AMB PROPERTY CORP - 10-K Annual Report

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003

OR

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

COMMISSION FILE NUMBER 001-13545
AMB PROPERTY CORPORATION
((Exact name of Registrant as specified in its charter)

MARYLAND 94-3281941
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
PIER 1, BAY 1, 94111
SAN FRANCISCO, CALIFORNIA (Zip Code)
(Address of Principal Executive Offices)

(415) 394-9000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

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 [X] No [ ]

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. [ ]

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

The aggregate market value of common shares held by non-affiliates of the
registrant (based upon the closing sale price on the New York Stock Exchange) on
June 30, 2003, was $2,196,704,854.

As of March 1, 2004, there were 81,849,795 shares of the Registrant's
common stock outstanding.

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 Corporation, a Maryland corporation, acquires, owns, operates,
manages, renovates, expands and develops primarily industrial properties in key
distribution markets throughout North America, Europe and Asia. We commenced
operations as a fully integrated real estate company effective with the
completion of our 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.
As of December 31, 2003, we owned, managed and had renovation and development
projects totaling 101.5 million square feet (9.4 million square meters) and
1,057 buildings in 36 markets within seven countries.

We operate our business through our subsidiary, AMB Property, L.P., a
Delaware limited partnership. We refer to AMB Property, L.P. as the "operating
partnership." As of December 31, 2003, we owned an approximate 94.5% general
partnership interest in the operating partnership, excluding preferred units. As
the sole general partner of the operating partnership, we have the full,
exclusive and complete responsibility for and discretion in its day-to-day
management and control.

Our investment strategy targets customers whose businesses are tied to
global trade, which, according to the World Trade Organization, has grown at
approximately 2.5 times the world gross domestic product (GDP) growth rate
during the last 20 years. To serve the facilities needs of these customers, we
invest in major distribution markets, transportation hubs and gateways in both
the U.S. and 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 annualized base rents, 67.4% of our 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, the San Francisco Bay
Area, Miami and Seattle. Our on-tarmac assets account for 8.9% of our annualized
base rents.

By focusing on an investment strategy that targets areas of high customer
demand and limited competition from new supply, we believe that over time our
net operating income (rental revenues less property operating expenses and real
estate taxes) will grow and our property values will increase. Much of 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.

We focus our investment strategy on High Throughput Distribution(R), or
HTD(R) facilities, which are buildings designed to quickly distribute our
customers' products, rather than store them. Our investment focus on HTD assets
is based on the global trend toward lower inventory levels and expedited supply
chains. HTD facilities generally have a variety of characteristics that allow
the rapid transport of goods from point-to-point. Examples of these physical
characteristics include numerous dock doors, shallower building depths, fewer
columns, large truck courts and more space for trailer parking. We believe that
these building characteristics represent an important success factor for
time-sensitive customers such as air express, logistics and freight forwarding
companies and that these facilities function best when located in convenient
proximity to transportation infrastructure such as major airports and seaports.

As of December 31, 2003, we owned and operated (exclusive of properties
that we managed for third parties) 948 industrial buildings and six retail and
other properties, totaling approximately 87.6 million rentable square feet,
located in 34 markets throughout North America and in France, Germany and Japan.
As of December 31, 2003, 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 0.5 million rentable square feet. In
addition, as of December 31, 2003, we had investments in operating industrial
buildings, totaling approximately 7.9 million rentable square feet, through
investments in unconsolidated joint ventures. As of December 31, 2003, we also
had investments in industrial development projects, some of which are part of
our development-for-sale program, totaling approximately 5.5 million square
feet.

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As of December 31, 2003, we had one retail land parcel and one industrial
building held for divestiture. During 2003, our dispositions and contributions
totaled $366.3 million, including assets in markets that no longer fit our
investment strategy and properties at valuations that we considered to be at
premium levels. While we will continue to sell assets on an opportunistic basis,
we believe that we have substantially achieved our near-term strategic
disposition goals.

We are self-administered and self-managed and expect that we have qualified
and will continue to qualify as a real estate investment trust for federal
income tax purposes beginning with the year ended December 31, 1997. As a
self-administered and self-managed real estate investment trust, our own
employees perform our corporate administrative and management functions, rather
than our relying on an outside manager for these services. Through our Strategic
Alliance Program(R), we have established relationships with third-party real
estate management firms, brokers and developers that provide property-level
administrative and management services under our direction.

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, Chicago, Illinois, Amsterdam, the
Netherlands and Tokyo, Japan. As of December 31, 2003, we employed 175
individuals, 126 at our San Francisco headquarters, 45 in our Boston office and
the remainder in our other regional offices. 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 Securities Exchange Act of 1934 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 U.S. Securities
and Exchange Commission. Information contained on our website is not and should
not be deemed a part of this annual report.

Unless the context otherwise requires, the terms "we," "us" and "our" refer
to AMB Property Corporation, AMB Property, L.P. and their other controlled
subsidiaries, and the references to AMB Property Corporation include AMB
Property, L.P. and their other controlled subsidiaries. The following marks are
our registered trademarks: AMB(R); Development Alliance Partners(R); HTD(R);
High Throughput Distribution(R); Management Alliance Program(R); Strategic
Alliance Partners(R); Strategic Alliance Programs(R); and UPREIT Alliance
Program(R).

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, which we refer to as our Strategic Alliance Partners(R).

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 believe that we, in turn, contribute value to the alliances
through our national and global customer relationships, industry knowledge,
perspective and financial strength. We actively manage our portfolio, including
the establishment of leasing strategies, negotiation of lease terms, pricing,
and level and timing of property improvements.

We believe our alliances give us both local market benefits and flexibility
to focus on our core competencies, which are developing and executing our
strategic approach to real estate investment and management and raising private
capital to finance growth.

GROWTH STRATEGIES

Growth Through Operations

We seek to generate long-term internal growth through rent increases on
existing space and renewals on rollover space, by seeking to: maintain a high
occupancy rate at our properties; and control expenses by capitalizing on the
economies of owning, operating and growing a large, global portfolio. However,
during
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2003, our average industrial base rental rates decreased by 10.1%, from the
expiring rent for that space, on leases entered into or renewed during the
period. This amount excludes expense reimbursements, rental abatements,
percentage rents and straight-line rents. Since 2001, as the industrial market
weakened, we have focused on maintaining occupancy. During 2003, cash-basis
same-store net operating income (rental revenues less property operating
expenses and real estate taxes) decreased by 5.6% on our industrial properties.
Since our initial public offering in November 1997, we have experienced average
annual increases in industrial base rental rates of 10.4% and maintained an
average occupancy of 95.0%. 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. See Part IV. "Item 15: Note 17 of the Notes to
Consolidated Financial Statements" for detailed segment information, including
revenue attributable to each segment, gross investment in each segment and total
assets.

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(R). We believe that these alliances will create
additional acquisition opportunities, as such managers frequently market
properties on behalf of sellers. Our operating structure also enables us to
acquire properties through our UPREIT Alliance Program(R) in exchange for
limited partnership units in the operating partnership, thereby enhancing our
attractiveness to owners and developers seeking to transfer properties on a
tax-deferred basis. In addition, 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 retained cash flow from operations, borrowings under
our unsecured credit facility, other forms of secured or unsecured debt
financing, issuances of debt or preferred or common equity securities by us or
the operating partnership (including issuances of units in the operating
partnership or its subsidiaries), proceeds from divestitures of properties,
assumption of debt related to the acquired properties and private capital from
our co-investment partners. See Part II. "Item 7: Management's Discussion and
Analysis of Financial Condition and Results of Operations" for a summary of key
transactions in 2003.

Growth Through Development

We believe that development, renovation and expansion of well-located,
high-quality industrial properties should continue to provide us with attractive
investment opportunities at a higher rate of return than we may obtain from the
purchase of existing properties. We believe we have the in-house expertise to
create value both through new construction and through acquisition and
management of value-added properties. Value-added properties are typically
characterized as properties with available space or near-term leasing exposure,
undeveloped land acquired in connection with other property that provides an
opportunity for development or properties that are well-located but require
redevelopment or renovation. Both new development and value-added properties
require significant management attention and capital investment to maximize
their return. In addition to our in-house development staff, we have established
strategic alliances with global and regional developers that we expect to
enhance our development capabilities. We believe our global market presence and
expertise will enable us to continue to generate and capitalize on a diverse
range of development opportunities.

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 officers have specific experience in
real estate development, both with us and with national development firms, and
over the past year we have expanded our development staff. We pursue development
projects directly and in joint ventures with our Development Alliance
Partners(R), which provides us with the flexibility to pursue development
projects independently or in partnerships, depending on market conditions,
submarkets or
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building sites. 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 such
that we would own 100% of the asset with an incentive development fee to be paid
upon completion to our development partner.

Growth Through Developments for Sale

The operating partnership, through its taxable REIT subsidiaries, conducts
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.

Growth Through Global Expansion

Over the next three-to-four years, we expect to have approximately 15% of
our portfolio (based on consolidated annualized base rent) invested in
international markets. As of December 31, 2003, our international operating
properties comprised 3.0% of our total annualized industrial base rent. Our
Mexican target markets currently include Mexico City, Guadalajara and Monterrey.
Our European target markets currently include Paris, Amsterdam, Frankfurt,
Madrid and London. Our Asian target markets currently include Singapore, Hong
Kong and Tokyo. 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. Further, it is possible that our target markets will
change over time to reflect experience, market opportunities, customer needs and
changes in global distribution patterns. For a breakout of the amount of our
revenues attributable to the United States and to foreign countries in total,
please see Part IV. "Item 15: Note 17 of the Notes to Consolidated Financial
Statements".

We believe that expansion into target international markets represents a
natural extension of our 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 global trade. Our
international expansion strategy mirrors our domestic focus on
supply-constrained submarkets with political, economic or physical constraints
to new development. 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 global trade. 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, our underwriting of markets and investment
considerations and our Strategic Alliance Programs with knowledgeable developers
and managers will assist us in competing internationally.

Growth Through Co-Investments

We co-invest in properties with private-capital investors through
partnerships, limited liability companies or joint ventures. Our co-investment
joint ventures typically operate under the same investment strategy that we
apply to our other operations. Typically we will own a 20-50% interest in our
co-investment 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; however, there can be no assurance that it will
continue to do so. In addition, our co-investment joint ventures are a
significant source of revenues as we earn acquisition and development fees,
asset management fees and priority distributions as well as promoted interests
and incentive fees based on the performance of the co-investment joint ventures.

