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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

EOP OPERATING LIMITED PARTNERSHIP

(312) 466-3300

      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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).     Yes     x     No     o

On April 30, 2004, 451,968,841 Units were outstanding.

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PART I — FINANCIAL INFORMATION

CONSOLIDATED BALANCE SHEETS

See accompanying notes.

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EOP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF OPERATIONS

See accompanying notes.

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EOP OPERATING LIMITED PARTNERSHIP

See accompanying notes.

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EOP OPERATING LIMITED PARTNERSHIP

See accompanying notes.

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CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)

See accompanying notes.

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EOP OPERATING LIMITED PARTNERSHIP

      Our consolidated financial statements have been prepared pursuant to the Securities and Exchange Commission’s (“SEC”) rules and regulations. The following notes, which present interim disclosures as required by the SEC, highlight significant changes to the notes to our December 31, 2003 audited consolidated financial statements and should be read together with the financial statements and notes thereto included in our Form 10-K.

NOTE 1 — BUSINESS AND FORMATION OF EOP PARTNERSHIP

      EOP Operating Limited Partnership (“EOP Partnership”) is a Delaware limited partnership. Our general partner is Equity Office Properties Trust (“Equity Office”), a Maryland real estate investment trust (“REIT”). The use of the word “we”, “us”, or “our” refers to EOP Partnership and its subsidiaries, except where the context otherwise requires. We were organized in 1996 to continue and expand the national office property business organized by Mr. Samuel Zell, the Chairman of the Board of Trustees of Equity Office, and to complete the consolidation of our predecessors. 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 us in exchange for units of partnership interest (“Units”). Equity Office has elected to be taxed as a 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 requirements.

      We are a fully integrated, self-administered and self-managed real estate company principally engaged, through our subsidiaries, in owning, managing, leasing, acquiring and developing office properties. At March 31, 2004, we owned or had an interest in 685 office properties comprising approximately 123.0 million rentable square feet of office space in 18 states and the District of Columbia and were located in 27 markets and 125 submarkets (the “Office Properties”). On a weighted average basis, the Office Properties were 86.1% occupied at March 31, 2004. Approximately 42.1% of the rentable square feet is located in central business districts and approximately 57.9% of the rentable square feet is located in suburban markets. At March 31, 2004, we also owned 75 industrial properties comprising approximately 5.8 million square feet of industrial space (the “Industrial Properties” and together with the Office Properties, the “Properties”) and approximately 0.3 million rentable square feet of office properties under development. On a weighted average basis, the Industrial Properties were 85.7% occupied at March 31, 2004.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      The consolidated financial statements represent our financial condition and results of operations and those of our subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Property holding entities and other subsidiaries of which we own 100% of the equity are consolidated. For those joint ventures of which we own less than 100% of the equity interest, we consolidate the property if we have the direct or indirect ability to make major decisions about the entities’ activities based on the terms of the respective joint venture agreements which specify the sharing of participating and protective rights such as decisions regarding major leases, encumbering the entities with debt and whether to dispose of entities. We would also consolidate certain property holding entities and other subsidiaries if we own less than a 100% equity interest if we are deemed to be the primary beneficiary in a variable interest entity (as defined in FASB Interpretation 46 Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51, as revised (“FIN 46”)).

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      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.

      The consolidated financial statements as of and for the three months ended March 31, 2004 and 2003 and related footnote disclosures are unaudited. In the opinion of management, such financial statements reflect all adjustments necessary for a fair presentation of the results of the interim periods. All such adjustments are of a normal and recurring nature.

      Certain reclassifications have been made to the previously reported 2003 statements in order to provide comparability with the 2004 statements reported herein. These reclassifications have not changed the 2003 results of operations or partners’ capital.

      Prior to January 1, 2003, we used the accounting provisions provided by Accounting Principles Board Opinion No. 25 (“APB 25”) to account for the issuance of share options and other equity awards. Effective January 1, 2003, we adopted Statement of Financial Accounting Standards No. 123 (“Statement 123”) Accounting for Stock Based Compensation, which requires a fair value based accounting method for determining compensation expense associated with the issuance of share options and other equity awards. We adopted the accounting provisions of Statement 123 to reflect the cost of issuing share options and other equity awards. Statement of Financial Accounting Standards No. 148 (“Statement 148”) Accounting for Stock-Based Compensation — Transition and Disclosure — an Amendment of FASB Statement No. 123, issued December 2002 and effective for interim periods beginning after December 15, 2002, provided various methods of applying Statement 123. In accordance with Statement 148, we employed the prospective method for adopting Statement 123, which requires the recognition of compensation expense based on the fair value method for share options and other equity awards granted on or after January 1, 2003 and for certain modifications made subsequent to December 31, 2002 to share options and other equity awards that were outstanding as of December 31, 2002. Compensation expense is recognized ratably over the respective vesting period of the award.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The following table illustrates the unaudited effect on net income available to unitholders and earnings per unit if the fair value based method had been applied to issued share options for the three months ended March 31, 2004 and 2003. Compensation expense related to restricted share awards is not presented in the table below because the expense amount is the same under APB 25 and Statement 123 and therefore, is already reflected in net income.

