tower		Seattle, WA		1,537,932		50.1	%		50.1	%
One Post Street		San Francisco, CA		391,450		50	%		50	%
Key Center		Seattle, WA		472,929		80	%		80	%
1301 Avenue of the Americas		New York, NY		1,765,694		84.47	%		84.47	%
Griffin Towers(3)		Orange County, CA		542,530		100	%		90	%
St. Louis parking garages(4)		St. Louis, MO		—		—			50	%
Concar		San Mateo, CA		205,000		79.96	%		79.96	%
Foundry Square I(5)		San Francisco, CA		—		100	%		64	%
San Rafael Corporate Center(6)		San Rafael, CA		155,318		100	%		79.96	%
Properties Under Development
Ferry Building(6)(7)		San Francisco, CA		—		(7	)		(7	)
Foundry Square II(6)		San Francisco, CA		—		87.5	%		70	%
Foundry Square III(6)		San Francisco, CA		—		(5	)		(5	)
Foundry Square IV		San Francisco, CA		—		40	%		40	%
Other
Wright Runstad Associates LP		—		—		30	%		30	%
Wilson/ Equity Office, LLC(5)(6)		—		—		(5	)(6)		(5	)
Regus Equity Business Centers, LLC		—		—		50	%		50	%
HQ Global Workplaces		—		—		50	%		50	%

		Total		14,384,278

(1) The amounts shown above approximate EOP Partnership’s economic ownership interest for the periods presented. Cash flow from operations, capital transactions and net income are allocated to the joint venture partners in accordance with their respective partnership agreements. EOP Partnership’s share of these items is subject to change based on, among other things, the operations of the Property and the timing and amount of capital transactions. EOP Partnership’s legal ownership may differ.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 8 — INVESTMENT IN UNCONSOLIDATED JOINT VENTURES — (continued)

(2) In 2002, in connection with the restructuring of the partnership EOP Partnership contributed approximately $30.9 million to the joint venture which increased EOP Partnership’s economic ownership of Rowes Wharf to 44%.

(3) In 2002, EOP Partnership acquired the remaining interest in the joint venture in exchange for the assumption by EOP Partnership of the joint venture partner’s share of the joint venture debt of approximately $50.8 million. EOP Partnership had previously accounted for the investment in Griffin Towers under the equity method and is now consolidating the investment.

(4) In January 2002, EOP Partnership disposed of its 50% interest in four parking facilities in St. Louis, Missouri to an unaffiliated party for approximately $47.5 million and repaid EOP Partnership’s share of the mortgage debt of approximately $28.7 million. During 2001, an impairment on assets held for sale of approximately $2.5 million was recognized in connection with the sale (see Note 7). The parking facilities contained approximately 7,464 parking spaces.

(5) In 2000, EOP Partnership formed a joint venture with Wilson Investors (“WI”, of which William Wilson III, a trustee of Equity Office, is principal), through its interest in Wilson/Equity Office (“W/EO” of which 49.9% is owned by EOP Partnership and 50.1%, is owned by WI), and an unaffiliated party to develop, construct, lease and manage Foundry Square I, a 327,000 square foot office building project located in San Francisco, California which was scheduled to be completed in the third quarter of 2003 and was leased to a single tenant. In March 2002, the tenant terminated its lease for $85 million. WI’s share of the lease termination income and consideration for its joint venture interest was approximately $26 million from which WI repaid the $12 million outstanding balance under a $25 million loan commitment from EOP Partnership previously made to WI and the accrued interest of approximately $2 million. EOP Partnership’s share of the lease termination income was approximately $40 million and was recorded as income from investment in unconsolidated joint ventures in the first quarter 2002.

(6) In December 2002, EOP Partnership and WI, entered into a nonmonetary exchange in which EOP Partnership acquired Wilson Investors’ ownership of the Ferry Building, San Rafael Corporate Center I and II (a land parcel) and Foundry Square II and III (a land parcel under option), in exchange for its ownership in Larkspur (a land parcel under option) and its ownership in the W/EO operating business. The transaction was accounted for as a nonmonetary exchange since the assets included in the exchange were similar and since the cash consideration exchanged was minimal. EOP Partnership’s investment in Larkspur and the W/EO operating business was recorded as additional basis in the assets received since it represented the fair value of WI’s equity in the assets received. As a result of the exchange, the Ferry Building, San Rafael Corporate Center I and II, and Foundry Square II and III are now consolidated.

(7) A joint venture between EOP Partnership and other unaffiliated parties leased the Ferry Building from the City and County of San Francisco, through its Port Commission (the “Port”). Under this lease, the Port is paid a stated base rent. In addition, once the lessee has received from the project a cumulative preferred return of 8% (prior to stabilization) and 11% (after stabilization), then 50% of the proceeds from the operation and ownership of the project are paid to the Port as percentage rent.

The joint venture is redeveloping the Ferry Building in a manner to permit the use of federal rehabilitation tax credits (“Historic Tax Credits”). Since the original members of the joint venture could not take full advantage of the Historic Tax Credits, the joint venture admitted a new member who could do so. This investor member will contribute approximately $23.5 million in equity to fund a portion of the Total Project Estimated Costs for the project, and will be entitled to a preferred return with an effective annual rate of approximately 3% on its capital investment. The investor member’s interest in the joint venture is subject to put/call rights during the sixth and seventh years after the Ferry Building is placed in service. Upon the purchase of the investor member’s interest pursuant to the put/call, it is estimated that the joint venture will retain approximately $11 million of the capital contributed by the investor member, based on a formula to determine the purchase price for the investor member’s interest and after taking

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 8 — INVESTMENT IN UNCONSOLIDATED JOINT VENTURES — (continued)

into account the preferred return that will have been paid to the investor member by such time. Through the creation of a master lease, EOP Partnership’s effective ownership percentage in the net cash flow of the Ferry Building project is approximately 100% after the payment to the Port of the percentage rent described above and the distribution of the preferred returns.

Combined summarized financial information of the unconsolidated joint ventures is as follows:



			December 31,

			2002			2001


			(Dollars in thousands)
Balance Sheets:
	Real estate, net		$	2,757,699		$	3,135,250
	Other assets			207,740			276,322

		Total Assets	$	2,965,439		$	3,411,572

	Mortgage debt		$	1,312,404		$	1,370,025
	Other liabilities			112,968			169,987
	Partners’ and shareholders’ equity			1,540,067			1,871,560

		Total Liabilities and Partners’ and Shareholders’ Equity	$	2,965,439		$	3,411,572

EOP Partnership’s share of equity			$	966,773		$	1,194,441
Net excess of cost of investments over the net book value of underlying net assets, net of accumulated depreciation of $20,704 and $17,517, respectively				121,042			126,686

Carrying value of investments in unconsolidated joint ventures			$	1,087,815		$	1,321,127

EOP Partnership’s share of unconsolidated non-recourse mortgage debt			$	818,975	(a)	$	848,944

(a) EOP Partnership’s share of the scheduled payments of principal on mortgage debt for each of the next five years and thereafter through maturity as of December 31, 2002 are as follows:


Year		Dollars in thousands

2003		$	109,006
2004			117,023
2005			466,410
2006			51,182
2007			1,454
Thereafter			73,900

	Total	$	818,975

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 8 — INVESTMENT IN UNCONSOLIDATED JOINT VENTURES — (continued)



				For the years ended December 31,

				2002		2001			2000


				(Dollars in thousands)
Statements of Operations:
	Revenues			$	561,482	$	509,238		$	383,526

	Expenses:
		Interest expense			77,020		95,389			74,376
		Depreciation and amortization			83,656		86,270			63,376
		Operating expenses			196,936		212,202			143,575

			Total expenses		357,612		393,861			281,327

	Net income before gain on sale of real estate				203,870		115,377			102,199
	Gain on sale of real estate				3,703		—			17,915
	Cumulative effect of a change in accounting principle				—		(2,279	)		—

	Net income			$	207,573	$	113,098		$	120,114

EOP Partnership’s share of:
	Net income			$	106,852	$	69,203		$	56,251

	Interest expense and loan cost amortization			$	53,248	$	63,105		$	41,947

	Depreciation and amortization (real estate related)			$	48,865	$	51,021		$	39,730

NOTE 9 — MORTGAGE DEBT

EOP Partnership had outstanding mortgage debt of approximately $2.5 billion and $2.7 billion as of December 31, 2002 and 2001, respectively. The historical cost, net of accumulated depreciation, of encumbered properties at December 31, 2002 and 2001 was approximately $5.2 billion and $5.6 billion, respectively. During the years ended December 31, 2002 and 2001, the following transactions occurred:



		For the years ended
		December 31,

		2002			2001


		(Dollars in thousands)
Balance at beginning of year(1)		$	2,662,099		$	2,933,626
	Assumed through Spieker Merger		—			47,204
	Repayments/principal amortization		(156,052	)		(426,112	)
	Proceeds from financings		14,427			140,000
	Repaid or assumed by buyer upon sale of property		—			(32,619	)

Balance at end of year(1)		$	2,520,474		$	2,662,099

(1) Excludes net discount on mortgage debt of approximately $(12,584) and $(11,761) as of December 31, 2002 and 2001, respectively.

Fixed Interest Rate Mortgage Debt

As of December 31, 2002 and 2001, approximately $2.5 billion and $2.6 billion, respectively, of mortgage debt was at a fixed interest rate. Payments on fixed interest rate mortgage debt are generally due in monthly installments of principal and interest or interest only. As of December 31, 2002 and 2001, the effective interest rates ranged from 5.81% to 8.63% and 6.80% to 8.63%, respectively, and the weighted average effective interest rate was approximately 7.70% and 7.74%, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 9 — MORTGAGE DEBT — (continued)

Variable Interest Rate Mortgage Debt

As of December 31, 2002 and 2001, approximately $36.0 million of mortgage debt was at variable interest rates based on spreads over LIBOR. Payments on variable interest rate mortgage debt are due in monthly installments of interest only. As of December 31, 2002 and 2001, the weighted average variable effective interest rate was approximately 1.98% and 2.59%, respectively.

Repayment Schedule

Scheduled payments of principal for the next five years and thereafter through maturity as of December 31, 2002 are as follows:


Year		Dollars in thousands

2003		$	102,230
2004			448,664
2005			584,595
2006			343,941
2007			237,024
Thereafter			804,020

Subtotal			2,520,474
Net discount (net of accumulated amortization of approximately $(6.4) million)			(12,584	)

	Total	$	2,507,890

NOTE 10 — LINE OF CREDIT AND TERM LOAN

EOP Partnership has a $1.0 billion revolving credit facility that was obtained in May 2000. The line of credit bears interest at LIBOR plus 60 basis points and matures on May 12, 2003. There is also an annual facility fee of $2.0 million payable quarterly. In addition, a competitive bid option, whereby the lenders participating in the credit facility bid on the interest to be charged, is available for up to $350 million of the borrowings under the credit facility. Agreements or instruments relating to the line of credit contain certain financial restrictions and requirements described below. As of December 31, 2002, EOP Partnership was in compliance with each of these financial restrictions and requirements.

Set forth below are the financial restrictions and requirements to which we are subject under our line of credit agreement:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 10 — LINES OF CREDIT AND TERM LOANS — (continued)

• we may not pay any distributions on Common Shares and Units in excess of 90% of annual Funds From Operations; and

• our investments in unimproved assets, interest in taxable REIT subsidiaries, developments, unconsolidated joint ventures, mortgages and securities, in the aggregate, may not exceed 25% of our total asset value.

Prior to the closing of the Spieker Merger on July 2, 2001, EOP Partnership obtained a $1.0 billion bridge term facility to finance a portion of the cash portion of the Spieker Merger. This $1.0 billion bridge term facility had a term of 364 days and an interest rate based on LIBOR plus 80 basis points. The $1.0 billion bridge loan facility was repaid and terminated on July 18, 2001 with proceeds from $1.4 billion unsecured note offering.

NOTE 11 — UNSECURED NOTES

During 2002, the following transactions occurred:


		Coupon/		All – in
		Stated		Effective		Principal			Maturity
Original Term (in years)		Rate		Rate(a)		Amount			Date


		(Dollars in thousands)
Issuance
10			6.75%		7.02%	$	500,000			2/15/12

Repayments
3			6.38%		6.62%		(200,000	)		1/15/02
4			6.38%		6.30%		(250,000	)		2/15/02
7			6.95%		5.37%		(110,000	)		12/15/02

	Total repayments						(560,000	)

Reversal of mark to market of swaps at December 31, 2001							8,117
Net discount on notes issuance in February 2002							(10,873	)
Proceeds from terminated interest rate swaps							42,810
Amortization of discounts and premiums							(16,390	)

Total							23,664

Net activity						$	(36,336	)

The following notes were outstanding as of December 31, 2002:


	Coupon/		All – in
	Stated		Effective		Principal		Maturity
Original Term (in years)	Rate		Rate(a)		Amount		Date


	(Dollars in thousands)
5 Year Unsecured Notes		6.38%		6.76%	$	300,000		02/15/03
3 Year Unsecured Notes		7.38%		7.55%		400,000		11/15/03
5 Year Unsecured Notes		6.50%		4.59%		300,000		01/15/04
9 Year Unsecured Notes		6.90%		6.27%		100,000		01/15/04
5 Year Unsecured Notes		6.80%		6.10%		200,000		05/01/04
6 Year Unsecured Notes		6.50%		5.31%		250,000		06/15/04
7 Year Unsecured Notes		7.24%		7.26%		30,000		09/01/04
8 Year Unsecured Notes		6.88%		6.40%		125,000		02/01/05

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 11 — UNSECURED NOTES — (continued)


			Coupon/		All – in
			Stated		Effective		Principal		Maturity
Original Term (in years)			Rate		Rate(a)		Amount		Date


			(Dollars in thousands)
7 Year Unsecured Notes				6.63%		4.99%		400,000		02/15/05
7 Year Unsecured Notes				8.00%		6.49%		100,000		07/19/05
8 Year Unsecured Notes				7.36%		7.69%		50,000		09/01/05
6 Year Unsecured Notes				8.38%		7.65%		500,000		03/15/06
9 Year Unsecured Notes				7.44%		7.74%		50,000		09/01/06
10 Year Unsecured Notes				7.13%		6.74%		100,000		12/01/06
9 Year Unsecured Notes				7.00%		6.80%		1,500		02/02/07
9 Year Unsecured Notes				6.88%		6.83%		25,000		04/30/07
9 Year Unsecured Notes				6.76%		6.76%		300,000		06/15/07
10 Year Unsecured Notes				7.41%		7.70%		50,000		09/01/07
7 Year Unsecured Notes				7.75%		7.91%		600,000		11/15/07
10 Year Unsecured Notes				6.75%		6.97%		150,000		01/15/08
10 Year Unsecured Notes				6.75%		7.01%		300,000		02/15/08
8 Year Unsecured Notes(b)				7.25%		7.64%		325,000		11/15/08
10 Year Unsecured Notes				6.80%		6.94%		500,000		01/15/09
10 Year Unsecured Notes				7.25%		7.14%		200,000		05/01/09
11 Year Unsecured Notes				7.13%		6.97%		150,000		07/01/09
10 Year Unsecured Notes				8.10%		8.22%		360,000		08/01/10
10 Year Unsecured Notes				7.65%		7.20%		200,000		12/15/10
10 Year Unsecured Notes				7.00%		6.83%		1,100,000		07/15/11
10 Year Unsecured Notes				6.75%		7.02%		500,000		02/15/12
20 Year Unsecured Notes				7.88%		8.08%		25,000		12/01/16
20 Year Unsecured Notes				7.35%		8.08%		200,000		12/01/17
20 Year Unsecured Notes				7.25%		7.54%		250,000		02/15/18
30 Year Unsecured Notes				7.50%		8.24%		150,000		10/01/27
30 Year Unsecured Notes				7.25%		7.31%		225,000		06/15/28
30 Year Unsecured Notes				7.50%		7.55%		200,000		04/19/29
30 Year Unsecured Notes				7.88%		7.94%		300,000		07/15/31

	Weighted Average/ Subtotal			7.19%		7.03%		9,016,500

Net premium (net of accumulated amortization of approximately $15.4 million)								41,151

		Total					$	9,057,651


(a)		Includes the effect of terminated interest rate protection and swap agreements, offering and transaction costs and premiums and discounts on certain unsecured notes.
(b)		The notes are exchangeable into Common Shares of Equity Office at an exchange rate of $34.00 per share. If the closing price at the time a holder exercises its exchange right is less than the exchange price of $34.00, the holder will receive, in lieu of Common Shares, cash in an amount equal to 97% of the product of the number of Common Shares into which the principal amount of notes subject to such exercise would otherwise be exchangeable and the current market price per Common Share. Upon exchange of a $1,000 note for Common Shares of Equity Office, EOP Partnership would issue a

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 11 — UNSECURED NOTES — (continued)

corresponding number of Units to Equity Office on a one-for-one basis. The notes were issued by EOP Partnership and are guaranteed by Equity Office.

As of December 31, 2002, $2.1 billion of unsecured debt securities and related guarantees were available for issuance under a shelf registration statement.

Restrictions and Covenants under Unsecured Indebtedness

Agreements or instruments relating to our unsecured notes and the line of credit contain certain financial restrictions and requirements described below. As of December 31, 2002, EOP Partnership was in compliance with each of these financial restrictions and requirements.

Restrictions and Covenants

Set forth below are the financial restrictions and requirements to which we are subject under our unsecured note indentures and EOP Partnership performance under each covenant as of December 31, 2002:


	Actual
Covenant	Performance

Debt to adjusted total assets may not exceed 0.60:1		0.47:1
Secured debt to adjusted total assets may not exceed 0.40:1		0.13:1
Consolidated income available for debt service to annual debt service charge may not be less than 1.50:1		2.73:1
Total unencumbered assets to unsecured debt may not be less than 1.50:1		2.22:1

NOTE 12 — DERIVATIVE FINANCIAL INSTRUMENTS

Interest Rate Swaps

During 2002 and 2001, EOP Partnership entered into and terminated several interest rate swap agreements that hedged certain unsecured notes. In each case, EOP Partnership was the variable interest rate payer and the counterparty was the fixed rate payer. The variable interest rates were based on various spreads over LIBOR. The settlement dates corresponded to the interest payment dates of the respective unsecured notes being hedged. Each of the interest rate swap agreements were to terminate on the maturity date of the respective unsecured notes being hedged. The interest rate swap agreements were designated as fair value hedges. As of December 31, 2001, approximately $1.4 million was included in other assets and approximately $9.5 million was included in other liabilities which represented the fair value of the interest rate swaps. A corresponding amount is included in discounts/premiums on unsecured notes at December 31, 2001. As of

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)


NOTE 12 —	DERIVATIVE FINANCIAL INSTRUMENTS — (continued)

December 31, 2002, all of the interest rate swaps in the table below had been terminated. The table below summarizes the interest rate swap agreements that were effective during 2002 and 2001.

Swap

Total Proceeds

Fixed

Maturity Date of

Effective

Termination

from Swap

Amount

Interest

Unsecured Notes/

Date

Termination(a)

Hedged

Rate

Swaps

May 2002

September 2002

7.1 million

150 million

8.38%

March 15, 2006

May 2002

September 2002

9.3 million

200 million

8.38%

March 15, 2006

March 2002

September 2002

4.3 million

150 million

6.50%

January 15, 2004

March 2002

September 2002

4.2 million

150 million

6.50%

January 15, 2004

December 2001

February 2002

3.2 million

267 million

7.00%

July 15, 2011

October 2001

September 2002

8.7 million

300 million

6.63%

February 15, 2005

October 2001

September 2002

3.6 million

150 million

6.50%

June 15, 2004

October 2001

September 2002

2.4 million

100 million

6.50%

June 15, 2004

July 2001

September 2001

31.6 million

500 million

7.00%

July 15, 2011

June 2001

September 2001

15.8 million

400 million

6.63%

February 15, 2005


(a)	The proceeds from the swap terminations were recorded as additional premium on the respective unsecured note that was hedged by the terminated swap. The amount recorded as additional premium is being amortized over the remaining term of the unsecured notes.

Forward-Starting Interest Rate Swaps

In October 2002, EOP Partnership entered into $1.1 billion of forward-starting interest rate swaps to effectively fix the 10-year Treasury rate at approximately 3.7% for note offerings that occurred in 2003 and are anticipated to occur in 2004. The forward-starting interest rate swaps were entered into at current market rates and, therefore, had no initial cost. The terms of the forward-starting interest rate swaps require EOP Partnership to pay a fixed-interest rate to the counterparties and to receive a variable rate from the counterparties. The swaps settle at six-month intervals beginning in 2003 and 2004 and are scheduled to terminate in 2004. The market value of the forward-starting swaps at December 31, 2002 was a liability of approximately $18.6 million which is included in other liabilities and in other comprehensive income. In January 2003, EOP Partnership settled one of the forward-starting swaps that had a notional amount of $300 million and received approximately $.8 million. The forward-starting swap was settled in connection with $500 million of unsecured notes that were issued in February 2003. EOP Partnership is obligated to settle the remaining swap agreements no later than the commencement of their term in early 2004. Upon settlement of the swaps, EOP Partnership may be obligated to pay the counterparties a settlement payment, or alternatively to receive settlement proceeds from the counterparties. Any monies paid or received will be amortized to interest expense over the term of the respective note offering.

NOTE 13 — MINORITY INTERESTS IN PARTIALLY OWNED PROPERTIES

Although the financial condition and results of operations of the following Properties are consolidated, there are unaffiliated parties that own an interest in these Properties. These Properties are consolidated since EOP Partnership owns at least 50% of the respective ownership entities and controls the major decisions regarding the respective Properties. All of the Properties are Office Properties except for Fremont Bayside, an Industrial Property. EOP Partnership’s legal ownership of each Property and its economic interest in each Property is substantially the same.

The amounts shown below approximate EOP Partnership’s economic ownership interest for the period presented. Cash flow from operations, capital transactions and net income are allocated to the minority interests in accordance with their respective partnership agreements. EOP Partnership’s share of these items is

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 13 — MINORITY INTERESTS IN PARTIALLY OWNED PROPERTIES — (continued)

subject to change based on, among other things, the operations of the Property and the timing and amount of capital transactions.



					Economic Interest
					as of
					December 31,
			Total Rentable
Office Property	Location		Square Feet		2002			2001

Plaza at La Jolla Village		San Diego, CA		635,419		66.7	%		66.7	%
Park Avenue Tower		New York, NY		568,060		94.0	%		94.0	%
850 Third Avenue		New York, NY		568,867		94.0	%		94.0	%
222 Berkley Street		Boston , MA		519,608		91.5	%		91.5	%
500 Boylston Street		Boston, MA		706,864		91.5	%		91.5	%
120 Montgomery(1)		San Francisco, CA		420,310		100.0	%		100.0	%
Washington Mutual Tower		Seattle, WA		1,210,162		75.0	%		75.0	%
Norwest Center		Minneapolis, MN		1,117,439		75.0	%		75.0	%
Waters Edge Phase I(2)		Los Angeles, CA		—		87.5	%		87.5	%
2951 28th Street(3)		Santa Monica, CA		85,000		98.0	%		98.0	%
Fremont Bayside(3)		Oakland, CA		103,920		90.0	%		90.0	%

Total				5,935,649


(1)	EOP Partnership acquired the remaining 33% interest in April 2001.

(2)	This property is currently under development.

(3)	Acquired in the Spieker Merger.

EOP Partnership has additional Properties that are partially owned by unaffiliated parties where EOP Partnership’s approximate economic ownership is 100%.