BUSINESS RISKS

See Part II. "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, including risks related to
our international operations.

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ITEM 2. PROPERTIES

INDUSTRIAL PROPERTIES

As of December 31, 2003, we owned 948 industrial buildings aggregating
approximately 87.1 million rentable square feet, located in 34 markets
throughout North America and in France, Germany and Japan. Our industrial
properties accounted for $518.1 million, or 98.9%, of our total annualized base
rent as of December 31, 2003. Our industrial properties were 93.1% leased to
over 2,500 customers, the largest of which accounted for no more than 3.1% of
our annualized base rent from our industrial properties. See "Item 15: 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:

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
Consumer Price Index 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 typically
located near major 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 City, the San Francisco Bay Area, Miami
and Seattle. Our international industrial facilities are located in major
distribution markets, including Mexico City, Guadalajara, Paris, Frankfurt and
Tokyo.

Within these metropolitan areas, our industrial properties are generally
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 airports, seaports or
convenient to major highways and rail lines, and are proximate to large and
diverse labor pools. There is typically broad demand for industrial space in
these centrally located submarkets typically 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(1)

As of December 31, 2003, we operated in 34 markets throughout North America
and in France, Germany and Japan. The following table represents properties in
which we own a 100% interest or a

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controlling interest (consolidated), and excludes properties in which we only
own a non-controlling interest (unconsolidated) and properties under
development:

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

(2) We also have a 19.9 acre parking lot with 2,720 parking spaces and 12
billboard signs in the Los Angeles market immediately adjacent to the Los
Angeles International Airport.

(3) Includes on-tarmac air cargo facilities at 14 airports.

(4) Annualized base rent is calculated as monthly base rent (cash basis) per the
terms of the lease, as of December 31, 2003, multiplied by 12.

(5) Same store pool excludes properties purchased or developments stabilized
after December 31, 2001. Stabilized properties are generally defined as
properties that are 90% leased or properties for which we have held a
certificate of occupancy or where building has been substantially complete
for at least 12 months.

(6) Total market square footage includes industrial and retail operating
properties, development properties, unconsolidated properties (100% of the
square footage), properties managed for third parties and reallocation of
on-tarmac properties into metro markets.

6

INDUSTRIAL OPERATING PORTFOLIO OVERVIEW

As of December 31, 2003, our 948 industrial buildings were diversified
across 34 markets throughout North America and in France, Germany and Japan. 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):

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(1) Annualized base rent for leases denominated in foreign currencies is
translated using the currency exchange rate at December 31, 2003.

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INDUSTRIAL LEASE EXPIRATIONS

The following table summarizes the lease expirations for our industrial
properties for leases in place as of December 31, 2003, without giving effect to
the exercise of renewal options or termination rights, if any, at or prior to
the scheduled expirations:

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(1) Schedule includes in-place leases and leases with future commencement dates.
The schedule also includes month-to-month leases totaling 0.2 million square
feet and leases in hold-over status totaling 1.9 million square feet.

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

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CUSTOMER INFORMATION

Largest Property Customers. As of December 31, 2003, our 25 largest
industrial property customers by annualized base rent are set forth in the table
below:

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(1) Customer(s) may be a subsidiary of or an entity affiliated with the named
customer. We also have a lease at our Park One property adjacent to the Los
Angeles International Airport with an annualized base rent of $6.1 million,
which is not included.

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

(3) Annualized base rent is calculated as monthly base rent (cash basis) per the
lease, as of December 31, 2003, multiplied by 12.

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

(5) Apron rental amounts (but not square footage) are included.

(6) United States Government includes the United States Postal Service, United
States Customs and the United Stated Department of Agriculture.

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(7) County of Los Angeles includes Child Support Service's Department, the Fire
Department, the District Attorney, the Sheriff's Department, 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, 2003,
2002 and 2001:

- ---------------

(1) Includes all consolidated industrial operating properties and excludes
industrial development and renovation projects. Excludes retail and other
properties' square footage of 0.5 million with occupancy of 75.2% and
annualized base rents of $5.5 million as of December 31, 2003.

(2) In addition to owned square feet as of December 31, 2003, we managed,
through our subsidiary, AMB Capital Partners, LLC, 0.5 million additional
square feet of industrial, retail and other properties. As of December 31,
2003, we also had investments in 7.9 million square feet of industrial
operating 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.

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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, 2003, 2002 and
2001:

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(1) Same store properties are those properties that we owned during both the
current and prior year reporting periods, excluding development properties
prior to being stabilized (generally defined as properties that are 90%
leased or properties for which we have held a certificate of occupancy or
building has been substantially complete for at least 12 months).

RETAIL AND OTHER PROPERTY SUMMARY

Our remaining retail and other properties, aggregating approximately 0.5
million square feet, were 75.2% leased and had an annualized base rent of $5.5
million at December 31, 2003.

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DEVELOPMENT PROPERTIES

DEVELOPMENT PIPELINE

The following table sets forth the properties owned by us as of December
31, 2003, which were undergoing renovation, expansion or development. No
assurance can be given that any of these projects will be completed on schedule
or within budgeted amounts.

INDUSTRIAL DEVELOPMENT AND RENOVATION DELIVERIES

- ---------------

(1) Represents total estimated cost of renovation, expansion or development,
including initial acquisition costs, Development Alliance Partner earnouts
and associated carry costs. The estimates are based on our current estimates
and forecasts and are subject to change. Excludes 349 acres of land held for
future development (representing a potential 5.9 million square feet) and
other acquisition-related costs totaling $49.8 million. Non-U.S. dollar
investments are translated to U.S. dollars using the exchange rate at
December 31, 2003.

(2) Our share of amounts funded to date for 2004, 2005 and 2006 deliveries was
$21.8 million, $29.1 million and $0.7 million, respectively, for a total of
$51.6 million.

(3) Represents a renovation project.

(4) The yields on international projects are on an after-tax basis.

The following table sets forth value-added conversion projects and
development projects that we intended to sell as of December 31, 2003:

DEVELOPMENT PROJECTS AVAILABLE FOR SALE

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(1) Represents build-to-suit and speculative development or redevelopment.
Excludes 267 acres of land held for future development or sale and other
acquisition-related costs totaling $47.0 million.

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

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

(4) Our share of amounts funded as of December 31, 2003, was $20.8 million.

PROPERTIES HELD THROUGH JOINT VENTURES, LIMITED LIABILITY COMPANIES AND
PARTNERSHIPS

Consolidated:

As of December 31, 2003, we held interests in joint ventures, limited
liability companies and partnerships with institutional investors and other
third parties, which we consolidate in our financial statements. Such
investments are consolidated because we owned a majority interest or, as general
partner, exercise significant control over major operating decisions such as
acquisition or disposition decisions, 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 typically provide certain rights to us or the other
party to the joint venture to sell our or their interest in the joint venture to
the joint venture or to the other joint-venture partner on terms specified in
the agreement. In addition, under certain circumstances, many of the joint
ventures include buy/sell provisions. See Part IV. "Item 15: Note 10 of the
Notes to Consolidated Financial Statements" for additional details. The tables
that follow summarize our consolidated joint ventures as of December 31, 2003.

CO-INVESTMENT CONSOLIDATED JOINT VENTURES

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(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 as of
December 31, 2003. Development book values include uncommitted land.

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

(4) AMB Institutional Alliance Fund I, L.P. and AMB Institutional Alliance Fund
II, L.P. are co-investment partnerships with institutional investors, which
invest through private real estate investment trusts.

(5) AMB Partners II, L.P. is a co-investment partnership formed in 2001 with the
City and County of San Francisco Employees' Retirement System.

(6) AMB-SGP, L.P. 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.

(7) AMB-AMS, L.P. is a commitment to form a co-investment partnership with two
Dutch pension funds advised by Mn Services NV.

OTHER CONSOLIDATED JOINT VENTURES

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(1) Represents the book value of the property (before accumulated depreciation)
owned by the joint-venture entity and excludes net other assets as of
December 31, 2003. Development book values include uncommitted land.

Unconsolidated Joint Ventures, Mortgage Investments and Other Investment:

As of December 31, 2003, we held interests in six equity investment joint
ventures that are not consolidated in our financial statements. The management
and control over significant aspects of these investments are held by the
third-party joint-venture partners and the investments do not meet the variable-
interest entity consolidation criteria under FASB Interpretation No. 46R,
Consolidation of Variable Interest Entities. In addition, as of December 31,
2003, we held mortgage investments, from which we receive interest income.

15

UNCONSOLIDATED JOINT VENTURES,
MORTGAGE INVESTMENTS AND OTHER INVESTMENT

- ---------------

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

(2) Represents our ownership percentage in the co-investment joint venture that
holds the mortgage investment.

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

SECURED DEBT

As of December 31, 2003, we had $1.4 billion of secured indebtedness, net
of unamortized premiums, secured by deeds of trust on 111 properties. As of
December 31, 2003, the total gross consolidated investment value of those
properties secured by debt was $2.6 billion. Of the $1.4 billion of secured
indebtedness,

16

$1.1 billion was joint venture debt secured by properties with a gross
investment value of $1.8 billion. For additional details, see "Item 7:
Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Item 15: Note 7 of Notes to
Consolidated Financial Statements" included in this report. We believe that as
of December 31, 2003, the fair 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, 2003, 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.

17

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

Our common stock began trading on the New York Stock Exchange on November
21, 1997, under the symbol "AMB." As of March 1, 2004, there were approximately
371 holders of record of our common stock (excluding shares held through The
Depository Trust Company, as nominee). Set forth below are the high and low
sales prices per share of our common stock, as reported on the NYSE composite
tape, and the distribution per share paid or payable by us during the period
from January 1, 2002, through December 31, 2003:

In November 2003, AMB Property II, L.P., one of our subsidiaries, also
issued 145,548 of its class B common limited partnership units, with an
aggregate value of $4.5 million, to four individual investors in connection with
the contribution of a property. The class B common limited partnership units,
upon redemption, are exchangeable for cash or, at the option of AMB Property II,
L.P., for shares of our common stock on a one-for-one basis.

18

ITEM 6. SELECTED FINANCIAL DATA

SELECTED COMPANY FINANCIAL AND OTHER DATA(1)

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

- ---------------

(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 stockholders' equity.