NOTE 3 — ACQUISITIONS

      In February 2004, we acquired the 15.53% economic interest of one of our joint venture partners in the 1301 Avenue of the Americas office building for approximately $60.7 million and we assumed our partner’s share of the mortgage notes of approximately $83.0 million. In addition, we acquired another joint venture partner’s interest for approximately $7.5 million which closed in April 2004. As a result of these transactions, our economic interest in the joint venture is now 100% and we control all major decisions. Accordingly, we have consolidated the property. The consolidated mortgage debt as of March 31, 2004 is approximately $533.7 million.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 4 — DISCONTINUED OPERATIONS

      In January 2004, we sold the Cal Center office property located in Sacramento, California to an unaffiliated party for approximately $18.5 million. The total gain on the sale of this property was approximately $2.2 million, which is included in discontinued operations. Cal Center consisted of one office building and approximately 118,172 square feet.

      The net income for properties sold is reflected in the consolidated statements of operations as Discontinued Operations for the periods presented. The properties that were partially sold during the three months ended December 31, 2003 are not required to be reflected as discontinued operations in accordance with Statement 144. Below is a summary of the results of operations for the properties sold, except for the properties that were partially sold, through their respective sale dates, which are classified as discontinued operations:

      For segment reporting purposes, the office properties, apartment properties 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 5 — INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES

      Several Office Properties are owned by us and other unaffiliated parties in joint ventures which we account for using the equity method. Combined summarized financial information for these unconsolidated joint ventures is as follows:

      We acquired the remaining economic interest in the 1301 Avenue of the Americas office building, which was previously unconsolidated. See Note 3-Acquisitions for more information.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 6 — MORTGAGE DEBT

      During the three months ended March 31, 2004, the following transactions occurred:

      In January 2004, we repaid upon their maturity $300 million of 6.50% unsecured notes and $100 million of 6.90% unsecured notes.

      In March 2004, we issued $1.0 billion of 4.75% senior unsecured notes due March 15, 2014. Equity Office is the guarantor of the notes. The net cash proceeds from the issuance were approximately $991.2 million and were used to repay the outstanding balance on our $1.0 billion revolving credit facility. In March 2004, we also paid $69.1 million to settle $800 million of forward-starting interest rate swaps that were previously entered into to hedge the interest rate of the $1.0 billion notes. Approximately $0.2 million of the settlement amount was recognized in interest expense and the remaining $68.9 million was recorded to other comprehensive income. The amount recorded to other comprehensive income will be amortized to interest expense over the 10-year term of the notes. Including all offering expenses and the settlement of $800 million of forward-starting swap agreements, the all-in effective rate of the unsecured notes is 5.54%.

      In March 2004, in conjunction with the debt offering, we entered into $1.0 billion of fixed-to-floating interest rate swap agreements that effectively convert the interest rate of the $1.0 billion of unsecured notes issued in March 2004 to a floating rate of LIBOR plus 43 basis points plus 79 basis points of loan costs. Because these swaps are considered perfect hedges of the $1.0 billion unsecured notes, they are marked-to-market each quarter with a corresponding mark-to-market adjustment on the $1.0 billion notes. Any market adjustment on the swap agreements will be reflected in other assets or other liabilities, and the corresponding market adjustment on the unsecured notes will be reflected as either a discount or premium on the unsecured notes. Because the swap agreements are considered a perfectly effective fair value hedge, there will be no effect on net income from the mark-to-market adjustment as long as they are outstanding.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      In March 2004, we cancelled our $1.0 billion 364-day line of credit.

NOTE 8 — PARTNERS’ CAPITAL AND MANDATORILY REDEEMABLE PREFERRED UNITS

      The following table presents the changes in the issued and outstanding Units since December 31, 2003:

      In January 2004, Equity Office redeemed all of its 4,562,900 outstanding 8 5/8% Series C Cumulative Redeemable Preferred Shares of Beneficial Interest. The Series C Preferred Shares were redeemed at a redemption price of $25.00 per share for an aggregate redemption price of approximately $114.1 million. The deferred issuance cost of approximately $4.1 million was reflected as a preferred distribution. In connection with such redemption, we redeemed all of the Series C Preferred Units from Equity Office.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 9 — CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE

      Under the provisions of FIN 46, which we adopted on January 1, 2004, we consolidated the financial condition and results of operations of Sun America Center, an office property located in Century City, California, which consists of approximately 780,000 square feet, as we determined we were the primary beneficiary in this variable interest entity. We own an approximate 67% share of a $202.2 million mezzanine-level debt position for which we paid approximately $73.9 million in 1999. As of December 31, 2003, this investment was recorded as a note receivable and was included in other assets. The note matures in August 2014 and prior to then interest is payable based on cash flow. Our maximum exposure to loss as a result of the investment is currently equivalent to the $73.9 million we invested in 1999. However, we may be required to contribute additional funds to support the operations of the property. Any additional funding will be in the form of a shortfall note, which is repayable from available cash flow. The shortfall notes may not exceed $2.5 million in the aggregate, of which our share would be approximately 67%. Our payment recourse is limited to the mezzanine borrower entity’s 100% interest in the property-owning entity.

      As a result of the consolidation of Sun America Center, we recorded a cumulative effect of a change in accounting principle loss of approximately $33.7 million. The effect on our financial condition as a result of the consolidation of Sun America Center as of January 1, 2004 is as follows:

(a)

As of January 1, 2004, our joint venture partner’s share of the mezzanine-level debt of approximately $49.7 million is recorded in other liabilities, which is net of a discount of approximately $31.5 million. Interest expense on the approximate $66 million face amount of the joint venture partner’s debt is accrued at 7.25% per annum and the discount is amortized to interest expense through the maturity of the mezzanine-level loan in 2014.

NOTE 10 — EARNINGS PER UNIT

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