NOTE 14 — REDEEMABLE COMMON UNITS

As of December 31, 2000, 1,717,844 redeemable common units were outstanding which related to Common Shares subject to a put option agreement entered into with an affiliate of the Wright Runstad & Company in connection with the acquisition of certain Properties in December 1997. In September 2001, EOP Partnership paid approximately $1.4 million in settlement of this put option. EOP Partnership previously recognized approximately $4.1 million as a total potential payment for the put option exercise between the period from August 1999 to August 2000. The difference of approximately $2.7 million between the $4.1 million previously recognized and the $1.4 million actually paid was recognized as a put option settlement.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 15 — PARTNER’S CAPITAL

Units

The following table presents the changes in the issued and outstanding Units since January 1, 2001:



		For the years ended
		December 31,

		2002			2001

Outstanding at January 1,			471,038,975			305,248,752
	Repurchases/retired(1)		(7,920,854	)		—
	Units issued in the Spieker Merger		—			118,276,542
	Issued to Equity Office related to common shares issued for share options exercised		1,739,863			3,282,003
	Conversion of redeemable Units		—			43,778,735
	Restricted shares and share awards issued/cancelled, net		214,291			558,666
	Units issued to Equity Office for Common Shares issued through the Dividend Reinvestment Program		63,379			34,989
	Units issued to Equity Office for conversion of Series B Preferred Shares into Common Shares		—			14,005
	Units redeemed for Cash		(3,727,925	)		(40,888	)
	Units retired		—			(113,829	)

Outstanding at December 31,			461,407,729			471,038,975

(1) In July 2002, Equity Office announced a Common Share repurchase program allowing for the repurchase of up to $200 million of Common Shares, which was later increased to $400 million in November 2002, over the next 12 months at the discretion of management. The Common Shares may be repurchased in the open market or privately negotiated transactions. During 2002, 7,901,900 Common Shares were repurchased at an average price of $24.92 for approximately $196.9 million in the aggregate. In connection with the repurchases, EOP Partnership purchased from Equity Office and retired a corresponding number of Units for an aggregate purchase price equal to the aggregate price for all Common Shares repurchases.

Ownership of EOP Partnership

As of December 31, 2002 and 2001, Equity Office had a 1% general partnership interest and an approximate 88.1% and 87.0% limited partnership interest in EOP Partnership, respectively. The remaining limited partners had an approximate 10.9% and 12.0% interest in EOP Partnership, respectively and consist of various individuals and entities that contributed their properties to EOP Partnership in exchange for partnership interests. Each limited partner of EOP Partnership, excluding Equity Office, may, subject to certain limitations, require that EOP Partnership redeem its Units. Under the partnership agreement of EOP Partnership, Equity Office has the right to assume directly and satisfy the redemption right of a limited partner by issuing its Common Shares or cash in exchange for any Units tendered for redemption. If Equity Office does not assume EOP Partnership’s obligation to redeem the Units, upon redemption, the limited partner will receive cash from EOP Partnership in an amount equal to the market value of the Common Shares for which the Units would have been redeemed if Equity Office had elected to assume and satisfy EOP Partnership’s obligation by paying Common Shares. Under an assignment and assumption agreement entered into with EOP Partnership on June 29, 2001, if Equity Office elects to assume directly and satisfy the redemption right of a limited partner, EOP Partnership is entitled to make the election as to whether Equity Office issues Common Shares or cash in exchange for Units tendered for redemption.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 15 — PARTNER’S CAPITAL — (continued)

Distributions

Distributions are declared and paid quarterly to holders of Units as of the record dates of each declaration. The current quarterly distribution is $0.50 per Unit. For the years ended December 31, 2002, 2001 and 2000, the per unit distributions were $2.00, $1.90 and $1.74, respectively.

Preferred Units

Listed below is a summary of EOP Partnership’s preferred units. The preferred unitholders are entitled to receive, when and as authorized by the Board of Trustees of Equity Office, cumulative preferential cash distributions. EOP Partnership is obligated to redeem the preferred units at their liquidation preference plus all accrued unpaid distributions in connection with any redemption by Equity Office of the corresponding series of Equity Office preferred shares.


					Current
					Balance		Quarterly
	Annual		Liquidation		Outstanding		Distribution				Equity Office’s
	Distribution		Preference		(Dollars in		Amount		Distribution		Voluntary	Maturity
Series	Rate		Per Unit		thousands)		Per Unit		Frequency		Redemption Date(1)	Date

A(2)		—	$	—	$	—	$	—			—
B(3)		5.25%		50.00		299,500		.65625		Quarterly	2/15/2003 through 2/15/2008		2/15/08
C		8.625%		25.00		114,073		.5390625		Quarterly	on or after 12/8/2003		Perpetual
D(4)		—		—		—		—			—
E(4)		7.875%		25.00		150,000		.4921875		Quarterly	on or after 10/10/2002		Perpetual
F(4)		8.0%		25.00		100,000		.50		Quarterly	on or after 6/4/2003		Perpetual
G(2)		7.75%		25.00		212,500		.484375		Quarterly	on or after 7/29/2007		Perpetual

The annual per unit distributions are as follows:



	Distributions per unit


	For the years ended December 31,

	2002		2001		2000

Series A(2)	$	1.3844167	$	2.245	$	2.245
Series B	$	2.625	$	2.625	$	2.625
Series C	$	2.15625	$	2.15625	$	2.15625
Series D(4)		—	$	0.8728125		—
Series E	$	1.96875	$	0.984375		—
Series F	$	2.00	$	1.00		—
Series G(2)	$	0.7427083		—		—

(1) Equity Office may redeem the corresponding series of its preferred shares during these periods solely out of the sale proceeds of other equity shares of Equity Office, except for the portion of the redemption price equal to any accrued but unpaid dividends. Under the partnership agreement of EOP Partnership, sale proceeds from the sale of shares by Equity Office must be contributed to EOP Partnership in exchange for additional units. The number of shares redeemed is limited to the aggregate sales proceeds received from such other equity shares of Equity Office. Equity Office may acquire any outstanding preferred shares that have been transferred to a charitable beneficiary under Article VII of the declaration of trust of Equity Office because they were owned or acquired by a shareholder of Equity Office in violation of the ownership limits. The corresponding Equity Office Series B preferred shares are mandatorily redeemable on February 15, 2008. If Equity Office redeems or acquires any or all of its outstanding preferred shares, EOP Partnership will redeem and cancel an equal number of EOP Partnership preferred units and provide cash to Equity Office with respect thereto in an amount equal to the amount paid with respect to

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 15 — PARTNER’S CAPITAL — (continued)

the Equity Office preferred shares redeemed or acquired by Equity Office. EOP Partnership is not subject to sinking fund requirements pertaining to the preferred units.

(2)   On July 29, 2002, EOP Partnership issued 8,500,000 7.75% Series G Cumulative Redeemable Preferred Units to Equity Office in exchange for Equity Office’s contribution of the proceeds of its issuance and sale of 8,500,000 7.75% Series G Cumulative Redeemable Preferred Shares in an offering that closed July 29, 2002. On the same date, substantially all of the net proceeds from the issuance of the Series G Preferred Units, totalling approximately $206.1 million were used to redeem the Series A Preferred Units from Equity Office and in turn, Equity Office used the proceeds to redeem its 7,994,000 outstanding 8.98% Series A Cumulative Redeemable Preferred Shares.

(3)   The corresponding Equity Office Series B preferred shares are convertible at any time by the holder into Common Shares at a conversion price of $35.70 per Common Share. Such conversion would require EOP Partnership to issue Units on a one-for-one basis to Equity Office. These shares are non-callable for five years with a mandatory call on February 15, 2008.

(4)   The corresponding Series D, E and F preferred shares were issued in connection with the Spieker Merger. In November 2001, Equity Office redeemed all of its 4,250,000 outstanding corresponding Series D preferred shares at a redemption price of $25.00 per share, plus accrued and unpaid distributions for the period from October 1, 2001 to the redemption date of $0.2821875 per share, or an aggregate redemption price of approximately $107.4 million. In connection with such redemption, Equity Office redeemed all of the Series B preferred units owned by it.

In March 2001, a holder of 10,000 Series B Preferred Shares exercised its right to convert its Series B Preferred Shares into 14,005 Common Shares. A corresponding number of Series B preferred units were converted into Units concurrently with such transaction.

In January 2000, Equity Office repurchased 6,000 Series A Cumulative Redeemable Preferred Shares and 37,100 Series C Cumulative Redeemable Preferred Shares at an average share price of $20.66 for approximately $0.9 million in the aggregate and the shares were retired. In connection with the purchase, EOP Partnership reimbursed Equity Office for the purchase price of the repurchased shares and canceled a corresponding number of Series A preferred units and Series C preferred units. The difference between the share repurchase amount and the carrying amount of the preferred shares was classified as a preferred distribution in the consolidated statement of operations for the year ended December 31, 2000.

NOTE 16 — FUTURE MINIMUM RENTS

Future minimum rental receipts due on noncancelable operating leases at the Office Properties and Industrial Properties as of December 31, 2002 were as follows:


Year	Dollars in thousands

2003	$	2,519,739
2004		2,246,422
2005		1,921,084
2006		1,549,562
2007		1,230,439
Thereafter		3,552,023

Total	$	13,019,269

EOP Partnership is subject to the usual business risks associated with the collection of the above scheduled rents. The future minimum rental receipts due on noncancelable operating leases from EOP Partnership’s investment in unconsolidated joint ventures are not included in the above schedule.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 17 — FUTURE MINIMUM LEASE PAYMENTS

Certain Office Properties are subject to ground leases. Certain of these leases are subject to rental increases based upon the appraised value of the Property at specified dates or certain financial calculations based on the operations of the respective Property. Future minimum lease obligations under these noncancelable leases as of December 31, 2002 were as follows:


Year	Dollars in thousands

2003	$	18,088
2004		15,588
2005		15,263
2006		15,118
2007		15,008
Thereafter		1,070,849

Total	$	1,149,914

Rental expense for the years ended December 31, 2002, 2001 and 2000 was approximately $24.4 million, $19.9 million and $12.8 million, respectively, including rental expenses included in discontinued operations of $0, $.1 million and $.1 million, respectively. These rental expense amounts include ground rent and rent for the corporate offices.

NOTE 18 — EXTRAORDINARY ITEM

The $1.0 million extraordinary loss in 2001 related to costs on certain Office Properties located in Seattle, Washington as a result of damage from an earthquake in February 2001.

In accordance with SFAS 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections”, effective for fiscal years beginning after May 15, 2002, any gain or loss on extinguishment of debt that was classified as an extraordinary loss in prior periods shall be reclassified. During the years ended December 31, 2001 and 2000, EOP Partnership recognized approximately $9.4 million and approximately $1.8 million relating to early extinguishments of debt as extraordinary items. These amounts have been reclassified to “amortization of deferred financing costs and prepayment expenses”.

NOTE 19 — EARNINGS PER UNIT

The following table sets forth the computation of basic and diluted earnings per Unit and unit equivalent:


	2002			2001			2000


	(Dollars in thousands, except per unit data)
Numerator:
Income from continuing operations	$	821,216		$	674,510		$	517,498
Discontinued operations (including net gain on disposal of $17,926 in 2002)		38,204			22,063			12,738
Extraordinary item		—			(1,000	)		—
Cumulative effect of a change in accounting principle		—			(1,142	)		—
Put option settlement		—			2,655			(2,576	)
Preferred distributions, net		(62,573	)		(57,041	)		(43,348	)

Numerator for basic and diluted earnings per unit — net income available for Units and unit equivalent	$	796,847		$	640,045		$	484,312

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 19 — EARNINGS PER UNIT — (continued)


		2002			2001			2000


		(Dollars in thousands, except per unit data)
Denominator:
Denominator for net income available per weighted average Unit outstanding — basic			467,134,774			408,919,582			316,067,694
Effect of dilutive securities:
	Units issuable upon exercise of Equity Office share options, put options and restricted shares		2,003,946			3,067,315			2,929,713

Denominator for net income available per weighted average Units and unit equivalents outstanding — diluted			469,138,720			411,986,897			318,997,407

Earnings per unit — basic:
Income from continuing operations		$	1.76		$	1.65		$	1.64
Discontinued operations			0.08			0.05			0.04
Put option settlement			—			0.01			(0.01	)
Preferred distributions, net			(0.13	)		(0.14	)		(0.14	)

Net income available for Units		$	1.71		$	1.57		$	1.53

Earnings per unit — diluted:
Income from continuing operations		$	1.75		$	1.64		$	1.62
Discontinued operations			0.08			0.05			0.04
Put option settlement			—			0.01			(0.01	)
Preferred distributions, net			(0.13	)		(0.14	)		(0.14	)

Net income available for Units		$	1.70		$	1.55		$	1.52

The following securities were not included in the computation of diluted earnings per Unit and unit equivalent since they would have an antidilutive effect:



				For the year ended December 31,
		Weighted Average
Antidilutive Securities		Exercise Price		2002		2001		2000

Share options		$	29.240		13,032,648		—		—
Share options		$	30.350		—		4,849,148		—
Share options		$	30.250		—		—		3,019,089
Series B Preferred Units		$	35.700		5,990,000		5,990,000		6,000,000
Warrants (expired on December 17, 2002)		$	39.375		4,808,219		5,000,000		5,000,000

	Total				23,830,867		15,839,148		14,019,089

For additional disclosures regarding employee share options and restricted shares, see Note 23 — Share Option Plan and Share Award Plan.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 20 — SEGMENT INFORMATION

As discussed in Note 1, EOP Partnership’s primary business is the ownership and operation of Office Properties. Management operates each Office Property as an individual operating segment and has aggregated these operating segments into a single operating segment for financial reporting purposes due to the fact that the individual operating segments have similar economic characteristics. EOP Partnership’s long-term tenants are in a variety of businesses, and no single tenant is significant to EOP Partnership’s business. The property operating revenues generated at the “Corporate and Other” segment consists primarily of revenues earned by the Industrial Properties and the stand-alone parking facilities. The “Other revenues” generated at the “Corporate and Other” segment consist primarily of fee income from the management of office properties owned by third parties and interest and dividend income from various investments.



		As of or for the year ended December 31, 2002

		Office			Corporate
		Properties			and Other			Consolidated


		(Dollars in thousands)
Property operating revenues		$	3,413,561		$	54,287		$	3,467,848
Property operating expenses			(1,107,452	)		(10,551	)		(1,118,003	)

Property net operating income from continuing operations			2,306,109			43,736			2,349,845

Adjustments to arrive at net income:
	Other revenues		2,721			35,513			38,234
	Interest expense(1)		(194,194	)		(615,935	)		(810,129	)
	Depreciation and amortization		(664,272	)		(24,806	)		(689,078	)
	Ground rent		(20,446	)		—			(20,446	)
	General and administrative		(1,668	)		(135,800	)		(137,468	)

	Total adjustments to arrive at net income		(877,859	)		(741,028	)		(1,618,887	)

Income before income taxes, allocation to minority interests and income from investment in unconsolidated joint ventures			1,428,250			(697,292	)		730,958
Income taxes			(2,398	)		(6,996	)		(9,394	)
Minority interests			(7,120	)		(80	)		(7,200	)
Income from investment in unconsolidated joint ventures			106,701			151			106,852

Income from continuing operations			1,525,433			(704,217	)		821,216
Discontinued operations (including net gain on sales of real estate of $17,926)			36,540			1,664			38,204

Net income		$	1,561,973		$	(702,553	)	$	859,420

Property net operating income from continuing operations		$	2,306,109		$	43,736		$	2,349,845
Property net operating income from discontinued operations (see Note 5 — Dispositions)			26,290			866			27,156

Total property net operating income from continuing operations and discontinued operations		$	2,332,399		$	44,602		$	2,377,001

Capital and tenant improvements		$	321,803		$	7,127		$	328,930

Investment in unconsolidated joint ventures		$	1,077,273		$	10,542		$	1,087,815

Total Assets		$	24,394,552		$	852,231		$	25,246,783


(1)	Interest expense for the Office Properties does not include allocation of interest expense on the unsecured notes or the line of credit.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 20 — SEGMENT INFORMATION — (continued)



		As of or for the year ended December 31, 2001

		Office			Corporate
		Properties			and Other			Consolidated


		(Dollars in thousands)
Property operating revenues		$	2,974,128		$	51,536		$	3,025,664
Property operating expenses			(958,935	)		(10,658	)		(969,593	)

Property net operating income from continuing operations			2,015,193			40,878			2,056,071

Adjustments to arrive at net income:
	Other revenues		3,695			51,604			55,299
	Interest expense(1)		(195,571	)		(531,359	)		(726,930	)
	Depreciation and amortization		(557,482	)		(24,110	)		(581,592	)
	Ground rent		(16,812	)		—			(16,812	)
	General and administrative		(11	)		(109,661	)		(109,672	)
	Impairment on securities and other investments		—			(132,684	)		(132,684	)
	Impairment on assets held for sale		—			(2,536	)		(2,536	)

	Total adjustments to arrive at net income		(766,181	)		(748,746	)		(1,514,927	)

Income before income taxes, allocation to minority interests, income from investment in unconsolidated joint ventures and net gain on sales of real estate			1,249,012			(707,868	)		541,144
Income taxes			(1,853	)		(6,961	)		(8,814	)
Minority interests			(8,685	)		—			(8,685	)
Income from investment in unconsolidated joint ventures			67,216			1,987			69,203
Net gain on sales of real estate			22,265			59,397			81,662

Income from continuing operations			1,327,955			(653,445	)		674,510
Discontinued operations			21,666			397			22,063

Income before extraordinary item and cumulative effect of change in accounting principle			1,349,621			(653,048	)		696,573
Extraordinary item			(1,000	)		—			(1,000	)
Cumulative effect of change in accounting principle			(1,142	)		—			(1,142	)

Net income		$	1,347,479		$	(653,048	)	$	694,431

Property net operating income from continuing operations		$	2,015,193		$	40,878		$	2,056,071
Property net operating income from discontinued operations (see Note 5 — Dispositions)			31,646			481			32,127

Total property net operating income from continuing operations and discontinued operations		$	2,046,839		$	41,359		$	2,088,198

Capital and tenant improvements		$	325,215		$	34,850		$	360,065

Investment in unconsolidated joint ventures		$	1,239,608		$	81,519		$	1,321,127

Total Assets		$	24,695,702		$	1,112,720		$	25,808,422


(1)	Interest expense for the Office Properties does not include allocation of interest expense on the unsecured notes or the line of credit.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 20 — SEGMENT INFORMATION — (continued)



			As of or for the year ended December 31, 2000

			Office			Corporate
			Properties			and Other			Consolidated


			(Dollars in thousands)
Property operating revenues			$	2,158,812		$	26,243		$	2,185,055
Property operating expenses				(734,350	)		(7,776	)		(742,126	)

Property net operating income from continuing operations				1,424,462			18,467			1,442,929

Adjustments to arrive at net income:
	Other revenues			3,526			43,481			47,007
	Interest expense(1)			(163,612	)		(360,248	)		(523,860	)
	Depreciation and amortization			(411,802	)		(20,886	)		(432,688	)
	Ground rent			(9,877	)		(19	)		(9,896	)
	General and administrative			(177	)		(88,519	)		(88,696	)

		Total adjustments to arrive at net income		(581,942	)		(426,191	)		(1,008,133	)

Income before income taxes, allocation to minority interests, income from investment in unconsolidated joint ventures and net gain on sales of real estate				842,520			(407,724	)		434,796
Income taxes				(1,696	)		(1,023	)		(2,719	)
Minority interests				(5,385	)		(1,458	)		(6,843	)
Income from investment in unconsolidated joint ventures				53,189			3,062			56,251
Net gain on sales of real estate				13,660			22,353			36,013

Income from continuing operations				902,288			(384,790	)		517,498
Discontinued operations				12,738			—			12,738

Net income			$	915,026		$	(384,790	)	$	530,236

Property net operating income from continuing operations			$	1,424,462		$	18,467		$	1,442,929
Property net operating income from discontinued operations (see Note 5 — Dispositions)				20,222			—			20,222

Total property net operating income from continuing operations and discontinued operations			$	1,444,684		$	18,467		$	1,463,151

Capital and tenant improvements			$	270,259		$	23,452		$	293,711


(1)	Interest expense for the Office Properties does not include allocation of interest expense on the unsecured notes or the line of credit.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 21 — QUARTERLY DATA (UNAUDITED)

Quarterly data for the last two years are presented in the tables below:



		For the three months ended

		12/31/2002		9/30/2002		6/30/2002		3/31/2002


		(Dollars in thousands, except per unit data)
Total revenues(a)		$	884,511	$	875,228	$	872,928	$	873,415
Income from continuing operations(a)		$	195,921	$	192,577	$	192,234	$	240,484
Discontinued operations(a)		$	11,657	$	11,318	$	11,249	$	3,980
Net income		$	207,578	$	203,895	$	203,483	$	244,464
Net income available for Units		$	192,117	$	188,444	$	187,652	$	228,634
Earnings per unit — basic:
	Income from continuing operations	$	0.43	$	0.41	$	0.41	$	0.51
	Income before extraordinary items and cumulative effect of change in accounting principle	$	0.45	$	0.44	$	0.43	$	0.52
	Net income available for Units	$	0.42	$	0.40	$	0.40	$	0.48
Earnings per unit — diluted:
	Income from continuing operations	$	0.42	$	0.41	$	0.41	$	0.51
	Income before extraordinary items and cumulative effect of change in accounting principle	$	0.45	$	0.43	$	0.43	$	0.52
	Net income available for Units	$	0.42	$	0.40	$	0.40	$	0.48


(a)		The amounts presented for the three months ended September 30, 2002, June 30, 2002, and March 31, 2002 are not equal to the same amounts previously reported in the Form 10-Q filed with the SEC for each period as a result of discontinued operations consisting of properties sold in 2002. Below is a reconciliation to the amounts previously reported in the Form 10-Q:



	For the three months ended

	9/30/2002			6/30/2002			3/31/2002

Total revenues previously reported in Form 10-Q	$	881,450		$	883,965		$	885,759
Revenues previously reported in Form 10-Q subsequently reclassified to discontinued operations		(6,222	)		(11,037	)		(12,344	)

Total revenues disclosed in Form 10-K	$	875,228		$	872,928		$	873,415

Income from continuing operations previously reported in Form 10-Q	$	195,450		$	197,877		$	247,028
Income from continuing operations previously reported in Form 10-Q subsequently reclassified to discontinued operations		(2,873	)		(5,643	)		(6,544	)

Income from continuing operations disclosed in Form 10-K	$	192,577		$	192,234		$	240,484

Discontinued operations previously reported in Form 10-Q	$	8,445		$	5,606		$	(2,564	)
Discontinued operations from properties sold subsequent to the respective reporting period		2,873			5,643			6,544

Discontinued operations disclosed in Form 10-K	$	11,318		$	11,249		$	3,980

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 21 — QUARTERLY DATA (UNAUDITED) — (continued)



		For the three months ended

		12/31/2001			9/30/2001		6/30/2001		3/31/2001


		(Dollars in thousands, except per unit data)
Total revenues(a)		$	885,573		$	877,318	$	660,104	$	657,968
Income from continuing operations(a)		$	144,567		$	237,094	$	146,765	$	146,084
Discontinued operations(a)		$	7,504		$	7,984	$	3,495	$	3,080
Income before extraordinary item and cumulative effect of a change in accounting principle		$	152,071		$	245,078	$	150,260	$	149,164
Extraordinary item(b)		$	(1,000	)	$	—	$	—	$	—
Net income available for Units		$	134,041		$	229,483	$	139,383	$	137,138
Earnings per unit — basic:
	Income from continuing operations	$	0.31		$	0.51	$	0.42	$	0.42
	Income before extraordinary items and cumulative effect of change in accounting principle	$	0.32		$	0.52	$	0.43	$	0.43
	Net income available for Units	$	0.29		$	0.49	$	0.40	$	0.39
Earnings per unit — diluted:
	Income from continuing operations	$	0.31		$	0.50	$	0.42	$	0.42
	Income before extraordinary items and cumulative effect of change in accounting principle	$	0.32		$	0.52	$	0.43	$	0.42
	Net income available for Units	$	0.28		$	0.49	$	0.40	$	0.39


(a)		The amounts presented for the three months ended September 30, 2001, June 30, 2001 and March 31, 2001 are not equal to the same amounts previously reported in the Form 10-Q filed with the SEC for each period as a result of discontinued operations consisting of properties sold in 2002. Below is a reconciliation to the amounts previously reported in the Form 10-Q:



	For the three months ended

	9/30/2001			6/30/2001			3/31/2001

Total revenues previously reported in Form 10-Q	$	883,723		$	664,039		$	662,870
Revenues previously reported in Form 10-Q subsequently reclassified to discontinued operations		(6,405	)		(3,935	)		(4,902	)

Total revenues disclosed in Form 10-K	$	877,318		$	660,104		$	657,968

Income from continuing operations previously reported in Form 10-Q	$	239,862		$	148,272		$	147,886
Income from continuing operations previously reported in Form 10-Q subsequently reclassified to discontinued operations		(2,768	)		(1,507	)		(1,802	)

Income from continuing operations disclosed in Form 10-K	$	237,094		$	146,765		$	146,084

Discontinued operations in Form 10-Q	$	5,216		$	1,988		$	1,278
Discontinued operations from properties sold subsequent to the respective reporting period		2,768			1,507			1,802

Discontinued operations disclosed in Form 10-K	$	7,984		$	3,495		$	3,080


(b)		The extraordinary item of $1.0 million related to costs on certain Office Properties located in Seattle,WA as a result of damage from an earthquake in February 2001.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 22 — RELATED PARTY TRANSACTIONS

Related parties provide various services to EOP Partnership. Fees and reimbursements paid to related parties for the years ended December 31, 2002, 2001 and 2000 were as follows (there was approximately $1.7 million and $0.3 million payable to related parties as of December 31, 2002 and 2001, respectively:



		Paid in years ended
		December 31,

		2002		2001		2000


		(Dollars in thousands)
Development fees, leasing commissions and management fees(1)		$	4,727	$	8,147	$	3,770
Interest and prepayment penalty on mortgage notes(2)			—		22,256		7,183
Office rent(3)			3,904		2,964		2,601
Development, management and leasing fees(4)			—		—		8,090

	Total	$	8,631	$	33,367	$	21,644

(1)

EOP Partnership and WI entered into a joint venture agreement to form W/EO for the purpose of developing, constructing, leasing and managing developments in northern California. W/EO is owned 49.9% by EOP Partnership and 50.1% by WI. William Wilson III, a trustee of Equity Office, through his ownership of WI, owns approximately 22% of W/EO and approximately 30% of any promote to which WI is entitled under the joint venture agreement. EOP Partnership has agreed to loan up to $25 million to WI for its required contribution to W/EO at a 15% interest rate per annum. In 2002, WI repaid the outstanding loan balance of approximately $12.0 million of principal and $2.0 million of accrued interest. As a result of the recent transactions with WI (refer to Note 8 — Investment in Unconsolidated Joint Venture — subfootnote (5)) the loan commitment has been terminated. EOP Partnership’s investment in W/EO as of December 31, 2002 and 2001 was approximately $3.6 million and $32.3 million, respectively.