19

(2) In July 2003, the U.S. Securities and Exchange Commission announced that it
had revised its position relating to the application of Emerging Issues Task
Force Topic No. D-42, The Effect on the Calculation of Earnings per Share
for the Redemption or Induced Conversion of Preferred Stock, ("Topic D-42").
As a result of this announcement, original issuance costs related to
preferred equity are to be reflected as a reduction of net income available
to common stockholders in determining earnings per share for the period in
which the preferred equity is redeemed. The announcement requires
retroactive application of the revised position in previously issued
financial statements. As a result, our financial statements for the year
ending December 31, 2001, are restated to reflect a reduction in net income
available to common stockholders of $3.2 million, representing the original
issuance costs of AMB Property II, L.P.'s series C preferred units, which
were redeemed in December 2001. Diluted earnings per share for the year
ended December 31, 2001 was $1.43 compared to $1.47 as previously reported.
The U.S. Securities and Exchange Commission's revised position on Topic D-42
did not require us to file amendments to previously filed reports and will
not impact any other previously reported periods.

(3) Basic and diluted net income per weighted average share equals the net
income available to common stockholders divided by 81,096,062 and 82,852,528
shares, respectively, for 2003; 83,310,885 and 84,795,987 shares,
respectively, for 2002; 84,174,644 and 85,214,066 shares, respectively, for
2001; 83,697,170 and 84,155,306 shares, respectively, for 2000; and
86,271,862 and 86,347,487 shares, respectively, for 1999.

(4) In 2003, we discontinued our practice of deducting amortization of
investments in leasehold interests from funds from operations ("FFO") as
such an adjustment is not provided for in NAREIT's FFO definition. In 2003,
we also modified our FFO reporting to no longer add back impairment losses
when computing FFO in accordance with NAREIT's FFO definition. Additionally,
we adopted Topic D-42 and began including preferred stock and unit
redemption discounts and issuance cost write-offs in FFO. As a result, FFO
for the periods presented has been adjusted to reflect the changes. For an
explanation of funds from operations and a discussion of why management
believes that FFO is a meaningful supplemental measure of our operating
performance, please see "Item 7: Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Supplemental Earnings
Measures".

(5) For an explanation of earnings before interest, tax, depreciation and
amortization, or EBITDA, and a discussion of why management believes that
EBITDA is a meaningful supplemental measure of our operating performance,
please see "Item 7: Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Supplemental Earnings Measures".

(6) Our share of total debt is the pro rata portion of the total debt based on
our percentage of equity interest in each of the consolidated ventures
holding the debt. We believe that our share of total debt is a meaningful
supplemental measure, which enables both management and investors to analyze
our leverage and to compare our leverage to that of other companies. In
addition, it allows for a more meaningful comparison of our debt to that of
other companies that do not consolidate their joint ventures. Our share of
total debt is not intended to reflect our actual liability should there be a
default under any or all of such loans or a liquidation of the joint
ventures. For a reconciliation of our share of total debt to total
consolidated debt, a GAAP financial measure, please see the table of debt
maturities and capitalization in Part II. "Item 7. Liquidity and Capital
Resources -- Capital Resources".

20

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:

- changes in general economic conditions or in the real estate sector;

- non-renewal of leases by customers or renewal at lower than expected
rent;

- difficulties in identifying properties to acquire and in effecting
acquisitions on advantageous terms and the failure of acquisitions to
perform as we expect;

- risks and uncertainties affecting property development and renovation
(including construction delays, cost overruns, our inability to obtain
necessary permits and financing);

- a downturn in California's economy or real estate conditions;

- losses in excess of our insurance coverage;

- our failure to divest of properties on advantageous terms or to timely
reinvest proceeds from any such divestitures;

- unknown liabilities acquired from our predecessors or in connection with
acquired properties;

- risks of doing business internationally, including unfamiliarity with new
markets and currency risks;

- risks associated with using debt to fund acquisitions and development,
including re-financing risks;

- our failure to obtain necessary financing;

- changes in local, state and federal regulatory requirements;

- environmental uncertainties; and

- our failure to qualify and maintain our status as a real estate
investment trust under the Internal Revenue Code of 1986.

Our success also depends upon economic trends generally, various market
conditions and fluctuations 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. We assume no obligation to update or supplement forward-looking
statements.

GENERAL

We commenced operations as a fully integrated real estate company effective
with the completion of our initial public offering on November 26, 1997, and
elected to be taxed as a real estate investment trust under Sections 856 through
860 of the Internal Revenue Code of 1986 with our initial tax return for the
year ended December 31, 1997. AMB Property Corporation and AMB Property, L.P.
were formed shortly before the consummation of our initial public offering. We
refer to AMB Property, L.P. as the "operating partnership."

21

MANAGEMENT'S OVERVIEW

We generate revenue and earnings primarily from rent received from
customers under long-term (generally three to ten years) operating leases at our
properties, including reimbursements from customers for certain operating costs,
and from partnership distributions and fees from our private capital business.
We also derive earnings from the strategic disposition of assets and from the
disposition of projects under our development-for-sale program. Our long-term
growth is dependent on our ability to maintain and increase occupancy rates or
increase rental rates at our properties and our ability to continue to acquire
and develop new properties.

Although the weak economy over the past three years has decreased customer
demand for space and has limited or in most cases lowered rental rates, many
types of investors are acquiring industrial real estate. We believe that we have
capitalized on this opportunity by accelerating the repositioning of our
portfolio through the disposition of properties. While property dispositions
result in reinvestment capacity and trigger gain/loss recognition, they also
create near-term earnings dilution. However, we believe that, in the long-term,
the repositioning of our portfolio will benefit our stockholders.

The table below summarizes our leasing activity for 2003 and 2002:

- ---------------

(1) Our U.S. hub and gateway markets include on-tarmac and Atlanta, Chicago,
Dallas/Fort Worth, Los Angeles, Northern New Jersey/New York City, the San
Francisco Bay Area, Miami and Seattle.

Occupancy levels in our industrial portfolio and rents on lease renewals
and rollovers were lower in 2003 as the general contraction in business
activity, which began in 2001, reduced demand for industrial warehouse
facilities. According to Torto Wheaton Research, the overall industrial market
deteriorated rapidly from its peak levels at the end of 2000, when availability
was 6.6%, through the second quarter of 2002, when availability reached 10.8%.
Subsequently, national industrial availability has deteriorated at a more modest
rate, declining an average of 13 basis points per quarter to reach 11.6% at
December 31, 2003. As a result of the increase in availability, market rents for
industrial properties in most markets decreased between 10% and 20% from their
peak levels in 2001. Over the same three-year period, our portfolio vacancy
increased from 3.6% at December 31, 2000 to 6.9% at December 31, 2003, which we
consider consistent with market trends, but still outperforming the national
industrial average. While the level of rental rate reduction varied by market,
we maintained high occupancy by pricing lease renewals and new leases with
sensitivity to local market conditions. In periods of decreasing rental rates,
we strive to sign leases with shorter terms to prevent locking-in lower rent
levels for long periods and to be prepared to sign new, longer-term leases
during periods of growing rental rates. When we sign leases of shorter duration,
we attempt to limit overall leasing costs and capital expenditures by offering
modest tenant improvement packages, appropriate to the lease term. We generally
followed this practice during 2003. Through the first half of 2003, we
experienced declining occupancy in our industrial operating portfolio; at June
30, 2003, occupancy in our operating industrial portfolio was 91.5%. However,
during the last half of 2003, we have increased occupancy in our operating
industrial portfolio by 160 basis points to 93.1% at December 31, 2003, 470
basis points greater than the
22

overall industrial market, according to Torto Wheaton Research. Rents on
industrial renewals and rollovers in our portfolio decreased 1.0% during 2002
and 10.1% during 2003.

During 2003, our dispositions and contributions (to a joint venture in
which we retained a 15% ownership interest in exchange for cash) totaled $366.3
million, including assets in markets that no longer fit our investment strategy
and properties at valuations that we considered to be at premium levels. Because
we did not immediately reinvest sales proceeds into attractively priced
industrial assets, these sales and contributions have diluted our near-term
operating results. However, we believe they help position us for long-term
growth and higher returns on invested capital by increasing the strategic fit of
our portfolio with our investment and private capital models. Further, proceeds
from these sales, along with our balance sheet and private capital sources,
create significant capacity for future deployment. While we will continue to
sell assets on an opportunistic basis, we believe that we have substantially
achieved our near-term strategic disposition goals.

During 2003, we also expanded our development staff and capabilities,
because we believe that development, renovation and expansion of well-located,
high-quality industrial properties should generally continue to provide us with
attractive investment opportunities at a higher rate of return than we may
obtain from the purchase of existing properties. In 2003, Eugene F. Reilly
joined us as Executive Vice President of North American Development, adding to
our in-house development team. We have increased our development pipeline from a
low of $107.0 million at the end of 2002 to $233.0 million at the end of 2003.
In addition to our committed development pipeline, we hold over 600 acres of
land, which could support approximately 10.0 million square feet of additional
development.

Going forward, we believe that our co-investment program with
private-capital investors will continue to serve as a significant source of
revenues and capital for acquisitions and developments. Through these co-
investment joint ventures we earn acquisition and development fees, asset
management fees and priority distributions as well as promoted interests and
incentive fees based on the performance of the co-investment joint ventures;
however, there can be no assurance that we will continue to do so. As of
December 31, 2003, we owned approximately 32.1 million square feet of our
properties (34.7% of the total consolidated operating and development portfolio)
through our co-investment joint ventures. We may make additional investments
through these joint ventures or new joint ventures in the future and presently
plan to do so.

Over the next three-to-four years, we expect to have approximately 15% of
our portfolio (based on consolidated annualized base rent) invested in
international markets. Our Mexican target markets currently include Mexico City,
Guadalajara and Monterrey. Our European target markets currently include Paris,
Amsterdam, Frankfurt, Madrid and London. Our Asian target markets currently
include Singapore, Hong Kong and Tokyo. It is possible that our target markets
will change over time to reflect experience, market opportunities, customer
needs and changes in global distribution patterns. As of December 31, 2003, our
international operating properties comprised 3.0% of our total annualized base
rent.

To maintain our qualification as a real estate investment trust, we must
pay dividends to our stockholders aggregating annually at least 90% of our
taxable income. As a result, we cannot rely on retained earnings to fund our
on-going operations to the same extent that other corporations that are not real
estate investment trusts can. We must continue to raise capital in both the debt
and equity markets to fund our working capital needs, acquisitions and
developments. See "Liquidity and Capital Resources" for a complete discussion of
the sources of our capital.

