AMB PROPERTY LP - 10-K Annual Report

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K


(Mark One)
þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the fiscal year ended December 31, 2002

or

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

Commission File Number 001-13545

AMB Property, L.P.

(Exact name of Registrant as specified in its charter)


Delaware		94-3285362
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)

Pier 1, Bay 1, San Francisco, California		94111
(Address of Principal Executive Offices)		(Zip Code)

(415) 394-9000

(Registrant’s Telephone Number, Including Area Code)

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

None

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

None

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 þ 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 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. o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes þ No o

State the aggregate market value of common shares held by non-affiliates of the registrant: None. No market for the Registrant’s partnership units exists and, therefore, a market value for such units cannot be determined.

DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates by reference the Registrant’s Proxy Statement for its Annual Meeting of Stockholders which the Registrant anticipates will be filed no later than 120 days after the end of its fiscal year pursuant to Regulation 14A.

PART I

Item 1. Business

General

AMB Property, L.P., a Delaware limited partnership, acquires, develops and operates industrial property in key distribution markets throughout North America, in Europe and in Asia. We commenced operations as a fully integrated real estate company effective with the completion of AMB Property Corporation’s initial public offering on November 26, 1997. Increasingly, our properties are designed for customers who value the efficient movement of goods in the world’s busiest distribution markets: large, supply-constrained locations with close proximity to airports, seaports and major freeway systems. We currently serve 2,550 customers in a portfolio (owned, managed or under development) totaling 992 buildings, encompassing approximately 94.6 million square feet (8.8 million square meters), in 30 global markets.

We are engaged in the acquisition, ownership, operation, management, renovation, expansion and development of primarily industrial properties in target markets in North America, in Europe and in Asia. As of December 31, 2002, AMB Property Corporation owned an approximate 94.5% general partnership interest in us, excluding preferred units. As our sole general partner, AMB Property Corporation has the full, exclusive and complete responsibility and discretion in our day-to-day management and control. Unless the context otherwise requires, the terms “we,” “us” and “our” refer to AMB Property, L.P. and our other controlled subsidiaries.

Our investment strategy targets customers whose businesses are growing at a faster rate than world gross domestic product (GDP) — specifically, participants in global trade. To serve the facilities needs of these customers, we invest in major markets: transportation hubs and gateways in the U.S., and targeted distribution and airport markets internationally. Our target markets are characterized by large population densities and typically offer substantial consumer bases, proximity to large clusters of distribution-facility users and significant labor pools. When measured by annual base rents, approximately 70% of these assets are concentrated in eight U.S. hub and gateway distribution markets: Atlanta, Chicago, Dallas/ Fort Worth, Los Angeles, Northern New Jersey/ New York City, San Francisco Bay Area, Miami and Seattle.

By focusing on an investment strategy that benefits from high customer demand and limited competition from new supply, we believe that over time net operating income will grow and our property values will increase. We work to implement this strategy by investing in locations that have geographic or regulatory supply constraints, high barriers to entry and close proximity to large population centers, and in buildings with customer-preferred characteristics.

Our portfolio is comprised of strategically located industrial buildings in in-fill submarkets; in-fill locations are characterized by supply constraints on the availability of land for competing projects as well as physical, political or economic barriers to new development. A substantial majority of our owned or managed buildings function as High Throughput Distribution®, or HTD® facilities; buildings designed to quickly distribute our customers’ products, rather than store them. Our investment focus on HTD assets is based on the secular change toward lower inventory levels and expedited supply chains.

HTD facilities have a variety of characteristics that allow the rapid transport of goods from point-to-point; examples include numerous dock doors, shallower building depths, fewer columns, large truck courts and more space for trailer parking. These facilities function best when located in convenient proximity to transportation infrastructure such as major airports and seaports. We believe that these building characteristics represent an important success factor for time-sensitive tenants such as air express, logistics and freight forwarding companies.

As of December 31, 2002, we owned and operated (exclusive of properties that we managed for third parties) 904 industrial buildings and nine retail and other properties, totaling approximately 85.2 million rentable square feet, located in 28 markets throughout North America and in France. As of December 31, 2002, our industrial and retail properties were 94.6% and 88.6% leased, respectively. As of December 31, 2002, through our subsidiary, AMB Capital Partners, LLC, we also managed, but did not have an ownership interest

in, industrial buildings and retail centers, totaling approximately 1.7 million rentable square feet, on behalf of various clients. In addition, as of December 31, 2002, we had investments in 43 industrial buildings, totaling approximately 5.5 million rentable square feet, through unconsolidated joint ventures.

As of December 31, 2002, we had two retail centers, four industrial properties and two development properties that we are holding for divestiture. Over the next few years, we intend to dispose of non-strategic assets and redeploy the resulting capital into industrial properties in supply-constrained markets in the U.S. and internationally that better fit our current investment focus.

Our principal executive office is located at Pier 1, Bay 1, San Francisco, California 94111; our telephone number is (415) 394-9000. We also maintain regional offices in Boston, Massachusetts and Amsterdam, the Netherlands. As of December 31, 2002, we employed 184 individuals, 141 at our San Francisco headquarters, 42 in our Boston office and one in our Amsterdam office. Our website address is www.amb.com. Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available on our website free of charge as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission.

The following marks are the registered trademarks of AMB Property Corporation: AMB®; Broker Alliance Partners®; Broker Alliance Program®; Customer Alliance Partners®; Customer Alliance Program®; Development Alliance Partners®; Development Alliance Program®; HTD®; High Throughput Distribution®; Institutional Alliance Partners®; Institutional Alliance Program®; Management Alliance Partners®; Management Alliance Program®; Strategic Alliance Partners®; UPREIT Alliance Partners®; and UPREIT Alliance Program®. The following mark is the unregistered trademark of AMB Property Corporation: Strategic Alliance Programs^TM.

Co-investment Joint Ventures

We enter into co-investment joint ventures with institutional investors. These co-investment joint ventures provide us with an additional source of capital to fund certain acquisitions, development projects and renovation projects, as well as private capital income, which enhances our returns. As of December 31, 2002, we had investments in five co-investment joint ventures with a gross book value of $1.6 billion, which are consolidated for financial reporting purposes.

Acquisition, Development and Disposition Activity

During 2002, we invested $403.3 million in operating properties, consisting of 43 industrial buildings, aggregating approximately 5.4 million square feet, and a parking lot adjacent to Los Angeles International Airport. Our acquisitions included the investment of $166.5 million in 31 buildings, aggregating approximately 3.1 million square feet, through two of our co-investment joint ventures.

During 2002, we completed industrial developments valued at $135.4 million, aggregating approximately 3.1 million square feet. We also initiated eight new industrial development projects valued at $90.6 million, aggregating approximately 1.8 million square feet, including new international industrial development projects valued at $50.3 million, aggregating approximately 1.1 million square feet.

As of December 31, 2002, we had in our development pipeline ten industrial projects, which will total approximately 1.7 million square feet and have an aggregate estimated investment of $106.8 million upon completion and three development projects available for sale, which will total approximately 0.6 million square feet and have an aggregate estimated investment of $49.1 million upon completion. As of December 31, 2002, we and our partners had funded an aggregate of $92.8 million and needed to fund an estimated additional $63.1 million in order to complete current and planned projects.

During 2002, we disposed of 58 industrial buildings, two retail buildings, and an undeveloped retail land parcel, aggregating approximately 5.7 million rentable square feet, for an aggregate price of $244.0 million. During 2002, we also sold $76.9 million in operating properties, consisting of 15 industrial buildings aggregating approximately 1.9 million square feet, to one of our co-investment joint ventures. During 2002, we

also completed and sold six buildings developed as part of our development-for-sale program for a net gain of $1.0 million.

Operating Strategy

We base our operating strategy on extensive operational and service offerings, including in-house acquisitions, development, redevelopment, asset management, leasing, finance, accounting and market research. We leverage our expertise across a large customer base and have long-standing relationships with entrepreneurial real estate management and development firms in our target markets, our Strategic Alliance Partners®.

We believe that real estate is fundamentally a local business and best operated by forging alliances with service providers in each target market. We believe that this strategy results in a mutually beneficial relationship as these alliance partners provide us with high-quality, local market expertise and intelligence. We, in turn, contribute value to the alliance relationship through national and global customer relationship development, industry knowledge, perspective and financial strength.

While our alliance relationships give us local market benefits, we retain flexibility to focus on our core competencies: developing and executing our strategic approach to real estate investment and management and raising private capital to finance growth and enhance returns.

Growth Strategies


	*Growth Through Operations*

We seek to generate internal growth through rent increases on existing space and renewals on rollover space. We do this by seeking to maintain a high occupancy rate at our properties and by seeking to control expenses by capitalizing on the economies of owning, operating and growing a large global portfolio. As of December 31, 2002, our industrial properties and retail centers were 94.6% leased and 88.6% leased, respectively. During 2002, average industrial base rental rates (on a cash basis) decreased by 1.0% from the expiring rent for that space, on leases entered into or renewed during the period. This amount excludes expense reimbursements, rental abatements and percentage rents. During 2002, we increased cash-basis same-store net operating income by 3.5% on our industrial properties. Since AMB Property Corporation’s initial public offering in November 1997, we have experienced average annual increases in industrial base rental rates (on a cash basis) of 14.5%; and we have experienced average quarterly increases in industrial same-store net operating income (on a cash basis) of 6.5%. While we believe that it is important to view real estate as a long-term investment, past results are not necessarily an indication of future performance.

While occupancy levels in our industrial portfolio were similar in 2002 and 2001, rents on lease renewals and rollovers were lower in 2002 as the general contraction in business activity nationwide caused a reduction in demand for industrial warehouse facilities. This reduction in demand was evidenced by two significant factors: decreases in national industrial occupancy levels and negative net absorption of industrial facility space. Specifically, according to Torto Wheaton Research, at December 31, 2001, national industrial occupancy was 90.2%; by December 31, 2002, national occupancy fell to 88.8%. As reported by Torto Wheaton Research, national net absorption of industrial space (the change in the amount of square footage leased in existing and newly constructed industrial properties) was positive from 1989 through 2000. By contrast, Torto Wheaton Research reported that net absorption was negative by 152 million square feet in 2001 and 34 million square feet in 2002. In 2002, these factors combined to reduce market rents for industrial properties by approximately 15% to 20% nationally from peak levels at the beginning of 2001. While the level of rental rate reduction varied by market, we strove to maintain high occupancy by pricing lease renewals and new leases with sensitivity to local market conditions.


	*Growth Through Acquisitions and Capital Redeployment*

We believe that our significant acquisition experience, our alliance-based operating strategy and our extensive network of property acquisition sources will continue to provide opportunities for external growth.

We have forged relationships with third-party local property management firms through our Management Alliance Program®. We believe that these alliances will create acquisition opportunities, as such managers market properties on behalf of sellers. Our operating structure also enables us to acquire properties through our UPREIT Alliance Program® in exchange for our limited partnership units, thereby enhancing our attractiveness to owners and developers seeking to transfer properties on a tax-deferred basis. In addition to acquisitions, we seek to redeploy capital from non-strategic assets into properties that better fit our current investment focus.

We are generally in various stages of negotiations for a number of acquisitions and dispositions that may include acquisitions and dispositions of individual properties, acquisitions of large multi-property portfolios and acquisitions of other real estate companies. There can be no assurance that we will consummate any of these transactions. Such transactions, if we consummate them, may be material individually or in the aggregate. Sources of capital for acquisitions may include undistributed cash flow from operations, borrowings under our unsecured credit facility, other forms of secured or unsecured debt financing, issuances of debt or limited partnership unit offerings (including issuances of limited partnership units by our subsidiaries), proceeds from divestitures of properties, assumption of debt related to the acquired properties and private capital from our co-investment partners.


	*Growth Through Development*

We believe that renovation and expansion of properties and development of well-located, high-quality industrial properties should continue to provide us with attractive opportunities for increased cash flow and a higher rate of return than we may obtain from the purchase of fully-leased, renovated properties. Value-added properties are typically characterized as properties with available space or near-term leasing exposure, undeveloped land acquired in connection with another property that provides an opportunity for development or properties that are well located but require redevelopment or renovation. Value-added properties require significant management attention or capital investment to maximize their return. We believe that we have developed the in-house expertise to create value through acquiring and managing value-added properties and believe that our global market presence and expertise will enable us to continue to generate and capitalize on these opportunities. Through our Development Alliance Program®, we have established strategic alliances with global and regional developers to enhance our development capabilities.

The multidisciplinary backgrounds of our employees should provide us with the skills and experience to capitalize on strategic renovation, expansion and development opportunities. Several of our general partner’s officers have extensive experience in real estate development, both with us and with national development firms. We generally pursue development projects in joint ventures with our Development Alliance Partners®. This way, we leverage the development skill, access to opportunities and capital of such developers and we eliminate the need and expense of an extensive in-house development staff. Under a typical joint venture agreement with a Development Alliance Partner, we would fund 95% of the construction costs and our partner would fund 5%; however, in certain cases we may own as little as 50% or as much as 98% of the joint venture. Upon completion, we generally would purchase our partner’s interest in the joint venture. We may also structure developments where we would own 100% of the asset with an incentive development fee to be paid upon completion to our development partner.


	*Growth Through Co-Investments*

We co-invest with third-party partners (some of whom may be clients of AMB Capital Partners, LLC, to the extent such partners commit new investment capital) through partnerships, limited liability companies or joint ventures. We currently use a co-investment formula with each third party whereby we will own at least a 20% interest in all ventures. In general, we control all significant operating and investment decisions of our co-investment entities. We believe that our co-investment program will continue to serve as a source of capital for acquisitions and developments and private capital income; however, there can be no assurance that it will continue to do so. During 2002, we sold $76.9 million in operating properties, consisting of 15 industrial buildings, aggregating approximately 1.9 million square feet, to one of our co-investment joint ventures, AMB-SGP, L.P. We recognized a gain of $3.3 million related to this sale, representing the portion of the sold

properties acquired by the third-party co-investor. We also sold 30% of our interest in AMB Partners II, L.P., our co-investment joint venture with the City and County of San Francisco Employees’ Retirement System, to our co-investment joint venture partner; we now own 20% of AMB Partners II, L.P. We recognized a gain of $6.3 million related to this sale.


	*Growth Through Developments for Sale*

We, through our taxable REIT subsidiaries, conduct a variety of businesses that include incremental income programs, such as our development projects available for sale to third parties. Such development properties include value-added conversion projects and build-to-sell projects. During 2002, we completed and sold six value-added conversion buildings for a net gain of $1.0 million. As of December 31, 2002, we were developing three projects for sale to third parties. During 2001, we completed and sold two value-added conversion projects for a net gain of $13.2 million.


	*Growth Through Global Expansion*

Over the next three to five years, we expect to have from 10% to 15% of our assets invested in international markets. Our Mexican target markets currently include Mexico City, Guadalajara and Monterrey. Our European target markets currently include Paris, Amsterdam, London, Frankfurt and Madrid. Our Asian target markets currently include Singapore, Hong Kong and Tokyo. In 2002, our first year of international operation, we earned $0.7 million in rental revenues from our Mexico City, Guadalajara and Paris properties. There are many factors that could cause our entry into target markets and future capital allocation to differ from our current expectations, which are discussed under the subheading “Our International Growth is Subject to Special Political and Monetary Risks” and elsewhere under the heading “Business Risks” in this report.

We believe that expansion into target international markets represents a natural extension of our well-established strategy to invest in industrial markets with high population densities, close proximity to large customer clusters and available labor pools, and major distribution centers serving the global supply chain. Our expansion strategy mirrors our domestic focus on in-fill locations, which are supply-constrained submarkets with political, economic or physical constraints to new development; and, land, as a high percentage of total asset value, becoming more valuable for higher and better use over time. Our international investments will extend our offering of High Throughput Distribution facilities for customers who value speed-to-market over storage. Specifically, we are focused on customers whose business is derived from world air-cargo flows, a sector expected to grow significantly faster than world GDP growth. In addition, our investments target major consumer distribution markets and customers.

We believe that our established customer relationships, our contacts in the air cargo and logistics industries, diligent underwriting of markets and investment considerations and our strategic alliance partnerships with knowledgeable, local-market property brokers, developers and managers will assist us in competing internationally.

Business Risks

See: “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Business Risks” for a complete discussion of the various risks that could adversely affect us.


Item 2.	*Properties*

Industrial Properties

As of December 31, 2002, we owned 904 industrial buildings aggregating approximately 84.2 million rentable square feet, located in 28 markets throughout North America and France. Our industrial properties accounted for $501.2 million, or 97.7%, of our total annualized base rent as of December 31, 2002. Our industrial properties were 94.6% leased to over 2,300 customers, the largest of which accounted for no more

than 2.6% of our annualized base rent from our industrial properties. See “Item 14. Note 17 of Notes to Consolidated Financial Statements” for segment information related to our operations.

Property Characteristics. Our industrial properties, which consist primarily of warehouse distribution facilities suitable for single or multiple customers, are typically comprised of multiple buildings. The following table identifies type and characteristics of our industrial buildings and each type’s percentage of our total portfolio based on square footage at December 31:


Building Type	Description	2002			2001

Warehouse	15,000-75,000 SF, single or multi-customer		40.2	%		40.3	%
Bulk Warehouse	Over 75,000 SF, single or multi-customer		39.6	%		37.8	%
Flex Industrial	Includes assembly or R&D, single or multi-customer		7.5	%		9.6	%
Light Industrial	Smaller customers, 15,000 SF or less, higher office finish		6.5	%		7.3	%
Trans-Shipment	Unique configurations for truck terminals and cross-docking		2.3	%		1.8	%
Air Cargo	On-tarmac or airport land for transfer of air cargo goods		2.6	%		1.6	%
Office	Single or multi-customer, used strictly for office		1.3	%		1.5	%

Lease Terms. Our industrial properties are typically subject to lease on a “triple net basis,” in which customers pay their proportionate share of real estate taxes, insurance and operating costs, or are subject to leases on a “modified gross basis,” in which customers pay expenses over certain threshold levels. In addition, most of our leases include fixed rental increases or CPI rental increases. Lease terms typically range from three to ten years, with an average of six years, excluding renewal options. However, the majority of our industrial leases do not include renewal options.

Overview of Major Target Markets. Our industrial properties are located near key passenger and air cargo airports, key interstate highways, and seaports in major domestic metropolitan areas, such as Atlanta, Chicago, Dallas/ Fort Worth, Los Angeles, Northern New Jersey/ New York, the San Francisco Bay Area, Miami and Seattle. Our international industrial facilities are located in major distributions markets including Mexico City, Guadalajara and Paris. We believe our industrial properties’ strategic location, transportation network and infrastructure, and large consumer and manufacturing bases support strong demand for industrial space.

Within these metropolitan areas, our industrial properties are concentrated in locations with limited new construction opportunities within established, relatively large submarkets, which we believe should provide a higher rate of occupancy and rent growth than properties located elsewhere. These in-fill locations are typically near major passenger and air cargo facilities, seaports or convenient to major highways and rail lines, and are proximate to a diverse labor pool. There is typically broad demand for industrial space in these centrally located submarkets due to a diverse mix of industries and types of industrial uses, including warehouse distribution, light assembly and manufacturing. We generally avoid locations at the periphery of metropolitan areas where there are fewer constraints to the supply of additional industrial properties.

Industrial Market Operating Statistics

As of December 31, 2002, we operated in eight domestic hub and gateway markets, in addition to 20 other markets throughout North America and France. The following table represents properties in which we own a fee simple interest or a controlling interest (consolidated), and excludes properties in which we only own a non-controlling interest (unconsolidated) and properties under development.


														No. New			San									Total			Total
								Dallas/			Los			Jersey/			Francisco									Hub			Other
		Atlanta			Chicago(1)			Ft.Worth			Angeles			New York			Bay Area			Miami			Seattle			Markets			Markets			Total

Square feet owned(1)			7,235,434			7,821,563			3,728,532			12,205,784			7,487,729			11,296,618			4,432,361			4,857,434			58,975,455			25,227,567			84,203,022
Our pro rata share of square feet			4,699,741			6,049,044			2,740,714			8,544,968			5,121,955			8,801,807			4,008,449			3,008,807			42,885,515			22,413,294			65,298,809
Occupancy Percentage			90.8	%		94.5	%		96.3	%		97.7	%		97.1	%		94.7	%		95.7	%		97.2	%		95.5	%		92.5	%		94.6	%
Annualized base rent (000’s)		$	27,187		$	34,879		$	14,761		$	71,391		$	46,997		$	94,458		$	30,357		$	22,718		$	342,748		$	158,461		$	501,209
Annualized base rent per square foot		$	4.14		$	4.72		$	4.11		$	5.99		$	6.46		$	8.83		$	7.31		$	4.81		$	6.09		$	6.79		$	6.29
Lease expirations as a percentage of ABR:
	2003		11.9	%		19.7	%		16.3	%		17.7	%		16.7	%		14.6	%		12.6	%		22.3	%		16.1	%		13.7	%		15.4	%
	2004		13.1	%		21.9	%		18.8	%		15.8	%		28.4	%		15.1	%		22.4	%		18.1	%		18.5	%		10.4	%		16.0	%
	2005		20.7	%		16.3	%		22.5	%		14.7	%		9.3	%		16.8	%		20.6	%		11.4	%		15.9	%		15.8	%		16.0	%
	2006		17.8	%		22.1	%		13.8	%		16.0	%		8.2	%		10.4	%		14.3	%		11.1	%		13.5	%		11.0	%		12.8	%
	2007		6.4	%		7.8	%		8.0	%		11.0	%		15.4	%		12.1	%		15.5	%		19.6	%		12.1	%		16.6	%		13.4	%
Weighted average lease terms Original			6.0 years			6.3 years			5.4 years			5.9 years			5.5 years			5.8 years			5.9 years			6.0 years			5.9 years			7.0 years			6.2 years
	Remaining		3.9 years			2.3 years			1.9 years			3.1 years			2.9 years			3.0 years			3.0 years			3.0 years			3.0 years			4.0 years			3.3 years
Tenant Retention (Year-to-date)			64.7	%		88.1	%		55.6	%		83.4	%		96.3	%		60.7	%		57.3	%		65.2	%		74.0	%		74.7	%		74.2	%
Rent increases on renewals and rollovers			-8.3	%		-5.6	%		3.4	%		10.8	%		11.7	%		-8.0	%		-15.1	%		-12.2	%		-1.8	%		1.0	%		-1.0	%
Same space leased			1,121,943			1,220,090			387,071			2,092,507			1,566,866			2,083,734			706,839			1,124,633			10,303,683			4,396,916			14,700,599
Same store cash basis NOI growth			-2.8	%		5.7	%		2.1	%		2.1	%		-5.3	%		15.1	%		4.0	%		-4.9	%		5.2	%		-0.4	%		3.5	%
Square feet owned in same store pool(2)			5,160,923			6,492,649			3,413,679			9,319,905			5,280,207			8,775,561			4,342,361			3,520,291			46,305,576			21,693,009			67,998,585
Total market square footage(3)			7,587,220			11,992,828			4,328,659			15,080,058			7,914,243			12,298,081			4,968,046			4,984,898			69,154,033			25,432,716			94,586,749

(1) Includes all industrial consolidated operating properties and excludes industrial developments and renovation projects.

(2) Same store pool excludes properties purchased or developments stabilized after December 31, 2000.

(3) Total market square footage includes industrial and retail operating properties, development properties, unconsolidated properties, properties managed for third parties and reallocation of on-tarmac properties.

Industrial Operating Portfolio Overview

As of December 31, 2002, our 904 industrial buildings were diversified across 28 markets throughout North America and France. The average age of our industrial properties is 19 years (since the property was built or substantially renovated). The following table represents properties in which we own a fee simple interest or a controlling interest (consolidated), and excludes properties in which we only own a non-controlling interest (unconsolidated).


						Total		Percentage								Percentage					Annualized
						Rentable		of Total						Annualized		of Total					Base Rent
				Number of		Square		Rentable			Percentage			Base Rent		Annualized			Number		per Leased
Industrial Properties				Buildings		Feet(1)		Square Feet			Leased			(000’s)		Base Rent			of Leases		Square Foot

Hub and Gateway Markets:
	Atlanta				61		7,235,434		8.6	%		90.8	%	$	27,187		5.4	%		183	$	4.14
	Chicago(2)				92		7,821,563		9.3			94.5			34,879		7.0			184		4.72
	Dallas/ Ft. Worth				41		3,728,532		4.4			96.3			14,761		2.9			105		4.11
	Los Angeles(3)				144		12,205,784		14.5			97.7			71,391		14.2			364		5.99
	N. New Jersey/ New York City				79		7,487,729		8.9			97.1			46,997		9.4			254		6.46
	San Francisco Bay Area				143		11,296,618		13.4			94.7			94,458		18.8			400		8.83
	Miami				42		4,342,361		5.2			95.7			30,557		6.1			225		7.31
	Seattle				47		4,857,434		5.8			97.2			22,718		4.5			168		4.81

		Subtotal/ Weighted Average			649		58,975,455		70.0			95.5			342,748		68.4			1,883		6.09
Other Markets:
	Austin				9		1,365,873		1.6			94.1			9,559		1.9			27		7.44
	Baltimore/ Washington D.C.				63		4,105,921		4.9			96.9			30,749		6.1			287		7.73
	Boston				38		4,401,018		5.2			95.1			22,933		4.6			57		5.48
	Charlotte				10		729,836		0.9			55.9			1,900		0.4			24		4.66
	Cincinnati				6		812,053		1.0			95.1			2,512		0.5			13		3.25
	Columbus				2		465,433		0.6			48.4			683		0.1			1		3.03
	Guadalajara, Mexico				5		687,088		0.8			88.3			3,691		0.7			13		6.08
	Memphis				17		1,883,845		2.2			97.4			9,014		1.8			46		4.91
	Mexico City				1		786,979		0.9			100.0			4,246		0.8			1		5.40
	Minneapolis				42		4,456,905		5.3			95.9			18,382		3.7			203		4.30
	New Orleans				5		411,689		0.5			94.5			1,959		0.4			47		5.04
	Newport News				1		60,215		0.1			78.8			584		0.1			3		12.31
	Orlando				19		1,845,494		2.2			81.9			6,608		1.3			80		4.37
	Paris, France				1		67,415		0.1			100.0			677		0.1			1		10.04
	Portland				5		676,104		0.8			100.0			2,940		0.6			11		4.35
	San Diego				5		276,167		0.3			100.0			2,545		0.5			21		9.22
	On-Tarmac(4)				26		2,195,532		2.6			91.0			39,479		7.9			167		19.76

		Subtotal/ Weighted Average			255		25,227,567		30.0			92.5			158,461		31.6			1,002		6.79

			Total/ Weighted Average		904		84,203,022		100.0	%		94.6	%	$	501,209		100.0	%		2,885	$	6.29

(1) In addition to owned square feet, we manage, through our subsidiary, AMB Capital Partners, LLC, 1.7 million additional square feet of industrial, retail and other properties.

(2) We also have an ownership interest in 36 industrial buildings totaling 4.0 million square feet in the Chicago market through our investment in an unconsolidated joint venture.

(3) We also have an ownership interest in 7 industrial buildings totaling 1.4 million square feet in the Los Angeles market through our investment in an unconsolidated joint venture.

(4) Includes on-tarmac airport air cargo facilities at 11 airports.

Industrial Lease Expirations

The following table summarizes the lease expirations for our industrial properties for leases in place as of December 31, 2002, without giving effect to the exercise of renewal options or termination rights, if any, at or prior to the scheduled expirations.


				Annualized		Percentage of
		Rentable		Base Rent		Annualized
Year of Lease Expiration(1)		Square Feet		(000s)(2)		Base Rent

2003(3)			14,068,516	$	82,252		15.4	%
2004			13,476,638		85,679		16.0
2005			13,542,987		84,741		16.0
2006			9,916,313		68,271		12.8
2007			9,572,812		71,905		13.4
2008			6,265,707		38,605		7.2
2009			3,697,563		21,802		4.1
2010			2,589,890		26,418		4.9
2011			1,898,797		21,040		3.9
2012			2,593,493		19,794		3.7
2013 and beyond			1,508,054		14,131		2.6

	Total		79,130,770	$	534,638		100.0	%

(1) Schedule includes in-place leases and leases with future commencement dates.

(2) Calculated as monthly rent at expiration multiplied by 12.

(3) Includes month-to-month leases totaling 0.5 million square feet.

Customer Information

Largest Property Customers. Our 25 largest industrial property customers by annualized base rent are set forth in the table below.


						Percentage of					Percentage of
		Number		Aggregate		Aggregate					Aggregate
		of		Rentable		Leased			Annualized		Annualized
Industrial Customer Name(1)		Leases		Square Feet		Square Feet(2)			Base Rent		Base Rent(3)

United States Government(4)(5)			30		642,264		0.8	%	$	13,150		2.6	%
FedEx Corporation(4)			30		727,965		0.9			9,608		1.9
Harmonic Inc.			3		241,980		0.3			4,776		0.9
Proctor & Gamble Manufactura			2		797,168		1.0			4,308		0.8
International Paper Company			7		541,379		0.7			4,069		0.8
Abgenix, Inc.			2		97,887		0.1			3,607		0.7
County of Los Angeles(6)			12		248,078		0.3			3,551		0.7
Waitex International Co. Ltd.			5		504,940		0.6			3,212		0.6
Ford Motor Company			1		610,878		0.8			3,034		0.6
Ahold NV			7		680,565		0.8			2,879		0.6
TJX Companies, Inc.			4		699,157		0.9			2,824		0.6
FMI International			3		439,390		0.5			2,533		0.5
Wells Fargo and Company			5		213,432		0.3			2,510		0.5
Danzas AEI International			7		352,476		0.4			2,472		0.5
United Airlines Inc.(4)			4		121,381		0.2			2,437		0.5
Home Depot USA Inc.			3		577,813		0.7			2,392		0.5
BAX Global Inc.(4)			4		151,452		0.2			2,332		0.5
Forward Air Corporation			7		344,765		0.4			2,249		0.4
CNF Inc.			9		545,495		0.4			2,242		0.4
Boeing Company			5		457,565		0.6			2,237		0.4
Johnson & Johnson			4		129,449		0.2			2,196		0.4
Applied Materials, Inc.			1		290,557		0.4			2,152		0.4
Cirrus Logic			1		48,384		0.1			2,113		0.4
United Liquors, Ltd.			1		440,000		0.5			2,057		0.4
DJ Air Services, Inc.			1		51,920		0.1			2,054		0.4

	Total				9,756,340		12.1	%	$	86,994		17.0	%

(1) Customer(s) may be a subsidiary of or an entity affiliated with the named customer. We also hold a lease at Park One with an annualized base rent of $6.5 million, which is not included because it is not an industrial operating property.

(2) Computed as aggregate leased square feet divided by the aggregate leased square feet of the industrial and retail properties.

(3) Computed as aggregate annualized base rent divided by the aggregate annualized base rent of the industrial and retail and other properties.

(4) Apron rental amount (but not square footage) are included.

(5) United States Government includes the United States Postal Service (USPS), U.S. Customs and the United Stated Department of Agriculture (USDA).

(6) County of Los Angeles includes Children’s Services, the Fire Department, the District Attorney’s Office, the Sheriff and the Unified School District.

Operating and Leasing Statistics

Industrial Operating and Leasing Statistics

The following table summarizes key operating and leasing statistics for all of our industrial properties as of and for the years ended December 31, 2002, 2001 and 2000:


				2002			2001			2000

Square feet owned at December 31(1)(2)					84,203,022			81,550,880			77,795,989
Occupancy percentage at December 31					94.6	%		94.5	%		96.4	%
Weighted average lease term:
		Original			6.2 years			6.3 years			6.4 years
		Remaining			3.3 years			3.3 years			3.5 years
Tenant retention					74.2	%		66.8	%		59.0	%
Same Space Leasing Activity:(3)
Rent increases on renewals and rollovers					(1.0	)%		20.4	%		25.6	%
	Same space square footage commencing (millions)				14.7			11.9			11.9
2nd generation leasing activity:(4)
		Renewals		$	1.30		$	0.99		$	1.22
		Re-tenanted			2.45			3.25			2.27

			Weighted average	$	1.90		$	2.05		$	1.86

	Same space square footage commencing (millions)				19.0			13.9			n/a

(1) Includes all consolidated operating properties and excludes industrial development and renovation projects.

(2) In addition to owned square feet as of December 31, 2002, we manage, through our subsidiary, AMB Capital Partners, 1.7 million additional square feet of industrial, retail and other properties. We also have investments in 5.5 million square feet of industrial properties through our investments in unconsolidated joint ventures.

(3) Consists of second-generation leases renewing or re-tenanting with current and prior lease terms greater than one year.

(4) Second generation leasing activity includes total tenant improvements, lease commissions and other leasing costs incurred during the leasing of second generation space. Costs incurred prior to leasing available space are not included until such space is leased. Second generation space excludes newly developed space or space vacant at acquisition.

Industrial Same Store Operating Statistics

The following table summarizes key operating and leasing statistics for our same store properties as of and for the years ended December 31, 2002, 2001 and 2000. The same store pool excludes properties purchased and developments stabilized after December 31, 2000. For an explanation of our same store properties, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations.”


		2002			2001			2000

Square feet in same store pool at December 31			67,998,585			60,165,437			52,145,350
% of total industrial square feet			80.8	%		73.8	%		68.8	%
Occupancy percentage at period end			94.6	%		94.6	%		96.8	%
Tenant retention			73.3	%		64.5	%		59.2	%
Rent increases on renewals and rollovers			(1.4	)%		23.5	%		27.0	%
	Same space square footage commencing (millions)		13.8			10.0			9.9
Cash basis net operating income growth % increase
	Revenues		3.9	%		6.4	%		7.3	%
	Expenses		5.1	%		6.9	%		3.5	%
	NOI		3.5	%		6.3	%		8.5	%

Retail Properties

Retail and Other Property Summary

The following table sets forth the rentable square footage of our retail centers and other properties as of December 31, 2002, and represents properties in which we own a fee simple interest or a controlling interest (consolidated).


		Total					Annualized
		Rentable		Percentage			Base Rent
Retail Properties		Square Feet		Leased			(000’s)(1)

Around Lenox(3)			120,946		67.1	%	$	2,185
Beacon Center			63,240		61.9			754
Charles & Chase			48,000		100.0			300
Howard & Western(4)			88,544		94.3			1,196
Mazzeo Drive			88,420		100.0			717
Novato Fair Shopping Center(3)			126,193		90.1			1,002
Palm Aire			131,233		96.9			1,648
Springs Gate land(3)			n/a		n/a			n/a
The Plaza at Delray(3)(4)			332,908		91.5			4,161

	Total/ Weighted Average		999,484		88.6	%	$	11,963

(1) Annualized base rent means the monthly contractual amount under existing leases at December 31, 2002, multiplied by 12. This amount excludes expense reimbursements, rental abatements, and percentage rents.