EOP Partnership created joint ventures with W/EO and, in certain cases, unaffiliated parties for the development of various office properties. EOP Partnership has agreed to provide first mortgage financing to the ownership entities of each of these developments at the greater of 6.5% or LIBOR plus 3.25%, generally maturing 36 months after initial funding or earlier at the option of EOP Partnership in the event alternative financing sources are available on terms reasonably acceptable to WI and any unaffiliated party. The aggregate amount of any such financing would generally be capped at 70% of budgeted construction costs (76% in the case of Concar which, at 12/31/02 had been completed and leased and as such is now reflected as investment in real estate). At December 31, 2002, EOP Partnership had committed to make mortgage loans for Foundry Square IV and Concar totaling approximately $96 million, of which approximately $74 million in principal and approximately $.4 million in accrued interest was outstanding.

In December 2002, EOP Partnership, W/EO and WI completed a transaction pursuant to which EOP Partnership acquired W/EO’s interests in various projects known as Foundry Square II, Foundry Square III (a land parcel under option), the Ferry Building, San Rafael Corporate Center I and San Rafael Corporate Center II (a land parcel). WI acquired W/EO’s interest in a project known as Larkspur (a land parcel under option) and WI acquired the operating business and all assets of W/EO other than its ownership interests in the development projects known as Foundry Square IV and Concar. In accordance with the W/EO operating agreement, EOP Partnership may, but is not required to, purchase the W/EO interest in Foundry Square IV and Concar, subsequent to project stabilization. A WI subsidiary will continue providing the development management services to Foundry Square II, the Ferry Building and Concar. EOP Partnership also engaged a subsidiary of WI to provide leasing brokerage services for Foundry Square II and the Ferry Building. EOP Partnership’s and W/EO’s interests in Foundry Square IV and Concar remain unchanged as a result of this transaction. Joint

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 22 — RELATED PARTY TRANSACTIONS — (continued)

ventures with other unaffiliated parties on the projects in which EOP Partnership acquired W/EO’s interest also remain unchanged as a result of this transaction.

(2) In connection with the Cornerstone Merger, $250 million of mortgage debt was assumed on certain properties payable to Stichting Pensioenfonds Voor de Gezondheid, Geestelijke en Maatcschappellijke Belangen (“PGGM”), of which Jan H.W.R. van der Vlist, a trustee of Equity Office, is a director of real estate. In October 2000, EOP Partnership repaid $65 million of mortgage debt encumbering, TransPotomac Plaza 5, upon its maturity. In December 2001, the remaining $185 million of mortgage debt encumbering several properties was prepaid. As a result of the prepayment, EOP Partnership paid a $5.0 million prepayment penalty to PGGM.

(3) EOP Partnership leases office space at Two North Riverside Plaza, Chicago, Illinois from Two North Riverside Plaza Joint Venture, a partnership composed of trusts established for the benefit of the families of Samuel Zell and Robert Lurie, a deceased former business partner of Mr. Zell.

(4) H. Jon Runstad, a former trustee who resigned in July 2000, is a principal of Wright Runstad & Company, the general partner of Wright Runstad Associates Limited Partnership (“WRALP”), which provides property management, leasing and development services. EOP Partnership owns a 30% limited partnership interest in WRALP. During 2000, EOP Partnership received distributions of approximately $9.7 million from WRALP. Since December 1997, affiliates of WRALP served as the co-property manager with EOP Partnership and leasing agent for certain Office Properties acquired in December 1997 from WRALP and for several other Office Properties. In addition to the amounts paid above to WRALP for development and management fees, leasing commissions and related expense reimbursements with respect to some of our Properties, an additional $5.0 million was paid during 2000 to WRALP for the reimbursement of salaries of personnel in connection with such management services.

WRALP owned a 20% interest and EOP Partnership owned an 80% interest in Sunset North Corporate Campus, a three-building office complex located in Bellevue, Washington. WRALP served as developer of the project. In June 2000, EOP Partnership acquired the interest held by WRALP at a price based on a formula set forth in the joint venture agreement.

WRALP owns a 20% interest and EOP Partnership owns an 80% interest in Key Center, an Office Property located in Bellevue, Washington. WRALP served as developer of the project and currently serves as co-property manager with EOP Partnership and the leasing agent.

In September 2000, EOP Partnership purchased the World Trade Center East located in Seattle, Washington, from WRALP. WRALP served as the developer of the project.

See Note 25 — Commitments and Contingencies for information regarding EOP Partnership’s guarantee of WRALP’s line of credit.

Transaction with Trustee

In connection with the Cornerstone Merger in 2000, EOP Partnership paid $5.0 million to John S. Moody to enter into a non-compete agreement. Mr. Moody became a trustee of EOP Partnership at the time of the Cornerstone Merger and is the former president and chief executive officer of Cornerstone.

Access Holdings

In October 2000, five current and previous executive officers of Equity Office organized Access Holdings Company, L.L.C. and on August 2000 organized its sister company, AHC II, L.L.C., which EOP Partnership refers to collectively as “Access Holdings,” to provide or arrange for services for tenants that Equity Office could not provide under the REIT tax rules then in effect and to make certain investments that Equity Office was precluded from making under the REIT rules then in effect. EOP Partnership made loans totaling

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 22 — RELATED PARTY TRANSACTIONS — (continued)

approximately $2.3 million in the aggregate at an annual interest rate of 7.0% to certain current and previous executive officers to finance their investment in Access Holdings. Of this amount, approximately $0.3 million was used by Access Holdings to purchase the voting interests in various tenant service and management companies owned by affiliates of Mr. Zell and the balance was used to operate Access Holdings. In consideration of the assumption of an outstanding capitalization note in the principal amount of $1.0 million payable by certain affiliates of Mr. Zell to EOP Office Company, Access Holdings also acquired the voting interest in EOP Office Company. EOP Office Company holds various assets, including 109,987 Units, a 10.2% interest in the Sunset North Property and a 30% interest in WRALP.

In connection with the formation of Access Holdings, Equity Office entered into an option agreement with Access Holdings under which Access Holdings granted Equity Office the right on or after January 1, 2001 to acquire its assets, subject to its liabilities. Equity Office also granted to Access Holdings the right to sell its assets to Equity Office for a period of five years from the date of the tax law change. Neither Equity Office nor Access Holdings was obligated to exercise its respective contractual rights, and there was no assurance prior to January 1, 2001 that either would do so. The parties also entered into marketing and cost-sharing agreements pursuant to which Access Holdings paid an affiliate a total of $1.8 million during 2000. In 2001, Equity Office determined that it was in Equity Office’s best interests to exercise its option to acquire the assets of Access Holdings and, accordingly, submitted the matter to the Conflicts Committee of Equity Office’s Board of Trustees. The Conflicts Committee engaged the services of a third party to perform a valuation analysis of the assets and liabilities of Access Holdings for purposes of calculating the applicable purchase price under the option agreements. That firm delivered its valuation report and, in reliance on such report and on other factors it considered to be relevant, the Conflicts Committee approved the exercise of the option effective as of January 1, 2001 at a purchase price equal to the fair market value of the assets plus the assumption of liabilities and determined the applicable purchase prices under the option agreements to be as follows: (a) $2.3 million for the assets of Access Holdings Company, L.L.C., plus assumption of liabilities of $1.4 million; and (b) $0.2 million for the assets of AHC II Company, L.L.C., plus the assumption of liabilities of $0.1 million. The executive officers of Equity Office repaid their loans from EOP Partnership, collectively totaling approximately $2.3 million, using a portion of the purchase price paid by EOP Partnership for the assets of Access Holdings. These executive officers each earned a profit of approximately $52,000 on their investment in Access Holdings.

As a result of these transactions, EOP Partnership now owns interests through its subsidiaries in several tenant service entities, interests in certain Office Properties and minority voting securities of certain former non-controlled subsidiaries engaged in real estate, insurance and management businesses.

Amounts Received from Related Parties

As described in Note 6, EOP Partnership owns preferred shares of CT Convertible Trust I, of which Mr. Zell is Chairman of the Board.

EOP Partnership has entered into third-party management contracts and a licensing agreement to manage and lease space at certain Properties owned or controlled by affiliates of Mr. Zell. Income recognized by EOP Partnership for providing these management services during 2002 and 2001 was approximately $1.0 million and $1.5 million.

In addition, EOP Partnership provided real estate tax consulting and risk management services to related parties for which it received approximately $1.6 million, $1.7 million and $1.4 million during 2002, 2001 and 2000, respectively.

NOTE 23 — SHARE OPTION PLAN AND SHARE AWARD PLAN

The following is a description of Equity Office’s 1997 Share Option and Share Award Plan, as amended, (the “Employee Plan”), which is included in the financial statements because any Common shares issued

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 23 — SHARE OPTION PLAN AND SHARE AWARD PLAN — (continued)

pursuant to the Employee Plan will result in EOP Partnership issuing Units to Equity Office, on a one-for-one basis. The purpose of the Employee Plan is to attract and retain highly qualified executive officers, trustees and employees. Through the Employee Plan, certain officers, trustees, employees and consultants of Equity Office are offered the opportunity to acquire Common Shares pursuant to grants of (i) options to purchase Common Shares (“Options”) and (ii) Share Awards (defined below). The Employee Plan is administered by the Compensation and Option Committee (the “Compensation Committee”), which is appointed by the Board of Trustees. The Compensation Committee determines those officers, trustees, key employees and consultants to whom, and the time or times at which, grants of Options and Share Awards will be made. The Compensation Committee interprets the Employee Plan, adopts rules relating thereto and determines the terms and provisions of Options and Share Awards. In 2002, 2001, and 2000 the Common Shares subject to Options and Share Awards under the Employee Plan were limited to 32,030,650, 23,733,869 and 19,433,472, respectively. The maximum aggregate number of Options and Share Awards that may be granted under the Plan may not exceed 6.8% of the outstanding Common Shares calculated on a fully diluted basis and determined annually on the first day of each calendar year. No more than one-half of the maximum aggregate number of Options and Share Awards shall be granted as Share Awards. To the extent that Options expire unexercised or are terminated, surrendered or canceled, the Options and Share Awards become available for future grants under the Plan, unless the Plan has terminated. The Employee Plan will terminate at such time as all of the unissued Common Shares reserved for the Plan have been issued. The Board of Trustees may at any time amend or terminate the Employee Plan, but termination will not affect Options and Share Awards previously granted. Any Options or Share Awards which vest prior to any such termination will continue to be exercisable by the holder thereof.

The Compensation Committee determines the vesting schedule of each Option and the term, which shall not exceed 10 years from the grant date. As to the Options that have been granted through December 31, 2002, the vesting schedules range from one-third of the Options being exercisable as of the first anniversary of the grant date, an additional one-third being exercisable as of the second anniversary of the grant date and the remaining one-third being exercisable as of the third anniversary of the grant date. The exercise price for all Options under the Employee Plan shall not be less than the fair market value of the underlying Common Shares at the time the Option is granted.

Each non-employee member of the Board of Trustees receives an annual grant of an Option to purchase 10,000 Common Shares (other than Mr. van der Vlist, who receives a grant of an equivalent share appreciation right exercisable for cash). If an individual becomes a trustee other than at an annual meeting, he or she is entitled to a prorated Option grant based upon the number of days until the next annual meeting of shareholders.

The Employee Plan permits the issuance of Share Awards to executive officers, trustees and key employees upon such terms and conditions as are determined by the Compensation Committee in its sole discretion. A Share Award is an award of a Common Share which (i) may be fully vested upon issuance (“Share Award”) or (ii) may vest over time (“Restricted Share Award”). Generally, members of the Board of Trustees have been granted Share Awards pursuant to the Employee Plan as payment of their board fees. In each case, the number of Share Awards granted to trustees was equal to the dollar value of the fee divided by the fair market value of a Common Share on the date the fee would have been paid. Restricted Share Awards were granted to certain officers and employees in 2002, 2001 and 2000. Restricted Share Awards granted in 2002 vest evenly over a five-year period, 20% per year on each of the first five anniversaries of the grant date. The Restricted Share Awards granted before 2002 vest over a five-year period as follows: 50% on the third anniversary of the grant date, 25% on the fourth anniversary of the grant date and the remaining 25% on the fifth anniversary of the grant date.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 23 — SHARE OPTION PLAN AND SHARE AWARD PLAN — (continued)

Equity Office has elected to apply the accounting provisions of Accounting Principles Board Opinion No. 25 Accounting for Stock Issued to Employees (“APB No. 25”) in the computation of compensation expense. Under APB No. 25, an intrinsic value method is used to determine compensation expense by computing the excess of the market price of the Common Shares subject to the Option or Share Award over the exercise price on the grant date or the measurement date. For Options, there is no intrinsic value on the grant date or measurement date because the option exercise price equalled the Common Share market price. For Share Awards, the intrinsic value equals the Common Share market price on the grant date or measurement date because there is no exercise price.

Statement of Financial Accounting Standards No. 123 (“SFAS No. 123”) requires the disclosure of pro forma net income and earnings per share as if a fair value based accounting method had been used in the computation of compensation expense. The fair value of the Options computed under SFAS No. 123 would be recognized over the vesting period of the Options. The fair value for Options granted in 2002, 2001, and 2000 was estimated at the time the Options were granted using the Black-Scholes option-pricing model with the following weighted average assumptions:


Assumptions:	2002		2001		2000

Risk-free interest rate		4.2%		4.2%		5.1%
Expected dividend yield		7.0%		6.7%		5.5%
Volatility		0.19		0.21		0.33
Weighted average expected life of the Options		5 years		5 years		5 years
Weighted average fair value of Options granted		$2.29		$2.76		$5.63

The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option-pricing models require the input of highly subjective assumptions, including the expected stock price volatility. Under the fair value method approximately $11.1 million, $11.9 million and $15.1 million would have been recognized as additional compensation expense for 2002, 2001 and 2000, respectively. For purposes of pro forma disclosures, the estimated fair value of the Options is amortized to expense evenly over the Options’ vesting period. The following is the unaudited pro forma information for the years ended December 31, 2002, 2001 and 2000:



	For the years ended December 31,

	2002		2001		2000


	(Dollars in thousands)
Pro forma net income available to Units	$	785,748	$	628,117	$	469,219



	For the years ended December 31,


	2002				2001				2000

Earnings per unit	Basic		Diluted		Basic		Diluted		Basic		Diluted

Historical net income available for Units	$	1.71	$	1.70	$	1.57	$	1.55	$	1.53	$	1.52

Pro forma net income available for Units	$	1.68	$	1.67	$	1.54	$	1.52	$	1.49	$	1.47

Effective January 1, 2003, EOP Partnership adopted Statement of Financial Accounting Standards No. 123 (“SFAS No. 123”) Accounting for Stock Based Compensation, which requires a fair value based accounting method for determining compensation expense associated with the issuance of stock options and other equity awards. EOP Partnership decided to adopt the accounting provisions of SFAS No. 123 to reflect the cost to the company of issuing stock options and other equity awards to certain individuals in the consolidated financial statements. EOP Partnership will employ the prospective method for adopting SFAS No. 123 which requires the recognition of compensation expense for stock options and other equity compensation granted on or after January 1, 2003 and to record compensation expense for modifications of

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 23 — SHARE OPTION PLAN AND SHARE AWARD PLAN — (continued)

stock options and other equity awards that were outstanding as of December 31, 2002. EOP Partnership anticipates recognizing compensation expense of approximately $6.0 million, $12.0 million and $18.0 million for the years ending December 31, 2003, 2004 and 2005, respectively, for both Option and Share Award grants accounted for under SFAS No. 123. These anticipated compensation expense amounts are based on the existing compensation structure for 2003 and assumes a similar level of Option and Share Award compensation in future years. Future Option and Share Award compensation is subject to change based on actual Options and Share Award grants in future years and their respective fair values.

Compensation expense related to Share Award grants was previously recognized in accordance with APB No. 25. The adoption of SFAS No. 123 does not significantly change the amount of compensation expense recognized for Share Awards.

The table below summarizes the Option activity of the Employee Plan for the years ended December 31, 2002, 2001 and 2000:


					Weighted Average
		Common Shares			Exercise Price
		Subject to Options			Per Option

Balance at December 31, 1999			13,462,154		$	24.66
	Options granted(a)		3,916,460			23.63
	Options canceled		(572,114	)		24.78
	Options exercised		(3,585,129	)		22.81

Balance at December 31, 2000			13,221,371			24.82
	Options granted(b)		6,785,666			27.26
	Options canceled		(438,681	)		27.53
	Options exercised		(3,282,003	)		21.89

Balance at December 31, 2001			16,286,353		$	26.41
	Options granted		6,540,705			28.36
	Options canceled		(592,102	)		28.98
	Options exercised		(1,739,863	)		23.00

Balance at December 31, 2002			20,495,093		$	27.18

The following table summarizes information regarding Options outstanding at December 31, 2002:



	Options Outstanding						Options Exercisable				Options Not Exercisable

			Weighted-
			average		Weighted-				Weighted-				Weighted-
			remaining		average				average				average
			contractual life		exercise				exercise				exercise
Range of Exercise Prices	Options		in years(c)		price		Options		price		Options		price

$12.09 to $21.00		2,015,855		4.6	$	20.79		2,015,855	$	20.79		—		—
$21.07 to $23.40		1,598,421		6.0		23.22		1,598,421		23.22		—		—
$24.23 to $24.62		3,091,379		7.0		24.23		3,091,379		24.23		—		—
$24.88 to $28.36		6,593,070		9.0		28.30		888,664		27.99		5,704,406	$	28.35
$28.38 to $29.50		2,212,000		5.4		29.47		2,125,329		29.49		86,671		29.19
$29.76 to $33.00		4,984,368		7.7		30.36		2,398,740		30.75		2,585,628		29.99

$12.09 to $33.00		20,495,093		7.3	$	27.18		12,118,388	$	26.01		8,376,705	$	28.87


(a)	Includes 3,681,212 Options granted in connection with the Cornerstone Merger.

(b)	Includes 1,890,648 Options granted in connection with the Spieker Merger.

(c)	Expiration dates ranged from May 2004 to September 2012.

During 2002, 2001 and 2000, there were 541,055, 602,666 and 555,100 Restricted Share Awards granted, respectively. The Restricted Shares Awards issued in 2002, 2001 and 2000 were, on average, valued at an

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 23 — SHARE OPTION PLAN AND SHARE AWARD PLAN — (continued)

average of $28.01, $20.61 and $23.91 each, respectively. The value of the Restricted Share Awards is recognized as compensation expense evenly over the vesting period.

NOTE 24 — 401(K) PLAN

The Equity Office Properties Trust Section 401(k) Savings/ Retirement Plan (the “401(k) Plan”) was established to cover eligible employees of EOP Partnership and employees of any designated affiliate. The 401(k) Plan permits eligible persons to defer up to 16% of their annual compensation into the 401(k) Plan, subject to certain limitations imposed by the Internal Revenue Code. Employees’ elective deferrals are immediately vested and nonforfeitable upon contribution to the 401(k) Plan. EOP Partnership matches dollar for dollar employee contributions to the 401(k) Plan up to 4% of the employee’s annual salary. In addition, EOP Partnership may elect to make an annual discretionary profit-sharing contribution. EOP Partnership expensed approximately $4.2 million, $3.8 million and $3.6 million in each of the years ended December 31, 2002, 2001 and 2000, respectively, related to the 401(k) Plan.

NOTE 25 — COMMITMENTS AND CONTINGENCIES

Concentration of Credit Risk

EOP Partnership maintains its cash and cash equivalents at financial institutions. The combined account balances at each institution typically exceed FDIC insurance coverage and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. Management of EOP Partnership believes that the risk is not significant.

Environmental

EOP Partnership, as an owner of real estate, is subject to various environmental laws of federal and local governments. Compliance by EOP Partnership with existing laws has not had a material adverse effect on EOP Partnership’s financial condition and results of operations, and management does not believe it will have such an impact in the future. However, EOP Partnership cannot predict the impact of unforeseen environmental contingencies or new or changed laws or regulations on its current Properties or on properties that it may acquire in the future.

Litigation

EOP Partnership is not presently subject to material litigation nor, to EOP Partnership’s knowledge, is any material litigation threatened against EOP Partnership, other than routine actions for negligence and other claims and administrative proceedings arising in the ordinary course of business, some of which are expected to be covered by liability insurance and all of which collectively are not expected to have a material adverse effect on the liquidity, results of operations, or financial condition of EOP Partnership.