SUMMARY OF KEY TRANSACTIONS IN 2003

During the year ended December 31, 2003, we completed the following capital
deployment transactions:

- Acquired 82 buildings in the U.S., Mexico, Europe and Asia, aggregating
approximately 6.5 million square feet, for $533.9 million, including
$238.3 million invested through two of our co-investment joint ventures;

- Completed industrial development projects in the U.S., Mexico and Europe,
comprising 1.6 million square feet, for a total investment of $105.7
million;

- Expanded our development pipeline, which at December 31, 2003, included
projects in the U.S., Mexico, Singapore and Spain totaling 5.0 million
square feet with an expected total investment of

23

$233.0 million, of which $91.2 million was invested as of December 31,
2003 and of which 34% was pre-leased;

- Divested ourselves of 24 industrial buildings and two retail centers,
aggregating approximately 2.8 million square feet, for an aggregate price
of $272.3 million; and

- Contributed $94.0 million in operating properties to our newly formed
unconsolidated joint venture, in which we retained a 15% interest.

See Part IV. "Item 15: Notes 4 and 5 of the Notes to Consolidated Financial
Statements" for a more detailed discussion of our acquisition, development and
disposition activity.

During the year ended December 31, 2003, we completed the following capital
markets transactions:

- Raised $103.4 million, net of costs, from the issuances of $50.0 million
of our 6.5% Series L Cumulative Redeemable Preferred Stock and $57.5
million of our 6.75% Series M Cumulative Redeemable Preferred Stock;

- Raised $125.0 million from the issuance by the operating partnership of
$75.0 million of 5.53%, 10-year, unsecured fixed-rate notes and $50.0
million of floating rate unsecured notes at a rate of three month-LIBOR
telerate plus 40 basis points;

- Redeemed all of our outstanding 8.5% Series A Cumulative Redeemable
Preferred Stock and all of the operating partnership's outstanding 8 5/8%
Series B Cumulative Redeemable Preferred Units for an aggregate of $165.8
million;

- Repurchased 812,900 shares of our common stock for $21.2 million;

- Obtained long-term secured debt financing for our co-investment joint
ventures totaling $177.0 million at an average rate of 4.3%; and

- Repaid the $45.5 million outstanding balance on the AMB Institutional
Alliance Fund II, L.P. credit facility with capital contributions and
secured debt financing proceeds.

See Part IV. "Item 15: Notes 7, 10 and 12 of the Notes to Consolidated
Financial Statements" for a more detailed discussion of our capital markets
transactions.

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 U.S.
("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:

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. We also
record at acquisition an intangible asset or liability for the value
attributable to above or below-market leases, in-place leases and lease
origination costs for all acquisitions subsequent to July 1, 2001. 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 amount of the property. The
estimation of expected future net cash flows is inherently uncertain and relies
on assumptions regarding current and future market conditions and the
availability of capital. Examples of certain situations that could affect future
cash flows of a property may

24

include, but are not limited to: significant decreases in occupancy; unforeseen
bankruptcy, lease termination and move-out of a major customer; or a significant
decrease in annual base rents of that property. If impairment analysis
assumptions change, then an adjustment to the carrying amount of our 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 earnings.

Revenue Recognition. 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 allowance for doubtful accounts, security deposits and letters
of credit, then we may have to recognize additional doubtful account charges in
future periods. We monitor the liquidity and creditworthiness of our customers
on an on-going basis. Each period we review our outstanding accounts receivable,
including straight-line rents, for doubtful accounts and provide allowances as
needed. We also record lease termination fees when a customer has executed a
definitive termination agreement with us and the payment of the termination fee
is not subject to any conditions that must be met or waived before the fee is
due to us.

Property Dispositions. We report real estate dispositions in three
separate categories on our consolidated statements of operations. First, when we
contribute properties to our joint ventures, we recognize gains representing the
portion of the contributed properties acquired by the third-party investors to
the extent of cash proceeds received. We also dispose of value-added conversion
projects and build-to-suit and speculative development projects that we have
held as development projects available for sale. The gain or loss recognized
from the disposition of these projects is reported net of estimated taxes, when
applicable. Lastly, beginning in 2002, SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, required us to separately report as
discontinued operations the historical operating results attributable to
operating properties sold and the applicable gain or loss on the disposition of
the properties. The consolidated statements of operations for prior periods are
also adjusted to conform with this classification. There is no impact on our
previously reported consolidated financial position, net income or cash flows.

Joint Ventures. We hold interests in both consolidated and unconsolidated
joint ventures. Our joint venture investments do not meet the variable interest
entity criteria under FASB Interpretation No. 46R, Consolidation of Variable
Interest Entities. Therefore, we determine consolidation based on standards set
forth in EITF 96-16, Investor's Accounting for an Investee When the Investor Has
a Majority of the Voting Interest but the Minority Shareholder or Shareholders
Have Certain Approval or Veto Rights, and Statement of Position 78-9, Accounting
for Investments in Real Estate Ventures. Based on the guidance set forth in
these pronouncements, we consolidate certain joint venture investments because
we own a majority interest or exercise significant control over major operating
decisions, such as approval of budgets, selection of property managers, asset
management, investment activity and changes in financing. For joint ventures
where we do not own a majority interest or do not exercise significant control
over major operating and management decisions, we use the equity method of
accounting and do not consolidate the joint venture for financial reporting
purposes.

Real Estate Investment Trust. As a real estate investment trust, we
generally will not be subject to corporate level federal income taxes if minimum
distribution, income, asset and shareholder tests are met. However, not all of
our underlying entities are qualified REIT subsidiaries and may be subject to
federal and state taxes, when applicable. In addition, foreign entities may also
be subject to the taxes of the host country. An income tax allocation is
required to be estimated on our taxable income arising from our taxable REIT
subsidiaries and foreign entities. A deferred tax component could arise based
upon the differences in GAAP versus tax income for items such as depreciation
and gain recognition. However, deferred tax is an immaterial component of our
consolidated balance sheet.

RESULTS OF OPERATIONS

The analysis below includes changes attributable to same store growth,
acquisitions, development activity and divestitures. Same store properties are
those that we owned during both the current and prior year reporting periods,
excluding development properties prior to being stabilized subsequent to
December 31, 2001 (generally defined as properties that are 90% leased or
properties for which we have held a certificate of occupancy or where building
has been substantially complete for at least 12 months). As of December 31,
25

2003, same store industrial properties consisted of properties aggregating
approximately 72.0 million square feet. The properties acquired during 2003,
consisted of 82 buildings, aggregating approximately 6.5 million square feet.
The properties acquired during 2002 consisted of 43 buildings, aggregating
approximately 5.4 million square feet. During 2003, property divestitures and
contributions consisted of 48 industrial buildings and two retail centers,
aggregating approximately 5.3 million square feet. In 2002, property
divestitures consisted of 58 industrial and two retail buildings, aggregating
approximately 5.7 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 results.

FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002 (DOLLARS IN MILLIONS)

The decrease in U.S. industrial same store rental revenues resulted
primarily from lower average occupancies, rental revenue decreases in our San
Francisco Bay Area sub-market totaling $14.9 million, increased allowances for
doubtful accounts of $3.3 million, and decreased straight-line rents of $1.3
million, partially offset by an increase in lease termination fees and
miscellaneous income of $0.9 million and fixed rent increases on existing
leases. Industrial same store occupancy was 93.0% at December 31, 2003, and
95.0% at December 31, 2002. For the year ended December 31, 2003, rents in the
same store portfolio decreased 10.6% on industrial renewals and rollovers (cash
basis) on 16.2 million square feet leased. The properties acquired during 2002
consisted of 43 buildings, aggregating approximately 5.4 million square feet.
The properties acquired during 2003 consisted of 82 buildings, aggregating
approximately 6.5 million square feet. Other industrial includes rental revenues
from divested properties not classified as discontinued operations. In 2003, we
acquired properties in Mexico and France, resulting in increased international
industrial revenues. The

26

increase in private capital income was primarily due to incentive distributions
earned from AMB Partners II, L.P.

The $3.4 million increase in same store properties' operating expenses was
primarily due to increases in common area maintenance expenses of $3.4 million,
including snow removal, and real estate taxes of $0.9 million, partially offset
by a decrease in insurance expenses of $1.2 million. The 2002 acquisitions
consisted of 43 buildings, aggregating approximately 5.4 million square feet.
The 2003 acquisitions consist of 82 buildings, aggregating approximately 6.5
million square feet. Other industrial includes expenses from divested properties
not classified as discontinued operations. The increase in depreciation and
amortization expense was due to the increase in our net investment in real
estate, partially offset by a reduction of $2.1 million for the recovery,
through the settlement of a lawsuit, of capital expenditures paid in prior
years. The 2003 impairment loss was on investments in real estate and leasehold
interests that we continue to hold for long-term investment. The 2002 impairment
included losses for lease cost write-offs of $1.7 million and an impairment on a
portion of our planned property contributions of $1.2 million. The increase in
general and administrative expenses was primarily due to increased stock-based
compensation expense of $2.8 million resulting from our decision to expense
stock options under SFAS No. 123 prospectively and the issuance of additional
restricted stock, partially offset by decreased personnel costs and taxes.

The decrease in interest and other income was primarily due to the
repayment in full of a $74.0 million 9.5% mortgage note receivable in July 2002.
The increase in gains from dispositions of real estate (not classified as
discontinued operations) resulted from our contribution of $94.0 million in
operating properties to our newly formed co-investment joint venture, Industrial
Fund I, LLC, in February 2003. We recognized a gain of $7.4 million on the
contribution, representing the portion of the contributed properties acquired by
the

27

third-party investors. During 2002, we sold two industrial buildings and one
retail center, aggregating approximately 0.8 million square feet, for an
aggregate price of $50.6 million, with a resulting loss of $0.8 million. In June
2002, we also contributed $76.9 million in operating properties to our
consolidated co-investment joint venture, AMB-SGP, LP. We recognized a gain of
$3.3 million on the contribution, representing the portion of the contributed
properties acquired by the third-party investors. The property contributions and
2002 divestitures of properties held for disposition at December 31, 2001, were
not classified as discontinued operations under the provisions of SFAS No. 144.
The increase in development profits, net of taxes, resulted from an increased
sales volume of $57.8 million in 2003.