(2) Calculated as total Annualized Base Rent divided by total rentable square feet actually leased as of December 31, 2002.

(3) We hold an interest in this property through a joint venture interest in a limited partnership.

(4) This property is held for divestiture as of December 31, 2002.

Our retail properties have an average age of 12 years since they were built, expanded or renovated. During 2002, we sold two retail properties totaling approximately 0.3 million rentable square feet and an undeveloped retail land parcel. As of December 31, 2002, we had two retail centers, aggregating approximately 0.4 million rentable square feet, held for divestiture.

Development Pipeline

The following table sets forth the properties owned by us as of December 31, 2002, which were undergoing renovation, expansion or new development. No assurance can be given that any of such projects will be completed on schedule or within budgeted amounts.

Industrial Development and Renovation Deliveries


									Estimated		Estimated			Estimated			Our
							Development Alliance		Stabilization		Square Feet at			Total			Ownership
Project					Location		Partner®		Date		Completion			Investment(1)			Percentage


					(Dollars in thousands)
2003 Deliveries
	1. Van Nuys Buildings 3 & 4					Van Nuys, CA		Trammell Crow Company		January		161,000		$	12,600			95	%
	2. Dulles Airport Park Building 300					Dulles, VA		Seefried Properties		April		77,000			5,600			21	%
	3. Airport South Building 700					College Park, GA		Seefried Properties		July		64,000			4,100			20	%
	4. Sunset Distribution Center(3)					Brea, CA		None		July		348,000			18,100			20	%
	5. Suwanee Creek Phase V					Atlanta, GA		Seefried Properties		July		167,000			6,000			100	%
	6. Des Plaines Distribution Center(4)					Des Plaines, IL		Seefried Properties		August		36,000			6,900			18	%
	7. Paris Nord Distribution II					Paris, France		None		September		101,000			8,300			100	%
	8. Carson Town Center, SE					Carson, CA		Mar Ventures		September		349,000			23,200			95	%
	9. Houston Air Cargo					Houston, TX		Trammell Crow Company		October		156,000			10,800			20	%

				Total 2003 Deliveries								1,459,000			95,600			60	%
			% Pre-leased/funded-to-date(2)									33	%	$	57,700	(2)
			Weighted Average Estimated Yield												9.9%/9.4	%
		GAAP/Cash(5)
2004 Deliveries
10. Airport Logistics Park of Singapore Phase I						Changi, Singapore		Boustead Projects		September		234,000			11,200			50	%

			% Pre-leased/funded-to- date(2)									0	%	$	100
			Weighted Average Estimated Yield												11.9%/11.9	%
		GAAP/Cash(5)
		Total Scheduled Deliveries(1)										1,693,000		$	106,800			59	%

			% Pre-leased/funded-to-date(2)									28	%	$	57,800	(2)
			Weighted Average Estimated Yield												10.1%/9.7	%
		GAAP/Cash(5)

(1) Represents total estimated cost or renovation, expansion or development, including initial acquisition costs, Development Alliance Partner® earnouts and associated equity carry costs. The estimates are based on our current estimates and forecasts and are subject to change. Excludes 178 acres of land held for future development and other acquisition-related costs totaling $27.1 million.

(2) As of December 31, 2002, our share of amounts funded to date for 2003 deliveries was $36.8 million.

(3) Represents a renovation project.

(4) This is a 79-door truck terminal.

(5) The yield on international projects is on an after-tax basis.

Development Projects Available for Sale(1)

Estimated

Our

Development

Stabilization

Square Feet at

Total

Ownership

Project

Market

Alliance Partner®

Date(2)

Completion

Investment(3)

Percentage

(Dollars in thousands)

Value-Added Conversion

None

Build-to-Sell(4)

1. Carson Town Center SW

Southern California

Mar Ventures

Completed

247,000

18,900

2. Novato Fair Shopping Center

SF Bay Area

AIG

November 2003

134,000

18,300

3. Wilsonville Phase II

Southern California

Trammell Crow

March 2004

250,000

11,900

100

Total Build-to-Sell Properties

631,000

49,100

Funded-to-date

35,000

(5)

(1) Excludes 47 acres of land and other acquisition-related costs totaling $11.2 million.

(2) We intend to sell these properties within two years of completion.

(3) Represents total estimated cost of renovation, expansion or development, including initial acquisition costs, debt and equity carry and partner earnouts. The estimates are based on our current estimates and forecasts and are subject to change.

(4) Represents build-to-suit and speculative development or redevelopment.

(5) As of December 31, 2002, our share of amounts funded to date was $27.0 million.

Properties Held Through Joint Ventures, Limited Liability Companies, and Partnerships

Consolidated:

As of December 31, 2002, we held interests in joint ventures, limited liability companies and partnerships with third parties, which are consolidated in our consolidated financial statements. Such investments are consolidated because we own a majority interest or exercise significant control over major operating decisions such as approval of budgets, selection of property managers and changes in financing. Under the agreements governing the joint ventures, we and the other party to the joint venture may be required to make additional capital contributions and, subject to certain limitations, the joint ventures may incur additional debt. Such agreements also impose certain restrictions on the transfer of joint venture interests by us or the other party to the joint venture and provide certain rights to us or the other party to the joint venture to sell its interest to the joint venture or to the other joint venture partner on terms specified in the agreement. See “Item 14. Note 10 of the Notes to Consolidated Financial Statements.”

Industrial Consolidated Joint Ventures


				Our											JV Partners’
				Ownership			Number of		Square		Gross Book				Share of
Joint Ventures				Percentage			Buildings		Feet(1)		Value(2)		Debt		Debt


				(Dollars in thousands)
Operating Joint Ventures:
Co-investment joint ventures with AMB:
	AMB/ Erie(3)				50	%		32		2,837,459	$	166,184	$	58,248	$	29,124
	AMB Institutional Alliance Fund I(4)				21	%		103		5,902,060		393,827		171,813		136,413
	AMB Partners II(5)				20	%		56		4,416,908		237,173		120,874		91,428
	AMB-SGP(6)				50	%		73		8,594,016		379,207		252,475		126,238
	AMB Institutional Alliance Fund II(4)				20	%		56		5,725,598		337,865		227,955		182,216

			Total co-investment joint ventures		31	%		320		27,476,041		1,514,256		831,365		565,419
Other Joint Ventures					92	%		41		4,094,640		320,721		80,250		4,944

		Total Operating Joint Ventures			42	%		361		31,570,681		1,834,977		911,615		570,363

Development Alliance Joint Ventures:
	AMB/ Erie(3)				50	%		—		—		13,985		—		—
	AMB Institutional Alliance Fund I(4)				21	%		2		233,000		9,933		9,748		7,701
	AMB Partners II(5)				20	%		1		64,000		3,006		—		—
	AMB Institutional Alliance Fund II(4)				20	%		3		384,000		17,805		—		—
	Other Development Alliance Joint Ventures				93	%		8		757,000		52,674		—		—

		Total Development Joint Ventures			64	%		14		1,438,000		97,403		9,748		7,701

		Total Industrial Consolidated Joint Ventures			43	%		375		33,008,681	$	1,932,380	$	921,363	$	578,064

(1) For development properties, this represents estimated square feet at completion of development for committed phases of development and renovation projects.

(2) Represents the book value of the property (before accumulated depreciation) owned by the joint venture entity and excludes net other assets.

(3) AMB Erie is a co-investment partnership formed in 1998 with the Erie Insurance Company and certain related entities.

(4) AMB Institutional Alliance Fund I (closed in 2000) and II (closed in 2001) are co-investment partnerships with institutional investors, which invest through private REITs.

(5) AMB Partners II is a co-investment partnership formed in 2001 with the City and County of San Francisco Employees’ Retirement System. In November 2002, CCSF increased its ownership in AMB Partners II from 50% to 80% by acquiring an additional 30% partnership interest in AMB Partners II from us.

(6) AMB-SGP is a co-investment partnership formed in 2001 with Industrial JV Pte Ltd, a subsidiary of GIC Real Estate Pte Ltd., the real estate investment subsidiary of the government of Singapore Investment Corporation.

Retail and Other Consolidated Joint Ventures


			Our							JV Partners’
			Ownership			Square	Gross Book			Share of
Properties		Market	Percentage			Feet	Value(1)		Debt	Debt


		(Dollars in thousands)
Operating Joint Ventures
1. Around Lenox		Atlanta		90	%	120,946	$	21,408	$9,424	$	942
2. Palm Aire		Miami		100	%	131,233		18,787	—		—
3. Plaza at Delray(2)		Miami		76	%	332,908		41,306	—		—

	Total Operating Joint Ventures			85	%	585,087		81,501	9,424		942

Development Alliance Joint Venture
4. Springs Gate land(3)		Miami		100	%	—		6,717	—		—
5. Novato Fair Shopping Center		SF Bay Area		50	%	134,000		14,522	7,806		3,903

	Total Development Joint Ventures			66	%	134,000		21,239	7,806		3,903

	Total Retail Consolidated Joint Ventures			81	%	719,087	$	102,740	$17,230	$	4,845

(1) Represents the book value of the property (before accumulated depreciation) owned by the joint-venture entity and excludes net other assets.

(2) Included as properties held for divestiture.

(3) Represents 26 acres of land for future development. We sold 13 acres of our 39 acres in December 2002.


	*Unconsolidated Joint Ventures, Mortgage Investments and Other Investments:*

As of December 31, 2002, we held interests in four equity investment joint ventures that are unconsolidated in our financial statements. The management and control over significant aspects of these investments are with the third party joint venture partner. In addition, as of December 31, 2002, we held one mortgage investment from which we receive interest income.

Unconsolidated Joint Ventures,

Mortgage and Other Investments


						Our
				Total		Net		Our		Our
				Square		Equity		Ownership		Share
Joint Ventures		Market	Alliance Partner	Feet		Investment		Percentage		of Debt


		(Dollars in thousands)
1. Elk Grove Du Page		Chicago	Hamilton Partners		4,046,721	$	58,966		56%	$13,438
2. Pico Rivera		Southern California	Majestic Realty		855,600		2,444		50%	16,826
3. Monte Vista Spectrum		Southern California	Majestic Realty		576,700		2,983		50%	9,024
4. Airport Logistics Park of Singapore Phase I(1)		Singapore	Boustead Projects		234,000		35		50%	—

	Total Unconsolidated Joint Ventures				5,713,021	$	64,428		56%	$39,288

Mortgage

Mortgage Investment

Market

Maturity

Receivable(2)

Rate

(Dollars in thousands)

1. Pier 1(3)

SF Bay Area

May 2026

13,133

13.0%

Our

Property

Ownership

Other Investments

Market

Type

Investment

Percentage

(Dollars in thousands)

1. Park One(4)

Southern California

Parking Lot

75,500

100

(1) Square feet for development alliance joint ventures represents estimated square feet at completion of development project.

(2) We also hold inter-company loans that we eliminate in consolidation.

(3) We also have a 0.1% unconsolidated equity interest (with a 33% economic interest) in this property and have an option to purchase the remaining equity interest beginning January 1, 2007, and expiring December 31, 2009.

(4) Park One is a 19.9 acre parking lot with 2,720 parking spaces and 12 billboard signs in the Los Angeles market, immediately adjacent to Los Angeles International Airport.

Secured Debt

As of December 31, 2002, we had $1.3 billion of indebtedness, net of unamortized premiums, secured by deeds of trust on 104 properties. As of December 31, 2002, the total gross investment value of those properties secured by debt was $2.6 billion. Of the $1.3 billion of secured indebtedness, $893.1 million was joint venture debt secured by properties with a gross investment value of $1.6 billion. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” and “Item 14. Note 7 of Notes to Consolidated Financial Statements” included in this report. We believe that as of December 31, 2002, the value of the properties securing the respective obligations in each case exceeded the principal amount of the outstanding obligations.


Item 3.	*Legal Proceedings*

As of December 31, 2002, there were no pending legal proceedings to which we were a party or of which any of our properties was the subject, the adverse determination of which we anticipate would have a material adverse effect upon our financial condition, results of operations and cash flows.


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

None.

PART II


Item 5.	*Market For Registrant’s Common Equity and Related Shareholder Matters*

There is no established public trading market for our partnership units. As of December 31, 2002, we had outstanding 93,542,225 partnership units, consisting of 85,795,838 general partnership units (consisting of 81,800,038 common units and 3,995,800 8 1/2% Series A Cumulative Redeemable Preferred Units) held by AMB Property Corporation and 7,746,387 limited partnership units (consisting of 4,846,387 common units, 1,300,000 8 5/8% Series B Cumulative Redeemable Preferred Units, 800,000 7.95% Series J Cumulative Redeemable Preferred Units and 800,000 7.95% Series K Cumulative Redeemable Preferred Units). Subject to certain terms and conditions, the limited partnership units are redeemable by the holders or, at the option of AMB Property Corporation, exchangeable on a one-for-one basis for shares of the common stock of AMB Property Corporation. As of December 31, 2002, there were 84 holders of our common partnership units (including AMB Property Corporation’s general partnership interest). As of the same date, AMB Property Corporation was the only holder of the 8 1/2% Series A Cumulative Redeemable Preferred Units, there was one

holder of the 8 5/8% Series B Cumulative Redeemable Units, there was one holder of the 7.95% Series J Cumulative Redeemable Units and there was one holder of the 7.95% Series K Cumulative Redeemable Units.

During 2002, 122,640 limited partnership units were redeemed for shares of AMB Property Corporation’s common stock.

Set forth below are the distributions per limited partnership unit paid by us during the years ended December 31, 2002, 2001 and 2000:


Year		Distribution

2002
	1st Quarter	$	0.410
	2nd Quarter		0.410
	3rd Quarter		0.410
	4th Quarter		0.410

2001
	1st Quarter		0.395
	2nd Quarter		0.395
	3rd Quarter		0.395
	4th Quarter		0.395
2000
	1st Quarter		0.370
	2nd Quarter		0.370
	3rd Quarter		0.370
	4th Quarter		0.370


Item 6.	*Selected Financial and Other Data*

SELECTED OPERATING PARTNERSHIP FINANCIAL AND OTHER DATA(1)

The following table sets forth selected consolidated historical financial and other data for AMB Property, L.P. on an historical basis as of and for the years ended December 31:


		2002			2001			2000			1999			1998


		(Dollars in thousands, except per unit amounts)
Operating Data
Total revenues		$	615,843		$	562,777		$	447,098		$	420,023		$	338,521
Income before minority interests			148,505			148,742			151,639			144,209			113,671
Income from continuing operations			94,371			121,653			107,847			163,975			102,526
Net income available to common unitholders attributable to general partner			116,153			125,053			113,282			167,603			108,954
Net income from continuing operations per common unit:
	Basic(2)		1.03			1.29			1.18			1.80			1.15
	Diluted(2)		1.02			1.28			1.18			1.80			1.15
Net income per common unit:
	Basic(2)		1.39			1.49			1.35			1.94			1.27
	Diluted(2)		1.37			1.47			1.35			1.94			1.26
Distributions declared per common unit			1.64			1.58			1.48			1.40			1.37
Other Data
Funds from operations(3)			217,628			212,907			208,651			191,147			170,407
Cash flows provided by (used in):
	Operating activities		288,801			288,562			261,175			190,391			177,180
	Investing activities		(318,471	)		(363,152	)		(726,499	)		63,732			(793,366	)
	Financing activities		45,931			127,303			452,370			(240,721	)		604,202
Balance Sheet Data
Investments in real estate at cost		$	4,925,982		$	4,530,711		$	4,026,597		$	3,249,452		$	3,369,060
Total assets			4,992,494			4,768,943			4,433,207			3,631,175			3,571,327
Total consolidated debt			2,235,361			2,143,714			1,843,857			1,279,662			1,376,638
Our share of total debt			1,691,737			1,655,386			1,681,161			1,168,218			1,348,107
Contractual obligations(4)			2,609,935			2,329,152			2,002,884			1,279,662			1,376,638
General partner’s capital			1,684,150			1,752,342			1,767,930			1,829,259			1,765,360

(1) Certain items in the consolidated financial statements for prior periods have been reclassified to conform with current classifications with no effect on net income or partners’ capital.

(2) Basic and diluted net income per weighted average unit equals the net income available to common unitholders divided by 88,204,208 and 89,689,310 shares, respectively, for 2002; 89,286,379 and 90,325,801 units, respectively, for 2001; 89,566,375 and 90,024,511 units, respectively, for 2000; 90,792,310 and 90,867,934 units, respectively, for 1999; and 89,493,394 and 89,852,187 units, respectively, for 1998.

(3) Funds from Operations, or FFO, is defined as income from operations before minority interest plus real estate depreciation, discontinued operations’ FFO and adjustments to derive our pro rata share of the FFO of unconsolidated joint ventures, less minority interests’ pro rata share of the FFO of consolidated joint ventures and preferred unit distributions. In accordance with the National Association of Real Estate Investment Trust White Paper on funds from operations, we include the effects of straight-line rents in funds from operations. We believe that FFO is an appropriate measure of performance for a real

estate investment trust because it is widely used by investors and analysts. While FFO is a relevant and widely used measure of operating performance of real estate investment trusts, it does not represent cash flow from operations or net income as defined by accounting principles generally accepted in the United States of America, or GAAP, and it should not be considered as an alternative to these indicators in evaluating liquidity or operating performance. Further, FFO as disclosed by other real estate investment trusts may not be comparable. For a presentation of and a quantitative reconciliation of FFO with the most directly comparable financial measure to FFO calculated in accordance with GAAP, please see the supplemental earnings table in Management’s Discussion and Analysis of Financial Condition and Results of Operations.

(4) Contractual obligations include short-term and long-term debt payments and lease obligations. Amounts due within one year were $160.3 million, $103.5 million, $54.1 million, $128.1 million and $14.1 million as of December 31, 2002, 2001, 2000, 1999 and 1998, respectively.


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

You should read the following discussion and analysis of our consolidated financial condition and results of operations in conjunction with the notes to consolidated financial statements. Statements contained in this discussion that are not historical facts may be forward-looking statements. Such statements relate to our future performance and plans, results of operations, capital expenditures, acquisitions, and operating improvements and costs. You can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “pro forma,” “estimates” or “anticipates,” or the negative of these words and phrases, or similar words or phrases. You can also identify forward-looking statements by discussions of strategy, plans or intentions. Forward-looking statements involve numerous risks and uncertainties and you should not rely upon them as predictions of future events. There is no assurance that the events or circumstances reflected in forward-looking statements will occur or be achieved. Forward-looking statements are necessarily dependent on assumptions, data or methods that may be incorrect or imprecise and we may not be able to realize them.

The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:

• defaults or non-renewal of leases by customers;

• increased interest rates and operating costs;

• our failure to obtain necessary outside financing;

• difficulties in identifying properties to acquire and in effecting acquisitions;

• our failure to successfully integrate acquired properties and operations;

• our failure to divest of properties that we have contracted to sell or to timely reinvest proceeds from any such divestitures;

• risks and uncertainties affecting property development and construction (including construction delays, cost overruns, our inability to obtain necessary permits and public opposition to these activities);

• environmental uncertainties;

• risks related to natural disasters;

• financial market fluctuations;

• changes in real estate and zoning laws;

• increases in real property tax rates; and

• risks of doing business internationally, including currency risks.

Our success also depends upon economic trends generally, including interest rates, income tax laws, governmental regulation, legislation, population changes and those other risk factors discussed in the section entitled “Business Risks” in this report. We caution you not to place undue reliance on forward-looking statements, which reflect our analysis only and speak as of the date of this report or as of the dates indicated in the statements.

GENERAL

We commenced operations in 1997 shortly before the consummation of AMB Property Corporation’s initial public offering.

We generate revenue primarily from rent received from customers under long-term operating leases at our properties, including reimbursements from customers for certain operating costs and our private capital business. In addition, our growth is, in part, dependent on our ability to increase occupancy rates or increase rental rates at our properties and our ability to continue the acquisition and development of additional properties. Although the weak economy has decreased customer demand for new space and has limited or in

some cases lowered rent growth, many types of investors are acquiring industrial real estate. In 2002, we capitalized on this opportunity by accelerating our portfolio repositioning program through the disposition of properties. Our income would be adversely affected if a significant number of customers were unable to pay rent or if we were unable to rent our industrial space on favorable terms. Certain significant expenditures associated with an investment in real estate (such as mortgage payments, real estate taxes and maintenance costs) generally do not decline when circumstances cause a reduction in income from the property. Moreover, as the general partner of the co-investment joint ventures, we generally will be liable for all of the joint ventures’ unsatisfied obligations other than non-recourse obligations. Any such liabilities could adversely affect our financial condition, results of operations, cash flow and ability to make distributions to our unitholders and payments to our noteholders.

Critical Accounting Policies

Our discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and contingencies as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We evaluate our assumptions and estimates on an on-going basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Rental Revenues. We record rental revenue from operating leases on a straight-line basis over the term of the leases and maintain an allowance for estimated losses that may result from the inability of our customers to make required payments. If customers fail to make contractual lease payments that are greater than our bad-debt reserves, security deposits and letters of credit, then we may have to recognize additional bad debt charges in future periods. Each period we review our outstanding accounts receivable, including straight-line rents, for doubtful accounts and provide allowances as needed. Historically, our bad debt expense has been between 50 and 150 basis points of total revenues.

Consolidated Joint Ventures. Minority interests represent the limited partnership interests in the operating partnership and interests held by certain third parties in several real estate joint ventures, aggregating approximately 33.8 million square feet, which are consolidated for financial reporting purposes. Such investments are consolidated because we own a majority interest or we exercise significant control over major operating decisions such as approval of budgets, selection of property managers, investment activity and changes in financing.

Investments in Unconsolidated Joint Ventures. We have non-controlling limited partnership interests in four separate unconsolidated joint ventures. These investments are not consolidated because we do not exercise significant control over major operating decisions such as approval of budgets, selection of property

managers, investment activity and changes in financing. We account for the joint ventures using the equity method of accounting.

Stock-based Compensation Expense. In 2002, we adopted the expense recognition provisions of Statement of Financial Accounting Standard (“SFAS”) No. 123, Accounting for Stock-Based Compensation. We value stock options issued by AMB Property Corporation, our general partner, using the Black-Scholes option-pricing model and recognize this value as an expense over the period in which the options vest. Under this standard, recognition of expense for stock options is retroactively applied to all options granted after the beginning of the year of adoption. Prior to 2002, we followed the intrinsic method set forth in APB Opinion 25, Accounting for Stock Issued to Employees. During 2002, AMB Property Corporation awarded 2.0 million stock options to our employees. In accordance with SFAS No. 123, we will recognize the associated expense over the three to five-year vesting periods. The expense is included in general and administrative expenses in the accompanying consolidated statements of operations.

RESULTS OF OPERATIONS

The analysis below includes changes attributable to acquisitions, development activity, divestitures and the changes resulting from properties that we owned during both the current and prior year reporting periods, excluding development properties prior to being stabilized (generally defined as 90% leased or 12 months after we receive a certificate of occupancy for the building). We refer to these properties as the same store properties. For the comparison between the years ended December 31, 2002 and 2001, the same store industrial properties consisted of properties aggregating approximately 68.0 million square feet. The properties acquired during 2002 consisted of 43 buildings, aggregating approximately 5.4 million square feet. The properties acquired during 2001 consisted of 65 buildings, aggregating approximately 6.8 million square feet. In 2002, property divestitures consisted of 58 industrial buildings and two retail centers, aggregating approximately 5.7 million square feet. In 2001, property divestitures consisted of 24 industrial and two retail buildings, aggregating approximately 3.2 million square feet. Our future financial condition and results of operations, including rental revenues, may be impacted by the acquisition of additional properties and dispositions. Our future revenues and expenses may vary materially from historical rates.

While occupancy levels in our industrial portfolio were similar in 2002 and 2001, rents on lease renewals and rollovers were lower in 2002 as the general contraction in business activity nationwide caused a reduction in demand for industrial warehouse facilities. This reduction in demand was evidenced by two significant factors: decreases in national industrial occupancy levels and negative net absorption of industrial facility space. Specifically, according to Torto Wheaton Research, at December 31, 2001, national industrial occupancy was 90.2%; by December 31, 2002, national occupancy fell to 88.8%. As reported by Torto Wheaton Research, national net absorption of industrial space (the change in the amount of square footage leased in existing and newly constructed industrial properties) was positive from 1989 through 2000. By contrast, Torto Wheaton Research reported that net absorption was negative by 152.0 million square feet in 2001 and 34.0 million square feet in 2002. These factors combined to reduce market rents for industrial properties by approximately 15% to 20% nationally from peak levels at the beginning of 2001. While the level of rental rate reduction varied by market, we strove to maintain high occupancy by pricing lease renewals and new leases with sensitivity to local market conditions.

For the Years Ended December 31, 2002 and 2001 (Dollars in millions)


Rental Revenues			2002			2001			$ Change			% Change

Industrial:
	Same store		$	490.9		$	472.4		$	18.5			3.9	%
	2001 acquisitions			46.7			20.3			26.4			130.0	%
	2002 acquisitions			21.2			—			21.2			—
	Developments			20.2			9.6			10.6			110.4	%
	Divestitures			21.9			31.3			(9.4	)		(30.0	)%
Retail				16.9			24.3			(7.4	)		(30.5	)%
Discontinued operations				(40.3	)		(38.0	)		2.3			—
Straight-line rents				11.0			10.1			0.9			8.9	%

		Total	$	588.5		$	530.0		$	58.5			11.0	%

The growth in rental revenues in same store properties resulted primarily from increased lease termination fees, fixed rent increases on existing leases and reimbursement of expenses, partially offset by lower average occupancies. Industrial same store occupancy was 94.6% at December 31, 2002, and 95.0% at December 31, 2001. Year-to-date, the same store rent decrease on industrial renewals and rollovers (cash basis) was (1.4%) on 13.8 million square feet leased. The increase in straight-line rents was partially offset by write-offs associated with lease terminations. In 2002, lease termination fees increased $9.5 million, net of straight-line rent adjustments and lease cost and tenant improvement write-downs, over 2001.


Private Capital and Other Income		2002		2001		$ Change			% Change

Equity in earnings of unconsolidated joint ventures		$	5.7	$	5.5	$	0.2			3.6	%
Private capital income			11.2		11.0		0.2			1.8	%
Interest and other income			10.4		16.3		(5.9	)		(36.2	)%

	Total	$	27.3	$	32.8	$	(5.5	)		(16.8	)%

The decrease in interest and other income was primarily due to the repayment of the $74.0 million mortgage note in July 2002. We carried a 9.5% mortgage note secured by the retail center that we sold in September 2000 in the principal amount of $74.0 million.


Property Operating Expenses and Real Estate Taxes			2002			2001			$ Change			% Change

(Exclusive of depreciation and amortization)
Rental expenses			$	77.5		$	64.5		$	13.0			20.2	%
Real estate taxes				68.4			63.3			5.1			8.1	%

	Property operating expenses		$	145.9		$	127.8		$	18.1			14.2	%

Industrial:
	Same store		$	118.3		$	112.6		$	5.7			5.1	%
	2001 acquisitions			11.0			3.9			7.1			182.1	%
	2002 acquisitions			6.8			—			6.8			—
	Developments			7.2			3.1			4.1			132.3	%
	Divestitures			6.7			10.0			(3.3	)		(33.0	)%
Retail				6.3			8.6			(2.3	)		(26.7	)%
Discontinued operations				(10.4	)		(10.4	)		0.0			—

		Total	$	145.9		$	127.8		$	18.1			14.2	%

The $5.7 million increase in same store properties’ operating expenses primarily relates to increases in real estate taxes of $1.2 million and insurance expenses of $3.7 million due to premium increases.


Other Expenses		2002		2001		$ Change		% Change

Interest, including amortization		$	147.1	$	124.9	$	22.2		17.8	%
Depreciation and amortization			127.2		104.8		22.4		21.4	%
General and administrative			47.2		35.8		11.4		31.8	%

	Total	$	321.5	$	265.5	$	56.0		21.1	%

The increase in interest expense was primarily due to the issuance of additional unsecured senior debt securities and an increase in secured debt balances, partially offset by decreased borrowings on our unsecured credit facility. The secured debt issuances were primarily for our co-investment joint ventures’ properties. The increase in depreciation expense was due to the increase in our net investment in real estate. The increase in general and administrative expenses was primarily due to the consolidation of AMB Investment Management, Inc. (predecessor-in-interest to AMB Capital Partners, LLC) and Headlands Realty Corporation on May 31, 2001. Prior to May 31, 2001, general and administrative expenses did not include expenses incurred by two unconsolidated preferred stock subsidiaries, Headlands Realty Corporation and AMB Investment Management, Inc. General and administrative expenses would have been $39.4 million had the subsidiaries been consolidated beginning January 1, 2001. The increase in general and administrative expenses was also due to increased stock-based compensation expense, additional staffing and expenses for new initiatives, including our international expansion and income taxes for our taxable REIT subsidiaries.

In 2001, we recognized $20.8 million of losses on investments in other companies, including our investment in Webvan Group, Inc. and other technology-related companies. The loss reflects a 100% write-down of the investments. No gains or losses were recognized in 2002.

For the Years Ended December 31, 2001 and 2000 (Dollars in millions)


Rental Revenues		2001			2000			$ Change			% Change

Same store		$	400.2		$	376.7		$	23.5			6.2	%
2000 acquisitions			97.1			25.6			71.5			279.3	%
2001 acquisitions			22.8			—			22.8			—
Developments			26.9			14.6			12.3			84.0	%
Discontinued operations			(38.0	)		(33.1	)		(4.9	)		14.8	%
Straight-line rents			10.1			10.2			(0.1	)		(1.0	)%

	Total	$	530.0		$	431.1		$	98.9			22.9	%

The growth in rental revenues in same store properties resulted primarily from the incremental effect of cash rental rate increases on renewals and rollovers, fixed rent increases on existing leases, and reimbursement of expenses, partially offset by lower average occupancies. During 2001, the same store rent increases on industrial renewals and rollovers (cash basis) was 23.5% on 10.0 million square feet leased.


Private Capital and Other Income		2001		2000		$ Change		% Change

Equity in earnings of unconsolidated joint ventures		$	5.5	$	5.2	$	0.3		5.8	%
Private capital income			11.0		4.3		6.7		155.8	%
Interest and other income			16.3		6.5		9.8		150.8	%

	Total	$	32.8	$	16.0	$	16.8		105.0	%

The $6.7 million increase in private capital income was due primarily to increased asset management and acquisition fees and priority distributions from our co-investment joint ventures. The $9.8 million increase in

interest and other income was primarily due to interest income from our mortgage note on the retail center that we sold in 2000 and from interest income resulting from higher average cash balances.


Property Operating Expenses and Real Estate Taxes			2001			2000			$ Change			% Change

(Exclusive of depreciation and amortization)
Rental expenses			$	64.5		$	46.4		$	18.1			39.0	%
Real estate taxes				63.3			52.0			11.3			21.7	%

	Property operating expenses		$	127.8		$	98.4		$	29.4			29.9	%

Same store			$	93.2		$	87.2		$	6.0			6.9	%
2000 acquisitions				27.9			7.1			20.8			293.0	%
2001 acquisitions				4.4			—			4.4			—
Developments				9.6			4.3			5.3			123.3	%
Divestitures				3.1			9.2			(6.1	)		(66.3	)%
Discontinued operations				(10.4	)		(9.4	)		(1.0	)		10.6	%

		Total	$	127.8		$	98.4		$	29.4			29.9	%

The increase in same store properties’ operating expenses primarily relates to increases in common area maintenance expenses of $2.3 million, real estate taxes of $2.5 million and insurance expense of $0.8 million.


Other Expenses		2001		2000		$ Change		% Change

Interest, including amortization		$	124.9	$	85.8	$	39.1		45.6	%
Depreciation and amortization			104.8		85.0		19.8		23.3	%
General and administrative			35.8		23.7		12.1		51.1	%

	Total	$	265.5	$	194.5	$	71.0		36.5	%

During 2001, we recognized $20.8 million of losses on investments in other companies, related to our investment in Webvan Group, Inc. and other technology-related companies. The loss reflects a 100% write-down of the book value of the investments.

LIQUIDITY AND CAPITAL RESOURCES

We currently expect that our principal sources of working capital and funding for acquisitions, development, expansion and renovation of properties will include:

• cash flow from operations;

• borrowings under our unsecured credit facility;

• other forms of secured or unsecured financing;

• proceeds from debt or limited partnership unit offerings (including issuances of limited partnership units by our subsidiaries);

• net proceeds from divestitures of properties; and

• private capital from co-investment partners.

We believe that our sources of working capital, specifically our cash flow from operations, borrowings available under our unsecured credit facility and our ability to access private and public debt and equity capital, are adequate for us to meet our liquidity requirements for the foreseeable future.

Capital Resources

Property Divestitures. During 2002, we divested ourselves of 58 industrial buildings, two retail centers and an undeveloped retail land parcel for an aggregate price of $244.0 million, with a resulting net gain of $9.6 million. During 2002, we also completed and sold six buildings developed as part of our development-for-sale program for a net gain of $1.0 million.

Properties Held for Divestiture. We have decided to divest ourselves of two retail centers, four industrial properties and two development properties, which are not in our core markets or which do not meet our current strategic objectives. The divestitures of the properties are subject to negotiation of acceptable terms and other customary conditions. As of December 31, 2002, the net carrying value of the properties held for divestiture was $107.9 million.

Co-investment Joint Ventures. We consolidate the financial position, results of operations and cash flows of our five co-investment joint ventures. Our five co-investment joint ventures are engaged in the acquisition, ownership, operation, management and, in some cases, the renovation, expansion and development of industrial buildings in target markets nationwide. We consolidate these joint ventures for financial reporting purposes because we are the sole managing general partner and, as a result, control all major operating decisions. Third-party equity interests in the joint ventures are reflected as minority interests in the consolidated financial statements. As of December 31, 2002, we owned approximately 28.2 million square feet of our properties through these five co-investment joint ventures and 5.6 million square feet of our properties through our other consolidated joint ventures. We may make additional investments through these joint ventures or new joint ventures in the future and presently plan to do so.