Contingencies

Certain Properties owned in joint ventures with unaffiliated parties have buy/sell options that may be exercised to acquire the other partner’s interest by EOP Partnership or its joint venture partner may acquire EOP Partnership’s interest if certain conditions are met as set forth in the respective joint venture agreement. In addition, EOP Partnership has granted options to a tenant to purchase two of its Office Properties.

In connection with the acquisition of certain Properties, EOP Partnership has agreed not to sell such Properties in a taxable transaction for a period of time as defined in their respective agreements or EOP Partnership may be obligated to make additional payments to the respective sellers.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 25 — COMMITMENTS AND CONTINGENCIES — (continued)

Insurance

Property Damage, Business Interruption, Earthquake and Terrorism: The insurance coverage provided through third-party insurance carriers is subject to coverage limitations. For each type of insurance coverage described below, should an uninsured or underinsured loss occur, EOP Partnership could lose all or a portion of its investment in, and anticipated cash flows from, one or more of the Properties. In addition, there can be no assurance that third-party insurance carriers will be able to maintain reinsurance sufficient to cover any losses that may be incurred.


Type of Insurance	Equity Office	Third-Party
Coverage	Loss Exposure/Deductible	Coverage Limitation

Property damage and business interruption(a)	$75 million in the aggregate (inclusive of retention amounts paid for earthquake loss), plus $1 million per occurrence deductible	$1.0 billion per occurrence(c)
Earthquake(a)(b)	$75 million in the aggregate (inclusive of retention amounts paid for property damage and business interruption loss) per year, plus $1 million per occurrence deductible	$325 million in the aggregate per year(c)
Acts of terrorism(d)	$1 million or 2% of total insurable value, whichever is greater, per occurrence deductible; and 30 day waiting period for loss of rent	$270 million in the aggregate per year(e)


(a)	In September 2002, EOP Partnership began retaining up to $75 million of such loss calculated throughout the EOP Partnership portfolio. In the event of a loss in excess of these retention limits, the third-party insurance carriers would be obligated to cover the losses up to the stated coverage amounts in the above table.

(b)	The amount of the third-party insurance relating to earthquakes is based on maximum probable loss studies performed by independent third parties. The maximum annual aggregate payment amount for earthquake loss is $325 million, inclusive of EOP Partnership’s loss exposure of $75 million plus $1 million per occurrence deductible. There can be no assurance that these actuarial studies have correctly estimated any losses that may occur.

(c)	These amounts include EOP Partnership’s loss exposure/deductible amount.

(d)	The third-party insurance coverage excludes nuclear, chemical or biological acts of terrorism. There can be no assurance that insurance coverage for acts of terrorism will be available in the future. It is also possible that the lenders under our unsecured credit facility and our secured mortgage indebtedness could seek to declare a default based on the absence of insurance coverage for terrorist acts for the type and amount in place. If one or more lenders were to declare such a default, EOP Partnership would challenge such conclusion as not being commercially reasonable in the context of the current marketplace. See Note 26. Subsequent Events for changes to the terrorism insurance.

(e)	This amount is in excess of EOP Partnership’s deductible amounts.

Workers Compensation, Automobile Liability and General Liability: EOP Partnership has per occurrence deductible amounts on workers compensation of $500,000, auto liability of $250,000 and general liability of $1,000,000.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 25 — COMMITMENTS AND CONTINGENCIES — (continued)

Off-Balance Sheet Arrangements

Commitments

In accordance with the agreement governing the investment in Wright Runstad Associates Limited Partnership (“WRALP”) made in 1997, EOP Partnership agreed, for a period generally continuing until December 31, 2007, to make available to WRALP up to $20.0 million in additional financing or credit support for future development. As of December 31, 2002, no amounts have been funded pursuant to this agreement. However, EOP Partnership has unconditionally guaranteed payment of WRALP’s $19.5 million revolving line of credit which has an outstanding balance of approximately $12.9 million as of December 31, 2002 in the event of WRALP’s non-payment. WRALP’s current line of credit matures in July 2003. EOP Partnership does not have a liability accrued related to this guarantee. In the event EOP Partnership makes payment on WRALP’s line of credit and WRALP does not repay EOP Partnership, EOP Partnership is entitled to (i) terminate the credit facility provided to WRALP from EOP Partnership and (ii) declare all amounts borrowed by WRALP due and payable. EOP Partnership believes the risk of an unrecovered loss is minimal at this time.

Letters of Credit

As of December 31, 2002, EOP Partnership had provided approximately $3.3 million in letters of credit. The letters of credit were required to be issued under the provisions of our worker’s compensation insurance policies and certain utility contracts.

NOTE 26 — SUBSEQUENT EVENTS

The following transactions occurred subsequent to December 31, 2002, through March 13, 2003:

In January 2003, EOP Partnership issued $500 million of 5.875% unsecured notes due January 15, 2013. Including all offering expenses, the all-in effective rate of the unsecured notes is 5.98%. The notes are guaranteed by Equity Office. Total cash proceeds net of selling commissions and other expenses were approximately $494.9 million. The net proceeds were used to repay $300 million of unsecured notes that matured in February 2003. The remaining net proceeds were used to repay outstanding balances on the line of credit and for general business purposes, including working capital.

In January 2003, EOP Partnership sold the ABAM Building, Washington Park and the Federal Way office buildings to an unaffiliated party for approximately $13.5 million. The properties comprised three office properties, approximately 114,527 square feet and are located in Seattle, Washington.

In February 2003, EOP Partnership sold the U.S. West Dex Center office building to an unaffiliated party for approximately $11.6 million. The property comprised one office building, approximately 136,176 square feet and is located in Salt Lake City, Utah.

In February 2003, EOP Partnership sold the Commerce Park office building to an unaffiliated party for approximately $16.1 million. The property comprised one office building, approximately 94,367 square feet and is located in Santa Monica, CA.

Effective in February 2003, EOP Partnership amended its third-party insurance coverage for acts of terrorism as a result of the Terrorism Risk Insurance Act of 2002 (“TRIA”) enacted by Congress and signed into law by President Bush on November 26, 2002. EOP Partnership cancelled the terrorism insurance program that provided a limit of $270 million in the aggregate per year and replaced it with a limit of $825 million in the current property insurance program which provides coverage for chemical and biological exposure, whereas the previous insurance coverage excluded this exposure. Under TRIA, EOP Partnership has a per occurrence deductible of $750,000 and retains 10% of each and every loss up to a maximum of

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 26 — SUBSEQUENT EVENTS — (continued)

$33.25 million per occurrence, inclusive of the deductible. The federal government is obligated to cover the remaining 90% of the loss above the deductible up to $100 billion in the aggregate annually.

In March 2003, EOP Partnership sold the Janss Court office building to an unaffiliated party for approximately $35.5 million. The property comprised one office building, approximately 92,403 square feet, 32 residential units and is located in Santa Monica, CA.

From January 1, 2003 through March 13, 2003, Equity Office had repurchased 2,518,100 Common Shares under a share repurchase program at an average price of $23.82 for approximately $60.0 million in the aggregate. In connection with the repurchases, EOP Partnership purchased from Equity Office and retired a corresponding number of Units for an aggregate purchase price equal to the aggregate price for all Common Share repurchases.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

100

PART III

Item 10. Directors and Executive Officers of the Registrant.

Information about Trustees of Equity Office is incorporated by reference from the discussion under Proposal 1 in Equity Office’s Proxy Statement for the 2003 Annual Meeting of Shareholders. The balance of the response to this item is contained in the discussion entitled “Executive and Senior Officers of Equity Office” under Item 1 of Part I of this report.

Item 11. Executive Compensation.

Information about executive compensation is incorporated by reference from the discussion under the heading “Executive Compensation” in Equity Office’s Proxy Statement for the 2003 Annual Meeting of Shareholders.


Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Information about security ownership of certain beneficial owners and management, and information about Equity Office’s equity compensation plans, are incorporated by reference from the discussion under the headings “Common Share and Unit Ownership by Trustees and Executive Officers” and “Equity Compensation Plan Information” in Equity Office’s Proxy Statement for the 2003 Annual Meeting of Shareholders.

Item 13. Certain Relationships and Related Transactions.

Information about certain relationships and transactions with related parties is incorporated herein by reference from the discussion under the heading “Certain Relationships and Related Transactions” in Equity Office’s Proxy Statement for the 2003 Annual Meeting of Shareholders.

Item 14. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

The principal executive officer of Equity Office, Samuel Zell, and the principal financial officer of Equity Office, Marsha C. Williams, evaluated within 90 days prior to the filing of this Form 10-K the effectiveness of the design and operation of our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. As a result of this evaluation, these executive officers have concluded that, as of such date, the design and operation of our disclosure controls and procedures were effective.

Changes in Internal Controls

Since the date of the evaluation of our disclosure controls and procedures by Mr. Zell and Ms. Williams described above, there have been no significant changes in our internal controls or in other factors that could significantly affect our disclosure controls and procedures.

101

PART IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K.

(a)(1) Financial Statements

Report of Independent Auditors

Consolidated Balance Sheets as of December 31, 2002 and 2001

Consolidated Statements of Operations for the years ended December 31, 2002, 2001 and 2000

Consolidated Statements of Changes in Partner’s Capital and Net Comprehensive Income for the years ended December 31, 2002, 2001 and 2000

Consolidated Statements of Cash Flows for the years ended December 31, 2002, 2001 and 2000

Notes to Consolidated Financial Statements

(a)(2) Financial Statement Schedules

Schedule III — Real Estate and Accumulated Depreciation as of December 31, 2002

All other schedules for which provision is made in the applicable accounting regulations of the SEC are not required under the related instructions or are inapplicable and therefore have been omitted.

(a)(3) Exhibits:

The exhibits required by this item are set forth on the Exhibit Index attached hereto.

(b) Reports on Form 8-K:

The following report(s) on Form 8-K were filed during the quarter ended December 31, 2002:


Date of Event				Items Reported/Financial Statements Filed

November 18, 2002				Item 5. Other Events

See Item 15(a)(3) above.

(d) Financial Statement Schedules:

None.

102

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

EOP OPERATING LIMITED PARTNERSHIP

By: EQUITY OFFICE PROPERTIES TRUST

its general partner

By: /s/ SAMUEL ZELL

Samuel Zell

Chairman of Equity Office’s Board of Trustees

and Chief Executive Officer

Date: March 28, 2003

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.



Signature				Title


/s/ SAMUEL ZELL Samuel Zell				Chairman of Equity Office’s Board of Trustees and Chief Executive Officer (principal executive officer)

/s/ RICHARD D. KINCAID Richard D. Kincaid				President and Trustee

/s/ MARSHA C. WILLIAMS Marsha C. Williams				Executive Vice President — Chief Financial Officer (principal financial officer)

/s/ STEPHEN M. BRIGGS Stephen M. Briggs				Senior Vice President — Chief Accounting Officer (principal accounting officer)

/s/ THOMAS E. DOBROWSKI Thomas E. Dobrowski				Trustee

/s/ JOHN A. FOSTER John A. Foster				Trustee

/s/ WILLIAM M. GOODYEAR William M. Goodyear				Trustee

/s/ JAMES D. HARPER, JR. James D. Harper, Jr.				Trustee

/s/ DAVID K. MCKOWN David K. McKown				Trustee

103



Signature				Title

/s/ JOHN S. MOODY, SR. John S. Moody, Sr.				Trustee

/s/ JERRY M. REINSDORF Jerry M. Reinsdorf				Trustee

/s/ SHELI Z. ROSENBERG Sheli Z. Rosenberg				Trustee

/s/ EDWIN N. SIDMAN Edwin N. Sidman				Trustee

/s/ WARREN E. SPIEKER, JR. Warren E. Spieker, Jr.				Trustee

Jan H.W.R. van der Vlist				Trustee

/s/ CRAIG G. VOUGHT Craig G. Vought				Trustee

William Wilson III				Trustee

104

CERTIFICATIONS

I, Samuel Zell, certify that:

1. I have reviewed this annual report on Form 10-K of EOP Operating Limited Partnership;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

      (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

      (b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

      (c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing similar functions):

(a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officer and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

/s/ SAMUEL ZELL

Samuel Zell

Chief Executive Officer of

Equity Office Properties Trust,

the general partner of

EOP Operating Limited Partnership

Date: March 28, 2003

105

I, Marsha C. Williams, certify that:

1. I have reviewed this annual report on Form 10-K of EOP Operating Limited Partnership;

/s/ MARSHA C. WILLIAMS

Marsha C. Williams

Executive Vice President and

Chief Financial Officer of

Equity Office Properties Trust,

the general partner of

EOP Operating Limited Partnership

Date: March 28, 2003

106

EXHIBIT INDEX


Exhibit No.			Description	Page No.

	3.1		Third Amended and Restated Agreement of Limited Partnership of EOP Partnership (incorporated herein by reference to Exhibit 99.8 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001)

	3.2		First Amendment to Third Amended and Restated Agreement of Limited Partnership of EOP Partnership (incorporated herein by reference to Exhibit 4.1 to EOP Partnership’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2002)

	4.1	*	Indenture, dated as of September 2, 1997, between EOP Partnership and State Street Bank and Trust Company

	4.2	*	First Supplemental Indenture, dated as of February 9, 1998, between EOP Partnership and State Street Bank and Trust Company

	4.3	*	$200,000,000 6.375% Note due 2003. A $100,000,000 6.375% Note due 2003, identical in all material respects other than principal amount to the Note filed as Exhibit 4.3 to Equity Office’s Annual Report on Form 10-K for the year ended December 31, 1997, as amended, has not been filed.

	4.4	*	$200,000,000 6.625% Note due 2005. Another $200,000,000 6.625% Note due 2005, identical in all material respects to the Note filed as Exhibit 4.4 to Equity Office’s Annual Report on Form 10-K for the year ended December 31, 1997, as amended, has not been filed.

	4.5	*	$200,000,000 6.750% Note due 2008. A $100,000,000 6.750% Note due 2008, identical in all material respects other than principal amount to the Note filed as Exhibit 4.5 to Equity Office’s Annual Report on Form 10-K for the year ended December 31, 1997, as amended, has not been filed.

	4.6	*	$200,000,000 7.250% Note due 2018. A $50,000,000 7.250% Note due 2018, identical in all material respects other than principal amount to the Note filed as Exhibit 4.6 to Equity Office’s Annual Report on Form 10-K for the year ended December 31, 1997, as amended, has not been filed.

	4.7		$30,000,000 7.24% Senior Note due 2004 (incorporated herein by reference to Exhibit 4.8 to Equity Office’s Annual Report on Form 10-K for the year ended December 31, 1997, as amended)

	4.8		$50,000,000 7.36% Senior Note due 2005 (incorporated herein by reference to Exhibit 4.9 to Equity Office’s Annual Report on Form 10-K for the year ended December 31, 1997, as amended)

	4.9		$50,000,000 7.44% Senior Note due 2006 (incorporated herein by reference to Exhibit 4.10 to Equity Office’s Annual Report on Form 10-K for the year ended December 31, 1997, as amended)

	4.10		$50,000,000 7.41% Senior Note due 2007 (incorporated herein by reference to Exhibit 4.11 to Equity Office’s Annual Report on Form 10-K for the year ended December 31, 1997, as amended)

	4.11		$250,000,000 6.50% Notes due 2004 (incorporated herein by reference to Exhibit 4.12 to Equity Office’s Annual Report on Form 10-K for the year ended December 31, 2000, as amended)

	4.12		$300,000,000 6.763% Notes due 2007 (incorporated herein by reference to Exhibit 4.13 to Equity Office’s Annual Report on Form 10-K for the year ended December 31, 2000, as amended)


Exhibit No.		Description	Page No.

	4.13	$225,000,000 7.25% Notes due 2028 (incorporated herein by reference to Exhibit 4.14 to Equity Office’s Annual Report on Form 10-K for the year ended December 31, 2000, as amended)

	4.14	$300,000,000 6.5% Notes due 2004 (incorporated herein by reference to Exhibit 4.16 to Equity Office’s Annual Report on Form 10-K for the year ended December 31, 2000, as amended)

	4.15	$500,000,000 6.8% Notes due 2009 (incorporated herein by reference to Exhibit 4.17 to Equity Office’s Annual Report on Form 10-K for the year ended December 31, 2000, as amended)

	4.16	$200,000,000 7.5% Notes due April 19, 2029 (incorporated herein by reference to Exhibit 4.23 to EOP Partnership’s Current Report on Form 8-K filed with the SEC on April 19, 1999)

	4.17	$400,000,000 8.375% Note due March 15, 2006 (incorporated herein by reference to Exhibit 4.24 to EOP Partnership’s Current Report on Form 8-K filed with the SEC on March 24, 2000)

	4.18	$100,000,000 8.375% Note due March 15, 2006 (incorporated herein by reference to Exhibit 4.25 to EOP Partnership’s Current Report on Form 8-K filed with the SEC on March 24, 2000)

	4.19	$360,000,000 8.10% Note due August 1, 2010 of EOP Partnership (incorporated herein by reference to Exhibit 4.1 to EOP Partnership’s Current Report on Form 8-K filed with the SEC on August 8, 2000)

	4.20	Indenture, dated August 23, 2000, by and among EOP Partnership, Equity Office and State Street Bank and Trust Company (incorporated herein by reference to Exhibit 4.1 to Equity Office’s Registration Statement on Form S-3 (SEC File No. 333-47754))

	4.21	Registration Rights Agreement, dated as of August 23, 2000, among Equity Office, EOP Partnership and Salomon Smith Barney Inc. (incorporated herein by reference to Exhibit 4.2 to Equity Office’s Registration Statement on Form S-3 (SEC File No. 333-47754))

	4.22	$300,000,000 (or applicable lesser amount) Senior Exchangeable Note due November 15, 2008, and related Guarantee (incorporated herein by reference to Exhibit 4.23 to Equity Offices annual report on Form 10-K for the year ended December 31, 2001, as amended)

	4.23	$25,000,000 (or applicable lesser amount) Senior Exchangeable Note due November 15, 2008, and related Guarantee (incorporated herein by reference to Exhibit 4.24 to Equity Offices annual report on Form 10-K for the year ended December 31, 2001, as amended)

	4.24	$325,000,000 (or applicable lesser amount) Senior Exchangeable Notes due November 15, 2008, and related Guarantee (incorporated herein by reference to Exhibit 4.25 to Equity Offices annual report on Form 10-K for the year ended December 31, 2001, as amended)

	4.25	Indenture, dated August 29, 2000, by and between EOP Partnership and U.S. Bank National Association (formerly known as U.S. Bank Trust National Association) (incorporated herein by reference to Exhibit 4.1 to EOP Partnership’s Registration Statement on Form S-3, as amended (SEC File No. 333-43530))


Exhibit No.		Description	Page No.

	4.26	First Supplemental Indenture, dated June 18, 2001, among EOP Partnership, Equity Office and U.S. Bank National Association (formerly known as U.S. Bank Trust National Association) (incorporated herein by reference to Exhibit 4.2 to Equity Office’s Registration Statement on Form S-3, as amended (SEC File No. 333-58976))

	4.27	$400,000,000 7 3/8% Note due 2003 (incorporated herein by reference to Exhibit 4.4 to EOP Partnership’s Current Report on Form 8-K filed with the SEC on November 20, 2000)

	4.28	$400,000,000 7 3/4% Note due 2007 (incorporated herein by reference to Exhibit 4.5 to EOP Partnership’s Current Report on Form 8-K filed with the SEC on November 20, 2000)

	4.29	$200,000,000 7 3/4% Note due 2007 (incorporated herein by reference to Exhibit 4.6 to EOP Partnership’s Current Report on Form 8-K filed with the SEC on November 20, 2000)

	4.30	Revolving Credit Agreement for $1,000,000,000 Revolving Credit Facility, dated as of May 12, 2000, among EOP Partnership and the Banks listed therein (incorporated herein by reference to Exhibit 99.7.1 of Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2000)

	4.31	Guaranty of Payment — No. 1, made as of May 12, 2000, between Equity Office and Bank of America, N.A. (incorporated herein by reference to Exhibit 99.7.2 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2000)

	4.32	Guaranty of Payment — No. 2, made as of May 12, 2000, between Equity Office and Bank of America, N.A. (incorporated herein by reference to Exhibit 99.7.3 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2000)

	4.33	Fixed Rate Promissory Note with The Chase Manhattan Bank (incorporated herein by reference to Exhibit 4.22 to Equity Office’s Annual Report on Form 10-K for the year ended December 31, 1999, as amended)

	4.34	First Amendment to Revolving Credit Agreement and Consent Agreement, dated as of May 18, 2001, among EOP Partnership and the banks listed therein (incorporated herein by reference to Exhibit 10.3 to Equity Office’s Registration Statement on Form S-4, as amended (SEC File No. 333-57526))

	4.35	$500,000,000 7.000% Note due July 15, 2011, and related Guarantee (incorporated herein by reference to Exhibit 4.4 to EOP Partnership’s Current Report on Form 8-K filed with the SEC on July 18, 2001)

	4.36	$500,000,000 7.000% Note due July 15, 2011, and related Guarantee (incorporated herein by reference to Exhibit 4.5 to EOP Partnership’s Current Report on Form 8-K filed with the SEC on July 18, 2001)

	4.37	$100,000,000 7.000% Note due July 15, 2011, and related Guarantee (incorporated herein by reference to Exhibit 4.6 to EOP Partnership’s Current Report on Form 8-K filed with the SEC on July 18, 2001)

	4.38	$300,000,000 7.875% Note due July 15, 2031, and related Guarantee (incorporated herein by reference to Exhibit 4.7 to EOP Partnership’s Current Report on Form 8-K filed with the SEC on July 18, 2001)


Exhibit No.		Description	Page No.

	4.39	$400,000,000 6 3/4% Note due February 15, 2012, and related Guarantee (incorporated herein by reference to Exhibit 4.1 to EOP Partnership’s Current Report on Form 8-K filed with the SEC on February 15, 2002)

	4.40	$100,000,000 6 3/4% Note due February 15, 2012, and related Guarantee (incorporated herein by reference to Exhibit 4.2 to EOP Partnership’s Current Report on Form 8-K filed with the SEC on February 15, 2002)

	4.41	Indenture, dated as of December 6, 1995, among Spieker and State Street Bank and Trust, as Trustee (incorporated herein by reference to Exhibit 99.17.1 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001)

	4.42	Fourth Supplemental Indenture, dated as of January 24, 1996, among Spieker, Spieker Partnership and State Street (incorporated herein by reference to Exhibit 99.17.7 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001)

	4.43	$100,000,000 6.90% Note due January 15, 2004 (incorporated herein by reference to Exhibit 99.17.8 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001)

	4.44	Fifth Supplemental Indenture, dated as of June 20, 1996, among Spieker, Spieker Partnership and State Street (incorporated herein by reference to Exhibit 99.17.9 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001)

	4.45	$100,000,000 Medium-Term Notes due nine months or more from July 19, 1996 (incorporated herein by reference to Exhibit 99.17.10 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001)

	4.46	Sixth Supplemental Indenture, dated as of December 10, 1996, among Spieker, Spieker Partnership and State Street (incorporated herein by reference to Exhibit 99.17.12 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001)

	4.47	$100,000,000 7.125% Note due December 1, 2006 (incorporated herein by reference to Exhibit 99.17.13 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001)

	4.48	Seventh Supplemental Indenture, dated as of December 10, 1996, among Spieker, Spieker Partnership and State Street (incorporated herein by reference to Exhibit 99.17.14 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001)

	4.49	$25,000,000 7.875% Note due December 1, 2016 (incorporated herein by reference to Exhibit 99.17.15 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001)

	4.50	Eighth Supplemental Indenture, dated as of July 14, 1997, among Spieker, Spieker Partnership and State Street (incorporated herein by reference to Exhibit 99.17.16 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001)

	4.51	$150,000,000 7.125% Note due July 1, 2009 (incorporated herein by reference to Exhibit 99.17.17 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001)


Exhibit No.		Description	Page No.