During 2003, we divested ourselves of 24 industrial buildings and two
retail centers, aggregating approximately 2.8 million square feet, for an
aggregate price of $272.3 million, with a resulting net gain of $42.9 million.
During 2002, we divested ourselves of 56 industrial buildings, one retail center
and an undeveloped land parcel, aggregating approximately 4.9 million square
feet, for an aggregate price of $193.4 million, with a resulting net gain of
$10.6 million. In November 2002, our joint venture partner in AMB Partners II,
L.P. increased its ownership in AMB Partners II, L.P. from 50% to 80% by
acquiring 30% of the operating partnership's interest in AMB Partners II, L.P.
We recognized a gain of $6.3 million on the sale of the operating partnership's
30% interest.

In July 2003, we redeemed all 3,995,800 outstanding shares of our 8.5%
Series A Cumulative Redeemable Preferred Stock and recognized a reduction of
income available to common stockholders of $3.7 million for the original
issuance costs. In addition, on November 26, 2003, the operating partnership
redeemed all 1,300,000 of its outstanding 8 5/8% Series B Cumulative Redeemable
Preferred Partnership Units and we recognized a reduction of income available to
common stockholders of $1.7 million for the original issuance costs.

FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001 (DOLLARS IN MILLIONS)

28

The growth in rental revenues in same store properties resulted primarily
from increased lease termination fees and miscellaneous income of $13.8 million,
rental revenue growth before lease-termination fees in our Los Angeles and San
Francisco Bay Area sub-markets of $11.0 million and $7.6 million, respectively,
and increased reimbursement of expenses of $7.7 million, partially offset by
lower average occupancies. Industrial same store occupancy was 94.6% at December
31, 2002, and 94.6% at December 31, 2001. In 2002, the same store rent decrease
on industrial renewals and rollovers (cash basis) was 1.4% on 13.8 million
square feet leased. Other industrial revenues include rental revenues from
divested properties not classified as discontinued operations.

The $12.8 million increase in same store properties' operating expenses
primarily relates to increases in real estate taxes of $5.1 million, insurance
expenses of $4.3 million and increases in common area maintenance expenses of
$2.7 million. Other industrial property operating costs include expenses from
sold properties not classified as discontinued operations. The increase in
depreciation expense was due to the increase in our net investment in real
estate. The 2002 impairment included losses for lease cost write-offs of $1.7
million and an impairment on a portion of our planned property contributions of
$1.2 million. The 2001 impairment loss included losses for investments in retail
real estate totaling $13.0 million, leasehold interests that we continue to hold
for long-term investment totaling $4.3 million and industrial real estate
properties held for disposition totaling $1.3 million. 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 these
two unconsolidated preferred stock subsidiaries. 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 due to our decision
to expense stock options under

29

SFAS No. 123 prospectively, additional staffing and expenses for new
initiatives, including our international expansion and income taxes for our
taxable REIT subsidiaries.

The decrease in interest and other income was primarily due to the
repayment in full of the $74.0 million 9.5% mortgage note receivable in July
2002. 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. 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.

During 2002, we divested ourselves of 56 industrial buildings, one retail
center and an undeveloped land parcel, aggregating approximately 4.9 million
square feet, for an aggregate price of $193.4 million, with a resulting net gain
of $10.6 million. In November 2002, our joint venture partner in AMB Partners
II, L.P. increased its ownership in AMB Partners II, L.P. from 50% to 80% by
acquiring 30% of the operating partnership's interest in AMB Partners II, L.P.
We recognized a gain of $6.3 million on the sale of the operating partnership's
30% interest.

On December 5, 2001, AMB Property II, L.P. redeemed all 2,200,000 of its
outstanding 8.75% Series C Cumulative Redeemable Preferred Limited Partnership
Units at a premium of $4.4 million and we recognized a reduction of income
available to common stockholders of $3.2 million for the original issuance
costs. In July 2003, the U.S. Securities and Exchange Commission announced that
it had revised its position relating to the application of Emerging Issues Task
Force Topic No. D-42, The Effect on the Calculation of Earnings per Share for
the Redemption or Induced Conversion of Preferred Stock, ("Topic D-42"). As a
result of this announcement, original issuance costs related to preferred equity
are to be reflected as a reduction of income available to common stockholders in
determining earnings per share for the period in which the preferred equity is
redeemed. The announcement requires retroactive application of the revised
position in previously issued financial statements. As a result, our financial
statements for the year ending December 31, 2001, have been restated to reflect
a reduction in income available to common stockholders of $3.2 million,
representing the original issuance costs of AMB Property II, L.P.'s series C
preferred units. Diluted earnings per share for the year ended December 31,
2001, was $1.43 compared to $1.47 as previously reported. The U.S. Securities

30

and Exchange Commission's revised position on Topic D-42 did not require us to
file amendments to previously filed reports and will not impact any other
previously reported periods.

LIQUIDITY AND CAPITAL RESOURCES

Balance Sheet Strategy. In general, we use unsecured lines of credit,
unsecured notes, preferred stock and common equity to capitalize our 100%-owned
assets. Over time, we plan to retire non-recourse, secured debt encumbering our
100%-owned assets and replace that debt with unsecured notes. In managing our
co-investment joint ventures, in general, we use non-recourse, secured debt to
capitalize our co-investment joint ventures.

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

- retained earnings and cash flow from operations;

- borrowings under our unsecured credit facility;

- other forms of secured or unsecured financing;

- proceeds from equity or debt offerings by us or the operating partnership
(including issuances of limited partnership units in the operating
partnership or its subsidiaries);

- net proceeds from divestitures of properties; and

- private capital from co-investment partners.

We currently expect that our principal funding requirements will include:

- working capital;

- development, expansion and renovation of properties;

- acquisitions, including our global expansion;

- debt service; and

- dividends and distributions on outstanding common and preferred stock and
limited partnership units.

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. The
unavailability of capital could adversely affect our financial condition,
results of operations, cash flow and ability to pay dividends on, and the market
price of, our stock.

CAPITAL RESOURCES

Property Contributions. In February 2003, we contributed $94.0 million in
operating properties, consisting of 24 industrial buildings, aggregating
approximately 2.4 million square feet, to our newly formed unconsolidated joint
venture, Industrial Fund I, LLC, with Citigroup Global Investments Real Estate
LP, LLC, a Delaware limited liability company, and recognized a gain of $7.4
million on the contribution representing the portion of the contributed
properties acquired by the third-party co-investors in exchange for cash.

Developments-for-Sale. During 2003, we sold seven development-for-sale and
other projects, for an aggregate price of $74.8 million, with a resulting gain
of $14.4 million, net of taxes.

Property Divestitures. During 2003, we divested ourselves of 24 industrial
buildings and two retail centers, for an aggregate price of $272.3 million, with
a resulting net gain of $42.9 million.

Properties Held for Divestiture. As of December 31, 2003, we had decided
to divest ourselves of one retail land parcel and one industrial building, 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

31

and other customary conditions. As of December 31, 2003, the net carrying value
of the properties held for divestiture was $11.8 million.

Co-investment Joint Ventures. Through the operating partnership, 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. We consolidate these joint ventures for financial
reporting purposes because we are the sole managing general partner and 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,
2003, we owned approximately 32.1 million square feet of our properties (34.7%
of the total consolidated operating and development portfolio) through our
co-investment joint ventures and 6.0 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.

Our co-investment joint ventures at December 31, 2003 (dollars in
thousands):

- ---------------

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

(2) Included 15 institutional investors as stockholders as of December 31, 2003.

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

(4) Included 13 institutional investors as stockholders as of December 31, 2003.

(5) AMB-AMS, L.P. is a commitment to form a co-investment partnership with two
Dutch pension funds advised by Mn Services NV.

(6) BPMT is Stichting Bedrijfspensioenfonds voor de Metaal en Technische
Bedrijfstakken and TNO is Stichting Pensioenfonds TNO.

Common and Preferred Equity. We have authorized for issuance 100,000,000
shares of preferred stock, of which the following series were designated as of
December 31, 2003: 1,595,337 shares of series D preferred stock; 220,440 shares
of series E preferred stock; 267,439 shares of series F preferred stock; 840,000
shares of series H preferred stock; 510,000 shares of series I preferred stock;
800,000 shares of series J preferred stock; 800,000 shares of series K preferred
stock; 2,300,000 shares of series L preferred stock; and 2,300,000 shares of
series M preferred stock.

On June 23, 2003, we issued and sold 2,000,000 shares of 6.5% Series L
Cumulative Redeemable Preferred Stock at a price of $25.00 per share. Dividends
are cumulative from the date of issuance and payable quarterly in arrears at a
rate per share equal to $1.625 per annum. The series L preferred stock is
redeemable by us on or after June 23, 2008, subject to certain conditions, for
cash at a redemption price equal to $25.00 per share, plus accumulated and
unpaid dividends thereon, if any, to the redemption date. We

32

contributed the net proceeds of $48.0 million to the operating partnership, and
in exchange, the operating partnership issued to us 2,000,000 6.5% Series L
Cumulative Redeemable Preferred Units. The operating partnership used the
proceeds, in addition to proceeds previously contributed to the operating
partnership from other equity issuances, to redeem all 3,995,800 of its 8.5%
Series A Cumulative Redeemable Preferred Units from us on July 28, 2003. We, in
turn, used those proceeds to redeem all 3,995,800 of our 8.5% Series A
Cumulative Redeemable Preferred Stock for $100.2 million, including all
accumulated and unpaid dividends thereon, to the redemption date.

On July 14, 2003, AMB Property II, L.P. repurchased, from an unrelated
third party, 66,300 of its series F preferred units for $3.3 million, including
accrued and unpaid dividends.

On November 25, 2003, we issued and sold 2,300,000 shares of 6.75% Series M
Cumulative Redeemable Preferred Stock at $25.00 per share. Dividends are
cumulative from the date of issuance and payable quarterly in arrears at a rate
per share equal to $1.6875 per annum. The series M preferred stock is redeemable
by us on or after November 25, 2008, subject to certain conditions, for cash at
a redemption price equal to $25.00 per share, plus accumulated and unpaid
dividends theron, if any, to the redemption date. We contributed the net
proceeds of $55.4 million to the operating partnership, and in exchange, the
operating partnership issued to us 2,300,000 6.75% Series M Cumulative
Redeemable Preferred Units.

On November 26, 2003, the operating partnership redeemed all 1,300,000 of
its outstanding 8 5/8% Series B Cumulative Redeemable Preferred Partnership
Units, for an aggregate redemption price of $65.6 million, including accrued and
unpaid dividends.