During 2002, we sold $76.9 million in operating properties, consisting of 15 industrial buildings, aggregating approximately 1.9 million square feet, to one of our co-investment joint ventures, AMB-SGP, L.P. We recognized a gain of $3.3 million related to this sale, representing the portion of the sold properties acquired by the third-party co-investor. We also sold 30% of our interest in AMB Partners II, L.P. to our co-investment joint venture partner, we now own 20% of AMB Partners II, L.P. We recognized a gain of $6.3 million related to this sale.

Our co-investment joint ventures at December 31, 2002 (dollars in thousands):


		Our
		Approximate
		Ownership			Total Planned
Co-investment Joint Venture	Joint Venture Partner	Percentage			Capitalization(1)

AMB/ Erie, L.P.	Erie Insurance Company and affiliates		50%		$	200,000
AMB Institutional Alliance Fund I, L.P.	AMB Institutional Alliance REIT I, Inc.(2)		21%		$	420,000
AMB Partners II, L.P.	City and County of San Francisco Employees’ Retirement System		20%	(5)	$	500,000
AMB-SGP, L.P.	Industrial JV Pte Ltd. GIC Real Estate Pte Ltd.(3)		50%		$	425,000
AMB Institutional Alliance Fund II, L.P.	AMB Institutional Alliance REIT II, Inc.(4)		20%		$	489,000

(1) Planned capitalization includes anticipated debt and both partners’ expected equity contributions.

(2) Included 15 institutional investors as stockholders as of December 31, 2002.

(3) A subsidiary of the real estate investment subsidiary of the Government of Singapore Investment Corporation.

(4) Included 14 institutional investors as stockholders as of December 31, 2002.

(5) In November 2002, our partner increased its ownership in AMB Partners II, L.P. from 50% to 80% by acquiring 30% of our partnership interest. We recognized a gain of $6.3 million.

Partners’ Capital. As of December 31, 2002, we had outstanding 81,800,038 common general partnership units, 4,846,387 common limited partnership units, 3,995,800 8 1/2% Series A Cumulative Redeemable Partnership Units, 1,300,000 8 5/8% Series B Cumulative Redeemable Partnership Units, 800,000 7.95% Series J Cumulative Redeemable Partnership Units and 800,000 7.95% Series K Cumulative Redeemable Partnership Units. On July 31, 2002, AMB Property II, L.P., one of our subsidiaries, repurchased 130,000 7.95% Series F Cumulative Redeemable Preferred Limited Partnership Units and all 20,000 of its outstanding 7.95% Series G Cumulative Redeemable Preferred Limited Partnership Units from a single institutional investor. We redeemed the units for an aggregate cost of $7.1 million, including accrued and unpaid dividends and a redemption discount of $0.4 million.

On April 17, 2002, we issued and sold 800,000 7.95% Series K Cumulative Redeemable Partnership Units at a price of $50.00 per unit in a private placement. Distributions are cumulative from the date of issuance and payable quarterly in arrears. The Series K preferred units are redeemable by us on or after April 17, 2007, subject to certain conditions, for cash at a redemption price equal to $50.00 per unit, plus accumulated and unpaid distributions thereon, if any, to the redemption date. The Series K preferred units are exchangeable at specified times and subject to certain conditions, on a one-for-one basis, for shares of AMB Property Corporation’s Series K preferred stock. We used the net proceeds of $39.0 million for general corporate purposes, which included the partial repayment of indebtedness and the acquisition and development of additional properties.

During 2002, we redeemed 122,640 common limited partnership units for shares of AMB Property Corporation’s common stock.

In December 2001, AMB Property Corporation’s board of directors approved a new stock repurchase program for the repurchase of up to $100.0 million worth of its common and preferred stock. In December 2002, AMB Property Corporation’s board of directors increased the repurchase program to $200.0 million. The current stock repurchase program expires in December 2003 and as of December 31, 2002, $130.6 million of repurchase capacity remained under AMB Property Corporation’s current stock repurchase program. During 2002, AMB Property Corporation repurchased 2,651,600 shares of its common stock for $69.4 million, including commissions, and we retired the same number of common general partnership units. In July 2002, AMB Property Corporation also repurchased 4,200 shares of its Series A preferred stock for an aggregate cost of $0.1 million, including accrued and unpaid dividends, and we retired the same number of Series A preferred general partnership units.

Debt. In order to maintain financial flexibility and facilitate the deployment of capital through market cycles, we presently intend to operate with a debt-to-total market capitalization ratio (our share) of approximately 45% or less. As of December 31, 2002, our share of total debt-to-total market capitalization ratio was 37.7%. Additionally, we currently intend to manage our capitalization in order to maintain an investment grade rating on our senior unsecured debt. In spite of these policies, our organizational documents do not contain any limitation on the amount of indebtedness that we may incur. Accordingly, our general partner’s board of directors could alter or eliminate these policies without unitholder or noteholder approval or circumstances could arise that could render us unable to comply with these policies.

As of December 31, 2002, the aggregate principal amount of our secured debt was $1.3 billion, excluding unamortized debt premiums of $9.8 million. Of the $1.3 billion of secured debt, $0.9 billion is secured by properties in our joint ventures. The secured debt is generally non-recourse and bears interest at rates varying from 3.0% to 10.4% per annum (with a weighted average rate of 7.3%) and final maturity dates ranging from January 2003 to June 2023. All of the secured debt bears interest at fixed rates, except for seven loans with an aggregate principal amount of $65.6 million as of December 31, 2002, which bear interest at variable rates

(with a weighted average interest rate of 3.5% as of December 31, 2002). Over time, we intend to repay the secured debt on our 100%-owned assets and may prepay if market conditions warrant.

In May 2002, we commenced a medium-term note program for the issuance of up to $400.0 million in principal amount of medium-term notes, which will be guaranteed by AMB Property Corporation. As of December 31, 2002, we had issued no medium-term notes under this program.

In August 2000, we commenced a medium-term note program for the issuance of up to $400.0 million in principal amount of medium-term notes, which are guaranteed by AMB Property Corporation. On January 14, 2002, we completed the program when we issued and sold the remaining $20.0 million of the notes to Lehman Brothers, Inc., as principal. AMB Property Corporation has guaranteed the notes, which mature on January 17, 2007, and bear interest at 5.90% per annum. We used the net proceeds of $19.9 million for general corporate purposes, to partially repay indebtedness and to acquire and develop additional properties.

If we are unable to refinance or extend principal payments due at maturity or pay them with proceeds from other capital transactions, then our cash flow may be insufficient to pay distributions to our unitholders in all years, make payments to our noteholders and to repay debt upon maturity. Furthermore, if prevailing interest rates or other factors at the time of refinancing (such as the reluctance of lenders to make commercial real estate loans) result in higher interest rates upon refinancing, then the interest expense relating to that refinanced indebtedness would increase. This increased interest expense would adversely affect our financial condition, results of operations, cash flow and ability to make distributions to our unitholders and payments to our noteholders.

Credit Facilities. In December 2002, we renewed our $500.0 million unsecured revolving line of credit. AMB Property Corporation guarantees our obligations under the credit facility. The credit facility matures in December 2005, has a one-year extension option and is currently subject to a 20 basis point annual facility fee. Borrowings under our credit facility currently bear interest at LIBOR plus 60 basis points. Both the facility fee and the interest rate are based on our credit rating, which is currently investment grade. However, if our credit rating falls below investment grade, then our facility fee and interest rate may increase. The credit facility includes a multi-currency component under which up to $150.0 million may be drawn in either British pounds sterling, euros or yen, provided that such currency is readily available and freely transferable and convertible to U.S. dollars. The Reuters Monitor Money Rates Service reports LIBOR for such currency in interest periods of 1, 2, 3 or 6 months. We have the ability to increase available borrowings to $700.0 million by adding additional banks to the facility or obtaining the agreement of existing banks to increase their commitments. We use our unsecured credit facility principally for acquisitions and for general working capital requirements. Monthly debt service payments on our credit facility are interest only. The total amount available under our credit facility fluctuates based upon the borrowing base, as defined in the agreement governing the credit facility, generally the value of our unencumbered properties. As of December 31, 2002, the outstanding balance on our unsecured credit facility was $95.0 million and the remaining amount available was $379.0 million, net of outstanding letters of credit (excluding the $200.0 million of potential additional capacity).

In July 2001, AMB Institutional Alliance Fund II, L.P. obtained a $150.0 million credit facility secured by the unfunded capital commitments of the investors in AMB Institutional Alliance REIT II, Inc. and AMB Institutional Alliance Fund II, L.P. Borrowings currently bear interest at LIBOR plus 87.5 basis points. As of December 31, 2002, the outstanding balance was $45.5 million and the remaining amount available was $31.2 million, net of outstanding letters of credit and capital contributions from third-party investors.

Mortgage Receivables. In September 2000, we sold a retail center located in Southern California. We carried a 9.5% mortgage note secured by the retail center in the principal amount of $74.0 million, due September 30, 2002. On July 3, 2002, we received a full repayment of the mortgage. Through a wholly-owned subsidiary, we also hold a mortgage loan receivable on AMB Pier One, LLC, an unconsolidated joint venture. The note bears interest at 13.0% and matures in May 2026. As of December 31, 2002, the outstanding balance on the note was $13.1 million.

The tables below summarize our debt maturities and capitalization as of December 31, 2002 (dollars in thousands):

Debt


			Our			Joint			Unsecured
			Secured			Venture			Senior Debt			Unsecured			Credit			Total
			Debt			Debt			Securities			Debt			Facilities			Debt

2003			$	74,631		$	19,678		$	—		$	558		$	45,500		$	140,367
2004				63,465			64,928			—			601			—			128,994
2005				45,511			59,326			250,000			647			95,000			450,484
2006				85,023			65,676			25,000			698			—			176,397
2007				24,073			43,163			75,000			752			—			142,988
2008				32,669			154,684			175,000			810			—			363,163
2009				4,147			76,826			—			873			—			81,846
2010				50,948			105,854			75,000			941			—			232,743
2011				409			179,295			75,000			1,014			—			255,718
2012				407			101,399			—			1,092			—			102,898
Thereafter				481			22,264			125,000			2,200			—			149,945

	Subtotal			381,764			893,093			800,000			10,186			140,500			2,225,543
	Unamortized premiums			7,835			1,983			—			—			—			9,818

		Total consolidated debt		389,599			895,076			800,000			10,186			140,500			2,235,361
Our share of unconsolidated joint venture debt(1)				—			39,288			—			—			—			39,288

		Total debt		389,599			934,364			800,000			10,186			140,500			2,274,649
Joint venture partners’ share of consolidated joint venture debt				—			(546,509	)		—			—			(36,400	)		(582,909	)

Our share of total debt			$	389,599		$	387,855		$	800,000		$	10,186		$	104,100		$	1,691,740

Weighed average interest rate				8.1	%		7.0	%		7.2	%		7.5	%		2.1	%		7.0	%
Weighed average maturity (in years)				3.7			7.1			6.5			11.8			2.2			6.0

(1) The weighted average interest and maturity for the unconsolidated joint venture debt were 6.4% and 6.6 years, respectively.

Market Capital


		Units		Market		Market
Security		Outstanding		Price(1)		Value(1)

Common general partnership units			81,800,038	$	27.36	$	2,238,049
Common limited partnership units			4,846,387		27.36		132,597

	Total		86,646,425			$	2,370,646

(1) Assumes that the general partnership units are exchanged for AMB Property Corporation’s common stock because there is no public market for the units.

Preferred Units


		Distribution			Liquidation		Redemption
Security		Rate			Preference		Provisions

Series A preferred units			8.50	%	$	99,895		July 2003
Series B preferred units			8.63	%		65,000		November 2003
Series D preferred units			7.75	%		79,767		May 2004
Series E preferred units			7.75	%		11,022		August 2004
Series F preferred units			7.95	%		13,372		March 2005
Series H preferred units			8.13	%		42,000		September 2005
Series I preferred units			8.00	%		25,500		March 2006
Series J preferred units			7.95	%		40,000		September 2006
Series K preferred units			7.95	%		40,000		April 2007

	Weighted average/total		8.17	%	$	416,556

Capitalization Ratios


Total debt-to-total market capitalization	44.9	%
Our share of total debt-to-total market capitalization	37.7	%
Total debt plus preferred-to-total market capitalization	53.1	%
Our share of total debt plus preferred-to-total market capitalization	47.0	%
Our share of total debt-to-total book capitalization	45.9	%

Liquidity

As of December 31, 2002, we had $117.2 million in cash, restricted cash and cash equivalents, and $379.0 million of additional available borrowings under our credit facility. We also had $31.2 million of additional available borrowings under our AMB Institutional Alliance Fund II, L.P. credit facility. To fund acquisitions, development activities and capital expenditures, and to provide for general working capital requirements, we intend to use:

• cash flow from operations;

• borrowings under our unsecured credit facility;

• other forms of secured and unsecured financing;

• proceeds from any future debt or limited partnership unit offerings (including issuances of limited partnership units by our subsidiaries);

• net proceeds from divestitures of properties; and

• private capital from our co-investment partners.

The unavailability of capital would adversely affect our financial condition, results of operations, cash flow and ability to make distributions to our unitholders and payments to our noteholders.

We declared a regular cash distribution for the quarter ending December 31, 2002, of $0.41 per common unit. The distribution was payable on January 6, 2003, to common unitholders of record on December 20, 2002. The Series A, B, E, F, J and K preferred unit distributions were payable on January 15, 2003, to unitholders of record on January 3, 2003. The Series D, H and I preferred unit distributions were payable on

December 26, 2002. The following table sets forth the distributions paid or payable per unit for the years ended December 31, 2002, 2001 and 2000:


Paying Entity	Security	2002	2001	2000

AMB Property, L.P.	Common limited partnership units	$1.64	$1.58	$1.48
AMB Property, L.P.	Series A preferred units	$2.13	$2.13	$2.13
AMB Property, L.P.	Series B preferred units	$4.31	$4.31	$4.31
AMB Property, L.P.	Series J preferred units	$3.98	$1.24	n/a
AMB Property, L.P.	Series K preferred units	$2.96	n/a	n/a
AMB Property II, L.P.	Series C preferred units	n/a	$3.88	$4.38
AMB Property II, L.P.	Series D preferred units	$3.88	$3.88	$3.88
AMB Property II, L.P.	Series E preferred units	$3.88	$3.88	$3.88
AMB Property II, L.P.	Series F preferred units(1)	$3.34	$3.98	$3.09
AMB Property II, L.P.	Series G preferred units(1)	$2.14	$3.98	$1.35
AMB Property II, L.P.	Series H preferred units	$4.06	$4.06	$1.30
AMB Property II, L.P.	Series I preferred units	$4.00	$3.04	n/a

(1) On July 31, 2002, AMB Property II, L.P., one of our subsidiaries, repurchased 130,000 of its 7.95% Series F Cumulative Redeemable Preferred Limited Partnership Units and all 20,000 of its outstanding 7.95% Series G Cumulative Redeemable Preferred Limited Partnership Units from a single institutional investor. On July, 31, 2002, AMB Property II, L.P. paid a distribution, which accrued during the period from July 15, 2002 to July 31, 2002, of $0.155 per unit on the 130,000 Series F preferred units that were redeemed.

The anticipated size of our distributions, using only cash from operations, will not allow us to retire all of our debt as it comes due. Therefore, we intend to also repay maturing debt with net proceeds from future debt or limited partnership unit offerings, as well as property divestitures. However, we may not be able to obtain future financings on favorable terms or at all. Our inability to obtain future financings on favorable terms or at all would adversely affect our financial condition, results of operations, cash flow and ability to make distributions to our unitholders and payments to our noteholders.

Capital Commitments

Developments. In addition to recurring capital expenditures, which consist of building improvements and leasing costs incurred to renew or re-tenant space, as of December 31, 2002, we are developing ten projects representing a total estimated investment of $106.8 million upon completion and three development projects available for sale representing a total estimated investment of $49.1 million upon completion. Of this total, $92.8 million had been funded as of December 31, 2002, and an estimated $63.1 million is required to complete current and planned projects. We expect to fund these expenditures with cash from operations, borrowings under our credit facility, debt or limited partnership unit issuances and net proceeds from property divestitures, which could have an adverse effect on our cash flow.

Acquisitions. During 2002, we invested $403.3 million in 43 operating industrial buildings, aggregating approximately 5.4 million rentable square feet, and a parking lot adjacent to Los Angeles International Airport. We funded these acquisitions and initiated development and renovation projects through private capital contributions, borrowings under our credit facility, cash, debt issuances and net proceeds from property divestitures.

Lease Commitments. We have entered into operating ground leases on certain land parcels, primarily on-tarmac facilities, and office space with remaining lease terms from one to 38 years. Future minimum rental

payments required under non-cancelable operating leases in effect as of December 31, 2002, were as follows (dollars in thousands):


2003		$	19,921
2004			19,753
2005			19,819
2006			20,553
2007			20,772
Thereafter			283,574

	Total lease commitments	$	384,392

These operating lease payments are being amortized ratably over the terms of the related leases.

Captive Insurance Company. We have responded to recent trends towards increasing costs and decreasing coverage availability in the insurance markets by obtaining higher-deductible property insurance from third-party insurers and by forming a wholly-owned captive insurance company, Arcata National Insurance Ltd., in December 2001. Arcata National Insurance Ltd. provides insurance coverage for all or a portion of losses below the increased deductible under the third-party policies. We capitalized Arcata National Insurance Ltd. in accordance with regulatory requirements. Arcata National Insurance Ltd. established annual premiums based on projections derived from the past loss experience of our properties. Annually, we engage an independent third party to perform an actuarial estimate of future projected claims and projected expenses necessary to fund associated risk management programs. Premiums paid to Arcata National Insurance Ltd. may be adjusted based on this estimate. Premiums paid to Arcata National Insurance Ltd. have a retrospective component, so that if expenses, including losses, are less than premiums collected, the excess will be returned to the property owners (and, in turn, as appropriate, to the customers) and conversely, subject to certain limitations, if expenses, including losses, are greater than premiums collected, an additional premium will be charged. As with all recoverable expenses, differences between estimated and actual insurance premiums will be recognized in the subsequent year. Through this structure, we believe that we have been able to obtain insurance for our portfolio with more comprehensive coverage at a projected overall lower cost than would otherwise be available in the market.

Potential Unknown Liabilities. Unknown liabilities may include the following:

• liabilities for clean-up or remediation of undisclosed environmental conditions;

• claims of customers, vendors or other persons dealing with our predecessors prior to our formation transactions that had not been asserted prior to our formation transactions;

• accrued but unpaid liabilities incurred in the ordinary course of business;

• tax liabilities; and

• claims for indemnification by the officers and directors of our general partner’s predecessors and others indemnified by these entities.

Overview of Contractual Obligations

The following tables summarizes our debt and lease commitments as of December 31, 2002 (dollars in thousands):


		Less than						More than
Contractual Obligations		1 year		1-3 years		3-5 years		5 years		Total

Debt		$	140,367	$	579,478	$	319,385	$	1,186,313	$	2,225,543
Lease commitments			19,921		39,572		41,325		283,574		384,392

	Total contractual obligations	$	160,288	$	619,050	$	360,710	$	1,469,887	$	2,609,935

OFF-BALANCE SHEET ARRANGEMENTS

We have no off-balance sheet transactions, arrangements, obligations, guarantees or other relationships with unconsolidated entities or other persons that have, or are reasonably likely to have, a material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Supplemental Earning Measure

We believe that net income, as defined by GAAP, is the most appropriate earnings measure. However, the real estate industry has adopted a supplemental earnings measure, funds from operations, or FFO, as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), that is widely used by investors and analysts. While FFO is a relevant and widely used measure of operating performance of real estate investment trusts, such as AMB Property Corporation, our general partner, 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 those indicators in evaluating liquidity or operating performance. Further, FFO as disclosed by other real estate investment trusts may not be comparable.

FFO is defined as income from operations before minority interest plus real estate depreciation, discontinued operations’ FFO and adjustments to derive our pro rata share of FFO of unconsolidated joint ventures, less minority interests’ pro rata share of FFO of consolidated joint ventures and perpetual preferred unit distributions. In accordance with the NAREIT White Paper on FFO, we include the effects of straight-line rents in FFO. Further, we do not adjust FFO to eliminate the effects of non-recurring charges.

The following table reflects the calculation of FFO for the years ended December 31, (dollars in thousands):


			2002			2001			2000			1999			1998

Net income available to common unitholders			$	122,996		$	132,756		$	121,324		$	176,392		$	113,838
Minority interests				30,963			27,132			12,281			5,697			4,466
Gains from dispositions of real estate, net of minority interests				(7,789	)		(23,259	)		(1,144	)		(51,263	)		—
Gains from dispositions of real estate, discontinued operations				(11,372	)		—			—			—			—
Preferred unit redemption discount/ (premium)				(412	)		4,400			—			—			—
Real estate related depreciation and amortization:
	Total depreciation and amortization			127,160			104,838			84,960			63,747			55,210
	Discontinued operations’ depreciation			7,529			6,600			5,398			3,758			2,254
	Furniture, fixtures and equipment depreciation and ground lease amortization(1)			(2,450	)		(1,963	)		(1,114	)		(1,002	)		(463	)
FFO attributable to minority interests				(52,051	)		(40,144	)		(15,030	)		(8,158	)		(5,887	)
Adjustments to derive FFO in unconsolidated joint ventures:
	Our share of net income			(5,674	)		(5,467	)		(5,212	)		(4,701	)		(1,750	)
	Our share of FFO			8,728			8,014			7,188			6,677			2,739

		Funds from operations	$	217,628		$	212,907		$	208,651		$	191,147		$	170,407

(1) Ground lease amortization represents the amortization of our investments in ground lease properties, for which we do not have a purchase option.

The following table reflects supplemental cash flow information and recurring capital expenditures for the years ended December 31, (dollars in thousands):


			2002			2001			2000

Straight-line rents			$	11,013		$	10,093		$	10,203
Our share of unconsolidated joint venture partners’ net operating income			$	11,055		$	10,181		$	8,338
Joint venture partners’ share of cash basis net operating income			$	86,482		$	65,010		$	24,979
Discontinued operations’ net operating income			$	29,949		$	27,642		$	23,727
Stock-based compensation amortization			$	5,265		$	2,725		$	1,022
Capitalized interest			$	6,919		$	13,650		$	15,461
Recurring capital expenditures:
	Tenant improvements		$	18,977		$	8,168		$	11,624
	Lease commissions and other lease costs			17,684			19,822			17,679
	Building improvements			18,270			19,852			11,270

		Subtotal		54,931			47,842			40,573
	Joint venture partners’ share of capital expenditures			(9,547	)		(5,824	)		(2,659	)

		Our share of recurring capital expenditures	$	45,384		$	42,108		$	37,914

BUSINESS RISKS

Our operations involve various risks that could have adverse consequences to us. These risks include, among others:

General Real Estate Risks

There are Factors Outside of Our Control that Affect the Performance and Value of Our Properties.

Real property investments are subject to varying degrees of risk. The yields available from equity investments in real estate depend on the amount of income earned and capital appreciation generated by the related properties as well as the expenses incurred in connection with the properties. If our properties do not generate income sufficient to meet operating expenses, including debt service and capital expenditures, then our ability to make distributions to our unitholders and payments to our noteholders could be adversely affected. Income from, and the value of, our properties may be adversely affected by the general economic climate, local conditions, such as oversupply of industrial space or a reduction in demand for industrial space, the attractiveness of our properties to potential customers, competition from other properties, our ability to provide adequate maintenance and insurance and an increase in operating costs. Periods of economic slowdown or recession in the United States and in other countries, rising interest rates or declining demand for real estate, or public perception that any of these events may occur, would result in a general decrease in rents or an increased occurrence of defaults under existing leases, which would adversely affect our financial condition and results of operations.

Our properties are currently concentrated predominantly in the industrial real estate sector. Our concentration in a certain property type exposes us to the risk of economic downturns in this sector to a greater extent than if our portfolio also included other property types. As a result of such concentration, economic downturns in the industrial real estate sector could adversely affect our financial condition, results of operations, cash flow and ability to make distributions to our unitholders and payments to our noteholders. In addition, revenues from properties and real estate values are also affected by factors such as the cost of compliance with regulations, the potential for liability under applicable laws (including changes in tax laws), interest rate levels and the availability of financing. Our income would be adversely affected if a significant number of customers were unable to pay rent or if we were unable to rent our industrial space on favorable terms. Certain significant expenditures associated with an investment in real estate (such as mortgage payments, real estate taxes, and maintenance costs) generally do not decline when circumstances cause a reduction in income from the property. Future terrorist attacks in the United States may result in declining economic activity, which could harm the demand for and the value of our properties. To the extent that our customers are impacted by future attacks, their businesses similarly could be adversely affected, including their ability to continue to honor their existing leases.

We May Be Unable to Renew Leases or Relet Space as Leases Expire.

We are subject to the risks that leases may not be renewed, space may not be relet, or the terms of renewal or reletting (including the cost of required renovations) may be less favorable than current lease terms. Leases on a total of 15.4% of our industrial properties (based on annualized base rent) as of December 31, 2002, will expire on or prior to December 31, 2003. In addition, numerous properties compete with our properties in attracting customers to lease space, particularly with respect to retail centers. The number of competitive commercial properties in a particular area could have a material adverse effect on our ability to lease space in our properties and on the rents that we are able to charge. Our financial condition, results of operations, cash flow and our ability to make distributions to our unitholders and payments to our noteholders could be adversely affected if we are unable to promptly relet or renew the leases for all or a substantial portion of expiring leases, if the rental rates upon renewal or reletting is significantly lower than expected, or if our reserves for these purposes prove inadequate.

Real Estate Investments are Illiquid.

Because real estate investments are relatively illiquid, our ability to vary our portfolio promptly in response to economic or other conditions is limited. The limitations in the Internal Revenue Code and related regulations on a real estate investment trust holding property for sale, which limitations are applicable to us as a subsidiary of AMB Property Corporation, may affect our ability to sell properties without adversely affecting distributions to our unitholders and payments to our noteholders. The relative illiquidity of our holdings and Internal Revenue Code prohibitions and related regulations could impede our ability to respond to adverse changes in the performance of our investments and could adversely affect our financial condition, results of operations, cash flow and our ability to make distributions to our unitholders and payments to our noteholders.

A Significant Number of Our Properties are Located in California.

Our industrial properties located in California as of December 31, 2002, represented 28.4% of the aggregate square footage of our industrial operating properties as of December 31, 2002, and 33.9% of our industrial annualized base rent. Annualized base rent means the monthly contractual amount under existing leases as of December 31, 2002, multiplied by 12. This amount excludes expense reimbursements and rental abatements. Our revenue from, and the value of, our properties located in California may be affected by a number of factors, including local real estate conditions (such as oversupply of or reduced demand for industrial properties) and the local economic climate. Business layoffs, downsizing, industry slowdowns, changing demographics, and other factors may adversely impact the local economic climate. A downturn in California’s economy, fiscal situation or real estate conditions could adversely affect our financial condition, results of operations, cash flow and ability to make distributions to our unitholders and payments to our noteholders. Certain of our properties are also subject to possible loss from seismic activity. See “Some Potential Losses are not Covered by Insurance.”

Some Potential Losses are not Covered by Insurance.

We carry commercial liability, property and rental loss insurance covering all properties owned and managed by us, with policy specifications and insured limits that we believe are adequate and appropriate under the circumstances given relative risks, the cost of such coverage and industry practice. Certain losses such as losses due to terrorism, windstorms, floods or seismic activity may be insured subject to certain limitations, including large deductibles or co-payments and policy limits. Although we have obtained coverage for certain acts of terrorism, with policy specifications and insured limits that we believe are commercially reasonable, it is not certain that we will be able to renew coverage or collect under such policies. From time to time, we evaluate the amount of earthquake coverage that we carry for all properties owned and managed by us, to assess whether, in our good faith discretion, the coverage is adequate. We may incur material losses in excess of insurance proceeds and we may not be able to continue to obtain insurance at commercially reasonable rates. In addition, there are certain losses that are not generally insured because it is not economically feasible to insure against them, including losses due to riots or acts of war. If an uninsured loss or a loss in excess of insured limits occurs with respect to one or more of our properties, then we could lose the capital we invested in the properties, as well as the anticipated future revenue from the properties and, in the case of debt, which is with recourse to us, we would remain obligated for any mortgage debt or other financial obligations related to the properties. Moreover, as the general partner of the joint ventures, we generally will be liable for all of the joint ventures’ unsatisfied obligations other than non-recourse obligations. Any such liabilities could adversely affect our financial condition, results of operations, cash flow and ability to make distributions to our unitholders and payments to our noteholders.

A number of our properties are located in areas that are known to be subject to earthquake activity, including California where, as of December 31, 2002, 295 industrial buildings, aggregating approximately 23.9 million square feet (representing 28.4% of our industrial operating properties based on aggregate square footage and 33.9% based on industrial annualized base rent), are located. We carry replacement-cost earthquake insurance on all of our properties located in areas historically subject to seismic activity, subject to coverage limitations and deductibles that we believe are commercially reasonable. This insurance coverage also applies to the properties managed by AMB Capital Partners, LLC, with a single aggregate policy limit

and deductible applicable to those properties and our properties. Through an annual analysis prepared by outside consultants, we evaluate our earthquake insurance coverage in light of current industry practice and determine the appropriate amount of earthquake insurance to carry, which we believe is commercially reasonable. We may incur material losses in excess of insurance proceeds and we may not be able to continue to obtain insurance at commercially reasonable rates.

We are Subject to Risks and Liabilities In Connection With Properties Owned Through Joint Ventures, Limited Liability Companies and Partnerships.

As of December 31, 2002, we had ownership interests in several joint ventures, limited liability companies or partnerships with third parties, as well as interests in three unconsolidated entities. As of December 31, 2002, we owned approximately 33.7 million square feet (excluding three unconsolidated joint ventures) of our properties through these entities. We may make additional investments through these ventures in the future and presently plan to do so. Such partners may share certain approval rights over major decisions. Partnership, limited liability company or joint venture investments may involve risks such as the following:

• our partners, co-members or joint venturers might become bankrupt (in which event we and any other remaining general partners, members, or joint venturers would generally remain liable for the liabilities of the partnership, limited liability company, or joint venture);

• our partners, co-members or joint venturers might at any time have economic or other business interests or goals that are inconsistent with our business interests or goals;

• our partners, co-members or joint venturers may be in a position to take action contrary to our instructions, requests, policies, or objectives; and

• agreements governing joint ventures, limited liability companies and partnerships often contain restrictions on the transfer of a joint venturer’s, member’s or partner’s interest or “buy-sell” or other provisions that may result in a purchase or sale of the interest at a disadvantageous time or on disadvantageous terms.

We will, however, generally seek to maintain sufficient control of our partnerships, limited liability companies, and joint ventures to permit us to achieve our business objectives. Our organizational documents do not limit the amount of available funds that we may invest in partnerships, limited liability companies or joint ventures. The occurrence of one or more of the events described above could adversely affect our financial condition, results of operations, cash flow and ability to make distributions to our unitholders and payments to our noteholders.

We May be Unable to Consummate Acquisitions on Advantageous Terms or Acquisitions May Not Perform As We Expect.

We intend to continue to acquire primarily industrial properties. The acquisition of and investment in properties entails various risks. In addition to the general investment risks associated with any real estate investment, our investments may not perform in accordance with our expectations or our cost estimates for bringing an acquired property up to market standards may prove inaccurate. Further, we may not be able to acquire additional properties on acceptable terms. We anticipate significant competition for attractive investment opportunities from other major real estate investors with significant capital including both publicly-traded real estate investment trusts and private institutional investment funds. In addition, we expect to finance future acquisitions through a combination of borrowings under our unsecured credit facility, proceeds from debt or limited partnership unit offerings (including issuances of limited partnership units by our subsidiaries) and proceeds from property divestitures, which could have an adverse effect on our cash flow. Our inability to finance future acquisitions on favorable terms, the failure of acquisitions to conform with our expectations or investment criteria, or our failure to timely reinvest the proceeds from property divestitures could adversely affect our financial condition, results of operations, cash flow and ability to make distributions to our unitholders and payments to our noteholders.

We May be Unable to Complete Divestitures on Advantageous Terms.

We have decided to divest ourselves of retail centers and industrial properties that are not in our core markets or which do not meet our strategic objectives. The divestitures of the properties are subject to negotiation of acceptable terms and other customary conditions. Our ability to dispose of properties on advantageous terms is dependent upon factors beyond our control, including competition from other owners (including other real estate investment trusts) that are attempting to dispose of industrial and retail properties and the availability of attractive financing for potential buyers of our properties. Our inability to dispose of properties on favorable terms or redeploy the proceeds of property divestitures in accordance with our investment strategy could adversely affect our financial condition, results of operations, cash flow and ability to make distributions to our unitholders and payments to our noteholders.

We May be Unable to Complete Renovation and Development Projects on Advantageous Terms.

The real estate development business, including the renovation and rehabilitation of existing properties, involves significant risks that include the following:

• we may not be able to obtain financing on favorable terms for development projects and we may not complete construction on schedule or within budget, resulting in increased debt service expense and construction costs and delays in leasing such properties and generating cash flow;

• we may not be able to obtain, or we may experience delays in obtaining, all necessary zoning, land-use, building, occupancy and other governmental permits and authorizations;

• new or renovated properties may perform below anticipated levels, producing cash flow below budgeted amounts;

• substantial renovation as well as new development activities, regardless of their ultimate success, typically require a substantial portion of management’s time and attention, diverting our attention from our day-to-day operations; and

• upon completion of construction, we may not be able to obtain permanent financing, or obtain permanent financing on advantageous terms, for activities that we have financed through construction loans.

These risks could adversely affect our financial condition, results of operations, cash flow, and ability to make distributions to our unitholders and payments to our noteholders.

Debt Financing

We Could Incur More Debt.

It is our policy to incur debt, either directly or through our subsidiaries, only if it will not cause our share of debt-to-total market capitalization ratio to exceed approximately 45%. The aggregate amount of indebtedness that we may incur under our policy varies directly with the valuation of AMB Property Corporation’s capital stock and the number of shares of capital stock outstanding. Accordingly, we would be able to incur additional indebtedness under our policy as a result of increases in the market price per share of AMB Property Corporation’s common stock or other outstanding classes of capital stock, and future issuance of shares of AMB Property Corporation’s capital stock. However, our organizational documents do not contain any limitation on the amount of indebtedness that we may incur. Accordingly, AMB Property Corporation, as our general partner, could alter or eliminate this policy without unitholder or noteholder consent. If we change this policy, then we could become more highly leveraged, resulting in an increase in debt service that could adversely affect our financial condition, results of operations, cash flow and ability to make distributions to our unitholders and payments to our noteholders.