	4.52	Ninth Supplemental Indenture, dated as of September 29, 1997, among Spieker, Spieker Partnership, First Trust of California, National Association and State Street (incorporated herein by reference to Exhibit 99.17.18 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001)

	4.53	$150,000,000 7.50% Debenture due October 1, 2027 (incorporated herein by reference to Exhibit 99.17.19 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001)

	4.54	Tenth Supplemental Indenture, dated as of December 8, 1997, among Spieker, Spieker Partnership and First Trust of California, National Association (incorporated herein by reference to Exhibit 99.17.20 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001)

	4.55	$200,000,000 7.35% Debenture due December 1, 2017 (incorporated herein by reference to Exhibit 99.17.21 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001)

	4.56	Eleventh Supplemental Indenture, dated as of January 27, 1998, among Spieker, Spieker Partnership and First Trust of California, National Association (incorporated herein by reference to Exhibit 99.17.22 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001)

	4.57	$150,000,000 6.75% Note due January 15, 2008 (incorporated herein by reference to Exhibit 99.17.23 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001)

	4.58	Twelfth Supplemental Indenture, dated as of February 2, 1998, among Spieker, Spieker Partnership and First Trust of California, National Association (incorporated herein by reference to Exhibit 99.17.24 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001)

	4.59	$125,000,000 6.875% Note due February 1, 2005 (incorporated herein by reference to Exhibit 99.17.25 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001)

	4.60	Thirteenth Supplemental Indenture, dated as of February 2, 1998, among Spieker, Spieker Partnership and First Trust of California, National Association (incorporated herein by reference to Exhibit 99.17.26 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001)

	4.61	$1,500,000 7.0% Note due February 1, 2007 (incorporated herein by reference to Exhibit 99.17.27 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001)

	4.62	Fourteenth Supplemental Indenture, dated as of April 29, 1998, among Spieker, Spieker Partnership and U.S. Bank National Association (formerly known as U.S. Bank Trust National Association) (incorporated herein by reference to Exhibit 99.17.28 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001)

	4.63	$25,000,000 6.88% Note due April 30, 2007 (incorporated herein by reference to Exhibit 99.17.29 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001)


Exhibit No.		Description	Page No.

	4.64	Fifteenth Supplemental Indenture, dated as of May 11, 1999, among Spieker, Spieker Partnership and U.S. Bank National Association (formerly known as U.S. Bank Trust National Association) (incorporated herein by reference to Exhibit 99.17.30 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001)

	4.65	$200,000,000 6.8% Note due May 1, 2004 (incorporated herein by reference to Exhibit 99.17.31 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001)

	4.66	$200,000,000 7.25% Note due May 1, 2009 (incorporated herein by reference to Exhibit 99.17.32 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001)

	4.67	Sixteenth Supplemental Indenture, dated as of December 11, 2000, among Spieker, Spieker Partnership and U.S. Bank National Association (formerly known as U.S. Bank Trust National Association) (incorporated herein by reference to Exhibit 99.17.33 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001)

	4.68	$200,000,000 7.65% Note due December 15, 2010 (incorporated herein by reference to Exhibit 99.17.34 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001)

	4.69	Seventeenth Supplemental Indenture relating to the substitution of Equity Office and EOP Partnership as successor entities for Spieker and Spieker Partnership, respectively (incorporated herein by reference to Exhibit 99.17.35 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001)

	4.70	$400,000,000 6 3/4% Note due February 15, 2012, and related Guarantee (incorporated by reference to Exhibit 4.1 to EOP Partnership’s Current Report on Form 8-K filed with the SEC on February 15, 2002)

	4.71	$100,000,000 6 3/4% Note due February 15, 2012, and related Guarantee (incorporated by reference to Exhibit 4.2 to EOP Partnership’s Current Report on Form 8-K filed with the SEC on February 15, 2002)

	4.72	$400,000,000 5.875% Note due January 15, 2013, and related Guarantee (incorporated herein by reference to Exhibit 4.1 to the Current Report on Form 8-K of EOP Partnership filed with the SEC on January 15, 2003)

	4.73	$100,000,000 5.875% Note due January 15, 2003, and related Guarantee (incorporated herein by reference to Exhibit 4.2 to the Current Report on Form 8-K of EOP Partnership filed with the SEC on January 15, 2003)

	10.1	Amended and Restated Operating Agreement No. 1 of Wilson/ Equity Office, LLC (incorporated herein by reference to Exhibit 10.13 to Equity Office’s Annual Report on Form 10-K for the year ended December 31, 2000, as amended)

	10.2	Separation Agreement dated as of December 24, 2002, by and between Wilson/Equity Office, LLC, Wilson Investors-California, LLC, EOP Investor, L.L.C., EOP-Concar Investor, L.L.C., Equity Office Properties Management Corp., EOP Operating Limited Partnership, Equity Office Properties Trust, William Wilson III, Thomas P. Sullivan, Jacqueline U. Moore, A. Robert Paratte, H. Lee Van Boven, Terry Reagan, Scott Stephens and Jon Knorpp. (incorporated herein by reference to Exhibit 10.8 to Equity Office’s Annual Report on Form 10-K for the year ended December 31, 2002)


Exhibit No.			Description	Page No.

	10.3†		Change in Control Agreement entered into effective as of September 1, 2001 by and between Equity Office Properties Management Corp., Equity Office and Richard D. Kincaid (incorporated herein by reference to Exhibit 10.2 to Equity Office’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001)

	10.4†		Change in Control Agreement entered into effective as of September 1, 2001 by and between Equity Office Properties Management Corp., Equity Office and Peter H. Adams (incorporated herein by reference to Exhibit 10.3 to Equity Office’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001)

	10.5	†	Change in Control Agreement entered into effective as of September 1, 2001 by and between Equity Office Properties Management Corp., Equity Office and David A. Helfand (incorporated herein by reference to Exhibit 10.5 to Equity Office’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001)

	10.6	†	Change in Control Agreement entered into effective as of September 1, 2001 by and between Equity Office Properties Management Corp., Equity Office and Stanley M. Stevens (incorporated herein by reference to Exhibit 10.8 to Equity Office’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001)

	10.7	†	Assumption and Amendment to Change in Control Agreement entered into effective as of May 22, 2002 by and between Equity Office Properties Management Corp., Equity Office, EOP Partnership and Richard D. Kincaid (incorporated by reference to Exhibit 10.1 to Equity Office’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2002)

	10.8	†	Assumption and Amendment to Change in Control Agreement entered into effective as of May 22, 2002 by and between Equity Office Properties Management Corp., Equity Office, EOP Partnership and Peter H. Adams (incorporated by reference to Exhibit 10.2 to Equity Office’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2002)

	10.9	†	Assumption and Amendment to Change in Control Agreement entered into effective as of May 22, 2002 by and between Equity Office Properties Management Corp., Equity Office, EOP Partnership and David A. Helfand (incorporated by reference to Exhibit 10.3 to Equity Office’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2002)

	10.10	†	Assumption and Amendment to Change in Control Agreement entered into effective as of May 22, 2002 by and between Equity Office Properties Management Corp., Equity Office, EOP Partnership and Stanley M. Stevens (incorporated by reference to Exhibit 10.4 to Equity Office’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2002)

	10.11	†	Severance Agreement, dated June 24, 2002, with Timothy H. Callahan (incorporated by reference to Exhibit 10.1 to Equity Office’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002)

	10.12		Construction Loan Agreement, dated as of April 30, 2002, between Foundry Square Associates IV, LLC, a California limited liability company, as Borrower and Riverside Finance Company, L.L.C., a Delaware limited liability company, as Lender (incorporated by reference to Exhibit 10.6 to Equity Office’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002)


Exhibit No.		Description	Page No.

	10.13	Construction Loan Agreement, dated as of November 21, 2002, by and between WEO-Concar LLC, a California limited liability company, as Borrower, and Riverside Finance L.L.C., a Delaware limited liability company, as Lender (incorporated herein by reference to Exhibit 10.17 to Equity Office’s Annual Report on Form 10-K for the year ended December 31, 2002)

	12.1	Statement of Earnings to Combined Fixed Charges and Preferred Distributions

	21.1	List of Subsidiaries

	23.1	Consent of Independent Auditors


	*	Incorporated herein by reference to the same-numbered exhibit to Equity Office’s Annual Report on Form 10-K for the year ended December 31, 1997, as amended.

† Represents a management contract or compensatory plan, contract or agreement.

Schedule III — Real Estate and Accumulated Depreciation as of December 31, 2002



														Costs Capitalized
										Initial Cost to				Subsequent to
										EOP Partnership				Acquisition

							Encumbrances					Building and				Building and
	Description	Notes		Location	State		at 12/31/02			Land		Improvements		Land		Improvements

	Office Properties:
	Atlanta Region
1	200 Galleria			Atlanta		GA	$	—		$	10,282	$	58,266	$	—	$	2,294
2	Prominence in Buckhead			Atlanta		GA		—			7,456		63,166		—		11,523
3	One Ninety One Peachtree Tower			Atlanta		GA		—			46,500		263,500		—		1,980
4	Central Park		(3)	Atlanta		GA		(55,718	)		9,163		82,463		—		4,280
5	Lakeside Office Park			Atlanta		GA		—			4,792		43,132		—		2,118
6	Paces West		(3)	Atlanta		GA		—			8,336		75,025		—		5,536
7	Perimeter Center			Atlanta		GA		(200,373	)		52,374		415,161		279		26,942
8	Wachovia Center		(3)	Charlotte		NC		—			5,061		45,549		—		1,560

	Atlanta Region Totals							(256,091	)		143,964		1,046,262		279		56,233

	Boston Region
9	Crosby Corporate Center			Bedford		MA		—			5,958		53,620		115		2,256
10	Crosby Corporate Center II			Bedford		MA		—			9,385		27,584		9		5,390
11	125 Summer Street			Boston		MA		(70,312	)		18,000		102,000		—		4,192
12	222 Berkeley Street			Boston		MA		—			25,593		145,029		—		3,009
13	500 Boylston Street			Boston		MA		—			39,000		221,000		—		—
14	Sixty State Street			Boston		MA		(76,626	)		—		256,000		—		3,104
15	100 Summer Street			Boston		MA		—			22,271		200,439		—		41,214
16	150 Federal Street			Boston		MA		—			14,131		127,182		—		13,777
17	175 Federal Street			Boston		MA		—			4,894		44,045		—		2,613
18	2 Oliver Street- 147 Milk Street			Boston		MA		—			5,017		45,157		—		3,106
19	225 Franklin Street			Boston		MA		—			34,608		311,471		—		7,456
20	28 State Street		(3)	Boston		MA		—			9,513		85,623		—		40,331
21	Center Plaza			Boston		MA		—			18,942		170,480		—		7,406
22	Russia Wharf			Boston		MA		—			3,891		35,023		—		3,014
23	South Station			Boston		MA		—			—		31,074		—		1,261
24	New England Executive Park			Burlington		MA		—			15,637		140,729		203		13,025
25	The Tower at New England Executive Park			Burlington		MA		—			2,793		31,462		5		11,098
26	One Memorial Drive			Cambridge		MA		(57,472	)		14,862		88,216		—		1,706
27	One Canal Park			Cambridge		MA		—			2,006		18,054		—		1,153
28	Riverview I & II			Cambridge		MA		—			5,938		53,438		6		2,611
29	Ten Canal Park			Cambridge		MA		—			2,383		21,448		—		62
30	Riverside Center			Newton		MA		—			24,000		69,849		—		19,773
31	175 Wyman			Walthan		MA		—			14,600		5,400		3		1,425
32	Wellesley Office Park			Wellesley		MA		—			16,493		148,434		20		5,942

	Boston Region Totals							(204,410	)		309,915		2,432,757		361		194,924

	Chicago Region
33	101 North Wacker			Chicago		IL		—			10,035		90,319		—		3,363
34	161 North Clark		(3)	Chicago		IL		—			15,882		142,936		—		18,487
35	200 West Adams			Chicago		IL		—			11,654		104,887		—		7,100
36	30 North LaSalle Street		(3)	Chicago		IL		—			12,489		112,401		—		7,432
37	Civic Opera House			Chicago		IL		—			12,771		114,942		—		6,318
38	One North Franklin		(3)	Chicago		IL		—			9,830		88,474		—		4,066
39	Presidents Plaza			Chicago		IL		—			13,435		120,919		—		7,041
40	BP Tower		(3)	Cleveland		OH		(84,638	)		17,403		157,260		—		5,790
41	Community Corporate Center		(3)	Columbus		OH		—			3,019		27,170		—		2,557
42	One Crosswoods		(3)	Columbus		OH		—			1,059		9,530		—		1,833
43	Corporate 500 Centre			Deerfield		IL		(76,601	)		20,100		113,900		—		4,251
44	1700 Higgins Centre		(3)	Des Plaines		IL		—			1,323		11,908		64		1,037
45	Tri-State International			Lincolnshire		IL		—			10,925		98,327		290		2,400
46	1111 West 22nd Street			Oakbrook		IL		—			4,834		43,508		48		1,933
47	One Lincoln Centre			Oakbrook		IL		—			7,350		41,650		—		1,947

[Additional columns below]

[Continued from above table, first column(s) repeated]

Gross Amount Carried at

Close of Period

12/31/2002

Date of

Building and Accumulated Construction/ Date Depreciable

Land Improvements Total(1) Depreciation Renovation Acquired Lives(2)

1
$ 10,282 $ 60,560 $ 70,842 $ (4,082 ) 1985 06/19/00 40

2
7,456 74,689 82,145 (7,898 ) 1999 07/13/99 40

3
46,500 265,480 311,980 (16,963 ) 1991 06/19/00 40

4
9,163 86,743 95,906 (13,110 ) 1986 10/17/95 40

5
4,792 45,250 50,042 (6,331 ) 1972-1978 12/19/97 40

6
8,336 80,561 88,897 (11,402 ) 1988 10/31/94 40

7
52,653 442,103 494,756 (61,250 ) 1970/1989 12/19/97 40

8
5,061 47,109 52,170 (6,570 ) 1972/1994 09/01/95 40

144,243 1,102,495 1,246,738 (127,606 )

9
6,073 55,876 61,949 (7,129 ) 1996 12/19/97 40

10
9,394 32,974 42,368 (5,237 ) 1998 12/19/97 40

11
18,000 106,192 124,192 (7,291 ) 1989 06/19/00 40

12
25,593 148,038 173,631 (9,564 ) 1991 06/19/00 40

13
39,000 221,000 260,000 (14,043 ) 1988 06/19/00 40

14
— 259,104 259,104 (16,509 ) 1979 06/19/00 40

15
22,271 241,653 263,924 (29,383 ) 1974/1990 03/18/98 40

16
14,131 140,959 155,090 (20,518 ) 1988 12/19/97 40

17
4,894 46,658 51,552 (6,173 ) 1977 12/19/97 40

18
5,017 48,263 53,280 (7,069 ) 1988 12/19/97 40

19
34,608 318,927 353,535 (41,408 ) 1966/1996 12/19/97 40

20
9,513 125,954 135,467 (25,823 ) 1968/1997 01/23/95 40

21
18,942 177,886 196,828 (23,138 ) 1969 12/19/97 40

22
3,891 38,037 41,928 (5,897 ) 1978-1982 12/19/97 40

23
— 32,335 32,335 (4,177 ) 1988 12/19/97 40

24
15,840 153,754 169,594 (21,521 ) 1970/1985 12/19/97 40

25
2,798 42,560 45,358 (5,602 ) 1971/1999 03/31/98 40

26
14,862 89,922 104,784 (5,640 ) 1985 06/19/00 40

27
2,006 19,207 21,213 (2,585 ) 1987 12/19/97 40

28
5,944 56,049 61,993 (7,296 ) 1985-1986 12/19/97 40

29
2,383 21,510 23,893 (2,717 ) 1987 12/19/97 40

30
24,000 89,622 113,622 (8,205 ) 2000 12/19/97 40

31
14,603 6,825 21,428 (420 ) 1999 12/19/97 40

32
16,513 154,376 170,889 (20,166 ) 1963/1984 12/19/97 40

310,276 2,627,681 2,937,957 (297,511 )

33
10,035 93,682 103,717 (12,770 ) 1980/1990 12/19/97 40

34
15,882 161,423 177,305 (28,317 ) 1992 07/26/95 40

35
11,654 111,987 123,641 (15,974 ) 1985/1996 12/19/97 40

36
12,489 119,833 132,322 (17,848 ) 1974/1990 06/13/97 40

37
12,771 121,260 134,031 (16,979 ) 1929/1996 12/19/97 40

38
9,830 92,540 102,370 (13,031 ) 1991 12/31/92 40

39
13,435 127,960 141,395 (16,830 ) 1980-1982 12/19/97 40

40
17,403 163,050 180,453 (23,367 ) 1985 09/04/96 40

41
3,019 29,727 32,746 (4,703 ) 1987 06/14/90 40

42
1,059 11,363 12,422 (1,678 ) 1984 11/12/93 40

43
20,100 118,151 138,251 (7,793 ) 1986/1990 06/19/00 40

44
1,387 12,945 14,332 (2,003 ) 1986 11/12/93 40

45
11,215 100,727 111,942 (14,000 ) 1986 12/19/97 40

46
4,882 45,441 50,323 (6,357 ) 1984 12/19/97 40

47
7,350 43,597 50,947 (3,033 ) 1986 06/19/00 40

Costs Capitalized

Initial Cost to Subsequent to

EOP Partnership Acquisition

Encumbrances Building and Building and

Description Notes Location State at 12/31/02 Land Improvements Land Improvements

48
Oakbrook Terrace Tower (3) Oakbrook Terrace IL — 11,950 107,552 486 7,042

49
Westbrook Corporate Center Westchester IL (100,494 ) 24,875 223,874 30 13,517

Chicago Region Totals (261,733 ) 188,934 1,609,557 918 96,114

Denver Region

50
Northland Plaza Bloomington MN — 4,705 42,346 — 2,239

51
Metropoint II Denver CO — 1,777 17,865 — 3,207

52
410 17th Street Denver CO — 4,474 40,264 — 3,841

53
4949 South Syracuse Denver CO — 822 7,401 22 1,022

54
Denver Corporate Center II & III (3) Denver CO — 4,059 36,534 3 4,740

55
Denver Post Tower Denver CO — — 52,937 — 6,335

56
Dominion Plaza Denver CO — 5,990 53,911 — 5,834

57
Metropoint Denver CO — 4,375 39,375 — 3,175

58
Tabor Center Denver CO — 12,948 116,536 — 33,070

59
Trinity Place Denver CO — 1,898 17,085 — 2,099

60
Millennium Plaza Englewood CO — 4,257 38,314 — 193

61
Terrace Building Englewood CO — 1,546 13,865 29 859

62
The Quadrant (3) Englewood CO — 4,357 39,215 — 3,069

63
The Solarium Englewood CO — 1,951 17,560 — 1,738

64
Wells Fargo Center Minneapolis MN (112,493 ) 39,045 221,255 — 502

65
US Bancorp Center Minneapolis MN — 17,269 99,018 — 22,512

66
LaSalle Plaza Minneapolis MN — 9,681 87,127 — 3,233

67
U.S. West Dex Center Salt Lake City UT — 1,725 9,775 49 306

68
49 East Thomas Road (3) Phoenix AZ — 65 588 — 35

69
One Phoenix Plaza (3) Phoenix AZ — 6,192 55,727 — —

Denver Region Totals (112,493 ) 127,136 1,006,698 103 98,009

Houston Region

70
One American Center (3) Austin TX — — 70,812 — 8,045

71
One Congress Plaza (3) Austin TX — 6,502 58,521 — 3,933

72
San Jacinto Center (3) Austin TX — 5,075 45,671 — 4,370

73
9400 NCX (3) Dallas TX — 3,570 32,130 — 5,294

74
Colonnade I & II Dallas TX — 9,044 81,394 — 6,291

75
Colonnade III Dallas TX — 6,152 56,634 — 5,549

76
Eighty Eighty Central Dallas TX — 3,760 33,854 — 3,541

77
Four Forest Plaza (3) Dallas TX — 4,768 42,911 — 5,872

78
Lakeside Square Dallas TX — 5,262 47,369 24 4,375

79
North Central Plaza Three (3) Dallas TX — 3,612 32,689 — 4,050

80
Summit Office Park (3) Ft. Worth TX — 1,421 12,790 — 2,496

81
2500 CityWest Houston TX — 8,089 72,811 — 3,272

82
Brookhollow Central Houston TX — 7,226 65,053 — 8,155

83
Intercontinental Center (3) Houston TX — 1,602 14,420 70 2,033

84
Northborough Tower (3) Houston TX — 1,355 12,199 37 2,067

85
San Felipe Plaza (3) Houston TX (49,500 ) 13,471 117,984 20 9,200

86
909 E. Las Colinas Boulevard Irving TX — 5,129 46,164 13 980

87
545 E. John Carpenter Freeway Irving TX — 5,525 49,728 — 1,596

88
One Lakeway Center (3) Metairie LA — 2,804 25,235 — 3,813

89
Three Lakeway Center (3) Metairie LA — 4,695 43,661 59 3,138

90
Two Lakeway Center (3) Metairie LA — 4,644 41,792 49 3,698

91
601 Tchoupitoulas Garage (7) New Orleans LA — 1,180 10,620 — 298

92
LL&E Tower (7) New Orleans LA (37,500 ) 6,186 55,672 46 7,507

93
Texaco Center (7) New Orleans LA (42,500 ) 6,686 60,177 10 4,166

94
Colonnade I (3) San Antonio TX — 1,414 12,725 81 1,826

95
Northwest Center (3) San Antonio TX — 1,948 17,532 — 1,978

96
Union Square (3) San Antonio TX — 1,582 14,236 9 2,799

Houston Region Totals (129,500 ) 122,702 1,174,784 418 110,342

Los Angeles Region

97
Stadium Towers Anaheim CA — 6,683 37,868 — 783

[Additional columns below]

[Continued from above table, first column(s) repeated]

Gross Amount Carried at

Close of Period

12/31/2002

Date of

Building and Accumulated Construction/ Date Depreciable

Land Improvements Total(1) Depreciation Renovation Acquired Lives(2)

48
12,436 114,594 127,030 (17,160 ) 1988 04/16/97 40

49
24,905 237,391 262,296 (31,909 ) 1985/1996 12/19/97 40

189,852 1,705,671 1,895,523 (233,752 )

50
4,705 44,585 49,290 (5,545 ) 1985 07/02/98 40

51
1,777 21,072 22,849 (2,817 ) 1999 04/10/00 40

52
4,474 44,105 48,579 (6,127 ) 1978 04/30/98 40

53
844 8,423 9,267 (1,029 ) 1982 07/15/98 40

54
4,062 41,274 45,336 (5,776 ) 1981/1993-1997 12/20/90 40

55
— 59,272 59,272 (8,341 ) 1984 04/21/98 40

56
5,990 59,745 65,735 (8,430 ) 1983 05/14/98 40

57
4,375 42,550 46,925 (4,985 ) 1987 07/15/98 40

58
12,948 149,606 162,554 (15,898 ) 1985 04/30/98 40

59
1,898 19,184 21,082 (2,694 ) 1983 04/30/98 40

60
4,257 38,507 42,764 (4,468 ) 1982 05/19/98 40

61
1,575 14,724 16,299 (1,856 ) 1982 07/15/98 40

62
4,357 42,284 46,641 (6,565 ) 1985 12/01/92 40

63
1,951 19,298 21,249 (2,469 ) 1982 07/15/98 40

64
39,045 221,757 260,802 (14,098 ) 1988 06/19/00 40

65
17,269 121,530 138,799 (8,308 ) 2000 06/19/00 40

66
9,681 90,360 100,041 (12,445 ) 1991 11/25/97 40

67
1,774 10,081 11,855 (718 ) 1985 06/19/00 40

68
65 623 688 (90 ) 1974/1993 12/11/96 40

69
6,192 55,727 61,919 (7,602 ) 1989 12/04/96 40

127,239 1,104,707 1,231,946 (120,261 )