In December 2003, our board of directors approved a new two-year common
stock repurchase program for the repurchase of up to $200.0 million of our
common stock. During 2003, we repurchased 812,900 shares of our common stock for
$21.2 million, including commissions.

In December 2001, our board of directors approved a stock repurchase
program for the repurchase of up to $100.0 million worth of our common and
preferred stock. In December 2002, our board of directors increased the 2001
repurchase program to $200.0 million. The 2001 stock repurchase program expired
in December 2003. During 2002, we repurchased 2,651,600 shares of our common
stock for $69.4 million, including commissions. In July 2002, we also
repurchased 4,200 shares of our series A preferred stock for an aggregate cost
of $0.1 million, including accrued and unpaid dividends.

During 2003, the operating partnership redeemed 226,145 of its common
limited partnership units for cash and 2,000 of its common limited partnership
units for shares of our common stock. In November 2003, AMB Property II, L.P.,
one of our subsidiaries, also issued 145,548 of its class B common limited
partnership units in connection with a property acquisition. During 2002, the
operating partnership redeemed 122,640 of its common limited partnership units
for shares of our common stock.

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, 2003, our share of total debt-to-total market
capitalization ratio was 37.9%. However, we typically finance our co-investment
joint ventures with secured debt at a loan-to-value ratio of 50-65%, per our
joint venture partnership agreements. Additionally, we currently intend to
manage our capitalization in order to maintain an investment grade rating on our
senior unsecured debt. Regardless of these policies, our organizational
documents do not limit the amount of indebtedness that we may incur.
Accordingly, our management could alter or eliminate these policies without
stockholder approval or circumstances could arise that could render us unable to
comply with these policies.

As of December 31, 2003, the aggregate principal amount of our secured debt
was $1.4 billion, excluding unamortized debt premiums of $10.8 million. Of the
$1.4 billion of secured debt, $1.1 billion is secured by properties in our joint
ventures. The secured debt is generally non-recourse and bears interest at rates
varying from 2.6% to 10.6% per annum (with a weighted average rate of 7.0%) and
final maturity dates ranging from June 2004 to June 2023. All of the secured
debt bears interest at fixed rates, except for five loans with an aggregate
principal amount of $52.3 million as of December 31, 2003, which bear interest
at variable rates (with a weighted average interest rate of 3.2% as of December
31, 2003).

33

In June 1998, the operating partnership issued $400.0 million of unsecured
senior debt securities. Interest on the unsecured senior debt securities is
payable semi-annually. The 2015 notes are putable and callable in September
2005. In August 2000, the operating partnership commenced a medium-term note
program and subsequently issued $400.0 million of medium-term notes with a
weighted average interest rate of 7.3%. The notes mature between December 2005
and September 2011 and are guaranteed by us.

In May 2002, the operating partnership commenced a new 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 us. On November 10, 2003, the
operating partnership issued $75.0 million aggregate principal amount of senior
unsecured notes to Teachers Insurance and Annuity Association of America. We
guaranteed the principal amount and interest on the notes, which mature on
November 1, 2013, and bear interest at 5.53% per annum. Teachers has agreed that
until November 10, 2005, the operating partnership can require Teachers to
return the notes to it for cancellation for an obligation of equal dollar amount
under a first mortgage loan to be secured by properties determined by the
operating partnership, except that in the event the ratings on operating
partnership's senior unsecured debt are downgraded by two ratings agencies to
BBB-, the operating partnership will only have ten days after the last of these
downgrades to exercise this right. During the period when the operating
partnership can exercise its cancellation right and until any mortgage loans
close, Teachers has agreed not to sell, contract to sell, pledge, transfer or
otherwise dispose of, any portion of the notes. On November 21, 2003, the
operating partnership issued $50.0 million aggregate principal amount of
floating rate senior unsecured notes. We guaranteed the principal amount and
interest on the notes, which mature on November 21, 2006, and bear interest at a
floating rate of 3-month LIBOR telerate plus 40 basis points. The operating
partnership intends to continue to issue medium-term notes, guaranteed by us,
under the program from time to time as market conditions permit. As of December
31, 2003, $275.0 million of capacity remained under the May 2002 medium-term
note program.

We guarantee the operating partnership's obligations with respect to its
senior debt securities. 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 dividends to our
stockholders in all years 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 pay dividends on, and the market price of, our stock.

Credit Facilities. In December 2002, the operating partnership renewed its
$500.0 million unsecured revolving line of credit. We guarantee 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. The credit facility includes a multi-currency
component, which was amended effective July 10, 2003, to increase from $150.0
million to $250.0 million the amount that 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 and the operating partnership has an investment grade credit rating).
U.S. dollar borrowings under the credit facility currently bear interest at
LIBOR plus 60 basis points. Euro borrowings under the credit facility currently
bear interest at EURIBOR plus 60 basis points. Yen borrowings under the credit
facility currently bear interest at the Japanese Yen TIBOR rate 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. However,
depending on the operating partnership's credit rating, the facility fee and
interest rate may increase. 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. We use the unsecured credit facility principally for acquisitions,
funding our development activity 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 our unencumbered properties. As of December 31, 2003, the
outstanding balance on our unsecured credit facility was $275.7 million and the
remaining amount available was $171.6 million, net of outstanding letters of
credit of $52.7 million (excluding the $200.0 million of potential additional
capacity). The outstanding balance included borrowings denomi-

34

nated in Euros and Yen and translated to U.S. dollars at December 31, 2003, of
$83.1 million and $47.6 million, respectively.

In August 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. In April 2003, AMB Institutional Alliance Fund II, L.P.
repaid the credit facility with capital contributions and secured debt financing
proceeds and terminated the credit facility.

Mortgages Receivable. Through a wholly-owned subsidiary, we 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,
2003, the outstanding balance on the note was $13.0 million. We also hold short-
term mortgages on sold properties totaling $30.1 million with a weighted average
interest rate of 6.2%. The mortgages mature between February 2004 and November
2006.

The tables below summarize our debt maturities and capitalization as of
December 31, 2003 (dollars in thousands):

- ---------------

(1) The weighted average interest and maturity for the unconsolidated joint
venture debt were 6.1% and 5.8 years, respectively.

(2) Includes Euro and Yen based borrowings translated to U.S. dollars using the
foreign exchange rates at December 31, 2003.

(3) Our share of total debt is the pro rata portion of the total debt based on
our percentage of equity interest in each of the consolidated ventures
holding the debt. We believe that our share of total debt is a meaningful
supplemental measure, which enables both management and investors to analyze
our leverage

35

and to compare our leverage to that of other companies. In addition, it
allows for a more meaningful comparison of our debt to that of other
companies that do not consolidate their joint ventures. Our share of total
debt is not intended to reflect our actual liability should there be a
default under any or all of such loans or a liquidation of the joint
ventures. The above table reconciles our share of total debt to total
consolidated debt, a GAAP financial measure. For the calculation of the
joint venture partners' share of consolidated joint venture debt used in the
above table, please see Part 1. "Item 2. Properties Held Through Joint
Ventures, Limited Liability Companies and Partnerships -- Co-investment
Joint Ventures".

- ---------------

(1) Includes 145,548 class B common limited partnership units issued by AMB
Property II, L.P. in November 2003.

- ---------------

(1) Our share of total debt is the pro rata portion of the total debt based on
our percentage of equity interest in each of the consolidated ventures
holding the debt. We believe that our share of total debt is a meaningful
supplemental measure, which enables both management and investors to analyze
our leverage and to compare our leverage to that of other companies. In
addition, it allows for a more meaningful comparison of our debt to that of
other companies that do not consolidate their joint ventures. Our share of
total debt is not intended to reflect our actual liability should there be a
default under any or all of such loans or a liquidation of the joint
ventures. For a reconciliation of our share of total debt to total
consolidated debt, a GAAP financial measure, please see the table of debt
maturities and capitalization on the preceding page in Part II. "Item 7.
Liquidity and Capital Resources -- Capital Resources".

36

LIQUIDITY

As of December 31, 2003, we had $127.7 million in cash (of which $81.1
million was held by our consolidated co-investment joint ventures) and cash
equivalents, and $171.6 million of additional available borrowings under our
credit facility.

Our board of directors declared a regular cash dividend for the quarter
ended December 31, 2003, of $0.415 per share of common stock and the operating
partnership announced its intention to pay a regular cash distribution for the
quarter ended December 31, 2003, of $0.415 per common unit. The dividends and
distributions were payable on January 5, 2004, to stockholders and unitholders
of record on December 22, 2003. The series L and M preferred stock dividends
were payable on January 15, 2004, to stockholders of record on January 5, 2004.
The series E, F, J and K preferred unit distributions were payable on January
15, 2004 in respect of the period commencing on and including October 15, 2003
and ending on and including January 14, 2004. The series D, H and I preferred
unit distributions were payable on December 26, 2003 in respect of the period
commencing on and including October 15, 2003 and ending on and including January
14, 2004. The following table sets forth the dividends and distributions paid or
payable per share or unit for the years ended December 31, 2003, 2002 and 2001:

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 equity
financings, 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 pay
dividends on, and the market price of, our stock.

CAPITAL COMMITMENTS

Developments. In addition to recurring capital expenditures, which consist
of building improvements and leasing costs incurred to renew or re-tenant space,
during 2003, we initiated 13 new industrial development projects with a total
estimated investment of $226.4 million at completion, aggregating an estimated
4.9 million square feet, including 438 acres of land for development in Miami's
Airport West submarket for $29.7 million. The master planned park, called Beacon
Lakes, is entitled for 6.8 million square feet of properties for lease or sale.
We began development of the first two buildings at Beacon Lakes, which will
aggregate approximately 0.4 million square feet and have an estimated investment
of $19.2 million. As of December 31, 2003, we had 16 projects in our development
pipeline representing a total estimated investment

37

of $233.0 million upon completion and four development projects available for
sale representing a total estimated investment of $38.8 million upon completion.
Of this total, $112.2 million had been funded as of December 31, 2003, and an
estimated $159.6 million was required to complete current and planned projects.
We expect to fund these expenditures with cash from operations, borrowings under
our credit facility, debt or equity issuances, net proceeds from property
divestitures, and private capital from co-investment partners, which could have
an adverse effect on our cash flow.