Scheduled Debt Payments Could Adversely Affect Our Financial Condition.

We are subject to risks normally associated with debt financing, including that cash flow will be insufficient to make distributions to our unitholders and payments to our noteholders, that we will be unable to refinance existing indebtedness on our properties (which in all cases will not have been fully amortized at maturity), and that the terms of refinancing will not be as favorable as the terms of existing indebtedness. As of December 31, 2002, we had total debt outstanding of $2.2 billion.

If we are unable to refinance or extend principal payments due at maturity or pay them with proceeds of other capital transactions, then we expect that our cash flow will not be sufficient in all years to make distributions to our unitholders and payments to our noteholders and to repay all such maturing debt. Furthermore, if prevailing interest rates or other factors at the time of refinancing (such as the reluctance of lenders to make commercial real estate loans) result in higher interest rates upon refinancing, then the interest expense relating to that refinanced indebtedness would increase. This increased interest expense would adversely affect our financial condition, results of operations, cash flow and ability to make distributions to our unitholders and payments to our noteholders. In addition, if we mortgage one or more of our properties to secure payment of indebtedness and we are unable to meet mortgage payments, then the property could be foreclosed upon or transferred to the mortgagee with a consequent loss of income and asset value. A foreclosure on one or more of our properties could adversely affect our financial condition, results of operations, cash flow and ability to make distributions to our unitholders and payments to our noteholders.

Rising Interest Rates Could Adversely Affect Our Cash Flow.

As of December 31, 2002, we had $45.5 million outstanding under our Alliance Fund II secured credit facility, $95.0 million outstanding on our unsecured credit facility, and we had seven secured loans with an aggregate principal amount of $65.6 million that bear interest at variable rates (with weighted average interest rate of 3.5% as of December 31, 2002). In addition, we may incur other variable rate indebtedness in the future. Increases in interest rates on this indebtedness could increase our interest expense, which would adversely affect our financial condition, results of operations, cash flow and ability to make distributions to our unitholders and payments to our noteholders. Accordingly, in the future, we may engage in transactions to limit our exposure to rising interest rates.

We Are Dependent on External Sources of Capital.

In order for our general partner, AMB Property Corporation, to qualify as a real estate investment trust under the Internal Revenue Code, we are required each year to make distributions to enable our general partner to distribute to its stockholders at least 90% of our real estate investment trust taxable income (determined without regard to the dividends-paid deduction and by excluding any net capital gain) and it is subject to tax on its income to the extent it is not distributed. Because of this distribution requirement, we may not be able to fund all future capital needs, including capital needs in connection with acquisitions, from cash retained from operations. As a result, to fund capital needs we rely on third-party sources of capital, which we may not be able to obtain on favorable terms or at all. Our access to third-party sources of capital depends upon a number of factors, including:

• general market conditions;

• the market’s perception of our growth potential;

• our current and potential future earnings and cash distributions; and

• the market price of AMB Property Corporation’s capital stock. Additional debt financing may substantially increase our debt-to-total capitalization ratio.

We Could Default on Cross-Collateralized and Cross-Defaulted Debt.

As of December 31, 2002, we had 26 non-recourse secured loans that are cross-collateralized by 60 properties, totaling $711.7 million (not including unamortized debt premium). If we default on any of these

loans, then we could be required to repay the aggregate of all indebtedness, together with applicable prepayment charges, to avoid foreclosure on all the cross-collateralized properties within the applicable pool. Foreclosure on our properties, or our inability to refinance our loans on favorable terms, could adversely impact our financial condition, results of operations, cash flow and ability to make distributions to our unitholders and payments to our noteholders. In addition, our credit facilities and senior debt securities contain certain cross-default provisions, which are triggered in the event that our other material indebtedness is in default. These cross-default provisions may require us to repay or restructure the credit facilities and the senior debt securities in addition to any mortgage or other debt that is in default, which could adversely affect our financial condition, results of operations, cash flow and ability to make distributions to our unitholders and payments to our noteholders.

Contingent or Unknown Liabilities Could Adversely Affect Our Financial Condition.

AMB Property Corporation’s predecessors have been in existence for varying lengths of time up to 19 years. At the time of our formation we acquired the assets of these entities subject to all of their potential existing liabilities. There may be current liabilities or future liabilities arising from prior activities that we are not aware of and therefore have not disclosed in this report. AMB Property Corporation assumed these liabilities as the surviving entity in the various merger and contribution transactions that occurred at the time of our formation. Existing liabilities for indebtedness generally were taken into account in connection with the allocation of our limited partnership units or shares of AMB Property Corporation’s common stock in the formation transactions, but no other liabilities were taken into account for these purposes. We do not have recourse against AMB Property Corporation’s predecessors or any of their respective stockholders or partners or against any individual account investors with respect to any unknown liabilities. Unknown liabilities might include the following:

• liabilities for clean-up or remediation of undisclosed environmental conditions;

• claims of customers, vendors, or other persons dealing with our predecessors prior to the formation transactions that had not been asserted prior to the formation transactions;

• accrued but unpaid liabilities incurred in the ordinary course of business;

• tax liabilities; and

• claims for indemnification by the officers and directors of AMB Property Corporation’s predecessors and others indemnified by these entities.

Certain customers may claim that the formation transactions gave rise to a right to purchase the premises that they occupy. We do not believe any such claims would be material and, to date, no such claims have been filed. See “— Government Regulations — We Could Encounter Costly Environmental Problems” below regarding the possibility of undisclosed environmental conditions potentially affecting the value of our properties. Undisclosed material liabilities in connection with the acquisition of properties, entities and interests in properties, or entities could adversely affect our financial condition, results of operations, cash flow, and ability to make distributions to our unitholders and payments to our noteholders.

Conflicts of Interest

Some of AMB Property Corporation’s Directors and Executive Officers are Involved in Other Real Estate Activities and Investments.

Some of AMB Property Corporation’s executive officers own interests in real estate-related businesses and investments. These interests include minority ownership interests in Institutional Housing Partners, L.P., a residential housing finance company (Messrs. Burke and Moghadam) and Aspire Development, Inc. and Aspire Development, L.P., developers of properties not within our investment criteria (Messrs. Belmonte, Burke and Moghadam). The continued involvement in other real estate-related activities by some of AMB Property Corporation’s executive officers and directors could divert management’s attention from our day-to-day operations. AMB Property Corporation’s executive officers have entered into non-competition agreements

with AMB Property Corporation pursuant to which they have agreed not to engage in any activities, directly or indirectly, in respect of commercial real estate, and not to make any investment in respect of any industrial or retail real estate, other than through ownership of not more than 5% of the outstanding shares of a public company engaged in such activities or through the existing investments referred to in this report. State law may limit our ability to enforce these agreements.

Certain of AMB Property Corporation’s Executive Officers and Directors May Have Conflicts of Interest with Us in Connection with Other Properties that They Own or Control.

As of December 31, 2002, Aspire Development, L.P. owned interests in several retail development projects in the U.S., which are individually less than 10,000 feet. In addition, Messrs. Moghadam and Burke, each a founder and director, own less than 1% interests in two partnerships that own office buildings in various markets; these interests have negligible value. Luis A. Belmonte, an executive officer of AMB Property Corporation, owns less than a 10% interest, representing an estimated value of $150,000, in a limited partnership, which owns an office building located in Oakland, California.

In addition, several of AMB Property Corporation’s executive officers individually own:

• less than 1% interests in the stocks of certain publicly-traded real estate investment trusts;

• certain interests in and rights to developed and undeveloped real property located outside the United States; and

• certain other de minimus holdings in equity securities of real estate companies.

Thomas W. Tusher, a member of AMB Property Corporation’s board of directors and chair of the board’s compensation committee, is a limited partner in a venture in which Messrs. Moghadam and Burke are two of three members in the controlling general partner. The venture owns an office building. Mr. Tusher owns a 20% interest in the venture and Messrs. Moghadam and Burke each have a 26.7% interest in the venture. These interests in the venture have negligible value. The venture was formed in 1985, prior to the time of our initial public offering, and we continue to act as property and asset manager of the office building, for which services the venture pays us a fee. In our capacity as property and asset manager, we oversee the management and operation of the property, including the obtaining of financing and negotiating with third party lenders in connection therewith. The largest tenant, which occupies 68% of the building, filed for bankruptcy in January 2003.

We believe that the properties and activities set forth above generally do not directly compete with any of our properties. However, it is possible that a property in which an executive officer or director, or an affiliate of an executive officer or director or AMB Property Corporation, has an interest may compete with us in the future if we were to invest in a property similar in type and in close proximity to that property. In addition, the continued involvement by AMB Property Corporation’s executive officers and directors in these properties could divert management’s attention from our day-to-day operations. Our policy prohibits us from acquiring any properties from our executive officers or their affiliates without the approval of the disinterested members of AMB Property Corporation’s board of directors with respect to that transaction.

AMB Property Corporation’s Duty to its Stockholders May Conflict with the Interests of Our Limited Partners and Noteholders.

AMB Property Corporation has fiduciary obligations to its stockholders, the discharge of which may conflict with the interests of our limited partners and noteholders.

AMB Property Corporation’s Directors, Executive Officers, and Significant Stockholders Could Act in a Manner that is Not in the Best Interest of Our Limited Partners or Noteholders.

As of December 31, 2002, AMB Property Corporation’s two largest stockholders, Morgan Stanley Investment Management, Inc. (with respect to various client accounts for which Morgan Stanley Investment Management, Inc. serves as investment advisor) and ABP Investments U.S. (with respect to various client

accounts for which ABP Investments U.S. serves as investment advisor) together beneficially owned 10.8% of AMB Property Corporation’s outstanding common stock. In addition, AMB Property Corporation’s executive officers and directors beneficially owned 4.3% of AMB Property Corporation’s outstanding common stock as of December 31, 2002, and will have influence on AMB Property Corporation’s management and operation and, as stockholders, will have influence on the outcome of any matters submitted to a vote of AMB Property Corporation’s stockholders. This influence might be exercised in a manner that is inconsistent with the interests of our limited partners and noteholders. Although there is no understanding or arrangement for these directors, officers, and stockholders and their affiliates to act in concert, these parties would be in a position to exercise significant influence over AMB Property Corporation’s affairs if they choose to do so.

Government Regulations

Many laws and governmental regulations are applicable to our properties and changes in these laws and regulations, or their interpretation by agencies and the courts, occur frequently.

We May Incur Costs to Comply with Americans with Disabilities Act.

Under the Americans with Disabilities Act, places of public accommodation must meet certain federal requirements related to access and use by disabled persons. Compliance with the Americans with Disabilities Act might require us to remove structural barriers to handicapped access in certain public areas where such removal is “readily achievable.” If we fail to comply with the Americans with Disabilities Act, then we might be required to pay fines to the government or damages to private litigants. The impact of application of the Americans with Disabilities Act to our properties, including the extent and timing of required renovations, is uncertain. If we are required to make unanticipated expenditures to comply with the Americans with Disabilities Act, then our cash flow and the amounts available for distributions to our unitholders and payments to our noteholders may be adversely affected.

We Could Encounter Environmental Problems.

Federal, state and local laws and regulations relating to the protection of the environment impose liability on a current or previous owner or operator of real estate for contamination resulting from the presence or discharge of hazardous or toxic substances or petroleum products at the property. A current or previous owner may be required to investigate and clean up contamination at or migrating from a site. These laws typically impose liability and clean-up responsibility without regard to whether the owner or operator knew of or caused the presence of the contaminants. Even if more than one person may have been responsible for the contamination, each person covered by the environmental laws may be held responsible for all of the clean-up costs incurred. In addition, third parties may sue the owner or operator of a site for damages based on personal injury, property damage, or other costs, including investigation and clean-up costs, resulting from environmental contamination present at or emanating from that site.

Environmental laws also govern the presence, maintenance and removal of asbestos. These laws require that owners or operators of buildings containing asbestos properly manage and maintain the asbestos, that they adequately inform or train those who may come into contact with asbestos and that they undertake special precautions, including removal or other abatement in the event that asbestos is disturbed during renovation or demolition of a building. These laws may impose fines and penalties on building owners or operators for failing to comply with these requirements and may allow third parties to seek recovery from owners or operators for personal injury associated with exposure to asbestos fibers. Some of our properties may contain asbestos-containing building materials.

Some of our properties are leased or have been leased, in part, to owners and operators of businesses that use, store, or otherwise handle petroleum products or other hazardous or toxic substances. These operations create a potential for the release of petroleum products or other hazardous or toxic substances. Some of our properties are adjacent to or near other properties that have contained or currently contain petroleum products or other hazardous or toxic substances. In addition, certain of our properties are on, are adjacent to, or are near other properties upon which others, including former owners or customers of the properties, have engaged or

may in the future engage in activities that may release petroleum products or other hazardous or toxic substances. From time to time, we may acquire properties, or interests in properties, with known adverse environmental conditions where we believe that the environmental liabilities associated with these conditions are quantifiable and the acquisition will yield a superior risk-adjusted return. Environmental issues for each property are evaluated and quantified prior to acquisition. The costs of environmental investigation, clean-up and monitoring are underwritten into the cost of the acquisition and appropriate environmental insurance is obtained for the property. In connection with certain divested properties, we have agreed to remain responsible for, and to bear the cost of, remediating or monitoring certain environmental conditions on the properties.

All of our properties were subject to a Phase I or similar environmental assessments by independent environmental consultants at the time of acquisition. Phase I assessments are intended to discover and evaluate information regarding the environmental condition of the surveyed property and surrounding properties and include an historical review, a public records review, an investigation of the surveyed site and surrounding properties, and preparation and issuance of a written report. We may perform additional Phase II testing if recommended by the independent environmental consultant. Phase II testing may include the collection and laboratory analysis of soil and groundwater samples, completion of surveys for asbestos-containing building materials, and any other testing that the consultant considers prudent in order to test for the presence of hazardous materials.

None of the environmental assessments of our properties has revealed any environmental liability that we believe would have a material adverse effect on our financial condition or results of operations taken as a whole. Furthermore, we are not aware of any such material environmental liability. Nonetheless, it is possible that the assessments do not reveal all environmental liabilities and that there are material environmental liabilities of which we are unaware or that known environmental conditions may give rise to liabilities that are materially greater than anticipated. Moreover, the current environmental condition of our properties may be affected by customers, the condition of land, operations in the vicinity of the properties (such as releases from underground storage tanks), or by third-parties unrelated to us. If the costs of compliance with existing or future environmental laws and regulations exceed our budgets for these items, then our financial condition, results of operations, cash flow, and ability to make distributions to our unitholders and payments to our noteholders could be adversely affected.

Our Financial Condition Could be Adversely Affected if We Fail to Comply with Other Regulations.

Our properties are also subject to various federal, state and local regulatory requirements such as state and local fire and life-safety requirements. If we fail to comply with these requirements, then we might incur fines by governmental authorities or be required to pay awards of damages to private litigants. We believe that our properties are currently in substantial compliance with all such regulatory requirements. However, these requirements may change or new requirements may be imposed that could require significant unanticipated expenditures by us. Any such unanticipated expenditure could adversely affect our financial condition, results of operations, cash flow, and ability to make distributions to our unitholders and payments to our noteholders.

Certain Property Transfers May Generate Prohibited Transaction Income.

From time to time, we may transfer or otherwise dispose of some of our properties. Under the Internal Revenue Code, any gain resulting from transfers of properties that we hold as inventory or primarily for sale to customers in the ordinary course of business would be treated as income from a prohibited transaction due to our general partner’s election to be treated as a real estate investment trust. Our general partner would be required to pay a 100% penalty tax on that income. Since we acquire properties for investment purposes, we believe that any transfer or disposal of property by us would not be deemed by the Internal Revenue Service to be a prohibited transaction with any resulting gain allocable to us being subject to a 100% penalty tax. However, whether property is held for investment purposes is a question of fact that depends on all the facts and circumstances surrounding the particular transaction. The Internal Revenue Service may contend that certain transfers or disposals of properties by us are prohibited transactions. While we believe that the Internal Revenue Service would not prevail in any such dispute, if the IRS were to argue successfully that a transfer or

disposition of property constituted a prohibited transaction, then our general partner would be required to pay a 100% penalty tax on any gain allocable to us from the prohibited transaction.

We May Be Unable to Manage Our Growth.

Our business has grown rapidly and continues to grow through property acquisitions and developments. If we fail to effectively manage our growth, then our financial condition, results of operations, cash flow and ability to make distributions to our unitholders and payments to our noteholders could be adversely affected.

Our International Growth is Subject to Special Political and Monetary Risks.

We have and expect to continue to acquire or develop additional properties in foreign countries. Local markets affect our operations and, therefore, we would be subject to economic fluctuations in foreign locations. Our international operations also would be subject to the usual risks of doing business abroad such as the revaluation of currencies, revisions in tax treaties or other laws governing the taxation of revenues, restrictions on the transfer of funds, and, in certain parts of the world, property rights uncertainty and political instability. We cannot predict the likelihood that any such developments may occur. Further, we may enter into agreements with non-U.S. entities that are governed by the laws of, and are subject to dispute resolution in, the courts of another country or region. We cannot accurately predict whether such a forum would provide us with an effective and efficient means of resolving disputes that may arise. Even if we are able to obtain a satisfactory decision through arbitration or a court proceeding, we could have difficulty enforcing any award or judgment on a timely basis. Our business has grown rapidly and continues to grow through property acquisitions and developments. If we fail to effectively manage our international growth, then our financial condition, results of operations, cash flow and ability to make distributions to our unitholders and payments to our noteholders could be adversely affected.

We Are Dependent On Our General Partner’s Key Personnel.

We depend on the efforts of our general partner’s executive officers. While we believe that AMB Property Corporation could find suitable replacements for these key personnel, the loss of their services or the limitation of their availability could adversely affect our financial condition, results of operations, cash flow and ability to make distributions to our unitholders and payments to our noteholders. AMB Property Corporation does not have employment agreements with any of its executive officers.

Item 7a. Qualitative Disclosures about Market Risk

Market risk is the risk of loss from adverse changes in market prices and interest rates. Our future earnings and cash flows are dependent upon prevailing market rates. Accordingly, we manage our market risk by matching projected cash inflows from operating, investing and financing activities with projected cash outflows for debt service, acquisitions, capital expenditures, distributions to unitholders and payments to noteholders, and other cash requirements. The majority of our outstanding debt has fixed interest rates, which minimizes the risk of fluctuating interest rates. Our exposure to market risk includes: (1) interest rate fluctuations in connection with our credit facilities and other variable rate borrowings; and (2) our ability to incur more debt without unitholder or noteholder approval, thereby increasing our debt service obligations, which could adversely affect our cash flows. As of December 31, 2002, we had no interest rate caps or swaps. See “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Capital Resources — Market Capitalization.”

The table below summarizes the market risks associated with our fixed and variable rated debt outstanding before unamortized debt premiums of $9.8 million as of December 31, 2002:



	Expected Maturity Date

	2003			2004			2005			2006			2007			Thereafter			Total Debt

Fixed rate debt(1)	$	93,088		$	98,490		$	351,996		$	167,804		$	136,120		$	1,171,945		$	2,019,443
Average interest rate		7.8	%		8.0	%		7.3	%		7.4	%		7.4	%		7.3	%		7.4	%
Variable rate debt(2)	$	47,279		$	30.504		$	98,488		$	8,593		$	6,868		$	14,368		$	206,100
Average interest rate		2.8	%		3.3	%		2.1	%		3.1	%		3.1	%		4.4	%		2.7	%

(1) Represents 93.9% of all outstanding debt.

(2) Represents 6.1% of all outstanding debt.

If market rates of interest on our variable rate debt increased by 10% (or approximately 27 basis points), then the increase in interest expense on the variable rate debt would be $0.6 million annually. As of December 31, 2002, the estimated fair value of our fixed rate debt was $2,152.6 million based on our estimate of current market interest rates.

Item 8. Financial Statements and Supplementary Data

See “Item 14. Exhibits, Financial Statement Schedules, and Reports of Form 8-K.”

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

PART III

Items 10, 11, 12 and 13.

Directors and Executive Officers of AMB Property Corporation, Executive Compensation, Security Ownership of Certain Beneficial Owners and Management, and Certain Relationships and Related Transactions

The information required by Item 10, Item 11, Item 12 and Item 13 will be contained in a definitive proxy statement for AMB Property Corporation’s Annual Meeting of Stockholders, which we anticipate will be filed no later than 120 days after the end of AMB Property Corporation’s fiscal year pursuant to Regulation 14A and accordingly these items have been omitted in accordance with General Instruction G(3) to Form 10-K.

Item 14. Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our general partner’s chief executive officer, president and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Also, we have investments in certain unconsolidated entities, which are accounted for using the equity method of accounting. As we do not control or manage these entities, our disclosure controls and procedures with respect to such entities are necessarily substantially more limited than those we maintain with respect to our consolidated subsidiaries.

Within 90 days prior to the date of this report, we carried out an evaluation, under the supervision and with the participation of our management, including our general partner’s chief executive officer, president and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our general partner’s chief executive officer, president and chief financial officer each concluded that our disclosure controls and procedures were effective.

There have been no significant changes in our internal controls or in other factors that could significantly affect the internal controls subsequent to the date we completed our evaluation.

PART IV

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a)(1) and (2) Financial Statements and Schedules:

The following consolidated financial information is included as a separate section of this report on Form 10-K.


	Page

Report of Independent Accountants		F-1
Consolidated Balance Sheets as of December 31, 2002 and 2001		F-2
Consolidated Statements of Operations for the years ended December 31, 2002, 2001 and 2000		F-3
Consolidated Statements of Partners’ Capital for the years ended December 31, 2002, 2001 and 2000		F-4
Consolidated Statements of Cash Flows for the years ended December 31, 2002, 2001 and 2000		F-5
Notes to Consolidated Financial Statements		F-6
Schedule III — Real Estate and Accumulated Depreciation		S-1

All other schedules are omitted since the required information is not present in amounts sufficient to require submission of the schedule or because the information required is included in the financial statements and notes thereto.

(a)(3) Exhibits:


Exhibit
Number		Description

	3.1	Sixth Amended and Restated Partnership Agreement of Limited Partnership of AMB Property, L.P. dated April 17, 2002 (incorporated herein by reference as Exhibit 10.1 to AMB Property, L.P.’s Current Report on Form 8-K filed on April 23, 2002).
	3.2	First Amendment to the Sixth Amended and Restated Agreement of Limited Partnership of AMB Property, L.P. dated October 30, 2002 (incorporated by reference to Exhibit 10.1 of AMB Property, L.P.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2002).
	4.1	$30,000,000 7.925% Fixed Rate Note No. 1 dated August 18, 2000, attaching the Parent Guarantee dated August 18, 2000 (incorporated by reference to Exhibit 4.5 of AMB Property, L.P.’s Annual Report on Form 10-K for the year ended December 31, 2000).
	4.2	$25,000,000,000 7.925% Fixed Rate Note No. 2 dated September 12, 2000, attaching the Parent Guarantee dated September 12, 2000 (incorporated by reference to Exhibit 4.6 of AMB Property, L.P.’s Annual Report on Form 10-K for the year ended December 31, 2000).
	4.3	$50,000,000 8.00% Fixed Rate Note No. 3 dated October 26, 2000, attaching the Parent Guarantee dated October 26, 2000 (incorporated by reference to Exhibit 4.7 of AMB Property, L.P.’s Annual Report on Form 10-K for the year ended December 31, 2000).
	4.4	$25,000,000 8.000% Fixed Rate Note No. 4 dated October 26, 2000, attaching the Parent Guarantee dated October 26, 2000 (incorporated by reference to Exhibit 4.8 of AMB Property, L.P.’s Annual Report on Form 10-K for the year ended December 31, 2000).


Exhibit
Number		Description

	4.5	$50,000,000 7.20% Fixed Rate Note No. 5 dated December 19, 2000, attaching the Parent Guarantee dated December 19, 2000 (incorporated herein by reference to Exhibit 4.1 of AMB Property, L.P.’s Current Report on Form 8-K filed on January 8, 2001).
	4.6	$50,000,000 7.20% Fixed Rate Note No. 6 dated December 19, 2000, attaching the Parent Guarantee dated December 19, 2000 (incorporated herein by reference to Exhibit 4.2 of AMB Property, L.P.’s Current Report on Form 8-K filed on January 8, 2001).
	4.7	$50,000,000 7.20% Fixed Rate Note No. 7 dated December 19, 2000, attaching the Parent Guarantee dated December 19, 2000 (incorporated herein by reference to Exhibit 4.3 of AMB Property, L.P.’s Current Report on Form 8-K filed on January 8, 2001).
	4.8	Indenture dated as of June 30, 1998, by and among AMB Property, L.P., AMB Property Corporation and State Street Bank and Trust Company of California, N.A., as trustee (incorporated by reference to Exhibit 4.1 of AMB Property, L.P.’s Registration Statement on Form S-11 (No. 333-49163)).
	4.9	First Supplemental Indenture dated as of June 30, 1998 by and among AMB Property, L.P., AMB Property Corporation and State Street Bank and Trust Company of California, N.A., as trustee (incorporated by reference to Exhibit 4.2 of AMB Property, L.P.’s Registration Statement on Form S-11 (No. 333-49163)).
	4.10	Second Supplemental Indenture dated as of June 30, 1998, by and among AMB Property, L.P., AMB Property Corporation and State Street Bank and Trust Company of California, N.A., as trustee (incorporated by reference to Exhibit 4.3 of AMB Property, L.P.’s Registration Statement on Form S-11 (No. 333-49163)).
	4.11	Third Supplemental Indenture dated as of June 30, 1998, by and among AMB Property, L.P., AMB Property Corporation and State Street Bank and Trust Company of California, N.A., as trustee (incorporated by reference to Exhibit 4.4 of AMB Property, L.P.’s Registration Statement on Form S-11 (No. 333-49163)).
	4.12	Fourth Supplemental Indenture, by and among AMB Property, L.P., AMB Property Corporation and State Street Bank and Trust Company of California, N.A., as trustee (incorporated herein by reference as Exhibit 4.1 of AMB Property, L.P.’s Current Report on Form 8-K/ A filed on November 9, 2000).
	4.13	Fifth Supplemental Indenture dated as of May 7, 2002, by and among AMB Property, L.P., AMB Property Corporation and State Street Bank and Trust Company of California, N.A., as trustee.
	4.14	Specimen of 7.10% Notes due 2008 (included in the First Supplemental Indenture incorporated by reference as Exhibit 4.2 of AMB Property, L.P.’s Registration Statement on Form S-11 (No. 333-49163)).
	4.15	Specimen of 7.50% Notes due 2018 (included in the Second Supplemental Indenture incorporated by reference as Exhibit 4.3 of AMB Property, L.P.’s Registration Statement on Form S-11 (No. 333-49163)).
	4.16	Specimen of 6.90% Reset Put Securities due 2015 (included in the Third Supplemental Indenture incorporated by reference as Exhibit 4.4 of AMB Property, L.P.’s Registration Statement on Form S-11 (No. 333-49163)).
	4.17	$25,000,000 6.90% Fixed Rate Note No. 8 dated January 9, 2001, attaching the Parent Guarantee dated January 9, 2001 (incorporated by reference to Exhibit 4.1 of AMB Property, L.P.’s Current Report on Form 8-K filed on January 31, 2001).
	4.18	$50,000,000 7.00% Fixed Rate Note No. 9 dated March 7, 2001, attaching the Parent Guarantee dated March 7, 2001 (incorporated by reference to Exhibit 4.1 of AMB Property, L.P.’s Current Report on Form 8-K filed on March 16, 2001).
	4.19	$25,000,000 6.75% Fixed Rate Note No. 10 dated September 6, 2001, attaching the Parent Guarantee dated September 6, 2001 (incorporated by reference to Exhibit 4.1 of AMB Property, L.P.’s Current Report on Form 8-K filed on September 18, 2001).


Exhibit
Number		Description

	4.20	$20,000,000 5.90% Fixed Rate Note No. 11 dated January 17, 2002, attaching the Parent Guarantee dated January 17, 2002 (incorporated by reference to Exhibit 4.1 of AMB Property, L.P.’s Current Report on Form 8-K filed on January 23, 2002).
	10.1	Distribution Agreement dated August 15, 2000 by and among AMB Property Corporation, AMB Property, L.P., Morgan Stanley & Co., Incorporated, Banc of America Securities LLC, Banc One Capital Markets, Inc., Chase Securities, Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan Securities Inc., and Salomon Smith Barney Inc. (incorporated herein by reference to Exhibit 1.1 of AMB Property, L.P.’s Current Report on Form 8-K/ A filed on November 9, 2000).
	10.2	Terms Agreement dated as of December 14, 2000, by and between Morgan Stanley & Co., Incorporated and J.P. Morgan Securities Inc. and AMB Property, L.P. (incorporated herein by reference to Exhibit 1.1 of AMB Property, L.P.’s Current Report on Form 8-K filed on January 8, 2001).
	10.3	Terms Agreement dated as of January 4, 2001, by and between A.G. Edwards & Sons, Inc. and AMB Property, L.P. (incorporated herein by reference to Exhibit 1.1 of AMB Property, L.P.’s Current Report on Form 8-K filed on January 31, 2001).
	10.4	Terms Agreement dated as of March 2, 2001, by and among First Union Securities, Inc., AMB Property, L.P. and AMB Property Corporation (incorporated by reference to Exhibit 1.1 of AMB Property, L.P.’s current report on Form 8-K filed on March 16, 2001).
	10.5	Form of Change in Control and Noncompetition Agreement between AMB Property Corporation and Executive Officers (incorporated by reference to AMB Property, L.P.’s Annual Report on Form 10-K for the year ended December 31, 1998).
	10.6	Eleventh Amended and Restated Agreement of Limited Partnership of AMB Property II, L.P., dated July 31, 2002 (incorporated by reference to Exhibit 10.2 of AMB Property, L.P.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002).
	10.7	Revolving Credit Agreement dated as of August 23, 2001, among AMB Institutional Alliance Fund II, L.P., AMB Institutional Alliance REIT II, Inc., the banks and financial institutions listed therein, Bank of America, N.A. as Administrative Agent, Dresdner Bank AG, as Syndication Agent, and Bank One, NA, as Documentation Agent (incorporated by reference to Exhibit 10.4 of AMB Property, L.P.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001).
	10.8	Amended and Restated Revolving Credit Agreement, dated as of December 11, 2002, by and among AMB Property, L.P., the banks listed therein, JPMorgan Chase Bank, as administrative agent, J.P. Morgan Europe Limited, as administrative agent for alternate currencies, Bank of America, N.A., as syndication agent, J.P. Morgan Securities Inc. and Banc of America Securities LLC, as joint lead arrangers and joint bookrunners, Bank One, NA, Commerzbank Aktiengesellschaft, New York and Grand Cayman Branches and Wachovia Bank, N.A., as documentation agents, PNC Bank, National Association, The Bank of Nova Scotia, acting through its San Francisco Agency, and Wells Fargo Bank, N.A., as managing agents, and KeyBank National Association, as co-agent (incorporated by reference to Exhibit 10.1 of AMB Property, L.P.’s Current Report on Form 8-K filed on December 18, 2002).
	10.9	Guaranty of Payment, dated as of December 11, 2002, by AMB Property Corporation for the benefit of JPMorgan Chase Bank, as administrative agent, and J.P. Morgan Europe Limited, as administrative agent for alternate currencies, for the banks listed on the signature page to the Revolving Credit Agreement (incorporated by reference to Exhibit 10.2 of AMB Property, L.P.’s Current Report on Form 8-K filed on December 18, 2002).
	10.10	Qualified Borrower Guaranty, dated as of December 11, 2002, by AMB Property, L.P. for the benefit of JPMorgan Chase Bank and J.P. Morgan Europe Limited, as administrative agents for the banks listed on the signature page to the Revolving Credit Agreement (incorporated by reference to Exhibit 10.3 of AMB Property, L.P.’s Current Report on Form 8-K filed on December 18, 2002).
	10.11	Terms Agreement dated as of August 30, 2001, by and among Lehman Brothers Inc., AMB Property, L.P., and AMB Property Corporation (incorporated by reference to Exhibit 1.1 of AMB Property, L.P.’s Current Report on Form 8-K filed on September 18, 2001).


Exhibit
Number		Description

	10.12	Terms Agreement dated as of January 14, 2002, by and among Lehman Brothers Inc., AMB Property, L.P., and AMB Property Corporation (incorporated by reference to Exhibit 1.1 of AMB Property, L.P.’s Current Report on Form 8-K filed on January 23, 2002).
	10.13	Third Amended and Restated 1997 Stock Option and Incentive Plan of AMB Property Corporation and AMB Property, L.P. (incorporated by reference to Exhibit 10.22 of AMB Property, L.P.’s Annual Report on Form 10-K for the year ended December 31, 2001).
	10.14	Amendment No. 1 to the Third Amended and Restated 1997 Stock Option and Incentive Plan of AMB Property Corporation and AMB Property, L.P. (incorporated by reference to Exhibit 10.23 of AMB Property, L.P.’s Annual Report on Form 10-K for the year ended December 31, 2001).
	10.15	2002 Stock Option and Incentive Plan of AMB Property Corporation and AMB Property, L.P. (incorporated by reference to Exhibit 10.21 of AMB Property, L.P.’s Annual Report on Form 10-K for the year ended December 31, 2001).
	10.16	Amended and Restated AMB Nonqualified Deferred Compensation Plan (incorporated by reference to Exhibit 4.17 of AMB Property, L.P.’s Registration Statement on Form S-8 (No. 333-100214)).
	21.1	Subsidiaries of AMB Property, L.P.
	23.1	Consent of PricewaterhouseCoopers LLP.
	24.1	Powers of Attorney (included in Part IV of this Form 10-K)

(b) Reports on Form 8-K:

• AMB Property, L.P. filed a Current Report on Form 8-K on December 18, 2002, in connection with its entrance into an amended and restated $500 million unsecured revolving credit agreement that replaced its then existing $500 million credit facility that was to mature in May 2003.

See Item 15(a)(3) above.

(d) Financial Statement Schedules:

See Item 15(a)(1) and (2) above.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, AMB Property, L.P. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on March 19, 2003.

AMB PROPERTY, L.P.