70
— 78,857 78,857 (11,791 ) 1984 11/01/95 40

71
6,502 62,454 68,956 (9,882 ) 1987 11/12/93 40

72
5,075 50,041 55,116 (7,530 ) 1987 12/13/91 40

73
3,570 37,424 40,994 (6,581 ) 1981/1995 06/24/94 40

74
9,044 87,685 96,729 (10,792 ) 1983-1985 09/30/98 40

75
6,152 62,183 68,335 (7,352 ) 1998 09/30/98 40

76
3,760 37,395 41,155 (5,348 ) 1984 10/01/97 40

77
4,768 48,783 53,551 (7,267 ) 1985 06/29/89 40

78
5,286 51,744 57,030 (7,470 ) 1987 11/24/97 40

79
3,612 36,739 40,351 (5,522 ) 1986/1994 04/21/92 40

80
1,421 15,286 16,707 (2,588 ) 1974/1993 03/01/89 40

81
8,089 76,083 84,172 (10,498 ) 1983 10/01/97 40

82
7,226 73,208 80,434 (10,960 ) 1979, 1981, 1995 10/01/97 40

83
1,672 16,453 18,125 (2,607 ) 1983/1991 06/28/89 40

84
1,392 14,266 15,658 (2,277 ) 1983/1990 08/03/89 40

85
13,491 127,184 140,675 (19,783 ) 1984 09/29/87 40

86
5,142 47,144 52,286 (4,710 ) 1988 01/07/99 40

87
5,525 51,324 56,849 (5,284 ) 1985 01/07/99 40

88
2,804 29,048 31,852 (4,751 ) 1981/1996 11/12/93 40

89
4,754 46,799 51,553 (7,061 ) 1987/1996 11/12/93 40

90
4,693 45,490 50,183 (7,190 ) 1984/1996 11/12/93 40

91
1,180 10,918 12,098 (1,475 ) 1982 09/03/97 40

92
6,232 63,179 69,411 (9,584 ) 1987 09/03/97 40

93
6,696 64,343 71,039 (9,497 ) 1984 09/03/97 40

94
1,495 14,551 16,046 (2,532 ) 1983 12/04/96 40

95
1,948 19,510 21,458 (3,235 ) 1984/1994 11/12/93 40

96
1,591 17,035 18,626 (3,040 ) 1986 12/23/92 40

123,120 1,285,126 1,408,246 (186,607 )

97
6,683 38,651 45,334 (1,471 ) 1988 07/02/01 40

Costs Capitalized

Initial Cost to Subsequent to

EOP Partnership Acquisition

Encumbrances Building and Building and

Description Notes Location State at 12/31/02 Land Improvements Land Improvements

98
East Hills Office Park Anaheim Hills CA — 1,202 6,812 — 130

99
Brea Corporate Place Brea CA — — 35,129 — 878

100
Brea Corporate Plaza Brea CA — 1,902 10,776 — 532

101
Brea Financial Commons Brea CA — 2,640 14,960 — 216

102
Brea Park Centre Brea CA — 2,682 15,198 — 1,061

103
Camino West Corporate Park Carlsbad CA — 1,030 5,835 — 2

104
Carlsbad Airport Plaza Carlsbad CA — 1,396 7,909 — 127

105
La Place Court Carlsbad CA — 1,506 8,532 — 525

106
Pacific Ridge Corporate Centre Carlsbad CA — 3,266 18,510 — 3

107
Pacific View Plaza Carlsbad CA — 1,205 6,827 — 45

108
Cerritos Towne Center Cerritos CA — — 60,368 — 1,587

109
Corona Corporate Center Corona CA — 758 4,293 — 46

110
700 North Brand Glendale CA (24,528 ) 5,970 33,828 — 2,028

111
One Pacific Plaza Huntington Beach CA — 2,328 13,194 — 446

112
18301 Von Karman (Apple Building) Irvine CA — 6,027 34,152 — 1,449

113
18581 Teller Irvine CA — 1,485 8,415 — 985

114
2600 Michelson Irvine CA — 11,291 63,984 — 1,177

115
Centerpointe Irvine I, II, & III Irvine CA — 1,253 7,100 — 395

116
Fairchild Corporate Center Irvine CA — 2,363 13,388 — 269

117
Inwood Park Irvine CA — 3,543 20,079 — 108

118
Tower 17 Irvine CA — 7,562 42,849 — 677

119
1920 Main Plaza (3) Irvine CA — 5,281 47,526 — 3,757

120
2010 Main Plaza (3) Irvine CA — 5,197 46,774 — 2,189

121
Oakbrook Plaza Laguna Hills CA — 2,778 15,745 (21 ) 339

122
Commerce Park Los Angeles CA — — 14,700 — 818

123
Sepulveda Center Los Angeles CA — 4,113 23,306 — 143

124
The Tower in Westwood Los Angeles CA — 10,041 56,899 — 606

125
10880 Wilshire Boulevard Los Angeles CA — 28,009 149,841 — 8,395

126
10960 Wilshire Boulevard Los Angeles CA — 16,841 151,574 — 7,666

127
550 South Hope Street Los Angeles CA — 10,016 90,146 — 8,402

128
Two California Plaza (3) Los Angeles CA — — 156,197 — 48,402

129
Marina Business Center Bldg 1-4 Marina Del Rey CA — 7,890 44,710 — 329

130
1201 Dove Street Newport Beach CA — 1,998 11,320 (12 ) 109

131
Ontario Corporate Center Ontario CA — 1,383 7,839 — 115

132
Ontario Gateway I Ontario CA — 830 4,703 — 340

133
The City- 3800 Chapman Orange CA — 3,019 17,107 — 239

134
500 Orange Tower Orange CA — 12,944 28,913 — 5,884

135
500-600 City Parkway Orange CA — 7,296 41,342 — 12,329

136
City Plaza Orange CA — 6,809 38,584 — 2,277

137
City Tower Orange CA — 10,440 59,160 — 737

138
1100 Executive Tower (3) Orange CA — 4,622 41,599 — 1,708

139
3280 E. Foothill Boulevard Pasadena CA — 3,396 19,246 — 456

140
790 Colorado Pasadena CA — 2,355 13,343 — 779

141
Century Square Pasadena CA — 6,787 38,457 — (55 )

142
Pasadena Financial Center Pasadena CA — 4,779 27,084 — 282

143
Regional Office Center III Redlands CA — 730 4,136 — 102

144
Bridge Pointe Corporate Centre I & II San Diego CA — 13,058 73,997 — 5

145
Centerside II San Diego CA (22,337 ) 5,777 32,737 — 761

146
La Jolla Centre I & II San Diego CA — 12,904 73,122 — 809

147
Nobel Corporate Plaza San Diego CA — 3,697 20,948 — 644

148
One Pacific Heights San Diego CA — 3,072 17,408 — 259

149
Pacific Corporate Plaza San Diego CA — 2,100 11,900 — —

150
Park Plaza San Diego CA — 2,203 12,484 — 88

151
Westridge I San Diego CA — 1,500 8,500 — —

152
Smith Barney Tower (3) San Diego CA — 2,658 23,919 — 4,622

[Additional columns below]

[Continued from above table, first column(s) repeated]

Gross Amount Carried at

Close of Period

12/31/2002

Date of

Building and Accumulated Construction/ Date Depreciable

Land Improvements Total(1) Depreciation Renovation Acquired Lives(2)

98
1,202 6,942 8,144 (266 ) 1988 07/02/01 40

99
— 36,007 36,007 (1,338 ) 1987 07/02/01 40

100
1,902 11,308 13,210 (471 ) 1982 07/02/01 40

101
2,640 15,176 17,816 (597 ) 1982/1989 07/02/01 40

102
2,682 16,259 18,941 (659 ) 1979-1982,1990 07/02/01 40

103
1,030 5,837 6,867 (213 ) 1991 07/02/01 40

104
1,396 8,036 9,432 (318 ) 1987 07/02/01 40

105
1,506 9,057 10,563 (369 ) 1988 07/02/01 40

106
3,266 18,513 21,779 (675 ) 1999 07/02/01 40

107
1,205 6,872 8,077 (256 ) 1986 07/02/01 40

108
— 61,955 61,955 (2,238 ) 1989/1998 07/02/01 40

109
758 4,339 5,097 (163 ) 1990 07/02/01 40

110
5,970 35,856 41,826 (2,555 ) 1981 06/19/00 40

111
2,328 13,640 15,968 (520 ) 1982/1987 07/02/01 40

112
6,027 35,601 41,628 (2,454 ) 1991 06/19/00 40

113
1,485 9,400 10,885 (342 ) 1983 07/02/01 40

114
11,291 65,161 76,452 (2,427 ) 1986 07/02/01 40

115
1,253 7,495 8,748 (333 ) 1979-1980,1994 07/02/01 40

116
2,363 13,657 16,020 (523 ) 1979 07/02/01 40

117
3,543 20,187 23,730 (752 ) 1985/1996 07/02/01 40

118
7,562 43,526 51,088 (1,618 ) 1987 07/02/01 40

119
5,281 51,283 56,564 (8,341 ) 1988 09/29/94 40

120
5,197 48,963 54,160 (7,135 ) 1988 12/13/94 40

121
2,757 16,084 18,841 (583 ) 1984 07/02/01 40

122
— 15,518 15,518 (1,068 ) 1977 06/19/00 40

123
4,113 23,449 27,562 (866 ) 1982 07/02/01 40

124
10,041 57,505 67,546 (2,128 ) 1989 07/02/01 40

125
28,009 158,236 186,245 (21,165 ) 1970/1992 12/19/97 40

126
16,841 159,240 176,081 (22,414 ) 1971/1992 12/19/97 40

127
10,016 98,548 108,564 (13,207 ) 1991 10/06/97 40

128
— 204,599 204,599 (39,071 ) 1992 08/23/96 40

129
7,890 45,039 52,929 (1,639 ) 1982-1984,1998 07/02/01 40

130
1,986 11,429 13,415 (423 ) 1975/1989 07/02/01 40

131
1,383 7,954 9,337 (300 ) 1989 07/02/01 40

132
830 5,043 5,873 (178 ) 1984 07/02/01 40

133
3,019 17,346 20,365 (634 ) 1984 07/02/01 40

134
12,944 34,797 47,741 (5,039 ) 1988 01/01/01 40

135
7,296 53,671 60,967 (1,653 ) 1974, 1978, 1998 07/02/01 40

136
6,809 40,861 47,670 (1,469 ) 1970 07/02/01 40

137
10,440 59,897 70,337 (2,244 ) 1988 07/02/01 40

138
4,622 43,307 47,929 (6,401 ) 1987 12/15/94 40

139
3,396 19,702 23,098 (742 ) 1982 07/02/01 40

140
2,355 14,122 16,477 (525 ) 1981 07/02/01 40

141
6,787 38,402 45,189 (1,402 ) 1984 07/02/01 40

142
4,779 27,366 32,145 (1,055 ) 1984/1996 07/02/01 40

143
730 4,238 4,968 (179 ) 1988 07/02/01 40

144
13,058 74,002 87,060 (2,698 ) 1998-2000 07/02/01 40

145
5,777 33,498 39,275 (2,281 ) 1987 06/19/00 40

146
12,904 73,931 86,835 (2,714 ) 1986-1989 07/02/01 40

147
3,697 21,592 25,289 (773 ) 1985 07/02/01 40

148
3,072 17,667 20,739 (681 ) 1989 07/02/01 40

149
2,100 11,900 14,000 (434 ) 1988 07/02/01 40

150
2,203 12,572 14,775 (458 ) 1982 07/02/01 40

151
1,500 8,500 10,000 (310 ) 1980 07/02/01 40

152
2,658 28,541 31,199 (5,146 ) 1987 04/28/97 40

Costs Capitalized

Initial Cost to Subsequent to

EOP Partnership Acquisition

Encumbrances Building and Building and

Description Notes Location State at 12/31/02 Land Improvements Land Improvements

153
The Plaza at La Jolla Village (3) San Diego CA (78,493 ) 10,916 98,243 19 4,089

154
Griffin Towers Santa Ana CA — 14,317 81,127 — 463

155
Lincoln Town Center Santa Ana CA — 4,403 24,950 — 905

156
2951 28th Street Santa Monica CA — 3,612 20,465 — 426

157
429 Santa Monica Santa Monica CA — 2,523 14,298 — 313

158
Arboretum Courtyard Santa Monica CA — 6,573 37,245 — 616

159
Janss Court Santa Monica CA (16,542 ) 4,350 24,650 — 192

160
Santa Monica Business Park Santa Monica CA (8,431 ) — 242,155 — 2,521

161
Searise Office Tower Santa Monica CA — 4,380 24,818 — 917

162
Wilshire Palisades Santa Monica CA (39,853 ) 9,763 55,323 — 1,556

163
Bixby Ranch Seal Beach CA (26,455 ) 6,450 36,550 — 1,541

Los Angeles Region Totals (216,639 ) 337,902 2,555,096 (14 ) 140,544

New York Region

164
527 Madison Avenue New York NY — 9,155 51,877 — 2,611

165
850 Third Avenue (3)(5) New York NY (6,287 ) 9,606 86,453 30 4,758

166
Park Avenue Tower (5) New York NY (180,000 ) 48,976 196,566 719 8,395

167
Tower 56 New York NY (22,733 ) 6,853 38,832 — 1,204

168
Worldwide Plaza New York NY (225,808 ) 124,919 496,665 — 6,897

169
Shelton Pointe (3) Shelton CT — 1,514 13,625 — 862

170
177 Broad Street (3) Stamford CT — 2,562 23,056 — 873

171
300 Atlantic Street (3) Stamford CT — 4,632 41,691 — 3,080

172
Canterbury Green (3) Stamford CT (19,217 ) — 41,987 92 1,688

173
Four Stamford Plaza (3) Stamford CT (15,977 ) 4,471 40,238 24 1,333

174
One and Two Stamford Plaza (3) Stamford CT — 8,268 74,409 — 5,594

175
Three Stamford Plaza (3) Stamford CT (16,721 ) 3,957 35,610 — 592

New York Region Totals (486,743 ) 224,913 1,141,009 865 37,887

San Francisco Region

176
Golden Bear Center Berkeley CA (18,858 ) 4,500 25,500 — 492

177
Sierra Point Brisbane CA — 3,198 18,120 — 38

178
Bay Park Plaza I & II Burlingame CA — 12,906 73,133 — 1,020

179
One Bay Plaza Burlingame CA — 8,642 48,973 — 1,048

180
One & Two Corporate Centre Concord CA — 6,379 36,146 — 716

181
5813 Shellmound /5855 Christie Emeryville CA — 870 4,930 — 8

182
Watergate Office Towers Emeryville CA — 46,568 263,885 — 5,245

183
Parkshore Plaza II Folsom CA — 4,082 23,130 — (107 )

184
Parkshore Plaza I Folsom CA — 2,916 16,524 — 9

185
Bayside Corporate Center Foster City CA — 2,836 16,069 — 589

186
Metro Center Foster City CA — — 282,329 — 2,146

187
Parkside Towers Foster City CA — 36,000 63,965 — 8,695

188
Vintage Industrial Park Foster City CA — 21,527 121,988 — 314

189
Vintage Park Office Foster City CA — 5,719 32,406 — 233

190
Lafayette Terrace Lafayette CA — 1,422 8,057 — 88

191
Drake’s Landing Larkspur CA — 5,735 32,499 — 1,204

192
Larkspur Landing Office Park Larkspur CA — 8,316 47,126 — 1,644

193
Wood Island Office Complex Larkspur CA — 3,735 21,163 — 52

194
PeopleSoft Plaza Pleasanton CA — 7,039 39,887 — 708

195
Redwood Shores Redwood City CA — 4,166 23,608 — 66

196
Seaport Centre Redwood City CA — 24,000 136,000 — 129

197
Seaport Plaza Redwood City CA — 10,132 26,108 — 2,845

198
Towers@Shores (6) Redwood City CA — 35,578 69,054 — 3,003

199
555 Twin Dolphin Plaza Redwood Shores CA — 11,790 66,810 — 1,105

200
Douglas Corporate Center Roseville CA — 2,391 13,550 — 59

201
Johnson Ranch Corp Centre I & II Roseville CA — 4,380 24,819 — 139

202
Roseville Corporate Center Roseville CA — 3,008 17,046 — —

203
3600-3620 American River Drive Sacramento CA — 2,209 12,518 — 395

204
455 University Avenue Sacramento CA — 465 2,634 — 93

[Additional columns below]

[Continued from above table, first column(s) repeated]

Gross Amount Carried at

Close of Period

12/31/2002

Date of

Building and Accumulated Construction/ Date Depreciable

Land Improvements Total(1) Depreciation Renovation Acquired Lives(2)

153
10,935 102,332 113,267 (15,087 ) 1987-1990 03/10/94 40

154
14,317 81,590 95,907 (1,602 ) 1987 07/02/01 40

155
4,403 25,855 30,258 (1,684 ) 1987 06/19/00 40

156
3,612 20,891 24,503 (753 ) 1971 07/02/01 40

157
2,523 14,611 17,134 (933 ) 1982 06/19/00 40

158
6,573 37,861 44,434 (1,358 ) 1999 07/02/01 40

159
4,350 24,842 29,192 (1,580 ) 1989 06/19/00 40

160
— 244,676 244,676 (9,146 ) 1979-1981 07/02/01 40

161
4,380 25,735 30,115 (1,621 ) 1975 06/19/00 40

162
9,763 56,879 66,642 (3,618 ) 1981 06/19/00 40

163
6,450 38,091 44,541 (2,526 ) 1987 06/19/00 40

337,888 2,695,640 3,033,528 (215,822 )

164
9,155 54,488 63,643 (3,503 ) 1986 06/19/00 40

165
9,636 91,211 100,847 (13,725 ) 1960/1996 03/20/95 40

166
49,695 204,961 254,656 (23,237 ) 1986 07/15/98 40

167
6,853 40,036 46,889 (2,635 ) 1983 06/19/00 40

168
124,919 503,562 628,481 (52,803 ) 1989 10/01/98 40

169
1,514 14,487 16,001 (2,276 ) 1985/1993 11/26/91 40

170
2,562 23,929 26,491 (3,386 ) 1989 01/29/97 40

171
4,632 44,771 49,403 (6,444 ) 1987/1996 03/30/93 40

172
92 43,675 43,767 (6,430 ) 1987 12/15/92 40

173
4,495 41,571 46,066 (6,132 ) 1979/1994 08/31/94 40

174
8,268 80,003 88,271 (11,970 ) 1986/1994 03/30/93 40

175
3,957 36,202 40,159 (5,124 ) 1980/1994 12/15/92 40

225,778 1,178,896 1,404,674 (137,665 )

176
4,500 25,992 30,492 (1,649 ) 1986 06/19/00 40

177
3,198 18,158 21,356 (662 ) 1979/1983 07/02/01 40

178
12,906 74,153 87,059 (4,773 ) 1985/1998 06/19/00 40

179
8,642 50,021 58,663 (3,231 ) 1979 06/19/00 40

180
6,379 36,862 43,241 (2,521 ) 1985-1987 06/19/00 40

181
870 4,938 5,808 (180 ) 1970-1971 07/02/01 40

182
46,568 269,130 315,698 (9,845 ) 1973/2001 07/02/01 40

183
4,082 23,023 27,105 (843 ) 1999 07/02/01 40

184
2,916 16,533 19,449 (602 ) 1999 07/02/01 40

185
2,836 16,658 19,494 (586 ) 1986-1987 07/02/01 40

186
— 284,475 284,475 (10,442 ) 1985-1988 07/02/01 40

187
36,000 72,660 108,660 (1,666 ) 2001 07/02/01 40

188
21,527 122,302 143,829 (4,456 ) 1985-1990 07/02/01 40

189
5,719 32,639 38,358 (1,191 ) 1985-1990 07/02/01 40

190
1,422 8,145 9,567 (303 ) 1985 07/02/01 40

191
5,735 33,703 39,438 (1,269 ) 1986 07/02/01 40

192
8,316 48,770 57,086 (1,836 ) 1981-1982 07/02/01 40

193
3,735 21,215 24,950 (775 ) 1978 07/02/01 40

194
7,039 40,595 47,634 (2,608 ) 1984 06/19/00 40

195
4,166 23,674 27,840 (863 ) 1986 07/02/01 40

196
24,000 136,129 160,129 (8,667 ) 1988 06/19/00 40

197
10,132 28,953 39,085 (1,202 ) 2000 06/19/00 40

198
35,578 72,057 107,635 (1,845 ) 2002 07/02/01 40

199
11,790 67,915 79,705 (2,537 ) 1989 07/02/01 40

200
2,391 13,609 16,000 (504 ) 1990 07/02/01 40

201
4,380 24,958 29,338 (915 ) 1990-1998 07/02/01 40

202
3,008 17,046 20,054 (621 ) 1999 07/02/01 40

203
2,209 12,913 15,122 (495 ) 1977-1979/ 1997 07/02/01 40

204
465 2,727 3,192 (100 ) 1973 07/02/01 40

Costs Capitalized

Initial Cost to Subsequent to

EOP Partnership Acquisition

Encumbrances Building and Building and

Description Notes Location State at 12/31/02 Land Improvements Land Improvements

205
555 University Avenue Sacramento CA — 939 5,323 — 136

206
575 & 601 University Avenue Sacramento CA — 1,159 6,569 — 170

207
655 University Avenue Sacramento CA — 672 3,806 — 45

208
701 University Avenue Sacramento CA — 934 5,294 — 79

209
740 University Avenue Sacramento CA — 212 1,199 — 33

210
Cal Center Sacramento CA — 2,393 13,560 — 392

211
Exposition Centre Sacramento CA — 1,200 7,800 — 205

212
Fidelity Plaza Sacramento CA — 1,149 6,513 — 89

213
Gateway Oaks I Sacramento CA — 2,391 13,546 — 170

214
Gateway Oaks II Sacramento CA — 1,341 7,600 — 194

215
Gateway Oaks III Sacramento CA — 936 5,305 — 128

216
Gateway Oaks IV Sacramento CA — 1,658 9,395 — —

217
Point West Commercentre Sacramento CA — 2,321 13,154 — 468

218
Point West Corporate Center I & II Sacramento CA — 3,653 14,779 — 537

219
Point West I - Response Road Sacramento CA — 774 4,384 — 57

220
Point West III - River Park Dr Sacramento CA — 1,141 6,467 — 216

221
The Orchard Sacramento CA — 1,226 6,948 — 185

222
Wells Fargo Center Sacramento CA — 17,819 100,975 — 885

223
Bayhill Office Center San Bruno CA (91,093 ) 24,010 136,055 — 1,003

224
Skyway Landing I & II San Carlos CA — 15,535 35,994 — 16,775

225
120 Montgomery San Francisco CA — 17,564 99,532 — 1,948

226
150 California San Francisco CA — 12,567 46,184 — 4,423

227
188 Embarcadero San Francisco CA (14,472 ) 4,108 23,280 — 841

228
201 California San Francisco CA (40,048 ) 10,520 59,611 — 1,877

229
201 Mission Street (3) San Francisco CA — 8,871 79,837 — 2,317

230
301 Howard Street San Francisco CA — 6,547 58,920 — 4,274

231
580 California (3) San Francisco CA (57,177 ) 7,491 67,421 8 4,038

232
60 Spear Street Building (3) San Francisco CA — 2,125 19,126 15 1,564

233
Maritime Plaza (3) San Francisco CA — 11,531 103,776 — 11,437

234
One Market (3) San Francisco CA (179,896 ) 34,814 313,330 — 32,936

235
Peninsula Office Park San Mateo CA (80,613 ) 27,275 154,561 — 1,850

236
San Mateo BayCenter I San Mateo CA — 5,382 30,498 — 214

237
San Mateo BayCenter II San Mateo CA (10,571 ) 6,245 35,389 — 177

238
San Mateo BayCenter III San Mateo CA — 3,357 19,023 — 170

239
San Rafael Corporate Center (6) San Rafael CA — 18,002 — — 27,076

240
Norris Tech Center San Ramon CA — 5,700 32,300 — 1,618

241
One & Two ADP Plaza San Ramon CA — 7,460 42,273 — 1,188

242
Fountaingrove Center Santa Rosa CA — 2,898 16,424 — 225

243
Treat Towers Walnut Creek CA — 18,512 104,899 — 356

San Francisco Region Totals (492,728 ) 574,964 3,279,027 23 152,272

San Jose Region

244
Pruneyard Office Towers Campbell CA — 16,502 154,783 — 3,731

245
Cupertino Business Center Cupertino CA — 2,910 16,490 (28 ) 35

246
2180 Sand Hill Road Menlo Park CA — 3,408 19,314 — 871

247
1900 McCarthy Milpitas CA — 1,998 11,319 — 201

248
California Circle II Milpitas CA — 1,764 9,997 — 405

249
Oak Creek I & II Milpitas CA — 1,309 7,417 — —

250
Shoreline Technology Park Mountain View CA — 31,575 190,894 69 810

251
Meier Mountain View Mountain View CA — 13,950 79,050 — 12

252
Ravendale at Central Mountain View CA — 2,550 14,450 — —

253
Embarcadero Place Palo Alto CA (34,900 ) 10,500 59,500 — 56

254
Palo Alto Square Palo Alto CA — — 78,143 161 258

255
Xerox Campus Palo Alto CA — — 132,810 — —

256
Foothill Research Center Palo Alto CA — — 104,894 — —

257
Lockheed Palo Alto CA — — 27,712 — 61

258
10 Almaden San Jose CA — 12,583 71,303 — 392

259
1740 Technology San Jose CA (18,183 ) 8,766 49,673 — 788

[Additional columns below]