Acquisitions. During 2003, we invested $533.9 million in 82 operating
industrial buildings, aggregating approximately 6.5 million rentable square
feet, of which we invested $238.3 million in 43 operating properties,
aggregating approximately 3.7 million square feet, through two of our
co-investment joint ventures. We generally fund our acquisitions through private
capital contributions, borrowings under our credit facility, cash, debt
issuances and net proceeds from property divestitures. In addition, in October
2003, we entered into an Agreement of Sale with privately-held International
Airport Centers L.L.C. and certain of its affiliated entities, pursuant to
which, if fully consummated, we will acquire a 3.4 million square foot portfolio
consisting of 37 airfreight buildings located adjacent to seven international
airports in the U.S. for approximately $481.0 million, including $119.0 million
of assumed debt. Pursuant to the Agreement of Sale, we will acquire the
buildings in separate tranches, as construction is completed and certain other
customary closing conditions, including acquiring the necessary consents, are
met. The first closings occurred in October and December 2003, and we currently
expect the balance of the portfolio to close by the third quarter of 2004. Some
of the properties in this portfolio have been allocated to one or more of our
co-investment joint ventures. We financed the first tranche, and expect to
finance the remainder of the purchase price, through additional debt financings
and proceeds from property dispositions.

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 37 years. Future minimum rental payments required under
non-cancelable operating leases in effect as of December 31, 2003, were as
follows (dollars in thousands):

2004........................................................ $ 20,149
2005........................................................ 20,272
2006........................................................ 20,922
2007........................................................ 21,120
2008........................................................ 21,340
Thereafter.................................................. 283,965
--------
Total..................................................... $387,768
========

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

Co-investment Joint Ventures. Through the operating partnership, 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. As of December 31, 2003, we had investments in
co-investment joint ventures with a gross book value of $1.9 billion, which are
consolidated for financial reporting purposes. As of December 31, 2003, we may
make additional capital contributions to current and planned co-investment joint
ventures of up to $27.9 million. We expect to fund these contributions with cash
from operations, borrowings under our credit facility, debt or equity issuances
or net proceeds from property divestitures, which could adversely effect our
cash flow.

Captive Insurance Company. In December 2001, we formed a wholly-owned
captive insurance company, Arcata National Insurance Ltd., which provides
insurance coverage for all or a portion of losses below the deductible under our
third-party policies. We capitalized Arcata National Insurance Ltd. in
accordance with the applicable 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, related
deductibles 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 and deductibles,
are less than

38

premiums collected, the excess may 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 more
comprehensive insurance coverage at an 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
predecessors and others indemnified by these entities.

OVERVIEW OF CONTRACTUAL OBLIGATIONS

The following table summarizes our debt, interest and lease payments due by
period as of December 31, 2003 (dollars in thousands):

OFF-BALANCE SHEET ARRANGEMENTS

Standby Letters of Credit. As of December 31, 2003, we had provided
approximately $64.1 million in letters of credit, of which $52.7 million was
provided under the operating partnership's $500.0 million unsecured credit
facility. The letters of credit were required to be issued under certain ground
lease provisions, bank guarantees and other commitments.

Guarantees. Other than disclosed elsewhere in this report, as of December
31, 2003, we had outstanding guarantees in the aggregate amount of $50.2 million
in connection with certain acquisitions, which are currently expected to close
in 2004.

Performance and Surety Bonds. As of December 31, 2003, we had outstanding
performance and surety bonds in an aggregate amount of $0.9 million. These bonds
were issued in connection with certain of our development projects and were
posted to guarantee certain tax obligations and the construction of certain real
property improvements and infrastructure, such as grading, sewers and streets.
Performance and surety bonds are commonly required by public agencies from real
estate developers. Performance and surety bonds are renewable and expire upon
the payment of the taxes due or the completion of the improvements and
infrastructure.

Promoted Interests and Other Contractual Obligations. Upon the achievement
of certain return thresholds and the occurrence of certain events, we may be
obligated to make payments to certain of joint venture partners pursuant to the
terms and provisions of their contractual agreements with us. From time to time
in the normal course of our business, we enter into various contracts with third
parties that may obligate us to make payments or perform other obligations upon
the occurrence of certain events.

39

SUPPLEMENTAL EARNINGS MEASURES

FFO. We believe that net income, as defined by GAAP, is the most
appropriate earnings measure. However, we consider funds from operations, or
FFO, as defined by the National Association of Real Estate Investment Trusts
("NAREIT"), to be a useful supplemental measure of our operating performance.
FFO is defined as net income, calculated in accordance with GAAP, less gains (or
losses) from dispositions of real estate held for investment purposes and real
estate-related depreciation, and adjustments to derive our pro rata share of FFO
of consolidated and unconsolidated joint ventures. Further, we do not adjust FFO
to eliminate the effects of non-recurring charges. We believe that FFO, as
defined by NAREIT, is a meaningful supplemental measure of our operating
performance because historical cost accounting for real estate assets in
accordance with GAAP implicitly assumes that the value of real estate assets
diminishes predictably over time, as reflected through depreciation and
amortization expenses. However, since real estate values have historically risen
or fallen with market and other conditions, many industry investors and analysts
have considered presentation of operating results for real estate companies that
use historical cost accounting to be insufficient. Thus, NAREIT created FFO as a
supplemental measure of operating performance for real estate investment trusts
that excludes historical cost depreciation and amortization, among other items,
from net income, as defined by GAAP. We believe that the use of FFO, combined
with the required GAAP presentations, has been beneficial in improving the
understanding of operating results of real estate investment trusts among the
investing public and making comparisons of operating results among such
companies more meaningful. We consider FFO to be a useful measure for reviewing
our comparative operating and financial performance because, by excluding gains
or losses related to sales of previously depreciated operating real estate
assets and real estate depreciation and amortization, FFO can help the investing
public compare the operating performance of a company's real estate between
periods or as compared to other companies.

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 GAAP and should not be considered as an alternative
to those measures in evaluating our liquidity or operating performance. FFO also
does not consider the costs associated with capital expenditures related to our
real estate assets nor is FFO necessarily indicative of cash available to fund
our future cash requirements. Further, our computation of FFO may not be
comparable to FFO reported by other real estate investment trusts that do not
define the term in accordance with the current NAREIT definition or that
interpret the current NAREIT definition differently than we do.

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

- ---------------

(1) In the quarter ended June 30, 2003, and effective January 1, 2003, we
discontinued our practice of deducting amortization of investments in
leasehold interests from FFO as such an adjustment is not provided for in
NAREIT's FFO definition. Basic FFO per share would have been $2.47, $2.10,
$2.27 and $2.10 for the years ended December 31, 2002, 2001, 2000 and 1999,
respectively, had we discontinued our practice of deducting amortization of
investments in leasehold interests from FFO retroactively. Diluted FFO per
share would have been $2.42, $2.08, $2.26 and $2.10 for the years ended
December 31, 2002, 2001, 2000 and 1999, respectively, had we discontinued
our practice of deducting amortization of investments in leasehold interests
from FFO retroactively.

(2) In the quarter ended September 30, 2003, we modified our FFO reporting to no
longer add back impairment losses when computing FFO in accordance with
NAREIT's FFO definition. Additionally, we adopted Topic D-42 and began
including preferred stock and unit redemption discounts and issuance cost
write-offs in FFO. As a result, FFO for the periods presented has been
restated to reflect these changes.

EBITDA. We use earnings before interest, tax, depreciation and
amortization, or EBITDA, to measure both our operating performance and
liquidity. We consider EBITDA to provide investors relevant and useful
information because it permits fixed income investors to view income from our
operations on an unleveraged basis before the effects of non-cash depreciation
and amortization expense. By excluding interest expense, EBITDA allows investors
to measure our operating performance independent of our capital structure and
indebtedness and, therefore, allows for a more meaningful comparison of our
operating performance between quarters as well as annual periods and to compare
our operating performance to that of other companies, both in the real estate
industry and in other industries. We consider EBITDA to be a useful supplemental
measure for reviewing our comparative performance with other companies because,
by excluding non-cash depreciation expense, EBITDA can help the investing public
compare the performance of a real estate company to that of companies in other
industries. As a liquidity measure, we believe that EBITDA helps fixed income
and equity investors to analyze our ability to meet our debt service obligations
and to make our quarterly preferred share

41

and unit distributions. Management uses EBITDA in the same manner as we expect
investors to when measuring our operating performance and our liquidity;
specifically when assessing our operating performance, and comparing that
performance to other companies, both in the real estate industry and in other
industries, and when evaluating our ability to meet our debt service obligations
and to make our quarterly preferred share and unit distributions. We believe
investors should consider EBITDA, in conjunction with net income (the primary
measure of our performance) and the other required GAAP measures of our
performance and liquidity, to improve their understanding of our operating
results and liquidity, and to make more meaningful comparisons of the
performance of our assets between periods and as against other companies.

By excluding interest, taxes, depreciation and amortization when assessing
our financial performance, an investor is assessing the earnings generated by
our operations, but not taking into account the eliminated expenses incurred in
connection with such operations. As a result, EBITDA has limitations as an
analytical tool and should be used in conjunction with our required GAAP
presentations. EBITDA does not reflect our historical cash expenditures or our
future cash requirements for working capital, capital expenditures or
contractual commitments. EBITDA also does not reflect the cash required to make
interest and principal payments on our outstanding debt. While EBITDA is a
relevant and widely used measure of operating performance and liquidity, it does
not represent net income or cash flow from operations as defined by GAAP and it
should not be considered as an alternative to those indicators in evaluating
operating performance or liquidity. Further, our computation of EBITDA may not
be comparable to EBITDA reported by other companies.

The following table reflects the calculation of EBITDA reconciled to net
income, a GAAP financial measure, for the years ended December 31, (dollars in
thousands):

42

The following table reflects the calculation of EBITDA reconciled to net
cash provided by operating activities, a GAAP financial measure, for the years
ended December 31, (dollars in thousands):

- ---------------

(1) Our share of net income is the pro rata portion of net income based on our
percentage of equity interest in each of the unconsolidated ventures
contributing to net income.

(2) Our share of FFO is the pro rata portion of FFO based on our percentage of
equity interest in each of the unconsolidated ventures contributing to FFO.

(3) Our share of interest expense is the pro rata portion of interest expense
based on our percentage of equity interest in each of the unconsolidated
ventures holding the debt.

43

BUSINESS RISKS

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

GENERAL REAL ESTATE RISKS

OUR PERFORMANCE AND VALUE ARE SUBJECT TO GENERAL ECONOMIC CONDITIONS AND RISKS
ASSOCIATED WITH OUR REAL ESTATE ASSETS.