By: AMB Property Corporation, its General Partner

By: /s/ HAMID R. MOGHADAM

_______________________________________
Hamid R. Moghadam

Chairman of the Board and

Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and directors of AMB Property Corporation, the general partner of AMB Property, L.P., hereby severally constitute Hamid R. Moghadam, W. Blake Baird, David S. Fries and Michael A. Coke, and each of them singly, our true and lawful attorneys with full power to them, and each of them singly, to sign for us and in our names in the capacities indicated below, the Form 10-K filed herewith and any and all amendments to said Form 10-K, and generally to do all such things in our names and in our capacities as officers and directors of the general partner of AMB Property, L.P. to enable AMB Property, L.P. to comply with the provisions of the Securities Exchange Act of 1934, and all requirements of the Securities and Exchange Commission, hereby ratifying and confirming our signatures as they may be signed by our said attorneys, or any of them, to said Form 10-K and any and all amendments thereto.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of AMB Property Corporation and in the capacities and on the dates indicated.



Name	Title	Date

/s/ HAMID R. MOGHADAM Hamid R. Moghadam	Chairman of the Board and Chief Executive Officer (Principal Executive Officer)	March 19, 2003

/s/ W. BLAKE BAIRD W. Blake Baird	President and Director	March 19, 2003

/s/ T. ROBERT BURKE T. Robert Burke	Director	March 19, 2003

/s/ DAVID A. COLE David A. Cole	Director	March 19, 2003

/s/ J. MICHAEL LOSH J. Michael Losh	Director	March 19, 2003

/s/ LYNN M. SEDWAY Lynn M. Sedway	Director	March 19, 2003



Name	Title	Date

/s/ JEFFREY L. SKELTON, PH.D Jeffrey L. Skelton, Ph.D	Director	March 19, 2003

/s/ THOMAS W. TUSHER Thomas W. Tusher	Director	March 19, 2003

/s/ CARYL B. WELBORN, ESQ. Caryl B. Welborn, Esq.	Director	March 19, 2003

/s/ MICHAEL A. COKE Michael A. Coke	Chief Financial Officer and Executive Vice President (Duly Authorized Officer and Principal Financial and Accounting Officer)	March 19, 2003

CERTIFICATIONS

I, Hamid R. Moghadam, certify that:

(1) I have reviewed this annual report on Form 10-K of AMB Property, L.P.;

(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 officers 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 we 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 officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the board of directors of the registrant’s general partner (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls that 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 officers and I have indicated in this annual report whether or not 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.

By: /s/ HAMID R. MOGHADAM

_______________________________________
Hamid R. Moghadam

Chairman of the Board and

Chief Executive Officer

of AMB Property Corporation, the

general partner of AMB Property, L.P.

Date: March 19, 2003

I, W. Blake Baird, certify that:

(1) I have reviewed this annual report on Form 10-K of AMB Property, L.P.;

By: /s/ W. BLAKE BAIRD

_______________________________________
W. Blake Baird

President and Director

of AMB Property Corporation, the

general partner of AMB Property, L.P.

Date: March 19, 2003

I, Michael A. Coke, certify that:

(1) I have reviewed this annual report on Form 10-K of AMB Property, L.P.;

By: /s/ MICHAEL A. COKE

_______________________________________
Michael A. Coke

Chief Financial Officer and

Executive Vice President

of AMB Property Corporation, the

general partner of AMB Property, L.P.

Date: March 19, 2003

REPORT OF INDEPENDENT ACCOUNTANTS

To the General Partner

of AMB Property, L.P.:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of partners’ capital and of cash flows present fairly, in all material respects, the financial position of AMB Property, L.P. and its subsidiaries as of December 31, 2002 and 2001, and the results of their operations and their 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 of America. These financial statements are the responsibility of the management of AMB Property Corporation, the general partner of AMB Property, L.P.; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 2 to the consolidated financial statements, AMB Property, L.P. adopted Statement of Financial Accounting Standards (“SFAS”) No. 144, Accounting for the Impairment or Disposal of Long Lived Assets, and the expense recognition provisions of SFAS No. 123, Accounting for Stock-based Compensation, in 2002.

PRICEWATERHOUSECOOPERS LLP

San Francisco, California

January 14, 2003

F-1

AMB PROPERTY, L.P.

CONSOLIDATED BALANCE SHEETS

As of December 31, 2002 and 2001


			December 31,			December 31,
			2002			2001


			(Dollars in thousands,
			except unit amounts)
ASSETS
Investments in real estate:
	Land		$	1,236,406		$	1,064,422
	Buildings and improvements			3,557,086			3,285,110
	Construction in progress			132,490			181,179

		Total investments in properties		4,925,982			4,530,711
	Accumulated depreciation and amortization			(362,540	)		(265,653	)

		Net investments in properties		4,563,442			4,265,058
Investments in unconsolidated joint ventures				64,428			71,097
Properties held for divestiture, net				107,871			157,174

		Net investments in real estate		4,735,741			4,493,329
Cash and cash equivalents				89,332			73,071
Restricted cash				27,882			8,661
Mortgages receivable				13,133			87,214
Accounts receivable net of allowance for doubtful accounts of $6,720 and $7,677, respectively				74,207			70,794
Other assets				52,199			35,874

		Total assets	$	4,992,494		$	4,768,943

LIABILITIES AND PARTNERS’ CAPITAL
Debt:
	Secured debt		$	1,284,675		$	1,228,214
	Unsecured senior debt securities			800,000			780,000
	Alliance Fund II credit facility			45,500			123,500
	Unsecured debt			10,186			—
	Unsecured credit facility			95,000			12,000

		Total debt		2,235,361			2,143,714
Distributions payable				41,213			4,960
Accounts payable and other liabilities				140,503			133,641

		Total liabilities		2,417,077			2,282,315
Commitments and contingencies (Note 12)
Minority interests				655,790			534,276
Partners’ capital:
	General partner, 81,800,038 and 83,592,418 units, respectively, and 3,995,800 and 4,000,000 Series A preferred units outstanding with a $99,895 and $100,000 liquidation preference, respectively			1,684,150			1,752,342
	Limited partners, 4,846,387 and 4,9,69,027 units, respectively, 1,300,000 Series B preferred units with a $65,000 liquidation preference and 800,000 Series J preferred units with a $40,000 liquidation preference and 800,000 Series K preferred units with a $40,000 liquidation preference			235,477			200,010

		Total partners’ capital		1,919,627			1,952,352

		Total liabilities and partners’ capital	$	4,992,494		$	4,768,943

The accompanying notes are an integral part of these consolidated financial statements.

F-2

AMB PROPERTY, L.P.

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended December 31, 2002, 2001 and 2000


				2002			2001			2000


				(Dollars in thousands, except unit and
				per unit amounts)
REVENUES AND OTHER INCOME
Rental revenues				$	588,522		$	530,041		$	431,122
Equity in earnings of unconsolidated joint ventures					5,674			5,467			5,212
Private capital income					11,193			10,972			4,282
Interest and other income					10,454			16,297			6,482

		Total revenues and other income			615,843			562,777			447,098
EXPENSES
Property operating expenses					77,481			64,452			46,419
Real estate taxes					68,389			63,301			51,996
Interest, including amortization					147,101			124,866			85,834
Depreciation and amortization					127,160			104,838			84,960
General and administrative					47,207			35,820			23,750
Loss on investments in other companies					—			20,758			2,500

		Total expenses			467,338			414,035			295,459

		Income before minority interests			148,505			148,742			151,639
Minority interests’ share of income:
	Preferred units				(13,873	)		(22,201	)		(19,005	)
	Minority interests				(30,963	)		(27,132	)		(12,281	)

		Total minority interests’ share of income			(44,836	)		(49,333	)		(31,286	)

		Income from continuing operations, before gains on developments and dispositions			103,669			99,409			120,353
Gains on developments and dispositions:
	Gains on developments held for sale				1,032			13,169			—
	Gains from dispositions of real estate, net of minority interests				7,789			23,259			1,144

		Total gains on developments and dispositions			8,821			36,428			1,144

		Income from continuing operations			112,490			135,837			121,497
Discontinued operations:
	Income attributable to discontinued operations				18,494			16,300			13,935
	Gains from dispositions of real estate, discontinued operations, net of minority interests				11,372			—			—

		Total discontinued operations			29,866			16,300			13,935

			Net income		142,356			152,137			135,432
Series A preferred unit distributions					(8,496	)		(8,500	)		(8,500	)
Series B preferred unit distributions					(5,606	)		(5,608	)		(5,608	)
Series J preferred unit distributions					(3,303	)		(873	)		—
Series K preferred unit distributions					(2,367	)		—			—
Preferred unit redemption discount/(premium)					412			(4,400	)		—

			Net income available to common unitholders	$	122,996		$	132,756		$	121,324

INCOME AVAILABLE TO COMMON UNITHOLDERS ATTRIBUTABLE TO:
General partner				$	116,153		$	125,053		$	113,282
Limited partners					6,843			7,703			8,042

			Net income available to common unitholders	$	122,996		$	132,756		$	121,324

BASIC INCOME PER COMMON UNIT
Income from continuing operations available to common unitholders				$	1.03		$	1.29		$	1.18
Discontinued operations					0.36			0.20			0.17

			Net income available to common unitholders	$	1.39		$	1.49		$	1.35

DILUTED INCOME PER COMMON UNIT
Income from continuing operations available to common unitholders				$	1.02		$	1.28		$	1.18
Discontinued operations					0.35			0.19			0.17

			Net income available to common unitholders	$	1.37		$	1.47		$	1.35

WEIGHTED AVERAGE COMMON UNITS OUTSTANDING
Basic					88,204,208			89,286,379			89,566,375

Diluted					89,689,310			90,325,801			90,024,511

The accompanying notes are an integral part of these consolidated financial statements.

F-3

AMB PROPERTY, L.P.

CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL

For the Years Ended December 31, 2002, 2001 and 2000



			General Partner												Limited Partners


			Preferred Units						Common Units						Preferred Units					Common Units

			Units			Amount			Units			Amount			Units		Amount			Units			Amount			Total


			(Dollars in thousands, except unit amounts)
Balance at December 31, 1999				4,000,000		$	96,100			84,903,630		$	1,733,159			1,300,000	$	62,190			4,507,689		$	92,100		$	1,983,549
Contributions				—			—			—			—			—		—			94,771			2,228			2,228
Comprehensive income:
	Net Income			—			8,500			—			113,282			—		5,608			—			8,042
	Unrealized loss on securities			—			—			—			(32,725	)		—		—			—			(2,275	)
		Total comprehensive income																									100,432
Issuance of common limited partnership units in connection with issuance of restricted stock				—			—			161,996			3,270			—		—			—			—			3,270
Issuance of common limited partnership units in connection with the exercise of stock options				—			—			103,217			2,180			—		—			—			—			2,180
Conversion of common limited partnership units to common stock				—			—			206,423			4,913			—		—			(206,423	)		(4,153	)		760
Conversion of common limited partnership units to cash				—			—			—			—			—		—			(34,046	)		(681	)		(681	)
Reallocation of common limited partnership units				—			—			(1,465,926	)		(29,318	)		—		—			1,465,926			29,318			—
Deferred compensation				—			—			—			(3,270	)		—		—			—			—			(3,270	)
Deferred compensation amortization				—			—			—			1,022			—		—			—			—			1,022
Reallocation of interests				—			—			—			3,622			—		—			—			(237	)		3,385
Distributions				—			(8,500	)		—			(124,305	)		—		(5,479	)		—			(8,688	)		(146,972	)

Balance at December 31, 2000				4,000,000			96,100			83,909,340		$	1,671,830			1,300,000		62,319			5,827,917			115,654			1,945,903
Contributions				—			—			—			—			800,000		38,906			—			—			38,906
Comprehensive income:
	Net Income			—			8,500			—			129,453			—		6,481			—			7,703
	Reversal of unrealized loss on securities			—			—			—			3,732			—		—			—			230
		Total comprehensive income																									156,099
Preferred unit redemption premium				—			—			—			(4,400	)		—		—			—			—			(4,400	)
Issuance of common limited partnership units in connection with issuance of restricted stock				—			—			237,920			5,853			—		—			—			—			5,853
Issuance of common limited partnership units in connection with the exercise of stock options				—			—			201,960			4,274			—		—			—			—			4,274
Conversion of common limited partnership units to common stock				—			—			635,798			15,255			—		—			(635,798	)		(12,650	)		2,605
Conversion of common limited partnership units to cash				—			—			—			—			—		—			(223,092	)		(4,343	)		(4,343	)
Retirement of units				—			—			(1,392,600	)		(32,892	)		—		—			—			—			(32,892	)
Deferred compensation				—			—			—			(5,853	)		—		—			—			—			(5,853	)
Deferred compensation amortization				—			—			—			2,725			—		—			—			—			2,725
Reallocation of interests				—			—			—			(256	)		—		256			—			—			—
Distributions				—			(8,500	)		—			(133,479	)		—		(6,481	)		—			(8,065	)		(156,525	)

Balance at December 31, 2001				4,000,000			96,100			83,592,418			1,656,242			2,100,000		101,225			4,969,027			98,785			1,952,352
Contributions				—			—			—			—			800,000		38,932			—			—			38,932
Comprehensive income:
	Net Income			—			8,496			—			115,741			—		11,276			—			6,843
	Preferred unit redemption discount			—			—			—			412			—		—			—			—
	Currency translation adjustment			—			—			—			31			—		—			—			—
		Total comprehensive income																									142,799
Issuance of common limited partnership units in connection with issuance of restricted stock and options				—			—			170,604			7,478			—		—			—			—			7,478
Issuance of common limited partnership units in connection with the exercise of stock options				—			—			565,976			14,830			—		—			—			—			14,830
Conversion of common limited partnership units to common stock				—			—			122,640			2,309			—		—			(122,640	)		(2,309	)		—
Retirement of units				(4,200	)		(106	)		(2,651,600	)		(69,399	)		—		—			—			—			(69,505	)
Deferred compensation				—			—			—			(7,478	)		—		—			—			—			(7,478	)
Deferred compensation amortization				—			—			—			5,265			—		—			—			—			5,265
Reallocation of interests				—			—			—			(54	)		—		946			—			(982	)		(90	)
Distributions				—			(8,496	)		—			(137,221	)		—		(11,276	)		—			(7,963	)		(164,956	)

Balance at December 31, 2002				3,995,800		$	95,994			81,800,038		$	1,588,156			2,900,000	$	141,103			4,846,387		$	94,374		$	1,919,627

The accompanying notes are an integral part of these consolidated financial statements.

F-4

AMB PROPERTY, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2002, 2001 and 2000


				2002			2001			2000


				(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income				$	142,356		$	152,137		$	135,432
Adjustments to reconcile net income to net cash provided by operating activities:
	Equity in loss of AMB Investment Management, L.P.				—			43			3,159
	Equity in earnings of unconsolidated joint ventures				(5,674	)		(5,467	)		(5,212	)
	Straight-line rents				(11,013	)		(10,093	)		(10,203	)
	Debt premiums, discounts and finance cost amortization, net				(58	)		(3,562	)		(6,055	)
	Depreciation and amortization, including discontinued operations				134,663			111,414			90,358
	Stock-based compensation amortization				5,265			2,725			1,022
	Loss on investments in other companies				—			20,758			2,500
	Minority interests, including discontinued operations				44,862			49,357			31,311
	Gains on developments held for sale				(1,032	)		(13,169	)		—
	Gains from dispositions of real estate, net of minority interests				(19,161	)		(23,259	)		(1,144	)
	Changes in assets and liabilities:
		Accounts receivable and other assets			(8,269	)		14,303			(37,664	)
		Accounts payable and other liabilities			6,862			(6,625	)		57,671

			Net cash provided by operating activities		288,801			288,562			261,175
CASH FLOWS FROM INVESTING ACTIVITIES
Change in restricted cash					(19,221	)		13,703			(4,002	)
Cash paid for property acquisitions					(355,964	)		(402,208	)		(604,872	)
Additions to buildings, development costs and other first generation improvements					(152,196	)		(174,651	)		(153,534	)
Additions to second generation building improvements and lease costs					(54,931	)		(47,842	)		(40,573	)
Additions to interests in unconsolidated joint ventures					35			—			(13,158	)
Distributions received from unconsolidated joint ventures					6,423			5,341			4,295
Net proceeds from divestiture of real estate					257,383			242,505			85,345

			Net cash used in investing activities		(318,471	)		(363,152	)		(726,499	)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common units					14,830			4,274			2,180
Retirement of common and preferred units					(69,505	)		(32,892	)		—
Borrowings on secured debt					167,960			362,052			156,797
Payments on secured debt					(146,118	)		(88,866	)		(71,822	)
Borrowings on unsecured credit facility					230,000			210,000			510,000
Payments on unsecured credit facility					(147,000	)		(414,000	)		(377,000	)
Payments on Alliance Fund I credit facility					—			—			(80,000	)
Borrowings on Alliance Fund II credit facility					67,250			125,000			—
Payments on Alliance Fund II credit facility					(145,250	)		(1,500	)		—
Payment of financing fees					(6,837	)		(7,296	)		(6,364	)
Repayment of mortgage receivable					74,081			—			—
Net proceeds from issuances of senior debt securities					19,883			99,406			278,183
Net proceeds from issuances of preferred units					38,932			63,727			61,413
Repurchase of preferred units					(7,927	)		(114,400	)		—
Contributions from co-investment partners					146,572			134,770			153,872
Distributions paid to general partner and preferred unitholders					(123,361	)		(148,460	)		(136,288	)
Distributions to limited partners, including preferred units					(67,579	)		(64,512	)		(38,601	)

		Net cash provided by financing activities			45,931			127,303			452,370

			Net increase (decrease) in cash and cash equivalents		16,261			52,713			(12,954	)
			Cash and cash equivalents at beginning of period		73,071			20,358			33,312

			Cash and cash equivalents at end of period	$	89,332		$	73,071		$	20,358

Supplemental Disclosures of Cash Flow Information
Cash paid for interest, net of capitalized interest				$	165,154		$	147,637		$	90,138
Non-cash transactions:
		Acquisition of properties		$	403,318		$	428,254		$	729,972
		Assumption of debt			(39,687	)		(9,724	)		(125,100	)
		Acquisition capital			(7,667	)		(16,322	)		—

			Net cash paid	$	355,964		$	402,208		$	604,872

The accompanying notes are an integral part of these consolidated financial statements.

F-5

AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2002 and 2001

1. Organization and Formation of the Operating Partnership

AMB Property Corporation, a Maryland corporation (the “Company”), commenced operations as a fully integrated real estate company effective with the completion of its initial public offering on November 26, 1997. The Company elected to be taxed as a real estate investment trust (“REIT”) under Sections 856 through 860 of the Internal Revenue Code of 1986 (the “Code”), commencing with its taxable year ended December 31, 1997, and believes its current organization and method of operation will enable it to maintain its status as a real estate investment trust. The Company, through its controlling interest in its subsidiary, AMB Property, L.P., a Delaware limited partnership (the “Operating Partnership”), is engaged in the acquisition, ownership, operation, management, renovation, expansion and development of industrial buildings primarily within key distribution markets worldwide. Unless the context otherwise requires, the “Company” means AMB Property Corporation, the Operating Partnership and their other controlled subsidiaries and the “Operating Partnership” means AMB Property, L.P. and its controlled subsidiaries.

As of December 31, 2002, the Company owned an approximate 94.5% general partner interest in the Operating Partnership, excluding preferred units. The remaining 5.5% limited partner interest is owned by non-affiliated investors and certain current and former directors and officers of the Company. For local law purposes, certain properties are owned through limited partnerships and limited liability companies. The ownership of such properties through such entities does not materially affect the Company’s overall ownership interests in the properties. As the sole general partner of the Operating Partnership, the Company has full, exclusive and complete responsibility and discretion in the day-to-day management and control of the Operating Partnership. Net operating results of the Operating Partnership are allocated after preferred unit distributions based on the respective partners’ ownership interests.

The Operating Partnership enters into co-investment joint ventures with institutional investors. These co-investment joint ventures provide the Operating Partnership with an additional source of capital and income. As of December 31, 2002, the Operating Partnership had investments in five co-investment joint ventures, which are consolidated for financial reporting purposes.

AMB Capital Partners, LLC, a Delaware limited liability company (“AMB Capital Partners”), the successor-in-interest to AMB Investment Management, Inc. (“AMB Investment Management”), provides real estate investment services to clients on a fee basis. Headlands Realty Corporation, a Maryland corporation, conducts a variety of businesses that include incremental income programs, such as the Operating Partnership’s CustomerAssist Program, and development projects available for sale to third parties. IMD Holding Corporation, a Delaware corporation, also conducts a variety of businesses that include development projects available for sale to third parties. On December 31, 2001, AMB Investment Management was reorganized through a series of related transactions into AMB Capital Partners. The Operating Partnership is the managing member of AMB Capital Partners. On May 31, 2001, the Operating Partnership acquired 100% of the common stock of AMB Investment Management and Headlands Realty Corporation from current and former executive officers of the Company, a former executive officer of AMB Investment Management, and a director of Headlands Realty Corporation, thereby acquiring 100% of both entities’ capital stock. The Operating Partnership began consolidating its investments in AMB Investment Management and Headlands Realty Corporation on May 31, 2001. Prior to May 31, 2001, the Operating Partnership reflected its investment using the equity method. The net impact of consolidating AMB Investment Management and Headlands Realty Corporation was not material.

Any references to the number of buildings, square footage, customers and occupancy data in the financial statement footnotes are unaudited.

As of December 31, 2002, the Operating Partnership owned 904 industrial buildings and seven retail centers, located in 28 markets throughout North America and France. The Operating Partnership’s strategy is

F-6

AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

to become a leading provider of distribution properties in supply-constrained, infill submarkets located near key international passenger and cargo airports, highway systems and seaports in major metropolitan areas. As of December 31, 2002, the industrial buildings, principally warehouse distribution buildings, encompassed approximately 84.2 million rentable square feet and were 94.6% leased to over 2,300 customers. As of December 31, 2002, the retail centers, principally grocer-anchored community shopping centers, encompassed approximately 1.0 million rentable square feet and were 88.6% leased to 122 customers.

As of December 31, 2002, through AMB Capital Partners, the Operating Partnership also managed, but did not have an ownership interest in, industrial, retail and other properties, totaling approximately 1.7 million rentable square feet on behalf of various clients. In addition, the Operating Partnership has investments in industrial buildings, totaling approximately 5.5 million rentable square feet, through unconsolidated joint ventures.

2. Summary of Significant Accounting Policies

Basis of Presentation. These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying consolidated financial statements include the financial position, results of operations and cash flows of the Operating Partnership, its wholly-owned subsidiaries and joint ventures, in which the Operating Partnership has a controlling interest. Third-party equity interests in the Operating Partnership and joint ventures are reflected as minority interests in the consolidated financial statements. The Operating Partnership also has four non-controlling limited partnership interests in four separate unconsolidated real estate joint ventures, which are accounted for under the equity method. All significant intercompany amounts have been eliminated.

Use of Estimates. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Investments in Real Estate. Investments in real estate are stated at cost unless circumstances indicate that cost cannot be recovered, in which case, the carrying value of the property is reduced to estimated fair value. Carrying values for financial reporting purposes are reviewed for impairment on a property-by-property basis whenever events or changes in circumstances indicate that the carrying value of a property may not be recoverable. Impairment is recognized when estimated expected future cash flows (undiscounted and without interest charges) are less than the carrying value of the property. The estimation of expected future net cash flows is inherently uncertain and relies on assumptions regarding current and future economics and market conditions and the availability of capital. If impairment analysis assumptions change, then an adjustment to the carrying value of the Operating Partnership’s long-lived assets could occur in the future period in which the assumptions change. To the extent that a property is impaired, the excess of the carrying amount of the property over its estimated fair value is charged to income and is included with gains from disposition of real estate, net on the consolidated statements of operations. The Operating Partnership evaluated its properties held for divestiture and operating properties for impairment and reduced their carrying value by $1.2 million, $18.6 million and $5.9 million in 2002, 2001 and 2000, respectively. The management of the Operating Partnership believes that there are no additional impairments of the carrying values of its investments in real estate as of December 31, 2002.

F-7

AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Depreciation and amortization are calculated using the straight-line method over the estimated useful lives of the real estate investments. The estimated lives and components of depreciation and amortization expense for the years ended December 31, are as follows (dollars in thousands):


			Estimated
Depreciation and Amortization Expenses			Lives		2002			2001			2000

Building costs				40	$	80,663		$	73,462		$	62,097
Buildings and improvements:
	Roof/ HVAC/parking lots			10		5,471			3,836			2,404
	Plumbing/signage			7		1,170			805			484
	Painting and other			5		13,370			7,664			6,345
Tenant improvements				Various		14,386			12,305			9,165
Lease commissions				Various		17,076			11,311			8,641

		Total real estate depreciation				132,136			109,383			89,136
Other depreciation and amortization				Various		2,527			2,031			1,222
Discontinued operations’ depreciation				Various		(7,503	)		(6,576	)		(5,398	)

		Total depreciation and amortization			$	127,160		$	104,838		$	84,960

The cost of buildings and improvements includes the purchase price of the property or interest in property, including legal fees and acquisition costs. Project costs directly associated with the development and construction of a real estate project, which include interest and property taxes, are capitalized as construction in progress. Capitalized interest related to construction projects for the years ended December 31, 2002, 2001 and 2000, was $6.9 million, $13.7 million and $15.5 million, respectively.

Expenditures for maintenance and repairs are charged to operations as incurred. Maintenance expenditures include painting and repair costs. The Operating Partnership expenses costs as incurred and does not accrue in advance of planned major maintenance activities. Significant renovations or betterments that extend the economic useful life of assets are capitalized and include parking lot, HVAC and roof replacement costs.

Business Combinations. In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard (“SFAS”) No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 and No. 142 require the Operating Partnership to record at acquisition an intangible asset or liability for the value attributable to above or below-market leases. The requirements are applicable to all acquisitions subsequent to July 1, 2001. The adoption of SFAS No. 141 and No. 142 did not have a material impact on the Operating Partnership’s financial position or results of operations.

Investments in Unconsolidated Joint Ventures. The Operating Partnership has non-controlling limited partnership interests in four separate unconsolidated joint ventures. These investments are not consolidated because the Operating Partnership does not exercise significant control over major operating decisions such as approval of budgets, selection of property managers, investment activity and changes in financing. The Operating Partnership accounts for the joint ventures using the equity method of accounting.

Section 1031 Reverse Exchanges. Reverse exchanges represent loan agreements with third parties, whereby the Operating Partnership loans substantially all funds to the third party to acquire a real estate investment that we intend to acquire in a Section 1031 exchange. The loan is secured by the real estate investment and title is held by the third party. Upon acquisition of the property by the third party, the Operating Partnership records the asset as an investment in real estate and records the rental income and expenses associated with the property as the Operating Partnership retains the risk of loss and the benefits of

F-8

AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

the asset. As of December 31, 2002, the Operating Partnership had one property in a reverse exchange valued at $13.5 million.

Concentration of Credit Risk. Other real estate companies compete with the Operating Partnership in its real estate markets. This results in competition for customers to occupy space. The existence of competing properties could have a material impact on the Operating Partnership’s ability to lease space and on the amount of rent received. As of December 31, 2002, the Operating Partnership did not have any single tenant that accounted for greater than 2.6% of rental revenues.

Cash and Cash Equivalents. Cash and cash equivalents include cash held in financial institutions and other highly liquid short-term investments with original maturities of three months or less.

Restricted Cash. Restricted cash includes cash held in escrow in connection with property purchases, Section 1031 exchange accounts and debt and real estate tax payments.

Accounts Receivable. Accounts receivable includes all current accounts receivable, net of allowances, other accruals and deferred rent receivable of $46.3 million and $37.9 million as of December 31, 2002 and 2001, respectively. The Operating Partnership regularly reviews the credit worthiness of its tenants and adjusts its allowance for doubtful accounts, straight-line rent receivable balance and tenant improvement and leasing costs amortization accordingly.

Mortgage Receivable. Through a wholly-owned subsidiary, the Operating Partnership holds a mortgage loan receivable on AMB Pier One, LLC, an unconsolidated joint venture. Based on borrowing rates available at December 31, 2002, the estimated fair value of the mortgage receivable was $15.5 million.

Deferred Financing Costs. Costs incurred in connection with financings are capitalized and amortized to interest expense using the effective-interest method over the term of the related loan. As of December 31, 2002 and 2001, deferred financing costs were $19.6 million and $17.5 million, respectively, net of accumulated amortization. Such amounts are included in other assets on the accompanying consolidated balance sheets.

Investments in Other Companies. Investments in other companies were accounted for on a cost basis and realized gains and losses were included in current earnings. For its investments in private companies, the Operating Partnership periodically reviewed its investments and management determined if the value of such investments had been permanently impaired. During 2001, the Operating Partnership recognized losses on its investments in other companies totaling $20.8 million, including its investment in Webvan Group, Inc. The Operating Partnership had previously recognized gains and losses on its investment in Webvan Group, Inc. as a component of other comprehensive income. As of December 31, 2001, the Operating Partnership had realized losses on 100% of its investments in such other companies. The Operating Partnership recognized no gains or losses in 2002.

Debt. The Operating Partnership’s debt includes both fixed and variable rate secured debt, unsecured fixed rate debt and unsecured variable rate credit facilities. Based on borrowing rates available to the Operating Partnership at December 31, 2002, the book value and the estimated fair value of the fixed rate secured and unsecured debt were $2,019.4 million and $2,152.6 million, respectively. The carrying value of the variable rate debt approximates fair value.

Debt Premiums. Debt premiums represent the excess of the fair value of debt over the principal value of debt assumed in connection with the Company’s initial public offering and subsequent property acquisitions. The debt premiums are being amortized into interest expense over the term of the related debt instrument using the effective interest method. As of December 31, 2002 and 2001, the net unamortized debt premium was $9.8 million and $14.9 million, respectively, and are included as a component of secured debt on the accompanying consolidated balance sheets.

F-9

AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Rental Revenues. The Operating Partnership, as a lessor, retains substantially all of the benefits and risks of ownership of the properties and accounts for its leases as operating leases. Rental income is recognized on a straight-line basis over the term of the leases. Reimbursements from customers for real estate taxes and other recoverable operating expenses are recognized as revenue in the period the applicable expenses are incurred. In addition, the Operating Partnership nets its bad debt expense against rental income for financial reporting purposes. Such amounts totaled $1.8 million, $5.2 million and $1.8 million for the years ended December 31, 2002, 2001 and 2000, respectively.

Private Capital Income. Private capital income consists primarily of asset management fees and acquisition and disposition fees earned by AMB Capital Partners from joint ventures and clients. Private capital income also includes priority distributions from the Operating Partnership’s co-investment joint ventures.

Interest and Other Income. Interest and other income consists primarily of interest income from mortgages receivable and on cash and cash equivalents.

Stock-based compensation expense. In 2002, the Operating Partnership adopted the expense recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation. The Operating Partnership values stock options issued by the Company, its general partner, using the Black-Scholes option-pricing model and recognizes this value as an expense over the period in which the options vest. Under this standard, recognition of expense for stock options is applied to all options granted after the beginning of the year of adoption. Prior to 2002, the Operating Partnership followed the intrinsic method set forth in APB Opinion 25, Accounting for Stock Issued to Employees. During 2002, the Company awarded 2.0 million stock options to employees. In accordance with SFAS No. 123, the Operating Partnership will recognize the associated expense over the three to five-year vesting periods. Related stock-based compensation expense was $0.9 million for the year ended December 31, 2002. The expense is included in general and administrative expenses in the accompanying consolidated statements of operations. The adoption of SFAS No. 123 is prospective and the 2002 expense relates only to stock options granted in 2002. Had compensation cost for the Operating Partnership’s stock-based compensation plans been determined based on the fair value at the grant dates for awards prior to 2002 consistent with the method of SFAS No. 123, the Operating Partnership’s pro forma net income available to common unitholders would have been reduced by $2.4 million, $3.9 million and $2.7 million and pro forma basic and diluted earnings per share would have been reduced to $1.37 and $1.34; $1.44 and $1.42; and $1.32 and $1.31, respectively, for the years ended December 31, 2002, 2001 and 2000.

Discontinued operations. In August 2001, the Financial Accounting Standards Board issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS No. 144 retains SFAS No. 121’s, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, fundamental provisions for the: (1) recognition and measurement of impairment of long-lived assets to be held and used; and (2) measurement of long-lived assets to be disposed of by sale. Beginning in 2002, the Operating Partnership reported operating results attributable to discontinued operations and the applicable gain on disposition of real estate separately as prescribed under the provisions of SFAS No. 144. The consolidated statements of operations for the years ended December 31, 2001 and 2000 were also revised to conform with this change.

Financial Instruments. For its lease denominated in Mexican pesos, the Operating Partnership used derivative financial instruments to manage foreign currency exchange rate risk. The Operating Partnership adopted SFAS No. 133, Accounting for Derivative Instruments and for Hedging Activities, as amended, on January 1, 2001. SFAS No. 133 provides comprehensive guidelines for the recognition and measurement of derivatives and hedging activities and, specifically, requires all derivatives to be recorded on the balance sheet at fair value as an asset or liability, with an offset to accumulated other comprehensive income or income. The Operating Partnership’s only derivative financial instruments in effect at December 31, 2002, were a combination of foreign currency option contracts. These derivative instruments were marked to market

F-10

AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

through accumulated other comprehensive income because they qualified for hedge accounting treatment. In assessing the fair value of its financial instruments, the Operating Partnership uses a variety of methods and assumptions that are based on market conditions and risks existing at each balance sheet date. The Operating Partnership uses quoted market prices or quotes from brokers or dealers for the same or similar instruments. These values represent a general approximation of possible value and may never actually be realized.

Comprehensive Income. Comprehensive income consists of net income, unrealized gains and losses on certain investments in equity securities and foreign currency translation adjustments and is presented in the consolidated statements of partners’ capital.

Reclassifications. Certain items in the consolidated financial statements for prior periods have been reclassified to conform with current classifications with no effect on net income or partners’ capital.