[Continued from above table, first column(s) repeated]

Gross Amount Carried at

Close of Period

12/31/2002

Date of

Building and Accumulated Construction/ Date Depreciable

Land Improvements Total(1) Depreciation Renovation Acquired Lives(2)

205
939 5,459 6,398 (220 ) 1974 07/02/01 40

206
1,159 6,739 7,898 (257 ) 1977 07/02/01 40

207
672 3,851 4,523 (143 ) 1979 07/02/01 40

208
934 5,373 6,307 (196 ) 1990 07/02/01 40

209
212 1,232 1,444 (44 ) 1973 07/02/01 40

210
2,393 13,952 16,345 (506 ) 1989 07/02/01 40

211
1,200 8,005 9,205 (539 ) 1984 06/19/00 40

212
1,149 6,602 7,751 (242 ) 1980 07/02/01 40

213
2,391 13,716 16,107 (507 ) 1990 07/02/01 40

214
1,341 7,794 9,135 (307 ) 1992 07/02/01 40

215
936 5,433 6,369 (209 ) 1996 07/02/01 40

216
1,658 9,395 11,053 (343 ) 1998 07/02/01 40

217
2,321 13,622 15,943 (526 ) 1983 07/02/01 40

218
3,653 15,316 18,969 (591 ) 1984 07/02/01 40

219
774 4,441 5,215 (163 ) 1976 07/02/01 40

220
1,141 6,683 7,824 (264 ) 1978 07/02/01 40

221
1,226 7,133 8,359 (266 ) 1987 07/02/01 40

222
17,819 101,860 119,679 (6,530 ) 1987 06/19/00 40

223
24,010 137,058 161,068 (8,711 ) 1982/1987 06/19/00 40

224
15,535 52,769 68,304 (1,651 ) 2000 07/02/01 40

225
17,564 101,480 119,044 (6,499 ) 1956 06/19/00 40

226
12,567 50,607 63,174 (3,928 ) 2000 12/19/97 40

227
4,108 24,121 28,229 (1,514 ) 1985 06/19/00 40

228
10,520 61,488 72,008 (3,956 ) 1980 06/19/00 40

229
8,871 82,154 91,025 (12,017 ) 1981 04/30/97 40

230
6,547 63,194 69,741 (8,471 ) 1988 04/29/98 40

231
7,499 71,459 78,958 (11,254 ) 1984 12/21/95 40

232
2,140 20,690 22,830 (3,015 ) 1967/1987 09/29/87 40

233
11,531 115,213 126,744 (17,032 ) 1967/1990 04/21/97 40

234
34,814 346,266 381,080 (55,808 ) 1976/1995 11/22/94 40

235
27,275 156,411 183,686 (10,012 ) 1971/1998 06/19/00 40

236
5,382 30,712 36,094 (1,147 ) 1984 07/02/01 40

237
6,245 35,566 41,811 (1,307 ) 1984 07/02/01 40

238
3,357 19,193 22,550 (708 ) 1987 07/02/01 40

239
18,002 27,076 45,078 — 2002 07/02/01 40

240
5,700 33,918 39,618 (2,303 ) 1984/1990 06/19/00 40

241
7,460 43,461 50,921 (2,788 ) 1987-1989 06/19/00 40

242
2,898 16,649 19,547 (620 ) 1986/1991 07/02/01 40

243
18,512 105,255 123,767 (3,842 ) 1998-1999 07/02/01 40

572,964 3,431,299 4,004,263 (235,623 )

244
16,502 158,514 175,016 (10,168 ) 1971/1999 06/19/00 40

245
2,882 16,525 19,407 (603 ) 1974-1975 07/02/01 40

246
3,408 20,185 23,593 (704 ) 1976 07/02/01 40

247
1,998 11,520 13,518 (432 ) 1984 07/02/01 40

248
1,764 10,402 12,166 (364 ) 1984 07/02/01 40

249
1,309 7,417 8,726 (270 ) 1982 07/02/01 40

250
31,644 191,704 223,348 (23,830 ) 1985/1991 12/19/97 40

251
13,950 79,062 93,012 (2,883 ) 1972/1980 07/02/01 40

252
2,550 14,450 17,000 (527 ) 1980 07/02/01 40

253
10,500 59,556 70,056 (3,793 ) 1984 06/19/00 40

254
161 78,401 78,562 (9,285 ) 1971/1985 10/01/99 23

255
— 132,810 132,810 (4,966 ) 1991 07/02/01 40

256
— 104,894 104,894 (4,026 ) 1991 07/02/01 40

257
— 27,773 27,773 (1,036 ) 1991 07/02/01 40

258
12,583 71,695 84,278 (4,580 ) 1989 06/19/00 40

259
8,766 50,461 59,227 (1,917 ) 1986/1994 07/02/01 40

Costs Capitalized

Initial Cost to Subsequent to

EOP Partnership Acquisition

Encumbrances Building and Building and

Description Notes Location State at 12/31/02 Land Improvements Land Improvements

260
2290 North First Street San Jose CA — 2,431 13,776 — 452

261
1871 The Alameda San Jose CA — 1,129 6,399 — 158

262
Aspect Telecommunications San Jose CA — 2,925 16,575 — —

263
Central Park Plaza San Jose CA — 11,181 63,358 23 1,466

264
Metro Plaza San Jose CA — 18,029 102,164 — 946

265
Ridder Park San Jose CA — 2,012 11,402 — —

266
Skyport East and West San Jose CA — 13,977 179,780 — 28,691

267
Concourse San Jose CA — 49,279 279,248 (51 ) 1,723

268
Creekside San Jose CA — 9,631 54,576 — 311

269
North First Office Center San Jose CA — 6,395 36,239 — 44

270
San Jose Gateway San Jose CA — 7,873 44,616 — 2,635

271
San Jose Gateway II San Jose CA — 16,286 92,288 — 693

272
San Jose Gateway III San Jose CA — 6,409 36,315 — 73

273
2727 Augustine Santa Clara CA — 3,000 17,000 — —

274
3001 Stender Way Santa Clara CA — 2,263 12,823 — —

275
3045 Stender Way Santa Clara CA — 1,050 5,950 — —

276
3281-3285 Scott Boulevard Santa Clara CA — 1,275 7,225 — —

277
Applied Materials I & II Santa Clara CA — 5,100 28,900 — —

278
Meier Central North Santa Clara CA — 2,880 16,320 — —

279
Meier Central South Santa Clara CA — 5,265 29,835 — 356

280
Patrick Henry Drive Santa Clara CA — 2,475 14,025 — 4

281
Santa Clara Office Center I Santa Clara CA — 2,010 11,391 — 122

282
Santa Clara Office Center II Santa Clara CA — 2,870 16,261 — 176

283
Santa Clara Office Center III Santa Clara CA — 2,031 11,509 — 169

284
Santa Clara Office Center IV Santa Clara CA — 186 1,057 — —

285
Lake Marriott Business Park Santa Clara CA — 9,091 84,967 297 2,470

286
Sunnyvale Business Center Sunnyvale CA — 4,890 44,010 — 44

287
Borregas Avenue Sunnyvale CA — 1,095 6,205 — —

288
Meier Sunnyvale Sunnyvale CA — 495 2,805 — —

San Jose Region Totals (53,083 ) 301,348 2,274,768 471 48,153

Seattle Region

289
10700 Building Bellevue WA — — 15,958 — 82

290
110 Atrium Place Bellevue WA (20,132 ) 6,333 35,888 — 886

291
Bellefield Office Park Bellevue WA — 12,232 69,312 (1 ) 1,196

292
Bellevue Gateway I Bellevue WA — 3,593 20,360 — 847

293
Bellevue Gateway II Bellevue WA — 2,016 11,423 — 350

294
Eastgate Office Park Bellevue WA — 6,468 36,650 3 1,043

295
Gateway 405 Building Bellevue WA — 1,011 5,727 — 76

296
I-90 Bellevue Bellevue WA — 3,725 21,108 — 153

297
Lincoln Executive Center Bellevue WA — 3,235 18,329 — 265

298
Lincoln Executive Center II & III Bellevue WA — 4,918 27,868 — 198

299
Main Street Building Bellevue WA — 1,398 7,922 — 243

300
Plaza Center Bellevue WA — 16,680 94,521 — 415

301
Plaza East Bellevue WA — 4,687 26,561 — 540

302
Sunset North Corporate Campus Bellevue WA — 17,031 79,249 — 12,281

303
City Center Bellevue Bellevue WA — 10,349 93,142 — 4,715

304
One Bellevue Center Bellevue WA — — 56,223 — 1,634

305
Rainier Plaza Bellevue WA — — 79,928 — 1,701

306
ABAM Building Federal Way WA — 804 4,555 — 429

307
Federal Way Office Building Federal Way WA — 173 979 — —

308
Washington Park Federal Way WA — 896 5,075 — 202

309
4000 Kruse Way Place Lake Oswego OR — 4,475 25,360 — 937

310
4004 Kruse Way Place Lake Oswego OR — 1,888 10,698 — 444

311
4800 Meadows Lake Oswego OR — — 17,448 — 54

312
4900-5000 Meadows Lake Oswego OR — — 30,528 — 633

313
4949 Meadows Lake Oswego OR — — 26,941 — 224

314
Kruse Oaks I Lake Oswego OR — — 14,648 — 4,057

[Additional columns below]

[Continued from above table, first column(s) repeated]

Gross Amount Carried at

Close of Period

12/31/2002

Date of

Building and Accumulated Construction/ Date Depreciable

Land Improvements Total(1) Depreciation Renovation Acquired Lives(2)

260
2,431 14,228 16,659 (507 ) 1984 07/02/01 40

261
1,129 6,557 7,686 (233 ) 1972 07/02/01 40

262
2,925 16,575 19,500 (604 ) 1989 07/02/01 40

263
11,204 64,824 76,028 (2,421 ) 1984-1985 07/02/01 40

264
18,029 103,110 121,139 (3,758 ) 1986-1987 07/02/01 40

265
2,012 11,402 13,414 (416 ) 1966 07/02/01 40

266
13,977 208,471 222,448 (7,139 ) 2001 07/02/01 40

267
49,228 280,971 330,199 (10,585 ) 1980/2000 07/02/01 40

268
9,631 54,887 64,518 (2,039 ) 1986 07/02/01 40

269
6,395 36,283 42,678 (1,326 ) 1985-1986 07/02/01 40

270
7,873 47,251 55,124 (1,688 ) 1981 07/02/01 40

271
16,286 92,981 109,267 (3,425 ) 1983-1984 07/02/01 40

272
6,409 36,388 42,797 (1,330 ) 1998 07/02/01 40

273
3,000 17,000 20,000 (620 ) 1975 07/02/01 40

274
2,263 12,823 15,086 (468 ) 1978 07/02/01 40

275
1,050 5,950 7,000 (217 ) 1975 07/02/01 40

276
1,275 7,225 8,500 (263 ) 1981 07/02/01 40

277
5,100 28,900 34,000 (1,054 ) 1979 07/02/01 40

278
2,880 16,320 19,200 (595 ) 1972/1980 07/02/01 40

279
5,265 30,191 35,456 (1,156 ) 1972/1980 07/02/01 40

280
2,475 14,029 16,504 (511 ) 1981 07/02/01 40

281
2,010 11,513 13,523 (422 ) 1981 07/02/01 40

282
2,870 16,437 19,307 (607 ) 1978 07/02/01 40

283
2,031 11,678 13,709 (422 ) 1980 07/02/01 40

284
186 1,057 1,243 (39 ) 1979 07/02/01 40

285
9,388 87,437 96,825 (11,311 ) 1981 12/19/97 40

286
4,890 44,054 48,944 (5,551 ) 1990 12/19/97 40

287
1,095 6,205 7,300 (226 ) 1978 07/02/01 40

288
495 2,805 3,300 (102 ) 1979 07/02/01 40

301,819 2,322,921 2,624,740 (128,419 )

289
— 16,040 16,040 (584 ) 1981 07/02/01 40

290
6,333 36,774 43,107 (2,369 ) 1981 06/19/00 40

291
12,231 70,508 82,739 (2,604 ) 1980 07/02/01 40

292
3,593 21,207 24,800 (867 ) 1985 07/02/01 40

293
2,016 11,773 13,789 (424 ) 1988 07/02/01 40

294
6,471 37,693 44,164 (1,411 ) 1985 07/02/01 40

295
1,011 5,803 6,814 (212 ) 1986 07/02/01 40

296
3,725 21,261 24,986 (773 ) 1986 07/02/01 40

297
3,235 18,594 21,829 (705 ) 1983-1985 07/02/01 40

298
4,918 28,066 32,984 (1,050 ) 1983-1985 07/02/01 40

299
1,398 8,165 9,563 (299 ) 1980 07/02/01 40

300
16,680 94,936 111,616 (3,500 ) 1978/1983 07/02/01 40

301
4,687 27,101 31,788 (1,000 ) 1988 07/02/01 40

302
17,031 91,530 108,561 (9,675 ) 1999 06/30/00 40

303
10,349 97,857 108,206 (9,828 ) 1987 01/28/99 40

304
— 57,857 57,857 (7,932 ) 1983 12/17/97 40

305
— 81,629 81,629 (10,761 ) 1986 12/17/97 40

306
804 4,984 5,788 (161 ) 1985 07/02/01 40

307
173 979 1,152 (35 ) 1981 07/02/01 40

308
896 5,277 6,173 (179 ) 1990 07/02/01 40

309
4,475 26,297 30,772 (1,053 ) 1981/1986 07/02/01 40

310
1,888 11,142 13,030 (441 ) 1996 07/02/01 40

311
— 17,502 17,502 (642 ) 1998 07/02/01 40

312
— 31,161 31,161 (1,171 ) 1990 07/02/01 40

313
— 27,165 27,165 (985 ) 1997 07/02/01 40

314
— 18,705 18,705 (652 ) 2001 07/02/01 40

Costs Capitalized

Initial Cost to Subsequent to

EOP Partnership Acquisition

Encumbrances Building and Building and

Description Notes Location State at 12/31/02 Land Improvements Land Improvements

315
Kruse Way Plaza I & II Lake Oswego OR — 2,866 16,239 — 227

316
Kruse Woods Lake Oswego OR — 10,812 80,977 — 1,345

317
Island Corporate Center Mercer Island WA (12,359 ) 2,700 15,300 — 236

318
5550 Macadam Building Portland OR — 870 4,929 — 213

319
Benjamin Franklin Plaza Portland OR — 7,505 42,529 — 1,624

320
Congress Center Portland OR — 5,383 48,634 — 7,301

321
Lincoln Center Portland OR — 18,760 106,307 — 3,380

322
One Pacific Square Portland OR — 4,451 25,221 — 422

323
River Forum I & II Portland OR — 4,038 22,881 — 1,262

324
RiverSide Centre (Oregon) Portland OR — 2,180 12,353 — 152

325
Southgate Office Plaza I & II Renton WA — 4,794 27,163 — 2,621

326
Washington Mutual Tower Seattle WA (78,568 ) 51,000 289,000 — (3 )

327
World Trade Center East Seattle WA — — 38,567 — 229

328
1111 Third Avenue Seattle WA — 9,900 89,571 — 3,479

329
10833-10845 NE 8th Street Seattle WA — — 2,000 — 28

330
Nordstrom Medical Tower Seattle WA — 1,700 15,450 — 465

331
Second and Seneca Seattle WA — 10,922 98,927 — 2,687

332
Second and Spring Building Seattle WA — 1,968 17,716 — 2,565

333
Wells Fargo Center Seattle WA — 21,361 193,529 — 6,632

334
Nimbus Corporate Center Tigard OR — 12,934 73,291 — 2,189

Seattle Region Totals (111,059 ) 276,056 2,056,985 2 70,659

Washington D.C. Region

335
Polk and Taylor Buildings Arlington VA — 16,943 152,483 — 13,852

336
Four & Five Valley Square Blue Bell PA — 866 7,793 (1 ) 1,702

337
One Valley Square Blue Bell PA — 717 6,457 (19 ) 784

338
Three Valley Square Blue Bell PA — 1,012 9,111 (50 ) 1,271

339
Two Valley Square Blue Bell PA — 879 7,913 (17 ) 572

340
Four Falls Conshohocken PA — 4,939 44,458 55 2,778

341
Centerpointe I & II Fairfax VA — 8,838 79,540 367 1,749

342
Fair Oaks Plaza Fairfax VA — 2,412 21,712 35 1,048

343
Northridge I (4) Herndon VA (13,246 ) 3,225 29,024 — 1,526

344
Oak Hill Plaza King of Prussia PA — 2,208 19,879 — 2,142

345
Walnut Hill Plaza King of Prussia PA (13,861 ) 2,045 18,410 — 845

346
E.J. Randolph (4) McLean VA (14,605 ) 3,937 35,429 7 791

347
E.J. Randolph II (6) McLean VA — 5,770 24,587 — 4,491

348
John Marshall I McLean VA (17,912 ) 5,216 46,814 24 461

349
John Marshall III McLean VA — 9,950 29,863 — 3,737

350
1601 Market (3) Philadelphia PA — 5,781 52,027 — 11,571

351
1700 Market Philadelphia PA — 9,389 84,498 — 24,827

352
Reston Town Center Garage (3) Reston VA — 1,943 9,792 — 1,776

353
Reston Town Center (3) Reston VA (116,199 ) 18,175 154,576 83 11,128

354
1300 North 17th Street Rosslyn VA — 9,811 88,296 — 2,973

355
1616 N. Fort Myer Drive Rosslyn VA — 6,961 62,646 — 2,657

356
Army and Navy Club Building Washington D.C — 3,773 33,954 — 156

357
1111 19th Street (3) Washington D.C — 5,024 45,216 — 1,136

358
1333 H Street Washington D.C — 6,715 60,438 — 2,526

359
1620 L Street (3) Washington D.C — 2,708 24,374 — 1,396

360
Market Square Washington D.C — 33,077 187,437 — 1,114

361
One Lafayette Centre Washington D.C — 8,262 74,362 — 2,434

362
Three Lafayette Centre Washington D.C — 6,871 61,841 — 138

363
Two Lafayette Centre Washington D.C — 2,642 26,676 — 717

364
Liberty Place Washington D.C — 5,625 50,625 — —

365
One Devon Square Wayne PA — 1,025 9,227 — 1,614

366
Three Devon Square Wayne PA — 413 3,713 — 23

[Additional columns below]

[Continued from above table, first column(s) repeated]

Gross Amount Carried at

Close of Period

12/31/2002

Date of

Building and Accumulated Construction/ Date Depreciable

Land Improvements Total(1) Depreciation Renovation Acquired Lives(2)

315
2,866 16,466 19,332 (601 ) 1984-1986 07/02/01 40

316
10,812 82,322 93,134 (3,095 ) 1986-1988 07/02/01 40

317
2,700 15,536 18,236 (1,004 ) 1987 06/19/00 40

318
870 5,142 6,012 (202 ) 1980 07/02/01 40

319
7,505 44,153 51,658 (1,721 ) 1974/1994 07/02/01 40

320
5,383 55,935 61,318 (7,378 ) 1980 12/17/97 40

321
18,760 109,687 128,447 (4,008 ) 1980/1989 07/02/01 40

322
4,451 25,643 30,094 (954 ) 1983 07/02/01 40

323
4,038 24,143 28,181 (963 ) 1985 07/02/01 40

324
2,180 12,505 14,685 (996 ) 1947/1979 07/02/01 40

325
4,794 29,784 34,578 (1,008 ) 1987/1991 07/02/01 40

326
51,000 288,997 339,997 (19,413 ) 1988 06/19/00 40

327
— 38,796 38,796 (2,225 ) 2000 09/08/00 40

328
9,900 93,050 102,950 (13,479 ) 1980 12/17/97 40

329
— 2,028 2,028 (2 ) 1962, 1978, 1982, 1987 07/02/01 40

330
1,700 15,915 17,615 (2,128 ) 1986 12/17/97 40

331
10,922 101,614 112,536 (13,542 ) 1991 12/17/97 40

332
1,968 20,281 22,249 (2,611 ) 1906/1989 07/29/98 40

333
21,361 200,161 221,522 (26,345 ) 1983 12/17/97 40

334
12,934 75,480 88,414 (2,805 ) 1991 07/02/01 40

276,058 2,127,644 2,403,702 (163,793 )