3. Transactions with Affiliates

AMB Capital Partners provides real estate investment services to clients on a fee basis. Headlands Realty Corporation, a Maryland corporation, conducts a variety of businesses that include incremental income programs, such as the Operating Partnership’s CustomerAssist Program, and development projects available for sale to third parties. IMD Holding Corporation, a Delaware corporation, also conducts a variety of businesses that include development projects available for sale to third parties. On December 31, 2001, AMB Investment Management was reorganized through a series of related transactions into AMB Capital Partners. The Operating Partnership is the managing member of AMB Capital Partners. On May 31, 2001, the Operating Partnership acquired 100% of the common stock of AMB Investment Management and Headlands Realty Corporation from current and former executive officers of the Company, a former executive officer of AMB Investment Management, and a director of Headlands Realty Corporation, thereby acquiring 100% of both entities’ capital stock. The Operating Partnership began consolidating its investments in AMB Investment Management (predecessor-in-interest to AMB Capital Partners) and Headlands Realty Corporation on May 31, 2001. Prior to May 31, 2001, the Operating Partnership reflected its investment using the equity method and did not include expenses incurred by these two unconsolidated preferred stock subsidiaries in general and administrative expenses, they were netted with private capital income. The net impact of consolidating AMB Investment Management and Headlands Realty Corporation was not material. General and administrative expenses for the twelve months ended December 31, 2001, would have been $39.4 million had the subsidiaries been consolidated beginning January 1, 2001.

4. Real Estate Acquisition and Development Activity

During 2002, the Operating Partnership invested $403.3 million in operating properties, consisting of 43 industrial buildings, aggregating approximately 5.4 million square feet, and a parking lot adjacent to Los Angeles International Airport. The Operating Partnership’s acquisitions included the investment of $166.5 million in 31 industrial buildings, aggregating approximately 3.1 million square feet through three of the Operating Partnership’s co-investment joint ventures.

During 2002, the Operating Partnership completed industrial developments valued at $135.4 million, aggregating approximately 3.1 million square feet. The Operating Partnership also initiated new industrial development projects in North America, France and Singapore valued at $90.6 million, aggregating approximately 1.8 million square feet.

As of December 31, 2002, the Operating Partnership had in its development pipeline: (1) 10 industrial projects, which will total approximately 1.7 million square feet and have an aggregate estimated investment of $106.8 million upon completion; and (2) three development projects available for sale, which will total approximately 0.6 million square feet and have an aggregate estimated investment of $49.1 million upon completion. As of December 31, 2002, the Operating Partnership and its Development Alliance Partners®

F-11

AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

have funded an aggregate of $92.8 million and will need to fund an estimated additional $63.1 million in order to complete current and planned projects during 2003 and 2004.

During 2001, the Operating Partnership invested $428.3 million in operating properties, consisting of 65 industrial buildings, aggregating approximately 6.8 million square feet, which included the investment of $219.5 million in 36 industrial buildings, aggregating approximately 3.8 million square feet through three of the Operating Partnership’s co-investment joint ventures.

During 2001, the Operating Partnership completed industrial and retail developments valued at $148.0 million and $73.9 million, respectively, aggregating approximately 2.3 million and 0.4 million square feet, respectively. The Operating Partnership also initiated new industrial development projects valued at $9.7 million, aggregating approximately 0.2 million square feet.

5. Property Divestitures and Properties Held for Divestiture

Property Divestitures. During 2002, the Operating Partnership divested itself of 58 industrial buildings, two retail properties and one undeveloped retail land parcel, aggregating approximately 5.7 million square feet, for an aggregate price of $244.0 million, with a resulting net gain of $9.6 million, which is net of minority interests’ share. During 2002, we also completed and sold six buildings developed as part of our development-for-sale program for a net gain of $1.0 million. As of December 31, 2002, we were developing three projects for sale to third parties.

In June 2002, the Operating Partnership also sold operating properties valued at $76.9 million, consisting of 15 industrial buildings, aggregating approximately 1.9 million square feet, to one of its co-investment joint ventures. The properties sold to the co-investment joint venture were reflected at the Operating Partnership’s historical cost because the Operating Partnership controls these joint ventures and, therefore, they were under common control. The Operating Partnership recognized a gain of $3.3 million related to these sales representing the portion of the properties acquired by the third-party co-investors. In November 2002, the Operating Partnership’s joint venture partner in AMB Partners II, L.P. (“Partners II”) increased its ownership in Partners II from 50% to 80% by acquiring 30% of the Operating Partnership’s partnership interest. The Operating Partnership recognized a gain of $6.3 million on the sale of its interest.

During 2001, the Operating Partnership divested itself of 24 industrial and two retail buildings, aggregating approximately 3.2 million square feet, for an aggregate price of $193.4 million, with a resulting net gain of $24.1 million, which is net of minority interests’ share. The resulting net gain is before impairment charges of $18.6 million and the gain on the Operating Partnership’s contributed properties of $17.8 million.

During 2001, the Operating Partnership also contributed operating properties valued at $539.2 million, consisting of 111 industrial buildings, aggregating approximately 10.8 million square feet, to three of its co-investment joint ventures. The properties contributed to the co-investment joint ventures were reflected at the Operating Partnership’s historical cost because the Operating Partnership controls these joint ventures and, therefore, they were under common control. The Operating Partnership recognized a gain of $17.8 million related to these contributions representing the portion of the contributed properties acquired by the third-party co-investors.

During 2000, the Operating Partnership divested itself of 25 industrial buildings and one retail center, aggregating approximately 2.5 million square feet, for an aggregate price of $175.7 million, with a resulting net gain of $7.0 million. The resulting net gain is before impairment charges of $5.9 million.

Properties Held for Divestiture. As of December 31, 2002, the Operating Partnership had decided to divest itself of four industrial properties, one development property and two retail properties with a net book value of $107.9 million. The properties are not in the Operating Partnership’s core markets and do not meet its current strategic objectives. The divestitures of the properties are subject to negotiation of acceptable terms

F-12

AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

and other customary conditions. Properties held for divestiture are stated at the lower of cost or estimated fair value less costs to sell. The following summarizes the condensed results of operations of the properties held for divestiture and sold under SFAS No. 144 for the years ended December 31, (dollars in thousands):


		2002			2001			2000

Rental revenues		$	38,809		$	37,952		$	31,951
Straight-line rents			1,522			73			1,091
Interest and other income			6			43			67
Property operating expenses			(4,876	)		(4,564	)		(4,147	)
Real estate taxes			(5,512	)		(5,879	)		(5,168	)
Interest, including amortization			(3,926	)		(4,725	)		(4,436	)
Depreciation and amortization			(7,503	)		(6,576	)		(5,398	)
Minority interests’ share			(26	)		(24	)		(25	)

	Income attributable to discontinued operations	$	18,494		$	16,300		$	13,935

As of December 31, 2002 and 2001, assets and liabilities of properties held for divestiture consisted of the following (dollars in thousands):


	2002		2001

Accounts receivable, net	$	3,986	$	3,065
Other assets	$	82	$	174
Secured debt	$	9,544	$	32,024
Accounts payable and other liabilities	$	1,912	$	2,257

6. Mortgages Receivable

In September 2000, the Operating Partnership sold a retail center located in Southern California. The Operating Partnership carried a 9.5% mortgage note secured by the retail center in the principal amount of $74.0 million, due September 30, 2002. The Operating Partnership received full repayment of this mortgage on July 3, 2002.

Through a wholly-owned subsidiary, the Operating Partnership holds a mortgage loan receivable on AMB Pier One, LLC, an unconsolidated joint venture. The note bears interest at 13.0% and matures in May 2026. As of December 30, 2002, the outstanding balance on the note was $13.1 million.

F-13

AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. Debt

As of December 31, 2002 and 2001, debt consisted of the following (dollars in thousands):


			December 31,		December 31,
			2002		2001

Operating Partnership secured debt, varying interest rates from 4.0% to 10.4%, due January 2003 to January 2014 (weighted average interest rate of 8.1% at December 31, 2002 and 2001)			$	381,764	$	453,954
Joint venture secured debt, varying interest rates from 3.0% to 12.0%, due April 2004 to April 2023 (weighted average interest rate of 7.0% and 7.1% at December 31, 2002 and 2001, respectively)				893,093		759,374
Unsecured senior debt securities, varying interest rates from 5.9% to 8.0%, (weighted average interest rate of 7.2% and 7.3% at December 31, 2002 and 2001, respectively) due June 2005 to June 2018.				800,000		780,000
Unsecured debt, interest rate of 7.5%, due June 2013 and November 2015.				10,186		—
Unsecured credit facility, variable interest at LIBOR plus 60 basis points (interest rate of 2.0% and 2.8% at December 31, 2002 and 2001, respectively), due December 2005.				95,000		12,000
Alliance Fund II credit facility, variable interest at LIBOR plus 87.5 basis points (interest rate of 2.3% at December 31, 2002), due August 2003.				45,500		123,500

	Total before premiums			2,225,543		2,128,828
	Unamortized premiums			9,818		14,886

		Total consolidated debt	$	2,235,361	$	2,143,714

Secured debt generally requires monthly principal and interest payments. The secured debt is secured by deeds of trust on certain properties and is generally non-recourse. As of December 31, 2002 and 2001, the total gross investment book value of those properties securing the debt was $2.6 billion and $2.3 billion, respectively, including $1.6 billion and $1.2 billion, respectively, in consolidated joint ventures. All of the secured debt bears interest at fixed rates, except for seven loans with an aggregate principal amount of $65.6 million as of December 31, 2002, which bear interest at variable rates (weighted average interest rate of 3.5% as of December 31, 2002). The secured debt has various covenants. Management believes that the Operating Partnership was in compliance with its financial covenants as of December 31, 2002. As of December 31, 2002, the Operating Partnership had 26 non-recourse secured loans, which are cross-collateralized by 60 properties, totaling $711.7 million (not including unamortized debt premiums).

Interest on the unsecured senior debt securities is payable semi-annually. The 2015 notes are putable and callable in September 2005. The senior debt securities are subject to various covenants. Management believes that the Operating Partnership was in compliance with its financial covenants as of December 31, 2002.

In May 2002, the Operating Partnership commenced a medium-term note program for the issuance of up to $400.0 million in principal amount of medium-term notes (unsecured senior debt securities), which will be guaranteed by the Company. As of December 31, 2002, the Operating Partnership had issued no medium-term notes under this program.

In August 2000, the Operating Partnership commenced a medium-term note program for the issuance of up to $400.0 million in principal amount of medium-term notes, which are guaranteed by the Company. On January 14, 2002, the Operating Partnership completed this program when it issued and sold the remaining

F-14

AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

$20.0 million of the notes to Lehman Brothers, Inc., as principal. The Company has guaranteed the notes, which mature on January 17, 2007, and bear interest at 5.90% per annum. The Operating Partnership used the net proceeds of $19.9 million for general corporate purposes, to partially repay indebtedness and to acquire and develop additional properties.

In December 2002, the Operating Partnership renewed its $500.0 million unsecured revolving line of credit. The Company guarantees the Operating Partnership’s obligations under the credit facility. The credit facility matures in December 2005, has a one-year extension option and is subject to a 20 basis point annual facility fee. Borrowings under the credit facility currently bear interest at LIBOR plus 60 basis points. Both the facility fee and the interest rate are based on the Operating Partnership’s credit rating, which is currently investment grade. The credit facility includes a multi-currency component under which up to $150.0 million may be drawn in either British pounds sterling, euros or yen, provided that such currency is readily available and freely transferable and convertible to U.S. dollars. The Reuters Monitor Money Rates Service reports LIBOR for such currency in interest periods of 1, 2, 3 or 6 months. The Operating Partnership has the ability to increase available borrowings to $700.0 million by adding additional banks to the facility or obtaining the agreement of existing banks to increase their commitments. The Operating Partnership uses its unsecured credit facility principally for acquisitions and for general working capital requirements. Monthly debt service payments on the credit facility are interest only. The total amount available under the credit facility fluctuates based upon the borrowing base, as defined in the agreement governing the credit facility, generally the value of the Operating Partnership’s unencumbered properties. As of December 31, 2002, the outstanding balance on the credit facility was $95.0 million and the remaining amount available was $379.0 million, net of outstanding letters of credit (excluding the additional $200.0 million of potential additional capacity). The credit facility has various covenants. Management believes that the Operating Partnership was in compliance with its financial covenants at December 31, 2002.

In July 2001, AMB Institutional Alliance Fund II, L.P. (“Alliance Fund II”) obtained a $150.0 million credit facility secured by the unfunded capital commitments of the investors in AMB Institutional Alliance REIT II, Inc. (“Alliance REIT II”) and the Alliance Fund II. Borrowings currently bear interest at LIBOR plus 87.5 basis points. As of December 31, 2002, the outstanding balance was $45.5 million and the remaining amount available was $31.2 million, net of outstanding letters of credit and capital contributions from third-party investors. The credit facility has various covenants. Management believes that the Alliance Fund II and the Alliance REIT II were in compliance with their financial covenants as of December 31, 2002.

F-15

AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of December 31, 2002, the scheduled maturities of the Operating Partnership’s total debt, excluding unamortized debt premiums, were as follows (dollars in thousands):


	Operating		Consolidated		Unsecured
	Partnership		Joint		Senior
	Secured		Venture		Debt		Unsecured		Credit
	Debt		Debt		Securities		Debt		Facilities		Total

2003	$	74,631	$	19,678	$	—	$	558	$	45,500	$	140,367
2004		63,465		64,928		—		601		—		128,994
2005		45,511		59,326		250,000		647		95,000		450,484
2006		85,023		65,676		25,000		698		—		176,397
2007		24,073		43,163		75,000		752		—		142,988
2008		32,669		154,684		175,000		810		—		363,163
2009		4,147		76,826		—		873		—		81,846
2010		50,948		105,854		75,000		941		—		232,743
2011		409		179,295		75,000		1,014		—		255,718
2012		407		101,399		—		1,092		—		102,898
Thereafter		481		22,264		125,000		2,200		—		149,945

	$	381,764	$	893,093	$	800,000	$	10,186	$	140,500	$	2,225,543

8. Leasing Activity

Future minimum base rental income due under non-cancelable leases with customers in effect as of December 31, 2002, was as follows (dollars in thousands):


2003		$	546,267
2004			454,176
2005			356,236
2006			274,783
2007			203,883
Thereafter			506,035

	Total	$	2,341,380

The schedule does not reflect future rental revenues from the renewal or replacement of existing leases and excludes property operating expense reimbursements.

In addition to minimum rental payments, certain customers pay reimbursements for their pro rata share of specified operating expenses, which amounted to $127.6 million, $116.7 million and $77.9 million for the years ended December 31, 2002, 2001 and 2000, respectively. These amounts are included as rental income and operating expenses in the accompanying consolidated statements of operations. Some leases contain options to renew.

9. Income Taxes

As a partnership, the allocated share of income of the Operating Partnership is included in the income tax returns of the partners. Accordingly, no accounting for income taxes is required in the accompanying consolidated financial statements. The Operating Partnership may be subject to certain state, local and foreign taxes on its income and property. In addition, the Operating Partnership is required to pay federal and state

F-16

AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

income tax on its net taxable income, if any, from the activities conducted through IMD Holding Corporation and Headlands Realty Corporation.

The following reconciles net income available to common unitholders attributable to the general partner to taxable income available to common unitholders for the years ended December 31, (dollars in thousands):


		2002			2001			2000

Net income available to common unitholders attributable to the general partner		$	116,153		$	125,053		$	113,282
Book depreciation and amortization			127,160			104,838			84,960
Book depreciation discontinued operations			7,503			6,576			5,398
Tax depreciation and amortization			(125,888	)		(117,400	)		(87,338	)
Book/tax difference on gain on divestiture of real estate			26,328			(7,563	)		24,688
Other book/tax differences, net(1)			(39,621	)		15,943			(5,723	)

	Taxable income available to common unitholders	$	111,635		$	127,447		$	135,267

(1) Primarily due to straight-line rent, prepaid rent, joint venture accounting and debt premium amortization timing differences.

10. Minority Interests in Consolidated Joint Ventures and Preferred Units

Minority interests in the Operating Partnership represent interests held by certain third parties in several real estate joint ventures, aggregating approximately 33.8 million square feet, which are consolidated for financial reporting purposes. Such investments are consolidated because the Operating Partnership owns a majority interest or exercises significant control over major operating decisions such as approval of budgets, selection of property managers, investment activity and changes in financing.

The Operating Partnership enters into co-investment joint ventures with institutional investors. As of December 31, 2002, the Operating Partnership had investments in five co-investment joint ventures with a gross book value of $1.6 billion, which are consolidated for financial reporting purposes and which are discussed below. The Operating Partnership’s five co-investment joint ventures are engaged in the acquisition, ownership, operation, management and, in some cases, the renovation, expansion and development of industrial buildings in target markets nationwide.

Our co-investment joint ventures at December 31, 2002 (dollars in thousands):


		Operating
		Partnership’s
		Ownership			Total
Co-investment Joint Venture	Joint Venture Partner	Percentage			Capitalization

AMB/ Erie, L.P.	Erie Insurance Company and affiliates		50%		$	170,084
AMB Institutional Alliance Fund I, L.P.	AMB Institutional Alliance REIT I, Inc.(1)		21%		$	393,007
AMB Partners II, L.P.	City and County of San Francisco Employees’ Retirement System		20%	(4)	$	248,306
AMB-SGP, L.P.	Industrial JV Pte Ltd. GIC Real Estate Pte Ltd.(2)		50%		$	367,082
AMB Institutional Alliance Fund II, L.P.	AMB Institutional Alliance REIT II, Inc.(3)		20%		$	350,416

(1) Included 15 institutional investors as stockholders as of December 31, 2002.

(2) A subsidiary of the real estate investment subsidiary of the Government of Singapore Investment Corporation.

F-17

AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(3) Included 14 institutional investors as stockholders as of December 31, 2002.

(4) In November 2002, the City and County of San Francisco Employees’ Retirement System increased its ownership in Partners II from 50% to 80% by acquiring 30% of the Operating Partnership’s partnership interest. The Operating Partnership recognized a gain of $6.3 million.

On July 31, 2002, AMB Property II, L.P., one of the Operating Partnership’s subsidiaries, repurchased 130,000 of its 7.95% Series F Cumulative Redeemable Preferred Limited Partnership Units and all 20,000 of its outstanding 7.95% Series G Cumulative Redeemable Preferred Limited Partnership Units from a single institutional investor. AMB Property II, L.P. redeemed the units for an aggregate cost of $7.1 million, including accrued and unpaid dividends and a redemption discount of $0.4 million.

On April 17, 2002, the Operating Partnership issued and sold 800,000 7.95% Series K Cumulative Redeemable Partnership Units at a price of $50.00 per unit in a private placement. Distributions are cumulative from the date of issuance and payable quarterly in arrears. The Series K preferred units are redeemable by the Operating Partnership on or after April 17, 2007, subject to certain conditions, for cash at a redemption price equal to $50.00 per unit, plus accumulated and unpaid distributions thereon, if any, to the redemption date. The Series K preferred units are exchangeable, at specified times and subject to certain conditions, on a one-for-one basis, for shares of the Company’s Series K preferred stock. The Operating Partnership used the net proceeds of $39.0 million for general corporate purposes, which included the partial repayment of indebtedness and the acquisition and development of additional properties.

The following table distinguishes the minority interest liability as of December 31, 2002 and 2001 (dollars in thousands):


			December 31, 2002		December 31, 2001

Joint venture partners			$	488,524	$	359,514
Held through AMB Property II, L.P.:
	Series D preferred units (liquidation preference of $79,767)			77,684		77,687
	Series E preferred units (liquidation preference of $11,022)			10,788		10,788
	Series F preferred units (liquidation preference of $13,372)			13,082		19,597
	Series G preferred units (repurchased in July 2002)			—		954
	Series H preferred units (liquidation preference of $42,000)			40,912		40,915
	Series I preferred units (liquidation preference of $25,500)			24,800		24,821

		Total minority interests	$	655,790	$	534,276

F-18

AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table distinguishes the minority interests’ share of net income for the years ended December 31, (dollars in thousands):


			2002		2001		2000

Joint venture partners			$	30,963	$	27,132	$	12,281
Held through AMB Property II, L.P.:
	Series C preferred units (repurchased in December 2001)			—		8,540		9,624
	Series D preferred units (liquidation preference of $79,767)			6,182		6,180		6,180
	Series E preferred units (liquidation preference of $11,022)			854		856		856
	Series F preferred units (liquidation preference of $13,372)			1,342		1,580		1,228
	Series G preferred units (repurchased in July 2002)			43		80		27
	Series H preferred units (liquidation preference of $42,000)			3,412		3,412		1,090
	Series I preferred units (liquidation preference of $25,500)			2,040		1,553		—

		Total minority interests’ share of net income	$	44,836	$	49,333	$	31,286

11. Investments in Unconsolidated Joint Ventures

The Operating Partnership has a 56.1% interest in a joint venture, which owns an aggregate of 36 industrial buildings totaling approximately 4.0 million square feet. The Operating Partnership has a 50% interest in two other operating joint ventures, which own an aggregate of 7 industrial buildings totaling approximately 1.4 million square feet. The Operating Partnership also has a 50% interest in a development alliance joint venture. The Operating Partnership’s net equity investment in these joint ventures is shown as investments in unconsolidated joint ventures on the accompanying consolidated balance sheets.

Under the agreements governing the joint ventures, the Operating Partnership and the other parties to the joint venture may be required to make additional capital contributions and, subject to certain limitations, the joint ventures may incur additional debt. As of December 31, 2002, the Operating Partnership’s share of unconsolidated joint venture debt was $39.3 million.

The Operating Partnership also has a 0.1% unconsolidated equity interest (with an approximate 33% economic interest) in AMB Pier One, LLC, a joint venture to redevelop the Operating Partnership’s office space in San Francisco. The investment is not consolidated because the Operating Partnership does not own a majority interest and does not exercise significant control over major operating decisions such as approval of budgets, selection of property managers, investment activity and changes in financing. The Operating Partnership has an option to purchase the remaining equity interest beginning January 1, 2007, and expiring December 31, 2009, based on the fair market value as stipulated in the operating agreement.

12. Partners’ Capital

During 2002, the Operating Partnership redeemed 122,640 of its common limited partnership units for shares of the Company’s common stock. Holders of common limited partnership units of the Operating Partnership have the right, commencing generally on or after the first anniversary of the holder becoming a limited partner of the Operating Partnership (or such other date agreed to by the Operating Partnership and the applicable unit holders), to require the Operating Partnership to redeem part or all of their common units for cash (based upon the fair market value of an equivalent number of shares of common stock at the time of redemption) or the Operating Partnership may, in its sole and absolute discretion (subject to the limits on ownership and transfer of common stock set forth in the Company’s charter), elect to have the Company exchange those common units for shares of the Company’s common stock on a one-for-one basis, subject to adjustment in the event of stock splits, stock dividends, issuance of certain rights, certain extraordinary distributions and similar events. The Operating Partnership presently anticipates that it will generally elect to

F-19

AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

have the Company issue shares of its common stock in exchange for common units in connection with a redemption request; however, the Operating Partnership has paid cash, and may in the future pay cash, for a redemption of common units. With each redemption or exchange, the Company’s percentage ownership in the Operating Partnership will increase. Common limited partners may exercise this redemption right from time to time, in whole or in part, subject to the limitations that limited partners may not exercise this right if such exercise would result in any person actually or constructively owning shares of common stock in excess of the ownership limit or any other amount specified by the board of directors, assuming common stock was issued in the exchange.

In December 2001, the Company’s board of directors approved a new stock repurchase program for the repurchase of up to $100.0 million worth of common and preferred stock. In December 2002, the Company’s board of directors increased the repurchase program to $200.0 million. The new stock repurchase program expires in December 2003. During 2002, the Company repurchased 2,651,600 shares of its common stock for $69.4 million, including commissions, and the Operating Partnership retired the same number of common general partnership units.

As of December 31, 2002, the Operating Partnership had outstanding 84,012,282 common general partnership units, 4,846,387 common limited partnership units, 3,995,800 8 1/2% Series A Cumulative Redeemable Partnership Units, 1,300,000 8 5/8% Series B Cumulative Redeemable Partnership Units, 800,000 7.95% Series J Cumulative Redeemable Partnership Units, and 800,000 7.95% Series K Cumulative Redeemable Partnership Units.

In July 2002, the Company repurchased 4,200 shares of its Series A Preferred Stock for an aggregate cost of $0.1 million, including accrued and unpaid dividends and the Operating Partnership retired the same number of preferred units.

The following table sets forth the distributions paid or payable per unit for the years ended December 31:


Paying Entity	Security	2002	2001	2000

Operating Partnership	Common limited partnership units	$1.64	$1.58	$1.48
Operating Partnership	Series A preferred units	$2.13	$2.13	$2.13
Operating Partnership	Series B preferred units	$4.31	$4.31	$4.31
Operating Partnership	Series J preferred units	$3.98	$1.24	n/a
Operating Partnership	Series K preferred units	$2.96	n/a	n/a
AMB Property II, L.P.	Series C preferred units	n/a	$3.88	$4.38
AMB Property II, L.P.	Series D preferred units	$3.88	$3.88	$3.88
AMB Property II, L.P.	Series E preferred units	$3.88	$3.88	$3.88
AMB Property II, L.P.	Series F preferred units(1)	$3.38	$3.98	$3.09
AMB Property II, L.P.	Series G preferred units(1)	$2.14	$3.98	$1.35
AMB Property II, L.P.	Series H preferred units	$4.06	$4.06	$1.30
AMB Property II, L.P.	Series I preferred units	$4.00	$3.04	n/a

(1) On July 31, 2002, AMB Property II, L.P., one of the Operating Partnership’s subsidiaries, repurchased 130,000 of its 7.95% Series F Cumulative Redeemable Preferred Limited Partnership Units and all 20,000 of its outstanding 7.95% Series G Cumulative Redeemable Preferred Limited Partnership Units from a single institutional investor. On July, 31, 2002, AMB Property II, L.P. paid a distribution, which accrued during the period from July 15, 2002, to July 31, 2002, of $0.155 per unit on the 130,000 Series F preferred units that were redeemed.

F-20

AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13. Stock Incentive Plan, 401(k) Plan and Deferred Compensation Plan

Stock Incentive Plan. The Company has Stock Option and Incentive Plans (“Stock Incentive Plans”) for the purpose of attracting and retaining eligible officers, directors and employees. The Company has reserved for issuance 18,950,000 shares of common stock under its Stock Incentive Plans. As of December 31, 2002, the Company had 8,764,912 non-qualified options outstanding granted to certain directors, officers and employees. Each option is exchangeable for one share of the Company’s common stock. The options have a weighted average exercise price of $23.16 and the exercise prices range from $18.94 to $30.83. Each option’s exercise price is equal to the Company’s market price on the date of grant. The options had an original ten-year term and generally vest pro rata in annual installments over a three- to five-year period from the date of grant.

In 2002, the Operating Partnership adopted the expense recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation. The Operating Partnership values stock options issued using the Black-Scholes option-pricing model and recognizes this value as an expense over the period in which the options vest. Under this standard, recognition of expense for stock options is applied to all options granted after the beginning of the year of adoption. Prior to 2002, the Operating Partnership followed the intrinsic method set forth in APB Opinion 25, Accounting for Stock Issued to Employees. In accordance with SFAS No. 123, the Operating Partnership will recognize the associated expense over the three to five-year vesting periods. Related stock-based compensation expense was $0.9 million for the twelve month period ended December 31, 2002. The expense is included in general and administrative expenses in the accompanying consolidated statements of operations. The adoption of SFAS No. 123 is prospective and the 2002 expense relates only to stock options granted in 2002. Prior to January 1, 2002, the Operating Partnership applied APB Opinion No. 25, “Accounting for Stock Issued to Employees” and related interpretations in accounting for its Stock Incentive Plan. Opinion 25 measures compensation cost using the intrinsic value based method of accounting. Under this method, compensation cost is the excess, if any, of the quoted market price of the stock at the date of grant over the amount an employee must pay to acquire the stock. Accordingly, no compensation cost had been recognized for the Company’s Stock Incentive Plan as of December 31, 2001.

As permitted by SFAS No. 148, Accounting for Stock-based Compensation — Transition and Disclosure — an amendment of FASB Statement No. 123, the Operating Partnership has changed its method of accounting for stock options beginning January 1, 2002. The Operating Partnership has not retroactively changed its method of accounting for stock options but has provided additional required disclosures. Had compensation cost for the Company’s stock-based compensation plans been determined based on the fair value at the grant dates for awards prior to 2002 consistent with the method of SFAS No. 123, the Operating Partnership’s pro forma net income available to common unitholders would have been reduced by $2.4 million, $3.9 million and $2.7 million and pro forma basic and diluted earnings per unit would have been reduced to $1.37 and $1.34; $1.44 and $1.42; and $1.32 and $1.31, respectively, for the years ended December 31, 2002, 2001 and 2000.

The fair value of each option grant was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions used for grants in 2002, 2001 and 2000, respectively: dividend yields of 5.9%, 6.4% and 6.5%; expected volatility of 13.3%, 14.9% and 13.3%; risk-free interest rates of 4.0%, 5.2% and 6.1%; and expected lives of 10 years for each year.

F-21

AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Following is a summary of the option activity for the years ended December 31 (options in thousands):


					Weighted		Options
		Shares Under			Average		Exercisable
		Option			Exercise Price		At Year End

Outstanding as of December 31, 1999			4,510		$	21.44		1,832

	Granted		1,565			20.86
	Exercised		(103	)		21.11
	Forfeited		(205	)		21.21

Outstanding as of December 31, 2000			5,767			20.83		3,326

	Granted		1,924			24.61
	Exercised		(202	)		21.15
	Forfeited		(52	)		22.45

Outstanding as of December 31, 2001			7,437			22.16		4,623

	Granted		1,990			26.48
	Exercised		(566	)		21.41
	Forfeited		(96	)		24.48

Outstanding as of December 31, 2002			8,765		$	23.16		5,526

Remaining average contractual life			7.1 years

Fair value of options granted during the year			$1.56

In 2002, 2001 and 2000, the Company issued 204,072, 238,790 and 162,229 restricted shares, respectively, to certain officers of the Company as part of the performance pay program and in connection with employment with the Company. As of December 31, 2002, 36,200 shares of restricted stock have been forfeited. The 717,611 outstanding restricted shares are subject to repurchase rights, which generally lapse over a period from three to five years.

401(k) Plan. In November 1997, the Company established a Section 401(k) Savings/ Retirement Plan (“401(k) Plan”), which is a continuation of the 401(k) Plan of the predecessor, to cover eligible employees of the Operating Partnership and any designated affiliates. During 2002 and 2001, the 401(k) Plan permitted eligible employees of the Operating Partnership to defer up to 20% of their annual compensation, subject to certain limitations imposed by the Code. The employees’ elective deferrals are immediately vested and non-forfeitable upon contribution to the 401(k) Plan. During 2002 and 2001, the Operating Partnership matched the employee contributions to the 401(k) Plan in an amount equal to 50% of the first 5.5% of annual compensation deferred by each employee. The Operating Partnership may also make discretionary contributions to the 401(k) Plan. In 2002 and 2001, the Operating Partnership paid $0.4 million and $0.3 million, respectively, for its 401(k) match.

Deferred Compensation Plan. Effective September 1, 1999, the Company established a non-qualified deferred compensation plan for officers of the Company and certain of its affiliates. As of January 1, 2002, the plan enables participants to defer income up to 100% of annual base pay and up to 100% of annual bonuses on a pre-tax basis. The Operating Partnership may make discretionary matching contributions to participant accounts at any time. The Operating Partnership made no such discretionary matching contributions in 2002, 2001 or 2000. The participant’s elective deferrals and any matching contributions are immediately 100% vested. As of December 31, 2002 and 2001, the total amount of compensation deferred was $2.9 million and $1.7 million, respectively.

F-22

AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14. Income Per Unit

The Operating Partnership’s only dilutive securities outstanding for the years ended December 31, 2002, 2001 and 2000 were stock options and restricted stock granted under the Company’s Stock Incentive Plans. The effect on income per unit was to increase weighted average units outstanding. Such dilution was computed using the treasury stock method.


			2002		2001		2000

WEIGHTED AVERAGE COMMON UNITS
	Basic			88,204,208		89,286,379		89,566,375
	Stock options and restricted stock			1,485,102		1,039,422		458,136

		Diluted weighted average common units		89,689,310		90,325,801		90,024,511

15. Commitments and Contingencies

Commitments

Lease Commitments. The Operating Partnership has entered into operating ground leases on certain land parcels, primarily on-tarmac facilities, and office space with remaining lease terms from one to 38 years. Future minimum rental payments required under non-cancelable operating leases in effect as of December 31, 2002, were as follows (dollars in thousands):


2003		$	19,921
2004			19,753
2005			19,819
2006			20,553
2007			20,772
Thereafter			283,574

	Total lease commitments	$	384,392

These operating lease payments are being amortized ratably over the terms of the related leases.

Contingencies

Litigation. In the normal course of business, from time to time, the Operating Partnership may be involved in legal actions relating to the ownership and operations of its properties. Management does not expect that the liabilities, if any, that may ultimately result from such legal actions will have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Operating Partnership.

Environmental Matters. The Operating Partnership monitors its properties for the presence of hazardous or toxic substances. The Operating Partnership is not aware of any environmental liability with respect to the properties that would have a material adverse effect on the Operating Partnership’s business, assets or results of operations. However, there can be no assurance that such a material environmental liability does not exist. The existence of any such material environmental liability would have an adverse effect on the Operating Partnership’s results of operations and cash flow.

General Uninsured Losses. The Operating Partnership carries property and rental loss, liability, flood, environmental and terrorism insurance. The Operating Partnership believes that the policy terms and conditions, limits and deductibles are adequate and appropriate under the circumstances, given the relative risk of loss, the cost of such coverage and industry practice. In addition, certain of the Operating Partnership’s

F-23

AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

properties are located in areas that are subject to earthquake activity; therefore, the Operating Partnership has obtained limited earthquake insurance on those properties. There are, however, certain types of extraordinary losses, such as those due to acts of war that may be either uninsurable or not economically insurable. Although we have obtained coverage for certain acts of terrorism, with policy specifications and insured limits that we believe are commercially reasonable, it is not certain that we will be able to collect under such policies. Should an uninsured loss occur, the Operating Partnership could lose its investment in, and anticipated profits and cash flows from, a property.

Captive Insurance Company. The Operating Partnership has responded to recent trends towards increasing costs and decreasing coverage availability in the insurance markets by obtaining higher-deductible property insurance from third party insurers and by forming a wholly-owned captive insurance company, Arcata National Insurance Ltd. (“Arcata”) in December 2001. Arcata provides insurance coverage for all or a portion of losses below the increased deductible under the third party policies. The Operating Partnership capitalized Arcata in accordance with regulatory requirements. Arcata established annual premiums based on projections derived from the past loss experience at the Operating Partnership’s properties. Annually, the Operating Partnership engages an independent third party to perform an actuarial estimate of future projected claims and projected expenses necessary to fund associated risk management programs. Premiums paid to Arcata may be adjusted based on this estimate. Premiums paid to Arcata have a retrospective component, so that if expenses, including losses, are less than premiums collected, the excess will be returned to the property owners (and, in turn, as appropriate, to the customers) and conversely, subject to certain limitations, if expenses, including losses, are greater than premiums collected, an additional premium will be charged. As with all recoverable expenses, differences between estimated and actual insurance premiums will be recognized in the subsequent year. Through this structure, the Operating Partnership believes that it will be able to obtain insurance for its portfolio with more comprehensive coverage at a projected overall lower cost than would otherwise be available in the market.

F-24

AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

16. Quarterly Financial Data (Unaudited)

Selected quarterly financial results for 2002 and 2001 were as follows (dollars in thousands):



			Quarter (unaudited)(1)

2002			March 31			June 30			September 30			December 31			Year

Total revenues and other income			$	149,807		$	148,933		$	155,346		$	161,757		$	615,843
Income before minority interests and gains				41,212			36,883			35,545			34,865			148,505
Total minority interests’ share of income				(11,499	)		(10,954	)		(12,880	)		(9,503	)		(44,836	)
Total gains on developments and dispositions, net of minority interests				(288	)		2,768			618			5,723			8,821
Income from continuing operations				29,425			28,697			23,283			31,085			112,490
Discontinued operations				4,998			4,566			8,177			12,125			29,866

	Net income			34,423			33,263			31,460			43,210			142,356
Series A preferred unit distributions				(2,125	)		(2,125	)		(2,123	)		(2,123	)		(8,496	)
Series B preferred unit distributions				(1,402	)		(1,401	)		(1,402	)		(1,401	)		(5,606	)
Series J preferred unit distributions				(918	)		(795	)		(795	)		(795	)		(3,303	)
Series K preferred unit distributions				—			(777	)		(795	)		(795	)		(2,367	)
Preferred unit redemption discount				—			—			412			—			412

		Net income available to common unitholders	$	29,978		$	28,165		$	26,757		$	38,096		$	122,996

INCOME FROM CONTINUING OPERATIONS PER COMMON UNIT(2)
	Basic		$	0.28		$	0.26		$	0.20		$	0.29		$	1.03

	Diluted		$	0.27		$	0.26		$	0.20		$	0.28		$	1.02

NET INCOME PER COMMON UNIT(2)
	Basic		$	0.34		$	0.32		$	0.30		$	0.44		$	1.39

	Diluted		$	0.33		$	0.31		$	0.30		$	0.43		$	1.37

WEIGHTED AVERAGE COMMON UNITS OUTSTANDING
	Basic			88,262,128			88,643,124			88,575,091			87,136,382			88,204,208

	Diluted			89,724,953			90,462,332			90,379,023			88,495,159			89,689,310

F-25

AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



				Quarter (unaudited) (1)

2001				March 31			June 30			September 30			December 31			Year

Total revenues and other income				$	137,343		$	136,084		$	144,891		$	144,459		$	562,777
Income before minority interests and gains					38,303			24,426			44,307			41,706			148,742
Total minority interests’ share of income					(9,815	)		(12,983	)		(14,695	)		(11,840	)		(49,333	)
Total gains from developments and Dispositions, net of minority interests					16,767			17,792			114			1,755			36,428
Income from continuing operations					45,255			29,235			29,726			31,621			135,837
Discontinued operations					2,362			4,683			5,131			4,124			16,300

	Net income				47,617			33,918			34,857			35,745			152,137
Series A preferred unit distributions					(2,125	)		(2,125	)		(2,125	)		(2,125	)		(8,500	)
Series B preferred unit distributions					(1,402	)		(1,402	)		(1,402	)		(1,402	)		(5,608	)
Series J preferred unit distributions					—			—			(78	)		(795	)		(873	)
Preferred unit redemption premium					—			—			—			(4,400	)		(4,400	)

			Net income available to common unitholders	$	44,090		$	30,391		$	31,252		$	27,023		$	132,756

INCOME FROM CONTINUING OPERATIONS PER COMMON UNIT(2)
		Basic		$	0.48		$	0.27		$	0.29		$	0.26		$	1.29

		Diluted		$	0.47		$	0.27		$	0.28		$	0.25		$	1.28

NET INCOME PER COMMON UNIT(2)
		Basic		$	0.50		$	0.33		$	0.35		$	0.31		$	1.49

		Diluted		$	0.50		$	0.33		$	0.34		$	0.30		$	1.47

WEIGHTED AVERAGE COMMON UNITS OUTSTANDING
	Basic				89,669,950			89,691,164			89,550,154			88,243,249			89,286,379

	Diluted				90,494,874			90,608,347			90,799,887			89,317,086			90,325,801

(1) Certain reclassifications have been made to the quarterly data to conform with the annual presentation with no net effect to net income or per unit amounts.

(2) The sum of quarterly financial data may vary from the annual data due to rounding.

17. Segment Information

The Operating Partnership operates industrial and retail properties in North America and France and manages its business both by property type and by market. Industrial properties represent more than 98% of the Operating Partnership’s portfolio by rentable square feet and consist primarily of warehouse distribution facilities suitable for single or multiple customers and are typically comprised of multiple buildings that are leased to customers engaged in various types of businesses. As of December 31, 2002, the Operating Partnership operated industrial properties in eight hub and gateway markets in addition to 20 other markets throughout North America and France. The Operating Partnership’s geographic markets for industrial properties are managed separately because each market requires different operating, pricing and leasing

F-26

AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

strategies. As of December 31, 2002, the Operating Partnership operated retail properties in Southeast Florida, Atlanta, Chicago, the San Francisco Bay Area, Boston and Baltimore. The Operating Partnership does not separately manage its retail operations by market. Retail properties are generally leased to one or more anchor customers, such as grocery and drug stores and various retail businesses. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Operating Partnership evaluates performance based upon property net operating income of the combined properties in each segment.

Within the hub and gateway market categorization, the Operating Partnership operates in eight major U.S. markets. The other industrial markets category captures all of the Operating Partnership’s other smaller markets. Summary information for the reportable segments is as follows (dollars in thousands):



			Rental Revenues									Property NOI(1)

Segments			2002			2001			2000			2002			2001			2000

Industrial hub and gateway markets:
	Atlanta		$	30,444		$	28,264		$	23,458		$	23,970		$	22,722		$	19,368
	Chicago			45,109			40,990			38,228			31,441			28,197			26,447
	Dallas/ Fort Worth			26,693			25,180			24,081			18,911			17,610			16,984
	Los Angeles			77,751			61,628			37,187			61,301			49,103			30,366
	Northern New Jersey/ New York			47,393			44,897			34,618			31,817			31,622			26,444
	San Francisco Bay Area			129,858			106,202			79,155			109,000			88,898			64,972
	Miami			35,069			33,176			22,853			25,421			24,366			16,775
	Seattle			25,656			23,215			22,081			20,394			18,620			18,048

		Total hub and gateway markets		417,973			363,552			281,661			322,255			281,138			219,404
Total other industrial markets				182,971			170,100			145,516			128,730			122,962			107,568
Straight-line rents				11,013			10,093			10,203			11,013			10,093			10,203
Total retail markets				16,896			24,321			26,784			10,597			15,677			19,259
Discontinued operations				(40,331	)		(38,025	)		(33,042	)		(29,943	)		(27,582	)		(23,727	)

		Total properties	$	588,522		$	530,041		$	431,122		$	442,652		$	402,288		$	332,707

(1) Property net operating income (NOI) is defined as rental revenue, including reimbursements, less property operating expenses, which excludes depreciation, amortization, general and administrative expenses and interest expense.

F-27

AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



			Total Gross Investment(1)
			As of December 31,

			2002			2001

Industrial hub and gateway markets:
	Atlanta		$	289,398		$	271,663
	Chicago			370,139			345,446
	Dallas/ Fort Worth			140,616			179,157
	Los Angeles			760,640			694,602
	Northern New Jersey/ New York			486,644			406,077
	San Francisco Bay Area			828,975			806,528
	Miami			305,399			288,046
	Seattle			249,500			193,154

		Total industrial hub and gateway markets		3,431,311			3,184,673
Total other industrial markets				1,489,431			1,321,959
Properties held for divestiture				(115,175	)		(164,831	)
Total retail markets				120,415			188,910

		Total properties	$	4,925,982		$	4,530,711

(1) Includes construction in progress of $132.5 million and $181.2 million as of December 31, 2002 and 2001, respectively.

F-28

REPORT OF INDEPENDENT ACCOUNTANTS

ON FINANCIAL STATEMENT SCHEDULES

To the General Partner

of AMB Property, L.P.:

Our audits of the consolidated financial statements referred to in our report dated January 14, 2003, appearing on page F-1 in this Annual Report on Form 10-K of AMB Property, L.P., also included an audit of the financial statement schedules listed in Item 14(a)(2) of this Form 10-K. In our opinion, these financial statement schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

PRICEWATERHOUSECOOPERS LLP

San Francisco, California

January 14, 2003

S-1

AMB PROPERTY, L.P.

SCHEDULE III

CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION

As of December 31, 2002



									Initial Cost to Company

	No. of										Building &
Property	Bldgs./ Ctrs.		Location		Type		Encumbrances		Land		Improvements


	(In thousands, except number of buildings/centers)
Acer Distribution Center		1		CA		IND	$	—	$	3,146	$	9,479
Activity Distribution Center		4		CA		IND		—		3,736		11,248
Addison Business Center		1		IL		IND		—		1,060		3,228
Airport South Business Park		7		GA		IND		17,362		10,019		16,528
Albrae Business Center		1		CA		IND		7,780		6,299		6,227
Alsip Industrial		1		IL		IND		—		1,200		3,744
Alvarado Business Center		5		CA		IND		24,195		4,915		26,671
AMB Meadowlands Park		9		NJ		IND		—		5,838		17,923
AMB O’Hare Rosemont		14		IL		IND		8,000		3,131		8,995
AMB Port O’Hare		2		IL		IND		6,150		4,913		5,761
Amwiler-Gwinnett Industial Portfolio		9		GA		IND		7,247		6,641		19,964
Anaheim Industrial		1		CA		IND		—		1,457		4,341
Artesia Industrial Portfolio		25		CA		IND		50,001		22,758		68,254
Around Lenox		1		GA		RET		9,424		3,462		13,848
Arthur Distribution Center		1		IL		IND		4,950		2,726		5,216
Atlanta South Business Park		9		GA		IND		—		8,047		24,180

[Additional columns below]

[Continued from above table, first column(s) repeated]

Gross Amount Carried at 12/31/02

Costs

Capitalized Total Year of Depreciable

Subsequent to Building & Costs(1) Accumulated Construction/ Life

Property Acquisition Land Improvements (2) Depreciation Acquisition (Years)

(In thousands, except number of buildings/centers)

Acer Distribution Center
$ 1,397 $ 3,146 $ 10,876 $ 14,023 $ 2,037 1997 5-40

Activity Distribution Center
1,460 3,736 12,708 16,444 3,976 1997 5-40

Addison Business Center
79 1,060 3,307 4,366 187 2000 5-40

Airport South Business Park
5,892 10,255 22,183 32,439 800 2001 5-40

Albrae Business Center
89 6,299 6,317 12,615 227 2001 5-40

Alsip Industrial
259 1,200 4,003 5,203 501 1998 5-40

Alvarado Business Center
728 4,915 27,399 32,314 1,266 1997 5-40

AMB Meadowlands Park
1,641 5,838 19,564 25,402 1,425 2000 5-40

AMB O’Hare Rosemont
979 3,131 9,975 13,106 622 1999 5-40

AMB Port O’Hare
252 4,913 6,013 10,926 151 2001 5-40

Amwiler-Gwinnett Industial Portfolio
2,541 6,641 22,504 29,146 3,813 1997 5-40

Anaheim Industrial
334 1,457 4,675 6,131 771 1997 5-40

Artesia Industrial Portfolio
7,008 22,758 75,262 98,020 11,751 1997 5-40

Around Lenox
4,098 3,462 17,946 21,408 2,164 1998 5-40

Arthur Distribution Center
171 2,726 5,387 8,113 258 2001 5-40

Atlanta South Business Park
1,692 8,047 25,872 33,919 3,997 1997 5-40

S-2

AMB PROPERTY, L.P.

SCHEDULE III

CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)

Initial Cost to Company

No. of Building &

Property Bldgs./ Ctrs. Location Type Encumbrances Land Improvements

(In thousands, except number of buildings/centers)

Atlantic Business Center (Formerly Peachtree North East)
3 GA IND — 2,197 6,592

Atlantic Distribution Center
1 GA IND 3,886 1,519 4,679

Beacon Centre — OP
18 FL IND 68,703 31,704 96,681

Beacon Centre — AF I
4 FL IND 17,355 7,229 22,238

Beacon Centre — Headlands
1 FL RET — 2,523 7,669

Beacon Industrial Park
8 FL IND 16,712 10,466 31,437

Bedford Warehouse
1 IL IND 2,827 1,354 3,225

Belden Avenue
3 IL IND 10,173 5,822 13,655

Bell Ranch Distribution
5 CA IND — 6,904 12,915

Beltway Distribution
1 VA IND — 4,800 15,159

Bennington Corporate Center
2 MD IND 5,958 2,671 8,181

Bensenville Industrial Park
13 IL IND 37,731 20,799 62,438

Black River
1 WA IND — 1,845 3,559

Blue Lagoon Business Park
2 FL IND 10,748 4,945 14,875

Boston Industrial Portfolio
20 MA IND 11,009 16,707 52,013

Braemar Business Center
2 MA IND — 1,566 4,613

Brennan Distribution
1 CA IND 4,600 3,683 3,022

[Additional columns below]

[Continued from above table, first column(s) repeated]

Gross Amount Carried at 12/31/02

Costs

Capitalized Total Year of Depreciable

Subsequent to Building & Costs(1) Accumulated Construction/ Life

Property Acquisition Land Improvements (2) Depreciation Acquisition (Years)

(In thousands, except number of buildings/centers)

Atlantic Business Center (Formerly Peachtree North East)
1,823 2,197 8,415 10,612 1,566 1998 5-40

Atlantic Distribution Center
155 1,519 4,834 6,353 282 2000 5-40

Beacon Centre — OP
11,271 31,704 107,952 139,656 7,600 2000 5-40

Beacon Centre — AF I
755 7,229 22,993 30,222 1,414 2000 5-40

Beacon Centre — Headlands
236 2,523 7,905 10,428 449 2000 5-40

Beacon Industrial Park
4,960 10,466 36,398 46,864 5,262 1997 5-40

Bedford Warehouse
7 1,354 3,232 4,586 95 2001 5-40

Belden Avenue
1,526 5,822 15,181 21,002 935 1997 5-40

Bell Ranch Distribution
158 6,904 13,073 19,976 529 2001 5-40

Beltway Distribution
5,496 4,800 20,655 25,455 1,933 1999 5-40

Bennington Corporate Center
962 2,671 9,144 11,815 844 2000 5-40

Bensenville Industrial Park
8,806 20,799 71,244 92,043 11,464 1997 5-40

Black River
159 1,845 3,718 5,563 205 2001 5-40

Blue Lagoon Business Park
1,174 4,945 16,048 20,993 2,263 1997 5-40

Boston Industrial Portfolio
15,084 16,707 67,098 83,805 9,046 1998 5-40

Braemar Business Center
934 1,566 5,546 7,113 858 1998 5-40

Brennan Distribution
1,557 3,683 4,578 8,261 138 2001 5-40

S-3

AMB PROPERTY, L.P.

SCHEDULE III

CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)

Initial Cost to Company

No. of Building &

Property Bldgs./ Ctrs. Location Type Encumbrances Land Improvements

(In thousands, except number of buildings/centers)

Bridgeview Industrial (Formerly Lake Michigan Industrial)
1 IL IND — 1,332 3,996

Burnsville Business Center
1 MN IND — 932 2,796

BWI Air Cargo Centre
1 MD IND 2,899 — 6,367

B.W.I.P
2 MD IND 3,521 2,258 5,149

Cabrillo Distribution Center
1 CA IND — 7,563 11,177

Cabot Business Park
13 MA IND — 15,283 46,433

Cabot Business Park (KYKJ)
3 MA IND — 1,474 14,353

Cabot Business Park SGP
3 MA IND 16,682 5,499 16,969

Carson Industrial
12 CA IND — 4,231 10,418

Cascade Business Center
4 OR IND — 2,825 7,860

Central Bay
2 CA IND 7,400 3,896 7,400

Chancellor
1 FL IND 2,634 1,587 4,802

Chancellor Square
3 FL IND 15,346 2,009 6,106

Charles and Chase
1 MD RET — 751 2,287

Chancellory Warehouse
1 IL IND — 1,566 2,006

Chartwell Distribution Center
1 CA IND — 2,711 8,191

Chemway Industrial Portfolio
5 NC IND — 2,875 8,625

Chicago Industrial Portfolio
1 IL IND 1,593 762 2,285

[Additional columns below]

[Continued from above table, first column(s) repeated]

Gross Amount Carried at 12/31/02

Costs

Capitalized Total Year of Depreciable

Subsequent to Building & Costs(1) Accumulated Construction/ Life

Property Acquisition Land Improvements (2) Depreciation Acquisition (Years)

(In thousands, except number of buildings/centers)

Bridgeview Industrial (Formerly Lake Michigan Industrial)
81 1,332 4,077 5,409 516 1997 5-40

Burnsville Business Center
1,048 932 3,844 4,776 695 1998 5-40

BWI Air Cargo Centre
87 — 6,454 6,454 370 2000 5-40

B.W.I.P
79 2,258 5,228 7,486 119 2002 5-40

Cabrillo Distribution Center
— 7,563 11,177 18,740 — 2002 5-40

Cabot Business Park
4,542 15,283 50,975 66,258 7,758 1998 5-40

Cabot Business Park (KYKJ)
17,851 2,920 30,759 33,679 2,486 1998 5-40

Cabot Business Park SGP
57 5,499 17,027 22,526 212 2002 5-40

Carson Industrial
3,734 4,231 14,153 18,384 1,293 1999 5-40

Cascade Business Center
2,062 2,825 9,922 12,748 1,480 1998 5-40

Central Bay
801 3,896 8,202 12,097 444 2001 5-40

Chancellor
270 1,587 5,072 6,660 693 1997 5-40

Chancellor Square
2,691 2,009 8,797 10,807 1,832 1998 5-40

Charles and Chase
7 751 2,294 3,044 228 1998 5-40

Chancellory Warehouse
676 1,566 2,681 4,248 57 2002 5-40

Chartwell Distribution Center
70 2,711 8,261 10,972 552 2000 5-40

Chemway Industrial Portfolio
949 2,875 9,574 12,449 1,370 1998 5-40

Chicago Industrial Portfolio
242 762 2,527 3,289 337 1997 5-40

S-4

AMB PROPERTY, L.P.

SCHEDULE III

CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)

Initial Cost to Company

No. of Building &

Property Bldgs./ Ctrs. Location Type Encumbrances Land Improvements

(In thousands, except number of buildings/centers)

Chicago Ridge Freight Terminal
1 IL IND — 3,705 3,576

Chicago/ O’Hare Industrial Portfolio
5 IL IND 9,090 4,816 9,603

Circle Freeway
1 OH IND — 530 1,591

Columbia Business Center
9 MD IND 3,988 3,856 11,736

Component Drive Ind Port
3 CA IND — 12,688 6,974

Concord Industrial Portfolio
10 CA IND 9,615 3,872 11,647

Corporate Park/ Hickory Hill
7 TN IND 15,937 6,789 20,366

Corporate Square Industrial
6 MN IND — 4,024 12,113

Corridor Industrial
1 MD IND 2,403 996 3,019

Crysen Industrial
1 DC IND 2,623 1,425 4,275

D/ FW Int’l Air Cargo — AF I
1 TX IND 4,700 — 19,683

D/ FW Air Cargo 2
1 TX IND — — 4,286

Dado Distribution
1 CA IND — 7,221 3,739

Dallas Industrial (Formerly Taxas Industrial Fortfolio)
8 TX IND — 3,715 11,143

Dayton Air Cargo Centre
5 OH IND 6,720 — 7,163

Del Amo Industrial Center
1 CA IND — 2,529 7,651

Dellamor
8 NJ IND 14,500 12,061 11,577

DFW Air Cargo Centre
3 TX IND 6,142 — 20,632

[Additional columns below]

[Continued from above table, first column(s) repeated]

Gross Amount Carried at 12/31/02

Costs

Capitalized Total Year of Depreciable

Subsequent to Building & Costs(1) Accumulated Construction/ Life

Property Acquisition Land Improvements (2) Depreciation Acquisition (Years)

(In thousands, except number of buildings/centers)

Chicago Ridge Freight Terminal
12 3,705 3,588 7,294 120 2001 5-40

Chicago/ O’Hare Industrial Portfolio
468 4,816 10,071 14,887 402 2001 5-40

Circle Freeway
613 530 2,204 2,735 540 1998 5-40

Columbia Business Center
1,886 3,856 13,622 17,478 1,753 1999 5-40

Component Drive Ind Port
550 12,688 7,524 20,212 372 2001 5-40

Concord Industrial Portfolio
2,206 3,872 13,853 17,724 1,791 1999 5-40

Corporate Park/ Hickory Hill
1,075 6,789 21,441 28,230 2,852 1998 5-40

Corporate Square Industrial
1,854 4,024 13,967 17,992 2,244 1997 5-40

Corridor Industrial
270 996 3,289 4,285 329 1999 5-40

Crysen Industrial
931 1,425 5,206 6,631 780 1998 5-40

D/ FW Int’l Air Cargo — AF I
3,060 — 22,743 22,743 1,935 1999 5-40

D/ FW Air Cargo 2
13,900 — 18,186 18,186 1,375 1999 5-40

Dado Distribution
56 7,221 3,795 11,016 120 2001 5-40

Dallas Industrial (Formerly Taxas Industrial Fortfolio)
2,486 3,715 13,629 17,344 2,496 1997 5-40

Dayton Air Cargo Centre
346 — 7,509 7,509 510 2000 5-40

Del Amo Industrial Center
31 2,529 7,682 10,211 433 2000 5-40

Dellamor
65 12,061 11,642 23,703 196 2002 5-40

DFW Air Cargo Centre
165 — 20,797 20,797 1,221 2000 5-40

S-5

AMB PROPERTY, L.P.

SCHEDULE III

CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)

Initial Cost to Company

No. of Building &

Property Bldgs./ Ctrs. Location Type Encumbrances Land Improvements

(In thousands, except number of buildings/centers)

DFW Airfreight Portfolio
6 TX IND 6,800 950 8,492

Diablo Industrial Park
13 CA IND 9,134 3,496 10,852

Dixie Highway
2 KY IND — 1,700 5,149

Dock’s Corner
1 NJ IND 36,328 5,125 22,516

Dock’s Corner II
1 NJ IND — 2,272 6,917

Doolittle Distribution Center
1 CA IND — 2,644 8,014

Dowe Industrial Center
2 CA IND — 2,665 8,034

Dublin Industrial Portfolio
1 CA IND — 2,980 9,042

Dulles Airport — Alliance
3 VA IND 9,748 2,301 6,884

Earlington Business Park
1 WA IND — 2,766 3,234

East Bay Doolittle
1 CA IND — 7,128 11,023

East Bay Whipple
1 CA IND 7,000 5,333 8,126

East Valley Warehouse
1 WA IND — 6,813 20,511

Eaves Distribution Center
3 CA IND 15,220 11,893 12,708

Edenvale Business Center
1 MN IND — 775 2,412

Edgewater Industrial Center
1 CA IND — 4,038 15,113

Elk Grove Village Industrial
10 IL IND 17,103 6,589 21,739

Elmwood Business Park
5 LA IND — 4,163 12,488

[Additional columns below]

[Continued from above table, first column(s) repeated]

Gross Amount Carried at 12/31/02

Costs

Capitalized Total Year of Depreciable

Subsequent to Building & Costs(1) Accumulated Construction/ Life

Property Acquisition Land Improvements (2) Depreciation Acquisition (Years)

(In thousands, except number of buildings/centers)

DFW Airfreight Portfolio
762 950 9,254 10,204 767 2000 5-40

Diablo Industrial Park
513 3,496 11,365 14,861 1,097 1999 5-40

Dixie Highway
210 1,700 5,358 7,059 746 1997 5-40

Dock’s Corner
29,628 13,672 43,597 57,269 2,057 1997 5-40

Dock’s Corner II
349 2,272 7,267 9,539 1,513 1997 5-40

Doolittle Distribution Center
333 2,644 8,347 10,991 638 2000 5-40

Dowe Industrial Center
1,294 2,665 9,328 11,993 1,417 1997 5-40

Dublin Industrial Portfolio
432 2,980 9,473 12,453 520 2000 5-40

Dulles Airport — Alliance
7,680 2,301 14,563 16,864 221 2000 5-40

Earlington Business Park
148 2,766 3,382 6,149 58 2002 5-40

East Bay Doolittle
1,264 7,128 12,288 19,416 544 2001 5-40

East Bay Whipple
701 5,333 8,827 14,160 322 2001 5-40

East Valley Warehouse
5,655 6,813 26,166 32,978 2,492 1999 5-40

Eaves Distribution Center
1,390 11,893 14,097 25,991 406 2001 5-40

Edenvale Business Center
721 775 3,132 3,907 593 1998 5-40

Edgewater Industrial Center
3,375 4,038 18,487 22,525 1,210 2000 5-40

Elk Grove Village Industrial
2,054 6,589 23,793 30,383 1,234 1997 5-40

Elmwood Business Park
1,567 4,163 14,054 18,217 1,865 1998 5-40

S-6

AMB PROPERTY, L.P.

SCHEDULE III

CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)

Initial Cost to Company

No. of Building &

Property Bldgs./ Ctrs. Location Type Encumbrances Land Improvements

(In thousands, except number of buildings/centers)

Empire Drive
1 KY IND — 1,590 4,815

Executive Drive
1 IL IND — 1,399 4,236

Fairway Drive Industrial
4 CA IND 12,383 3,228 13,949

Ford Distribution Cntr
8 CA IND — 25,443 23,529

Fordyce Distribution Center
1 CA IND 7,600 4,340 8,335

Gateway 58
3 MD IND — 3,256 9,940

Gateway Commerce Center
5 MD IND — 4,083 12,336

Gateway Corporate Center
9 WA IND 27,000 10,643 32,908

Gateway North
6 WA IND 14,000 5,270 16,296

Greater Dallas Industrial Portfolio
5 TX IND — 5,633 18,414

Greenwood Industrial
3 MD IND — 4,729 14,188

Hamilton Parkway (Formerly Lake Michigan Industrial)
1 IL IND — 1,554 4,703

Harris Business Center — AF I
10 CA IND 27,254 19,194 26,368

Harris Business Center — AF II
10 CA IND 33,500 21,414 33,182

Harvest Business Park
3 WA IND — 2,371 7,153

Hawthorne LAX Cargo Center
1 CA IND 6,550 2,775 8,377

Hayward Industrial — Hathaway
2 CA IND — 4,473 13,546

[Additional columns below]

[Continued from above table, first column(s) repeated]

Gross Amount Carried at 12/31/02

Costs

Capitalized Total Year of Depreciable

Subsequent to Building & Costs(1) Accumulated Construction/ Life

Property Acquisition Land Improvements (2) Depreciation Acquisition (Years)

(In thousands, except number of buildings/centers)

Empire Drive
277 1,590 5,091 6,682 786 1997 5-40

Executive Drive
806 1,399 5,042 6,441 821 1997 5-40

Fairway Drive Industrial
669 3,228 14,618 17,846 651 1997 5-40

Ford Distribution Cntr
1,811 25,443 25,340 50,782 797 2001 5-40

Fordyce Distribution Center
232 4,340 8,568 12,908 454 2001 5-40

Gateway 58
110 3,256 10,050 13,306 648 2000 5-40

Gateway Commerce Center
1,180 4,083 13,516 17,600 1,669 1999 5-40

Gateway Corporate Center
2,747 10,643 35,655 46,298 3,407 1999 5-40

Gateway North
1,048 5,270 17,344 22,614 1,478 1999 5-40

Greater Dallas Industrial Portfolio
1,231 5,633 19,645 25,277 3,369 1997 5-40

Greenwood Industrial
1,511 4,729 15,698 20,427 2,166 1998 5-40

Hamilton Parkway (Formerly Lake Michigan Industrial)
134 1,554 4,837 6,391 669 1997 5-40

Harris Business Center — AF I
1,129 19,194 27,496 46,690 1,725 2000 5-40

Harris Business Center — AF II
2,791 21,414 35,973 57,386 2,343 2000 5-40

Harvest Business Park
1,040 2,371 8,193 10,564 1,307 1997 5-40

Hawthorne LAX Cargo Center
263 2,775 8,640 11,415 436 2000 5-40

Hayward Industrial — Hathaway
177 4,473 13,723 18,196 713 2000 5-40

S-7

AMB PROPERTY, L.P.

SCHEDULE III

CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)

Initial Cost to Company

No. of Building &

Property Bldgs./ Ctrs. Location Type Encumbrances Land Improvements

(In thousands, except number of buildings/centers)

Hayward Industrial — Wiegman
1 CA IND 6,525 2,773 8,393

Highway 17
2 NJ IND — 8,185 6,516

Hintz Building
1 TX IND — 420 1,259

Holton Drive
1 KY IND — 2,633 7,899

IAD Cargo Building 5
1 VA IND 14,205 — 39,050

International Multifoods
1 CA IND — 1,613 4,879

Interstate Crossdock
1 NJ IND — 12,712 19,295

Itasca Industrial Portfolio
6 IL IND — 6,416 19,289

Jacksonville Air Cargo Centre
1 FL IND 3,100 — 3,028

Jamesburg
3 NJ IND 22,571 11,700 35,101

Janitrol
1 OH IND — 1,797 5,390

JFK Air Cargo — OP
15 NY IND — 15,434 45,660

JFK Air Cargo — AF I
15 NY IND 19,120 10,260 30,128

JFK Airport Park
1 NY IND — 2,350 7,251

JFK International Cargo 75&77
2 NJ IND — — 30,965

Junction Industrial Park
4 CA IND — 7,875 23,975

Kent Centre Corporate Park
4 WA IND — 3,042 9,165

Kingsport Industrial Park
7 WA IND 16,232 7,919 23,798

[Additional columns below]

[Continued from above table, first column(s) repeated]

Gross Amount Carried at 12/31/02

Costs

Capitalized Total Year of Depreciable

Subsequent to Building & Costs(1) Accumulated Construction/ Life

Property Acquisition Land Improvements (2) Depreciation Acquisition (Years)

(In thousands, except number of buildings/centers)

Hayward Industrial — Wiegman
406 2,773 8,799 11,571 453 2000 5-40

Highway 17
— 8,185 6,516 14,701 35 2002 5-40

Hintz Building
271 420 1,530 1,950 205 1998 5-40

Holton Drive
368 2,633 8,267 10,900 1,435 1997 5-40

IAD Cargo Building 5
14 — 39,064 39,064 489 2002 5-40

International Multifoods
1,059 1,613 5,938 7,551 783 1997 5-40

Interstate Crossdock
67 12,712 19,362 32,074 201 2002 5-40

Itasca Industrial Portfolio
2,744 6,416 22,033 28,449 3,651 1997 5-40

Jacksonville Air Cargo Centre
— — 3,028 3,028 169 2000 5-40

Jamesburg
1,561 11,700 36,662 48,363 4,948 1998 5-40

Janitrol
313 1,797 5,703 7,499 775 1997 5-40

JFK Air Cargo — OP
3,097 15,434 48,757 64,190 3,696 2000 5-40

JFK Air Cargo — AF I
2,827 10,260 32,955 43,215 2,713 2000 5-40

JFK Airport Park
507 2,350 7,757 10,107 582 2000 5-40

JFK International Cargo 75&77
1,052 — 32,017 32,017 384 2002 5-40

Junction Industrial Park
1,457 7,875 25,432 33,307 2,795 1999 5-40

Kent Centre Corporate Park
954 3,042 10,120 13,161 1,660 1997 5-40

Kingsport Industrial Park
2,658 7,919 26,457 34,376 3,964 1997 5-40

S-8

AMB PROPERTY, L.P.

SCHEDULE III

CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)

Initial Cost to Company

No. of Building &

Property Bldgs./ Ctrs. Location Type Encumbrances Land Improvements

(In thousands, except number of buildings/centers)

L.A. County Industrial Portfolio
6 CA IND 23,161 8,226 29,242

LA Media Tech Center
7 CA IND — 12,810 12,531

Laurelwood Drive
2 CA IND — 2,750 8,538

Lawrence SSF
1 CA IND — 2,870 5,521

LAX Air Cargo Centre
3 CA IND 7,590 — 13,445

Lincoln Industrial Center
1 TX IND — 671 2,052

Linden Industrial
1 NJ IND — 900 2,753

Locke Drive
1 MA IND — 1,074 3,227

Lonestar
7 TX IND 16,665 6,878 21,154

Los Nietos
4 CA IND 8,109 2,459 7,751

MCI I Air Cargo Centre
1 MO IND 5,255 — 5,793

MCI II Air Cargo Centre
1 MO IND 9,350 — 8,134

Mahwah Corporate Center
5 NJ IND — 9,003 27,573

Marietta Industrial
3 GA IND — 1,830 5,489

Marina Business Park
2 CA IND 4,387 3,280 4,316

Martin/ Scott Ind Port
2 CA IND — 9,052 5,309

Mazzeo
1 MA RET 3,372 1,477 4,432

Meadow Lane 495
1 NJ IND — 838 2,594

Meadowlands AF II
4 NJ IND 12,400 6,755 13,093

Meadowlands Cross Dock
1 NJ IND — 1,110 3,485

Meadowridge
3 MD IND — 3,716 11,147

[Additional columns below]

[Continued from above table, first column(s) repeated]

Gross Amount Carried at 12/31/02

Costs

Capitalized Total Year of Depreciable

Subsequent to Building & Costs(1) Accumulated Construction/ Life

Property Acquisition Land Improvements (2) Depreciation Acquisition (Years)

(In thousands, except number of buildings/centers)

L.A. County Industrial Portfolio
685 8,226 29,927 38,153 1,420 1997 5-40

LA Media Tech Center
27,341 12,810 39,872 52,682 2,216 1998 5-40

Laurelwood Drive
123 2,750 8,661 11,411 1,174 1997 5-40

Lawrence SSF
1,124 2,870 6,644 9,514 391 2001 5-40

LAX Air Cargo Centre
123 — 13,568 13,568 766 2000 5-40

Lincoln Industrial Center
211 671 2,262 2,933 399 1997 5-40

Linden Industrial
449 900 3,201 4,101 264 1999 5-40

Locke Drive
113 1,074 3,339 4,413 399 1998 5-40

Lonestar
503 6,878 21,657 28,536 289 1997 5-40

Los Nietos
134 2,459 7,884 10,344 382 1999 5-40

MCI I Air Cargo Centre
88 — 5,882 5,882 368 2000 5-40

MCI II Air Cargo Centre
— — 8,134 8,134 441 2000 5-40

Mahwah Corporate Center
485 9,003 28,058 37,061 3,010 1998 5-40

Marietta Industrial
1,493 1,830 6,983 8,812 1,278 1998 5-40

Marina Business Park
— 3,280 4,316 7,596 36 2002 5-40

Martin/ Scott Ind Port
296 9,052 5,605 14,657 216 2001 5-40

Mazzeo
218 1,477 4,650 6,127 539 1998 5-40

Meadow Lane 495
279 838 2,874 3,711 265 1999 5-40

Meadowlands AF II
990 6,755 14,082 20,837 644 2001 5-40

Meadowlands Cross Dock
935 1,110 4,420 5,530 443 2000 5-40

Meadowridge
339 3,716 11,487 15,202 1,429 1998 5-40

S-9

AMB PROPERTY, L.P.