335
16,943 166,335 183,278 (20,653 ) 1970 05/22/98 40

336
865 9,495 10,360 (1,356 ) 1988 10/07/97 40

337
698 7,241 7,939 (1,296 ) 1982 11/21/97 40

338
962 10,382 11,344 (1,735 ) 1984 11/21/97 40

339
862 8,485 9,347 (1,259 ) 1990 10/07/97 40

340
4,994 47,236 52,230 (6,785 ) 1988 10/07/97 40

341
9,205 81,289 90,494 (10,541 ) 1990/1998 12/19/97 40

342
2,447 22,760 25,207 (3,210 ) 1986 11/24/97 40

343
3,225 30,550 33,775 (4,066 ) 1988 12/19/97 40

344
2,208 22,021 24,229 (2,755 ) 1982 10/07/97 40

345
2,045 19,255 21,300 (2,775 ) 1985 10/07/97 40

346
3,944 36,220 40,164 (4,675 ) 1983 12/19/97 40

347
5,770 29,078 34,848 (767 ) 2002 12/19/97 40

348
5,240 47,275 52,515 (5,966 ) 1981 12/19/97 40

349
9,950 33,600 43,550 (3,142 ) 2000 12/19/97 40

350
5,781 63,598 69,379 (10,016 ) 1970 01/18/96 40

351
9,389 109,325 118,714 (17,577 ) 1969/1989 10/01/97 40

352
1,943 11,568 13,511 (1,134 ) 1999 10/22/96 40

353
18,258 165,704 183,962 (22,160 ) 1990 10/22/96 40

354
9,811 91,269 101,080 (11,581 ) 1980 12/19/97 40

355
6,961 65,303 72,264 (8,391 ) 1974 12/19/97 40

356
3,773 34,110 37,883 (495 ) 1986 05/24/02 40

357
5,024 46,352 51,376 (6,605 ) 1979/1993 12/18/91 40

358
6,715 62,964 69,679 (8,192 ) 1982 12/19/97 40

359
2,708 25,770 28,478 (4,079 ) 1989 02/05/93 40

360
33,077 188,551 221,628 (12,048 ) 1990 06/19/00 40

361
8,262 76,796 85,058 (10,337 ) 1980/1993 10/17/97 40

362
6,871 61,979 68,850 (1,871 ) 1986 10/17/01 40

363
2,642 27,393 30,035 (1,730 ) 1985 07/11/00 40

364
5,625 50,625 56,250 (369 ) 1991 09/17/02 40

365
1,025 10,841 11,866 (1,715 ) 1984 10/07/97 40

366
413 3,736 4,149 (484 ) 1985 10/07/97 40

Costs Capitalized

Initial Cost to Subsequent to

EOP Partnership Acquisition

Encumbrances Building and Building and

Description Notes Location State at 12/31/02 Land Improvements Land Improvements

367
Two Devon Square Wayne PA — 659 5,935 — 307

Washington D.C. Region Totals (175,823 ) 197,811 1,569,106 484 104,242

Subtotal Office Properties (2,500,302 ) 2,803,622 20,146,049 3,910 1,109,379

Development Properties:

368
Kruse Woods V (9) Lake Oswego OR — 5,478 5,173 — —

369
Douglas Corporate Center II (9) Roseville CA — 1,700 3,347 — —

370
Ferry Building (9) San Francisco CA — — 81,268 — —

371
Foundry Square II (9) San Francisco CA — 14,391 115,298 — (2 )

372
Water’s Edge Phase I (9) Los Angeles CA — 16,697 41,387 — —

Subtotal Development Properties — 38,266 246,473 — (2 )

Industrial Properties:

Los Angeles Region

1
Airport Commerce Center Bakersfield CA — 525 2,975 — —

Los Angeles Region Totals — 525 2,975 — —

San Francisco Region

2
Benicia Ind II & III Benicia CA — 2,250 12,750 — 59

3
BayCenter Business Park I, II & III Hayward CA — 6,240 35,360 — 87

4
Cabot Boulevard Warehouse Hayward CA — 1,905 10,795 — 43

5
Eden Landing Business Center Hayward CA — 945 5,355 — 240

6
Hayward Business Park Hayward CA — 6,750 38,250 — 156

7
Huntwood Business Center Hayward CA — 2,625 14,875 — 208

8
Huntwood Business Park Hayward CA — 675 3,825 — —

9
Keebler Warehouse Hayward CA — 630 3,570 — 102

10
The Good Guys Distribution Center Hayward CA — 3,525 19,975 — —

11
Independent Road Warehouse Oakland CA — 900 5,100 — —

12
Port of Oakland Oakland CA — 2,025 11,475 — 205

13
Montgomery Ward Pleasant Hill CA — 600 3,400 — —

14
Doolittle Business Center San Leandro CA — 1,320 7,480 — 23

San Francisco Region Totals — 30,390 172,210 — 1,123

San Jose Region

15
Fremont Bayside (8) Fremont CA (5,535 ) 2,025 11,475 — 59

16
Fremont Commerce Centers Fremont CA — 4,440 25,160 — 108

17
Industrial Drive (8) Fremont CA (2,053 ) 2,250 12,750 — —

18
Kato R & D Fremont CA — 1,095 6,205 — —

19
Milmont R & D Fremont CA — 900 5,100 — —

20
Cadillac Court I & II Milpitas CA — 1,460 8,272 — —

21
COG Warehouse Milpitas CA — 1,275 7,225 — —

22
Dixon Landing North I & II Milpitas CA — 3,922 22,222 — —

23
Okidata Distribution Center Milpitas CA — 1,613 9,138 — 22

24
Charcot Business Center San Jose CA — 3,450 19,550 — 184

25
Montague Industrial Center San Jose CA — 3,750 21,250 — 431

26
North American Van Lines San Jose CA — 2,089 11,837 (58 ) 58

27
2509-2909 Stender Way Santa Clara CA — 1,275 7,225 — —

28
Walsh @ Lafayette Industrial Park Santa Clara CA — 5,250 29,750 — —

29
Kifer Road Industrial Park Sunnyvale CA — 4,830 27,370 — 9

San Jose Region Total (7,588 ) 39,624 224,529 (58 ) 871

[Additional columns below]

(1) The aggregate cost for federal income tax purposes as of December 31, 2002 was approximately $14.8 billion net of accumulated depreciation.

(2) The life to compute depreciation on building is 40 years, except for Palo Alto Square (#254) which is subject to a ground lease that terminates in 2023. Therefore, the building is depreciated over the remaining term of the ground lease. The life to compute depreciation on building improvements is 4-40 years.

(3) The date acquired represents the date these Properties were acquired by EOP Partnership. The acquisition of the Properties, or interest therein, by the Company from EOP Partnership Predecessors in connection with the Consolidation on July 11, 1997, was accounted for using the purchase method of accounting in accordance with Accounting Principles Board Opinion No. 16. Accordingly, the assets were recorded by the Company at their fair values.

(4) These loans are subject to cross default and collateralization provisions.

(5) These loans are subject to cross default and collateralization provisions.

(6) These properties were previously under development and have been placed into service during 2002.

(7) These loans are subject to cross default and collateralization provisions.

(8) These loans are subject to cross default and collateralization provisions.

(9) These properties are in various development stages. During the development period certain operating costs, including real estate taxes together with interest incurred during the development stages will be capitalized.

(10) The encumbrances at December 31, 2002 include a net discount (net of accumulated amortization of approximately $6.4 million) of approximately $12.6 million.

A summary of activity of investment in real estate and accumulated depreciation is as follows:

The changes in investment in real estate for each of the years ended presented below are as follows:


			December 31,			December 31,			December 31,
			2002			2001			2000

Balance, beginning of the period			$	24,816,351		$	17,619,380		$	13,202,540
	Additions during period:
		Acquisitions		121,986			7,323,459			4,864,976
		Consolidation of Properties previously accounted for under the equity method		377,532			—			—
		Improvements		328,930			360,065			293,711
		Other(1)		—			(4,516	)		—
	Deductions during period:
		Properties disposed of(2)		(457,077	)		(482,037	)		(722,828	)
		Write-off of fully depreciated assets which are no longer in service		(24,206	)		—			(19,019	)

Balance, end of period			$	25,163,516		$	24,816,351		$	17,619,380

The changes in accumulated depreciation for each of the years presented below are as follows:


			December 31,			December 31,			December 31,
			2002			2001			2000

Balance, beginning of the period			$	(1,494,301	)	$	(978,055	)	$	(630,387	)
	Additions during period:
		Depreciation		(637,633	)		(532,403	)		(399,768	)
		Consolidation of Properties previously accounted for under the equity method		(617	)		—			—
	Deductions during period:
		Properties disposed of (2)		30,732			16,157			33,081
		Write-off of fully depreciated assets which are no longer in service		24,206			—			19,019

Balance, end of period			$	(2,077,613	)	$	(1,494,301	)	$	(978,055	)

(1) Approximately $3.7 million relates to the value of building equipment received in exchange for EOP Partnership’s equity position in a telecom company and the remainder relates to the write-off of internally developed software.

(2) The 2000 Properties disposed of amounts include approximately $.4 billion of disposed assets related to the partial sale of interests in various Properties. The related accumulated depreciation on the partially sold Properties was approximately $18.7 million.


	•	changes in general economic conditions, including those affecting industries in which EOP Partnership’s principal tenants compete;

	•	the extent of any white-collar job growth in markets in which we have a presence;

	•	the extent, duration and strength of any economic recovery, including its effect on the demand for office space and the creation of new office development;

	•	the domestic effect of any heightened geopolitical risks;

	•	the extent of tenant bankruptcies, financial difficulties and defaults;

	•	the amount of lease termination fees received, if any;

	•	the availability of new competitive supply, which may become available by way of sublease rather than new construction;

	•	the extent of future demand for high-rise and other office space in markets in which EOP Partnership has a presence;

	•	EOP Partnership’s ability to complete and lease current and future development projects on schedule, on budget and in accordance with expectations;

	•	EOP Partnership’s ability to maintain occupancy and to timely lease or re-lease space at current or anticipated rents;

	•	future demand for EOP Partnership’s debt and Equity Office’s equity securities;

	•	EOP Partnership’s ability to refinance its debt at reasonable terms upon maturity;

	•	EOP Partnership’s ability to achieve economies of scale over time and to realize anticipated cost savings from the implementation of its EOPlus initiatives;

	•	EOP Partnership’s ability to attract and retain high quality personnel at a reasonable cost;

	•	changes in interest rates;

	•	changes in operating costs, including real estate taxes, utilities, insurance and security costs;

	•	EOP Partnership’s ability to pay amounts due to its noteholders and preferred unitholders before any distribution to holders of Units; and

	•	EOP Partnership’s ability to obtain, at a reasonable cost, adequate insurance coverage for catastrophic events, such as earthquakes and terrorist acts.


	•	disposed of 45 office properties, four parking facilities, two industrial properties and three land parcels in various transactions to unaffiliated parties for approximately $508.3 million. The sold office properties consisted of approximately 3,113,189 square feet, the industrial properties consisted of approximately 77,072 square feet, and the parking facilities consisted of approximately 7,464 parking spaces;

	•	acquired two office buildings for approximately $92.3 million. The properties are located in Washington, D.C., and consist of approximately 327,550 square feet, of which approximately 260,372 square feet is office space;

	•	placed two developments into service consisting of three buildings and approximately 330,646 square feet;

	•	commenced two developments consisting of approximately 292,000 square feet;

	•	exchanged our equity interest in a land parcel under option and operating business in exchange for Wilson/Equity Office’s equity interest in several developments and land parcels;

	•	issued $500 million of unsecured notes due February 2012 at an all-in cost of 7.0%, which are guaranteed by Equity Office, and exchanged approximately $260.0 million of these notes for the previously outstanding $250.0 million MandatOry Par Put Remarketed Securities^SM which were subject to mandatory redemption; repaid $310 million of unsecured notes upon maturity and repaid approximately $156.1 million of mortgage debt;


	•	redeemed the 7,994,000 outstanding 8.98% Series A Cumulative Redeemable Preferred Units from Equity Office for $201.9 million, including accrued distributions, and, in turn, Equity Office used the proceeds to redeem its 7,994,000 outstanding 8.98% Series A Cumulative Redeemable Preferred Shares;

	•	issued 8,500,000 7.75% Series G Cumulative Redeemable Preferred Units to Equity Office in exchange for Equity Office’s contribution of the proceeds of approximately $206.1 million from its issuance and sale of 8,500,000 7.75% Series G Cumulative Redeemable Preferred Shares;

	•	Equity Office repurchased 7,901,900 common shares of beneficial interest (“Common Shares”) at an average price of $24.92 per share for a total of $196.9 million in the aggregate as part of a Common Share repurchase program for up to $400 million of Equity Office’s Common Shares. In connection with the repurchases, EOP Partnership purchased from Equity Office and retired a corresponding number of Units for an aggregate purchase price equal to the aggregate purchase price for all Common Share repurchases;

	•	redeemed 3,727,925 units of limited partnership interest (“Units”) for cash at an average price of $28.62 per Unit for a total of approximately $106.7 million;

	•	recognized approximately $105.5 million from lease termination fees, including approximately $46.1 million and 5,000,000 common shares (which were initially valued at zero and subsequently sold and recognized in March 2003 for a gain on sale of securities of approximately $8.1 million) from one tenant. In addition, we recognized approximately $46.4 million from lease terminations at our unconsolidated joint ventures, including approximately $40 million from one tenant; and

	•	received approximately $20.1 million from CT Convertible Trust I in connection with the redemption of its non-convertible preferred securities.


	•	increasing occupancy by leasing up vacant space, retaining tenants, reducing the lease cycle time and improving customer service;

	•	recycling of capital through selective disposition of certain assets and reinvestment in properties or other assets more consistent with our desire to focus on core assets in core markets;

	•	our ability to achieve economies of scale over time, including anticipated cost savings from the implementation of our EOPlus initiatives; and

	•	completion and lease-up of development properties.


	•	the attractiveness of the property to existing and potential tenants;

	•	the likelihood and relative attractiveness of competitive supply;

	•	the anticipated demand for space in the local market;

	•	the creditworthiness and diversity of risk in the current tenants occupying the property;

	•	the ability to acquire the asset at an attractive going-in yield, as well as the potential to increase operating income over time by renewing leases for increasing rents;


	•	the physical condition of the property, including the extent of funds required for its maintenance and for physical upgrades needed in order to establish or sustain its market competitiveness;

	•	the ability to operate the property with a competitive cost structure; and

	•	the property’s location in one of our target markets.


	•	the extent of lease-up risk in the context of the demand/supply characteristics of the local market;

	•	the ability to minimize construction risks; and

	•	the quality of local development partners, if relevant.


	•	our ability to recycle capital into markets consistent with our long-term strategy;

	•	exiting markets that are not core markets;

	•	whether the property is strategically located;

	•	tenant composition and lease rollover for the asset;

	•	general economic conditions, including job growth in the local market;

	•	the general quality of the asset; and

	•	the long-term outlook for the market for which the asset is located.


	•	Interim President of Equity Office from April 2002 until November 2002; and

	•	Chairman of Equity Group Investments, Inc., a related entity of Equity Group Investments, L.L.C., for more than five years until December 1998.


	•	Executive Vice President of Equity Office from March 1997 until November 2002;

	•	Chief Operating Officer of Equity Office from September 2001 until November 2002;

	•	Chief Financial Officer of Equity Office from March 1997 until August 2002;

	•	Senior Vice President of Equity Office from October 1996 until March 1997;

	•	Senior Vice President and Chief Financial Officer of Equity Office Holdings, L.L.C., a predecessor of Equity Office, from July 1995 until October 1997;

	•	Senior Vice President of Equity Group Investments, Inc. from February 1995 until July 1995;

	•	Senior Vice President of the Yarmouth Group, a real estate investment company in New York, New York, from August 1994 until February 1995;

	•	Senior Vice President — Finance of Equity Group Investments, Inc. from December 1993 until July 1994; and

	•	Vice President — Finance of Equity Group Investments, Inc. from August 1990 until December 1993.


	•	Senior Vice President — Strategic Planning and Operations of Equity Office from May 2000 until September 2001;

	•	Senior Vice President — Pacific Region of Equity Office from March 1998 until May 2000;

	•	Regional Vice President — Pacific of Equity Office from July 1997 until March 1998;

	•	Vice President/ Regional Manager of Equity Office Holdings, L.L.C. from March 1997 until October 1997;

	•	Vice President/ Regional Manager of Equity Office Properties, L.L.C., a predecessor of Equity Office, from July 1995 until October 1997; and

	•	Vice President/ Group Manager of Equity Office Properties, Inc., a provider of real estate property management services and a former subsidiary of Equity Group Investments, Inc., from July 1994 until January 1998.


	•	Executive Vice President — Business Development of Equity Office from February 2000 until September 2001;

	•	Senior Vice President — New Business Development of Equity Office from July 1998 until February 2000; and

	•	Managing Director of Equity International Properties, Ltd., a real estate investment company, from December 1997 until July 1998.


	•	Senior Vice President — Human Resources of Equity Office from March 2001 until November 2002 and


	•	Vice President of NEC Technologies, Inc., a leading supplier of presentation systems, computing and other empowering technologies for the North American market, from April 1995 until October 2000 (in this capacity, Mr. Krema managed the human resources division of the company in North America and was responsible for corporate services, which included real estate, travel and office services).


	•	Senior Vice President — Strategic Planning and Operations of Equity Office from May 2000 until September 2001;

	•	Senior Vice President — Northeast Region of Equity Office from March 1998 until May 2000;

	•	Regional Vice President — Northeast of Equity Office from July 1997 until March 1998;

	•	Vice President/ Regional Manager of Equity Office Holdings, L.L.C. from March 1997 until October 1997;

	•	Vice President/ Regional Leasing Director of Equity Office Properties, L.L.C. from July 1995 until October 1997; and

	•	Vice President/ Regional Leasing Director of Equity Office Properties, Inc. from September 1993 until January 1998.


	•	Executive Vice President and General Counsel of Equity Office Holdings, L.L.C. from September 1996 until October 1997.


	•	Chief Administrative Officer of Crate and Barrel, a national Chicago-based leading retailer of contemporary home furnishings and accessories (Crate and Barrel is the trade name of Euromarket Designs Inc., which is an indirect majority owned subsidiary of Otto Versand Gmbh & Co., a German mail-order company), from May 1998 until August 2002 (in this capacity, Ms. Williams participated in the planning and execution of Crate and Barrel’s growth strategy and managed its finance, accounting, information technology, warehousing, distribution and logistics, loss prevention, strategic planning, direct marketing operations and purchasing departments); and

	•	Vice President of Amoco Corporation, a worldwide energy and chemical company, from December 1997 until April 1998 and Treasurer of Amoco Corporation from October 1993 until April 1998, as well as other capacities and positions from May 1989 until October 1993.


	•	Senior Vice President — Development of Equity Office from June 2002 until November 2002;

	•	Senior Vice President — Development Investments of Equity Office from July 2001 until June 2002;

	•	President and Chief Executive Officer of Amli Commercial Properties Trust, a private real estate investment trust with office and industrial properties in the suburban Chicago market, from August 1998 until July 2001 (in this capacity, Mr. Winter was responsible for all aspects of the company’s business, including the development, management and ownership of its properties); and

	•	President and Chief Executive Officer of Amli Commercial Properties, LLC, a limited liability company and predecessor of Amli Commercial Properties Trust, from November 1996 until July 1998


(1)	Total net rentable square feet represented by expiring leases.
(2)	Percentage of total net rentable feet represented by expiring leases.
(3)	Annualized rent is the monthly contractual rent under existing leases as of December 31, 2002, multiplied by 12 months. Annualized rent per occupied square foot is annualized rent divided by occupied square feet at December 31, 2002. This amount reflects total base rent and estimated expense reimbursements from tenants as of December 31, 2002 without regard to any rent abatements and contractual increases or decreases in rent subsequent to December 31, 2002.
(4)	Total square feet on month to month leases is 1,389,831.
(5)	Management offices and building use square footage is included with no rent per square foot.


(1)	In 2002, we recognized approximately $105.5 million in lease termination fees from consolidated properties and an additional $46.4 million in lease termination fees from unconsolidated joint ventures.


	See Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations — Comparison of Year Ended December 31, 2002 to December 31, 2001.

(2)	On July 2, 2001, EOP Partnership completed its acquisition by merger (the “Spieker Merger”) of Spieker Properties, L.P. (“Spieker Partnership”) at a cost of approximately $7.2 billion. As a result of the Spieker Merger, EOP Partnership acquired an interest in 391 office properties containing approximately 28.3 million square feet and 98 industrial properties containing approximately 10.1 million square feet.

(3)	On June 19, 2000, EOP Partnership completed its acquisition by merger (the “Cornerstone Merger”) of Cornerstone Properties Limited Partnership (“Cornerstone Partnership”) at a cost of approximately $4.5 billion. As a result of the Cornerstone Merger, EOP Partnership acquired an interest in 82 office properties containing approximately 18.9 million square feet.

(4)	Refer to Item 7. Management’s Discussion and Analysis of Financial Condition — Funds from Operations for information regarding why EOP Partnership presents funds from operations and for a reconciliation of this non-GAAP financial measure to net income available for units.

(5)	Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is a non-GAAP financial measure and is presented because EOP Partnership considers EBITDA to be an indicative measure of its operating performance due to the significance of EOP Partnership’s long-lived assets and because this data can be used to measure EOP Partnership’s ability to service debt, fund capital expenditures and expand its business. However, this data should not be considered as an alternative to net income, operating profit, cash flow from operations or any other operating or liquidity performance measure prescribed by generally accepted accounting principles (“GAAP”). In addition, EBITDA as calculated by EOP Partnership may not be comparable to similarly titled measures reported by other companies. Interest expense, taxes, depreciation and amortization, impairment on securities and other investments, impairment on assets held for sale, minority interests, net gain on sales of real estate, extraordinary items, preferred distributions, put option settlements and cumulative effect of a change in accounting principle for consolidated properties and unconsolidated joint ventures which are not reflected in the presentation of EBITDA, have been, and will or may be, incurred by EOP Partnership. Investors are cautioned that these excluded items are significant components in understanding and assessing EOP Partnership’s financial performance.


(6)	Calculated as property operating revenue less property operating expense from continuing operations and discontinued operations. For more information, refer to Item 8. Financial Statements and Supplementary Data — Note 20 — Segment Information.


(a)	Average annual rent per square foot for new office leases for which the tenants have occupied the space during the relevant period may lag behind market because leasing decisions typically are made anywhere from one month to 12 or more months prior to taking occupancy.


(a)	See Item 2. Properties for an explanation of how these amounts are calculated.


(a)	Interest expense on unsecured notes and the line of credit are not allocated to the Core Portfolio.

(b)	For the Total Portfolio, these amounts include amounts from discontinued operations and exclude amounts from unconsolidated joint ventures.


(a)	Interest expense on unsecured notes and the line of credit are not allocated to the Core Portfolio.

(b)	These amounts include amounts from discontinued operations and exclude amounts from unconsolidated joint ventures.


(1)	Balance excludes net discount of $(12.6) million, net of accumulated amortization of approximately $(6.4) million.

(2)	Balance excludes net premium of $41.2 million, net of accumulated amortization of approximately ($15.4) million.


(1)	The variable rate debt as of December 31, 2001 included $817 million of fixed rate unsecured notes that were converted to a variable rate based on various spreads over LIBOR through several interest rate swap agreements. During 2002, the interest rate swap agreements were terminated.
(2)	The variable rate debt bears interest at a rate based on various spreads over LIBOR.


	•	total liabilities to total asset value may not exceed 0.55:1 at any time;

	•	earnings before interest, taxes, depreciation and amortization to interest expense may not be less than 2.00:1;

	•	cash flow to fixed charges may not be less than 1.5:1;

	•	secured debt to total asset value may not exceed 0.40:1;

	•	unsecured debt to unencumbered asset value may not exceed 0.55:1;

	•	unencumbered net operating income to unsecured debt service may not be less than 2.0:1;

	•	consolidated tangible net worth may not be less than the sum of $7.8 billion and 70% of all net offering proceeds received by Equity Office or EOP Partnership after February 29, 2000;

	•	we may not pay any distributions on Common Shares and Units in excess of 90% of annual funds from operations (“FFO”); and

	•	our investments in unimproved assets, interest in taxable REIT subsidiaries, developments, unconsolidated joint ventures, mortgages and securities, in the aggregate, may not exceed 25% of our total asset value.


	• Capital Improvements — improvements that enhance the value of the property such as lobby renovations, roof replacement, significant renovations for Americans with Disabilities Act compliance, chiller replacement and elevator upgrades.

	• Development and Redevelopment Costs — include costs associated with the development or redevelopment of a property including tenant improvements, leasing commissions, capitalized interest and operating costs incurred during completion of the property and incurred while the property is made ready for its intended use.