SCHEDULE III

CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)

Initial Cost to Company

No. of Building &

Property Bldgs./ Ctrs. Location Type Encumbrances Land Improvements

(In thousands, except number of buildings/centers)

Melrose Park
1 IL IND — 2,936 9,190

Mendota Heights
1 MN IND — 1,367 4,565

Metric Center
5 TX IND — 10,968 32,944

Miami Airport Business Center
6 FL IND — 6,400 19,634

Milmont Page Business Center
3 CA IND 11,561 1,836 10,600

Minneapolis Distribution Portfolio
4 MN IND — 6,227 18,692

Minneapolis Industrial Portfolio IV
4 MN IND 7,420 4,938 14,854

Minneapolis Industrial V
7 MN IND 4,885 4,426 13,317

Minnetonka
10 MN IND 11,259 6,690 20,380

Moffett Business Center (MBC Industrial)
4 CA IND 11,605 5,892 17,716

Moffett Distribution
7 CA IND 21,130 26,916 11,277

Moffett Park R&D Portfolio
14 CA IND — 14,805 44,462

Moonachie Industrial
2 NJ IND 4,825 2,731 5,228

Murray Hill Parkway
2 NJ IND — 1,670 2,568

NDP — Chicago (Formerly Glen Ellyn Rd. & Mitel Drive)
3 IL IND — 1,496 4,487

NDP — Los Angeles
6 CA IND 9,313 5,948 17,844

NDP — Seattle
4 WA IND 12,041 3,758 11,773

Newark Airport I& II
2 NJ IND 3,694 1,755 5,400

[Additional columns below]

[Continued from above table, first column(s) repeated]

Gross Amount Carried at 12/31/02

Costs

Capitalized Total Year of Depreciable

Subsequent to Building & Costs(1) Accumulated Construction/ Life

Property Acquisition Land Improvements (2) Depreciation Acquisition (Years)

(In thousands, except number of buildings/centers)

Melrose Park
1,737 2,936 10,927 13,863 1,654 1997 5-40

Mendota Heights
2,051 1,367 6,616 7,983 2,379 1998 5-40

Metric Center
979 10,968 33,923 44,891 4,573 1997 5-40

Miami Airport Business Center
1,781 6,400 21,415 27,815 2,269 1999 5-40

Milmont Page Business Center
317 1,836 10,917 12,752 498 1997 5-40

Minneapolis Distribution Portfolio
4,083 6,227 22,775 29,001 3,238 1997 5-40

Minneapolis Industrial Portfolio IV
1,979 4,938 16,833 21,771 2,750 1997 5-40

Minneapolis Industrial V
2,319 4,426 15,635 20,061 2,585 1997 5-40

Minnetonka
2,896 6,690 23,277 29,967 3,323 1998 5-40

Moffett Business Center (MBC Industrial)
3,211 5,892 20,927 26,820 2,948 1997 5-40

Moffett Distribution
933 26,916 12,211 39,127 355 2001 5-40

Moffett Park R&D Portfolio
9,081 14,805 53,543 68,348 10,072 1997 5-40

Moonachie Industrial
258 2,731 5,486 8,217 274 2001 5-40

Murray Hill Parkway
5,195 1,670 7,763 9,433 1,053 1999 5-40

NDP — Chicago (Formerly Glen Ellyn Rd. & Mitel Drive)
694 1,496 5,181 6,677 783 1998 5-40

NDP — Los Angeles
1,226 5,948 19,069 25,017 2,442 1998 5-40

NDP — Seattle
97 3,758 11,870 15,629 151 1998 5-40

Newark Airport I& II
395 1,755 5,794 7,549 465 2000 5-40

S-10

AMB PROPERTY, L.P.

SCHEDULE III

CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)

Initial Cost to Company

No. of Building &

Property Bldgs./ Ctrs. Location Type Encumbrances Land Improvements

(In thousands, except number of buildings/centers)

Nicholas Warehouse
1 IL IND — 2,599 1,883

Norcross/ Brookhollow Portfolio
4 GA IND — 3,721 11,180

Northfield Distribution Center
4 TX IND 12,401 3,944 16,033

Normandie Industrial
1 CA IND — 2,398 7,491

Northbrook Distribution Center
1 GA IND — 1,039 3,481

Northpointe Commerce
2 CA IND — 1,773 5,358

Northwest Distribution Center
3 WA IND — 3,533 10,751

Novato Fair Shopping Center
1 CA RET 7,806 4,393 8,424

Oakland Ridge Industrial Center
12 MD IND 4,293 5,571 16,933

O’Hare Industrial Portfolio
15 IL IND — 7,357 22,112

Orlando Central Park
2 FL IND — 1,779 979

Orchard Hill
1 NJ IND — 1,212 1,411

Pacific Business Center
2 CA IND 8,890 5,417 16,291

Pacific Service Center
1 GA IND — 504 1,511

Palm Aire
1 FL RET — 2,279 9,720

Pardee Drive
1 CA IND 1,559 619 1,880

Park One at LAX, LLC
0 CA IND — 75,000 431

Parkway Business Center
1 MN IND — 475 1,425

[Additional columns below]

[Continued from above table, first column(s) repeated]

Gross Amount Carried at 12/31/02

Costs

Capitalized Total Year of Depreciable

Subsequent to Building & Costs(1) Accumulated Construction/ Life

Property Acquisition Land Improvements (2) Depreciation Acquisition (Years)

(In thousands, except number of buildings/centers)

Nicholas Warehouse
199 2,599 2,081 4,681 92 2001 5-40

Norcross/ Brookhollow Portfolio
1,094 3,721 12,274 15,995 1,896 1997 5-40

Northfield Distribution Center
24 3,944 16,056 20,001 403 2002 5-40

Normandie Industrial
1,018 2,398 8,508 10,906 613 2000 5-40

Northbrook Distribution Center
964 1,039 4,445 5,484 804 2000 5-40

Northpointe Commerce
332 1,773 5,691 7,464 880 1997 5-40

Northwest Distribution Center
997 3,533 11,748 15,281 1,897 1997 5-40

Novato Fair Shopping Center
2,505 4,393 10,929 15,322 550 2001 5-40

Oakland Ridge Industrial Center
6,116 5,571 23,049 28,620 3,127 1999 5-40

O’Hare Industrial Portfolio
2,551 7,357 24,663 32,020 3,930 1997 5-40

Orlando Central Park
9,914 1,779 10,892 12,671 1,453 1998 5-40

Orchard Hill
— 1,212 1,411 2,622 12 2002 5-40

Pacific Business Center
962 5,417 17,253 22,670 2,553 1997 5-40

Pacific Service Center
659 504 2,170 2,674 708 1998 5-40

Palm Aire
6,789 2,452 16,335 18,787 1,649 1996 5-40

Pardee Drive
64 619 1,944 2,563 92 1999 5-40

Park One at LAX, LLC
— 75,000 431 75,431 — 2002 5-40

Parkway Business Center
528 475 1,953 2,428 341 1998 5-40

S-11

AMB PROPERTY, L.P.

SCHEDULE III

CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)

Initial Cost to Company

No. of Building &

Property Bldgs./ Ctrs. Location Type Encumbrances Land Improvements

(In thousands, except number of buildings/centers)

Patuxent Range Road
2 MD IND — 1,696 5,127

Patuxent Alliance 8280
1 MD IND — 887 1,706

Peninsula Business Center III
1 VA IND — 992 2,976

Penn James Office Warehouse
2 MN IND — 1,991 6,013

Pioneer Alburtis
5 CA IND 7,150 2,433 7,166

Poplar Gateway Truck Terminal
1 IL IND — 4,551 3,152

Porete Avenue Warehouse
1 NJ IND — 4,067 12,202

Portland Air Cargo Center
2 OR IND — — 26

Presidents Drive
6 FL IND — 5,770 17,655

Preston Court
1 MD IND — 2,313 7,192

Production Drive
1 KY IND — 425 1,286

Puget Sound Airfreight
1 WA IND — 1,329 1,830

Renton Northwest Corp. Park
6 WA IND 24,400 25,959 14,792

Richardson Tech Center
2 TX IND 5,183 1,320 5,887

The Rotunda
2 MD IND 12,669 4,400 17,736

Round Lake Business Center
1 MN IND — 875 2,625

Sand Lake Service Center
6 FL IND — 3,483 10,585

Santa Barbara Court
1 MD IND — 1,617 5,029

Scripps Sorrento
1 CA IND — 1,110 3,330

[Additional columns below]

[Continued from above table, first column(s) repeated]

Gross Amount Carried at 12/31/02

Costs

Capitalized Total Year of Depreciable

Subsequent to Building & Costs(1) Accumulated Construction/ Life

Property Acquisition Land Improvements (2) Depreciation Acquisition (Years)

(In thousands, except number of buildings/centers)

Patuxent Range Road
431 1,696 5,558 7,254 879 1997 5-40

Patuxent Alliance 8280
43 887 1,749 2,636 79 2001 5-40

Peninsula Business Center III
195 992 3,171 4,162 350 1998 5-40

Penn James Office Warehouse
1,028 1,991 7,041 9,032 1,170 1997 5-40

Pioneer Alburtis
357 2,433 7,523 9,956 421 1999 5-40

Poplar Gateway Truck Terminal
— 4,551 3,152 7,703 — 2002 5-40

Porete Avenue Warehouse
10,667 4,067 22,869 26,936 3,670 1998 5-40

Portland Air Cargo Center
9,588 — 9,614 9,614 235 2002 5-40

Presidents Drive
1,724 5,770 19,379 25,149 2,970 1997 5-40

Preston Court
323 2,313 7,515 9,827 1,089 1997 5-40

Production Drive
344 425 1,630 2,055 375 1997 5-40

Puget Sound Airfreight
139 1,329 1,969 3,298 37 2002 5-40

Renton Northwest Corp. Park
123 25,959 14,915 40,874 220 2002 5-40

Richardson Tech Center
— 1,320 5,887 7,206 124 1997 5-40

The Rotunda
3,006 4,400 20,742 25,142 2,660 1999 5-40

Round Lake Business Center
477 875 3,102 3,977 498 1998 5-40

Sand Lake Service Center
2,351 3,483 12,936 16,419 2,145 1998 5-40

Santa Barbara Court
881 1,617 5,910 7,527 1,027 1997 5-40

Scripps Sorrento
101 1,110 3,432 4,542 392 1998 5-40

S-12

AMB PROPERTY, L.P.

SCHEDULE III

CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)

Initial Cost to Company

No. of Building &

Property Bldgs./ Ctrs. Location Type Encumbrances Land Improvements

(In thousands, except number of buildings/centers)

Sea Tac I Air Cargo Centre
2 WA IND 4,855 — 15,594

Sea Tac II Air Cargo Centre
1 WA IND — — 3,056

Seattle Airport Industrial
1 WA IND — 619 1,923

Shawnee Industrial
1 GA IND — 2,481 7,531

Silicon Valley R&D Portfolio*
6 CA IND — 8,024 24,205

Skyland Crossdock
1 NJ IND — — 7,250

Slauson Distribution Center
8 CA IND 20,499 7,806 23,552

South Bay Industrial
8 CA IND 18,064 14,992 45,016

South Point Business Park
5 NC IND 8,481 3,130 10,452

South Ridge at Hartsfield
1 GA IND 4,132 2,096 4,008

Southfield Industrial Portfolio
13 GA IND 34,641 12,533 35,730

Southfield Logistics Center
2 GA IND — 3,200 10,012

Southside Distribution Center
1 GA IND 1,274 766 2,480

Stadium Business Park
9 CA IND — 3,768 11,345

Sunrise Industrial
4 FL IND 12,349 6,266 18,798

Sunset Distribution Center
1 CA IND — 3,126 1,284

Suwanee Creek Distribution
3 GA IND 13,799 5,186 23,330

Sylvan
1 GA IND — 1,946 5,905

[Additional columns below]

[Continued from above table, first column(s) repeated]

Gross Amount Carried at 12/31/02

Costs

Capitalized Total Year of Depreciable

Subsequent to Building & Costs(1) Accumulated Construction/ Life

Property Acquisition Land Improvements (2) Depreciation Acquisition (Years)

(In thousands, except number of buildings/centers)

Sea Tac I Air Cargo Centre
75 — 15,668 15,668 861 2000 5-40

Sea Tac II Air Cargo Centre
130 — 3,185 3,185 211 2000 5-40

Seattle Airport Industrial
173 619 2,097 2,715 156 2000 5-40

Shawnee Industrial
4,825 2,481 12,356 14,837 1,684 1999 5-40

Silicon Valley R&D Portfolio*
5,631 8,024 29,836 37,860 5,168 1997 5-40

Skyland Crossdock
249 — 7,499 7,499 38 2002 5-40

Slauson Distribution Center
2,161 7,806 25,712 33,519 1,365 2000 5-40

South Bay Industrial
5,057 14,992 50,074 65,066 7,600 1997 5-40

South Point Business Park
1,231 3,130 11,684 14,814 1,428 1998 5-40

South Ridge at Hartsfield
33 2,096 4,041 6,137 195 2001 5-40

Southfield Industrial Portfolio
5,826 12,533 41,555 54,088 1,972 1997 5-40

Southfield Logistics Center
5,195 3,200 15,206 18,406 709 2002 5-40

Southside Distribution Center
— 766 2,480 3,246 62 2001 5-40

Stadium Business Park
831 3,768 12,176 15,945 1,825 1997 5-40

Sunrise Industrial
1,649 6,266 20,447 26,713 2,196 1998 5-40

Sunset Distribution Center
47 3,126 1,331 4,457 3 2002 5-40

Suwanee Creek Distribution
3,402 5,186 26,732 31,918 1,711 1998 5-40

Sylvan
89 1,946 5,993 7,940 549 1999 5-40

S-13

AMB PROPERTY, L.P.

SCHEDULE III

CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)

Initial Cost to Company

No. of Building &

Property Bldgs./ Ctrs. Location Type Encumbrances Land Improvements

(In thousands, except number of buildings/centers)

Systematics
1 CA IND — 911 2,773

Technology I
2 MD IND — 1,657 5,049

Technology II
9 MD IND — 10,206 3,761

TechRidge Phase IA
3 TX IND 15,074 7,132 21,396

TechRidge Phase II
1 TX IND 11,476 7,261 13,484

Teterboro Meadowlands 15
1 NJ IND 9,900 4,961 9,618

Thorndale Distribution
1 IL IND — 4,130 4,216

Torrance Commerce Center
6 CA IND — 2,045 6,136

Twin Cities
2 MN IND — 4,873 14,638

Two South Middlesex
1 NJ IND — 2,247 6,781

Valwood
2 TX IND 3,625 1,983 5,989

Van Nuys Airport Industrial
4 CA IND — 9,393 9,399

Viscount
1 FL IND — 984 3,016

Walnut Drive (Formerly East Walnut Drive)
1 CA IND — 964 2,918

Watson Industrial Center
1 CA IND 4,600 2,417 4,617

Weigman Road
1 CA IND — 1,563 4,688

West North Carrier
1 TX IND 2,935 1,375 4,165

West Pac Air Cargo Centre
1 PA IND — — 9,716

Williams & Bouroughs
4 CA IND 6,650 2,337 6,981

Willow Lake Industrial Park
10 TN IND 19,988 12,415 35,990

[Additional columns below]

[Continued from above table, first column(s) repeated]

Gross Amount Carried at 12/31/02

Costs

Capitalized Total Year of Depreciable

Subsequent to Building & Costs(1) Accumulated Construction/ Life

Property Acquisition Land Improvements (2) Depreciation Acquisition (Years)

(In thousands, except number of buildings/centers)

Systematics
620 911 3,393 4,304 459 1997 5-40

Technology I
343 1,657 5,392 7,049 557 1999 5-40

Technology II
29,037 10,206 32,798 43,004 3,374 1999 5-40

TechRidge Phase IA
269 7,132 21,664 28,796 1,329 2000 5-40

TechRidge Phase II
229 7,261 13,714 20,975 600 2001 5-40

Teterboro Meadowlands 15
1,277 4,961 10,895 15,856 689 2001 5-40

Thorndale Distribution
19 4,130 4,235 8,365 71 2002 5-40

Torrance Commerce Center
792 2,045 6,928 8,974 1,013 1998 5-40

Twin Cities
5,327 4,873 19,965 24,838 3,173 1997 5-40

Two South Middlesex
842 2,247 7,623 9,870 1,158 1997 5-40

Valwood
1,220 1,983 7,209 9,192 1,254 1997 5-40

Van Nuys Airport Industrial
13,235 9,393 22,635 32,027 1,486 2000 5-40

Viscount
440 984 3,457 4,440 537 1997 5-40

Walnut Drive (Formerly East Walnut Drive)
614 964 3,532 4,496 435 1997 5-40

Watson Industrial Center
347 2,417 4,963 7,380 244 2001 5-40

Weigman Road
1,621 1,563 6,310 7,872 679 1997 5-40

West North Carrier
239 1,375 4,403 5,778 585 1997 5-40

West Pac Air Cargo Centre
218 — 9,934 9,934 617 2000 5-40

Williams & Bouroughs
2,624 2,337 9,606 11,943 702 1999 5-40

Willow Lake Industrial Park
14,368 12,415 50,358 62,773 10,008 1998 5-40

S-14

AMB PROPERTY, L.P.

SCHEDULE III

CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)

Initial Cost to Company

No. of Building &

Property Bldgs./ Ctrs. Location Type Encumbrances Land Improvements

(In thousands, except number of buildings/centers)

Willow Park Industrial Portfolio
21 CA IND 4,967 25,590 76,771

Wilmington Avenue Wharehouse
2 CA IND — 3,849 11,605

Wilsonville
1 OR IND — 3,407 13,493

Windsor Court
1 IL IND — 766 2,338

Wood Dale Industrial (Includes Bonnie Lane)
5 IL IND 8,890 2,904 9,166

Yosemite Drive
1 CA IND — 2,350 7,051

Zanker/ Charcot Industrial
5 CA IND — 5,282 15,887

Bodega San Martin (Mexico City)
1 Mexico IND — 7,234 10,889

AMB-Accion Centro Logistico Parque I (Guadalajara)
4 Mexico IND 17,500 9,555 22,386

Paris Nord Distribution I
1 France IND — 2,975 5,112

Total
900 $ 1,258,049 $ 1,226,003 $ 3,040,740

[Additional columns below]

[Continued from above table, first column(s) repeated]

Gross Amount Carried at 12/31/02

Costs

Capitalized Total Year of Depreciable

Subsequent to Building & Costs(1) Accumulated Construction/ Life

Property Acquisition Land Improvements (2) Depreciation Acquisition (Years)

(In thousands, except number of buildings/centers)

Willow Park Industrial Portfolio
10,468 25,590 87,239 112,829 11,430 1998 5-40

Wilmington Avenue Wharehouse
2,640 3,849 14,245 18,094 1,777 1999 5-40

Wilsonville
58 3,407 13,551 16,958 1,668 1998 5-40

Windsor Court
98 766 2,436 3,202 327 1997 5-40

Wood Dale Industrial (Includes Bonnie Lane)
260 2,904 9,426 12,330 451 1999 5-40

Yosemite Drive
505 2,350 7,556 9,907 1,007 1997 5-40

Zanker/ Charcot Industrial
1,712 5,282 17,600 22,882 2,602 1997 5-40

Bodega San Martin (Mexico City)
15,577 7,234 26,466 33,700 195 2002 5-40

AMB-Accion Centro Logistico Parque I (Guadalajara)
— 9,555 22,386 31,941 20 2002 5-40

Paris Nord Distribution I
— 2,975 5,112 8,087 20 2002 5-40

Total
526,750 $ 1,236,406 $ 3,557,086 $ 4,793,492 $ 362,540

S-15

AMB PROPERTY, L.P.

SCHEDULE III

CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)

(1) Reconciliation of total cost to consolidated balance sheet caption as of December 31, 2002:


Total per Schedule III(3)		$	4,793,492
Construction in process(4)			132,490

	Total investments in properties	$	4,925,982

(2) As of December 31, 2002, the aggregate cost for federal income tax purposes of investments in real estate was $4,449,171.

(3) A summary of activity for real estate and accumulated depreciation for the year ended December 31, 2002, is as follows:


Investments in Properties:
	Balance at beginning of year	$	4,530,711
	Acquisition of properties		395,651
	Improvements, including properties under development/redevelopment		213,875
	Divestiture of properties		(263,911	)
	Adjustment for properties held for divestiture		49,656

	Balance at end of year	$	4,925,982

Accumulated Depreciation:
	Balance at beginning of year	$	265,653
	Depreciation expense, including discontinued operations		132,136
	Adjustment for properties divested and held for divestiture		(36,399	)
	Asset impairment		1,150

	Balance at end of year	$	362,540

(4) Includes $92.8 million of fundings for development projects as of December 31, 2002.

S-16


(1)	Includes all industrial consolidated operating properties and excludes industrial developments and renovation projects.

(2)	Same store pool excludes properties purchased or developments stabilized after December 31, 2000.

(3)	Total market square footage includes industrial and retail operating properties, development properties, unconsolidated properties, properties managed for third parties and reallocation of on-tarmac properties.


(1)	In addition to owned square feet, we manage, through our subsidiary, AMB Capital Partners, LLC, 1.7 million additional square feet of industrial, retail and other properties.

(2)	We also have an ownership interest in 36 industrial buildings totaling 4.0 million square feet in the Chicago market through our investment in an unconsolidated joint venture.

(3)	We also have an ownership interest in 7 industrial buildings totaling 1.4 million square feet in the Los Angeles market through our investment in an unconsolidated joint venture.

(4)	Includes on-tarmac airport air cargo facilities at 11 airports.


(1)	Schedule includes in-place leases and leases with future commencement dates.

(2)	Calculated as monthly rent at expiration multiplied by 12.

(3)	Includes month-to-month leases totaling 0.5 million square feet.


(1)	Customer(s) may be a subsidiary of or an entity affiliated with the named customer. We also hold a lease at Park One with an annualized base rent of $6.5 million, which is not included because it is not an industrial operating property.

(2)	Computed as aggregate leased square feet divided by the aggregate leased square feet of the industrial and retail properties.

(3)	Computed as aggregate annualized base rent divided by the aggregate annualized base rent of the industrial and retail and other properties.

(4)	Apron rental amount (but not square footage) are included.

(5)	United States Government includes the United States Postal Service (USPS), U.S. Customs and the United Stated Department of Agriculture (USDA).

(6)	County of Los Angeles includes Children’s Services, the Fire Department, the District Attorney’s Office, the Sheriff and the Unified School District.


(1)	Includes all consolidated operating properties and excludes industrial development and renovation projects.

(2)	In addition to owned square feet as of December 31, 2002, we manage, through our subsidiary, AMB Capital Partners, 1.7 million additional square feet of industrial, retail and other properties. We also have investments in 5.5 million square feet of industrial properties through our investments in unconsolidated joint ventures.

(3)	Consists of second-generation leases renewing or re-tenanting with current and prior lease terms greater than one year.

(4)	Second generation leasing activity includes total tenant improvements, lease commissions and other leasing costs incurred during the leasing of second generation space. Costs incurred prior to leasing available space are not included until such space is leased. Second generation space excludes newly developed space or space vacant at acquisition.


(1)	Annualized base rent means the monthly contractual amount under existing leases at December 31, 2002, multiplied by 12. This amount excludes expense reimbursements, rental abatements, and percentage rents.

(2)	Calculated as total Annualized Base Rent divided by total rentable square feet actually leased as of December 31, 2002.

(3)	We hold an interest in this property through a joint venture interest in a limited partnership.

(4)	This property is held for divestiture as of December 31, 2002.


(1)	Represents total estimated cost or renovation, expansion or development, including initial acquisition costs, Development Alliance Partner® earnouts and associated equity carry costs. The estimates are based on our current estimates and forecasts and are subject to change. Excludes 178 acres of land held for future development and other acquisition-related costs totaling $27.1 million.

(2)	As of December 31, 2002, our share of amounts funded to date for 2003 deliveries was $36.8 million.

(3)	Represents a renovation project.


(4)	This is a 79-door truck terminal.

(5)	The yield on international projects is on an after-tax basis.


(1)	Excludes 47 acres of land and other acquisition-related costs totaling $11.2 million.

(2)	We intend to sell these properties within two years of completion.

(3)	Represents total estimated cost of renovation, expansion or development, including initial acquisition costs, debt and equity carry and partner earnouts. The estimates are based on our current estimates and forecasts and are subject to change.

(4)	Represents build-to-suit and speculative development or redevelopment.

(5)	As of December 31, 2002, our share of amounts funded to date was $27.0 million.


(1)	For development properties, this represents estimated square feet at completion of development for committed phases of development and renovation projects.

(2)	Represents the book value of the property (before accumulated depreciation) owned by the joint venture entity and excludes net other assets.

(3)	AMB Erie is a co-investment partnership formed in 1998 with the Erie Insurance Company and certain related entities.

(4)	AMB Institutional Alliance Fund I (closed in 2000) and II (closed in 2001) are co-investment partnerships with institutional investors, which invest through private REITs.

(5)	AMB Partners II is a co-investment partnership formed in 2001 with the City and County of San Francisco Employees’ Retirement System. In November 2002, CCSF increased its ownership in AMB Partners II from 50% to 80% by acquiring an additional 30% partnership interest in AMB Partners II from us.

(6)	AMB-SGP is a co-investment partnership formed in 2001 with Industrial JV Pte Ltd, a subsidiary of GIC Real Estate Pte Ltd., the real estate investment subsidiary of the government of Singapore Investment Corporation.


(1)	Represents the book value of the property (before accumulated depreciation) owned by the joint-venture entity and excludes net other assets.

(2)	Included as properties held for divestiture.

(3)	Represents 26 acres of land for future development. We sold 13 acres of our 39 acres in December 2002.


(1)	Square feet for development alliance joint ventures represents estimated square feet at completion of development project.

(2)	We also hold inter-company loans that we eliminate in consolidation.

(3)	We also have a 0.1% unconsolidated equity interest (with a 33% economic interest) in this property and have an option to purchase the remaining equity interest beginning January 1, 2007, and expiring December 31, 2009.

(4)	Park One is a 19.9 acre parking lot with 2,720 parking spaces and 12 billboard signs in the Los Angeles market, immediately adjacent to Los Angeles International Airport.


(1)	Certain items in the consolidated financial statements for prior periods have been reclassified to conform with current classifications with no effect on net income or partners’ capital.

(2)	Basic and diluted net income per weighted average unit equals the net income available to common unitholders divided by 88,204,208 and 89,689,310 shares, respectively, for 2002; 89,286,379 and 90,325,801 units, respectively, for 2001; 89,566,375 and 90,024,511 units, respectively, for 2000; 90,792,310 and 90,867,934 units, respectively, for 1999; and 89,493,394 and 89,852,187 units, respectively, for 1998.

(3)	Funds from Operations, or FFO, is defined as income from operations before minority interest plus real estate depreciation, discontinued operations’ FFO and adjustments to derive our pro rata share of the FFO of unconsolidated joint ventures, less minority interests’ pro rata share of the FFO of consolidated joint ventures and preferred unit distributions. In accordance with the National Association of Real Estate Investment Trust White Paper on funds from operations, we include the effects of straight-line rents in funds from operations. We believe that FFO is an appropriate measure of performance for a real


	estate investment trust because it is widely used by investors and analysts. While FFO is a relevant and widely used measure of operating performance of real estate investment trusts, it does not represent cash flow from operations or net income as defined by accounting principles generally accepted in the United States of America, or GAAP, and it should not be considered as an alternative to these indicators in evaluating liquidity or operating performance. Further, FFO as disclosed by other real estate investment trusts may not be comparable. For a presentation of and a quantitative reconciliation of FFO with the most directly comparable financial measure to FFO calculated in accordance with GAAP, please see the supplemental earnings table in Management’s Discussion and Analysis of Financial Condition and Results of Operations.

(4)	Contractual obligations include short-term and long-term debt payments and lease obligations. Amounts due within one year were $160.3 million, $103.5 million, $54.1 million, $128.1 million and $14.1 million as of December 31, 2002, 2001, 2000, 1999 and 1998, respectively.


	•	defaults or non-renewal of leases by customers;

	•	increased interest rates and operating costs;

	•	our failure to obtain necessary outside financing;

	•	difficulties in identifying properties to acquire and in effecting acquisitions;

	•	our failure to successfully integrate acquired properties and operations;

	•	our failure to divest of properties that we have contracted to sell or to timely reinvest proceeds from any such divestitures;

	•	risks and uncertainties affecting property development and construction (including construction delays, cost overruns, our inability to obtain necessary permits and public opposition to these activities);

	•	environmental uncertainties;

	•	risks related to natural disasters;

	•	financial market fluctuations;

	•	changes in real estate and zoning laws;

	•	increases in real property tax rates; and

	•	risks of doing business internationally, including currency risks.


	•	cash flow from operations;

	•	borrowings under our unsecured credit facility;

	•	other forms of secured or unsecured financing;

	•	proceeds from debt or limited partnership unit offerings (including issuances of limited partnership units by our subsidiaries);

	•	net proceeds from divestitures of properties; and


(1)	Planned capitalization includes anticipated debt and both partners’ expected equity contributions.

(2)	Included 15 institutional investors as stockholders as of December 31, 2002.


(3)	A subsidiary of the real estate investment subsidiary of the Government of Singapore Investment Corporation.

(4)	Included 14 institutional investors as stockholders as of December 31, 2002.

(5)	In November 2002, our partner increased its ownership in AMB Partners II, L.P. from 50% to 80% by acquiring 30% of our partnership interest. We recognized a gain of $6.3 million.


(1)	The weighted average interest and maturity for the unconsolidated joint venture debt were 6.4% and 6.6 years, respectively.


(1)	Assumes that the general partnership units are exchanged for AMB Property Corporation’s common stock because there is no public market for the units.


	•	cash flow from operations;

	•	borrowings under our unsecured credit facility;

	•	other forms of secured and unsecured financing;

	•	proceeds from any future debt or limited partnership unit offerings (including issuances of limited partnership units by our subsidiaries);

	•	net proceeds from divestitures of properties; and

	•	private capital from our co-investment partners.


	•	liabilities for clean-up or remediation of undisclosed environmental conditions;

	•	claims of customers, vendors or other persons dealing with our predecessors prior to our formation transactions that had not been asserted prior to our formation transactions;

	•	accrued but unpaid liabilities incurred in the ordinary course of business;

	•	tax liabilities; and

	•	claims for indemnification by the officers and directors of our general partner’s predecessors and others indemnified by these entities.


(1)	Ground lease amortization represents the amortization of our investments in ground lease properties, for which we do not have a purchase option.


	•	our partners, co-members or joint venturers might become bankrupt (in which event we and any other remaining general partners, members, or joint venturers would generally remain liable for the liabilities of the partnership, limited liability company, or joint venture);

	•	our partners, co-members or joint venturers might at any time have economic or other business interests or goals that are inconsistent with our business interests or goals;

	•	our partners, co-members or joint venturers may be in a position to take action contrary to our instructions, requests, policies, or objectives; and

	•	agreements governing joint ventures, limited liability companies and partnerships often contain restrictions on the transfer of a joint venturer’s, member’s or partner’s interest or “buy-sell” or other provisions that may result in a purchase or sale of the interest at a disadvantageous time or on disadvantageous terms.


	•	we may not be able to obtain financing on favorable terms for development projects and we may not complete construction on schedule or within budget, resulting in increased debt service expense and construction costs and delays in leasing such properties and generating cash flow;

	•	we may not be able to obtain, or we may experience delays in obtaining, all necessary zoning, land-use, building, occupancy and other governmental permits and authorizations;

	•	new or renovated properties may perform below anticipated levels, producing cash flow below budgeted amounts;

	•	substantial renovation as well as new development activities, regardless of their ultimate success, typically require a substantial portion of management’s time and attention, diverting our attention from our day-to-day operations; and

	•	upon completion of construction, we may not be able to obtain permanent financing, or obtain permanent financing on advantageous terms, for activities that we have financed through construction loans.


	•	general market conditions;

	•	the market’s perception of our growth potential;

	•	our current and potential future earnings and cash distributions; and

	•	the market price of AMB Property Corporation’s capital stock. Additional debt financing may substantially increase our debt-to-total capitalization ratio.


	•	liabilities for clean-up or remediation of undisclosed environmental conditions;

	•	claims of customers, vendors, or other persons dealing with our predecessors prior to the formation transactions that had not been asserted prior to the formation transactions;

	•	accrued but unpaid liabilities incurred in the ordinary course of business;

	•	tax liabilities; and

	•	claims for indemnification by the officers and directors of AMB Property Corporation’s predecessors and others indemnified by these entities.


	•	less than 1% interests in the stocks of certain publicly-traded real estate investment trusts;

	•	certain interests in and rights to developed and undeveloped real property located outside the United States; and

	•	certain other de minimus holdings in equity securities of real estate companies.


(1)	Represents 93.9% of all outstanding debt.

(2)	Represents 6.1% of all outstanding debt.


	•	AMB Property, L.P. filed a Current Report on Form 8-K on December 18, 2002, in connection with its entrance into an amended and restated $500 million unsecured revolving credit agreement that replaced its then existing $500 million credit facility that was to mature in May 2003.