The investment returns available from equity investments in real estate
depend on the amount of income earned and capital appreciation generated by the
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 pay
dividends to our stockholders could be adversely affected. In addition, there
are significant expenditures associated with an investment in real estate (such
as mortgage payments, real estate taxes and maintenance costs) that generally do
not decline when circumstances reduce the income from the property. Income from,
and the value of, our properties may be adversely affected by:

- changes in the general economic climate;

- local conditions, such as oversupply of 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;

- increased operating costs;

- increased cost of compliance with regulations; and

- the potential for liability under applicable laws (including changes in
tax laws).

In addition, 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. Future terrorist attacks may result in declining economic
activity, which could reduce the demand for and the value of our properties. To
the extent that future attacks impact our customers, their businesses similarly
could be adversely affected, including their ability to continue to honor their
existing leases.

Our properties are concentrated predominantly in the industrial real estate
sector. As a result of this concentration, we would feel the impact of an
economic downturn in this sector more acutely than if our portfolio included
other property types.

WE MAY BE UNABLE TO RENEW LEASES OR RELET SPACE AS LEASES EXPIRE.

As of December 31, 2003, leases on a total of 17.8% of our industrial
properties (based on annualized base rent) will expire on or prior to December
31, 2004. We derive most of our income from rent received from our customers.
Accordingly, our financial condition, results of operations, cash flow and our
ability to pay dividends on, and the market price of, our stock could be
adversely affected if we are unable to promptly relet or renew these expiring
leases, if the rental rates upon renewal or reletting are significantly lower
than expected. If a tenant experiences a downturn in its business or other type
of financial distress, then it may be unable to make timely rental payments or
renew its lease. Further, our ability to rent space and the rents that we can
charge are impacted, not only by customer demand, but by the number of other
properties we have to compete with to appeal to customers.

44

REAL ESTATE INVESTMENTS ARE RELATIVELY ILLIQUID, MAKING IT DIFFICULT FOR US TO
RESPOND PROMPTLY TO CHANGING CONDITIONS.

Real estate assets are not as liquid as certain other types of assets.
Further, as a real estate investment trust, the Internal Revenue Code regulates
the number of properties that we can dispose of in a year, their tax bases and
the cost of improvements that we make to the properties. These limitations may
affect our ability to sell properties. This lack of liquidity and the Internal
Revenue Code restrictions may limit our ability to vary our portfolio promptly
in response to changes in economic or other conditions and, as a result, could
adversely affect our financial condition, results of operations, cash flow and
our ability to pay dividends on, and the market price of, our stock.

WE MAY BE UNABLE TO CONSUMMATE ACQUISITIONS ON ADVANTAGEOUS TERMS OR
ACQUISITIONS MAY NOT PERFORM AS WE EXPECT.

We acquire and intend to continue to acquire primarily industrial
properties. The acquisition of properties entails various risks, including the
risks that our investments may not perform as we expect, that we may be unable
to quickly and efficiently integrate our new acquisitions into our existing
operations and that our cost estimates for bringing an acquired property up to
market standards may prove inaccurate. Further, we face significant competition
for attractive investment opportunities from other well-capitalized real estate
investors, including both publicly-traded real estate investment trusts and
private institutional investment funds. This competition increases as
investments in real estate become increasingly attractive relative to other
forms of investment. As a result of competition, we may be unable to acquire
additional properties as we desire or the purchase price may be significantly
elevated. In addition, we expect to finance future acquisitions through a
combination of borrowings under our unsecured credit facility, proceeds from
equity or debt offerings by us or the operating partnership or its subsidiaries
and proceeds from property divestitures, which may not be available and which
could adversely affect our cash flow. Any of the above risks could adversely
affect our financial condition, results of operations, cash flow and ability to
pay dividends on, and the market price of, our stock.

WE MAY BE UNABLE TO COMPLETE RENOVATION AND DEVELOPMENT PROJECTS ON
ADVANTAGEOUS TERMS.

As part of our business, we develop new and renovate existing properties.
The real estate development and renovation business involves significant risks
that could adversely affect our financial condition, results of operations, cash
flow and ability to pay dividends on, and the market price of, our stock, which
include:

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

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

- the properties may perform below anticipated levels, producing cash flow
below budgeted amounts;

- substantial renovation and new development activities, regardless of
their ultimate success, typically require a significant amount of
management's time and attention, diverting their attention from our
day-to-day operations; and

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

OUR PERFORMANCE AND VALUE ARE IMPACTED BY THE LOCAL ECONOMIC CONDITIONS OF AND
THE RISKS ASSOCIATED WITH DOING BUSINESS IN CALIFORNIA.

As of December 31, 2003, our industrial properties located in California
represented 28.4% of the aggregate square footage of our industrial operating
properties and 31.5% of our industrial annualized base rent. Our revenue from,
and the value of, our properties located in California may be affected by local
real estate conditions (such as an oversupply of or reduced demand for
industrial properties) and the local economic climate. Business layoffs,
downsizing, industry slowdowns, changing demographics, and other

45

factors may adversely impact California's economic climate. Because of the
number of properties we have located in California, a downturn in California's
economy or real estate conditions could adversely affect our financial
condition, results of operations, cash flow and ability to pay dividends on, and
the market price of, our stock. In addition, certain of our properties are
subject to possible loss from seismic activity.

WE MAY EXPERIENCE LOSSES THAT OUR INSURANCE DOES NOT COVER.

We carry commercial liability, property and rental loss insurance covering
all the properties that we own and manage in types and amounts that we believe
are adequate and appropriate given the relative risks applicable to the
property, the cost of coverage and industry practice. Certain losses, such as
those 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 consider commercially
reasonable given the cost and availability of such coverage, we cannot be
certain that we will be able to renew coverage on comparable terms or collect
under such policies. In addition, there are other types of losses, such as those
from riots, bio-terrorism, or acts of war, that are not generally insured in our
industry because it is not economically feasible to do so. 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. If we experience a loss that
is uninsured or that exceeds our insured limits with respect to one or more of
our properties, then we could lose the capital invested in the damaged
properties, as well as the anticipated future revenue from those properties and,
if there is recourse debt, then we would remain obligated for any mortgage debt
or other financial obligations related to the properties. Moreover, as the
general partner of the operating partnership, we generally will be liable for
all of the operating partnership's unsatisfied recourse obligations, including
any obligations incurred by the operating partnership as the general partner of
co-investment joint ventures. Any such losses could adversely affect our
financial condition, results of operations, cash flow and ability to pay
dividends on, and the market price of, our stock.

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,
2003, we had 299 industrial buildings, aggregating approximately 24.7 million
square feet and representing 28.4% of our industrial operating properties based
on aggregate square footage and 31.5% based on industrial annualized base rent.
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. We
evaluate our earthquake insurance coverage annually in light of current industry
practice through an analysis prepared by outside consultants.

WE ARE SUBJECT TO RISKS AND LIABILITIES IN CONNECTION WITH PROPERTIES OWNED
THROUGH JOINT VENTURES, LIMITED LIABILITY COMPANIES AND PARTNERSHIPS.

As of December 31, 2003, we owned approximately 48.1 million square feet of
our properties through several joint ventures, limited liability companies or
partnerships with third parties. Our organizational documents do not limit the
amount of available funds that we may invest in partnerships, limited liability
companies or joint ventures and we intend to continue to develop and acquire
properties through joint ventures, limited liability companies and partnerships
with other persons or entities when warranted by the circumstances. Such
partners may share certain approval rights over major decisions. Partnership,
limited liability company or joint venture investments involve certain risks,
including:

- if our partners, co-members or joint venturers go bankrupt, then we and
any other remaining general partners, members, or joint venturers would
generally remain liable for the partnership's, limited liability
company's, or joint venture's liabilities;

- our partners, co-members or joint venturers might have economic or other
business interests or goals that are inconsistent with our business
interests or goals that would affect our ability to operate the property;

- our partners, co-members or joint venturers may have the power to act
contrary to our instructions, requests, policies, or objectives,
including our current policy with respect to maintaining our
qualification as a real estate investment trust; and
46

- the joint venture, limited liability and partnership agreements often
restrict the transfer of a joint venturer's, member's or partner's
interest or "buy-sell" or may otherwise restrict our ability to sell the
interest when we desire or on advantageous terms.

We generally seek to maintain sufficient control of our partnerships,
limited liability companies, and joint ventures to permit us to achieve our
business objectives, however, we may not be able to do so, and 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 pay dividends on, and
the market price of, our stock.

WE MAY BE UNABLE TO COMPLETE DIVESTITURES ON ADVANTAGEOUS TERMS OR CONTRIBUTE
PROPERTIES.

We intend to continue to divest ourselves of retail centers and industrial
properties that do not meet our strategic objectives, provided that we can
negotiate acceptable terms and conditions. Our ability to dispose of properties
on advantageous terms depends on factors beyond our control, including
competition from other sellers and the availability of attractive financing for
potential buyers of our properties. If we are unable to dispose of properties on
favorable terms or redeploy the proceeds of property divestitures in accordance
with our investment strategy, then our financial condition, results of
operations, cash flow and ability to pay dividends on, and the market price of,
our stock could be adversely affected.

We also anticipate contributing or selling properties to funds and joint
ventures. If we do not have sufficient properties available that meet the
investment criteria of current or future property funds, or if the funds have
reduced or no access to capital on favorable terms, then such contributions or
sales could be delayed or prevented, adversely affecting our financial
condition, results of operations, cash flow and ability to pay dividends on, and
the market price of, our stock.

CONTINGENT OR UNKNOWN LIABILITIES COULD ADVERSELY AFFECT OUR FINANCIAL
CONDITION.

At the time of our formation we acquired assets from our predecessor
entities subject to all of their potential existing liabilities, without
recourse. In addition, we have and may in the future acquire properties subject
to liabilities and without any recourse, or with only limited recourse, with
respect to unknown liabilities. As a result, if a liability were asserted
against us based upon ownership of any of these entities or properties, then we
might have to pay substantial sums to settle it, which could adversely affect
our cash flow. Unknown liabilities with respect to entities or properties
acquired might include:

- 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 or the former owners of
the properties;

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

- tax liabilities; and

- claims for indemnification by the general partners, officers and
directors and others indemnified by our predecessors or the former owners
of the properties.

RISKS ASSOCIATED WITH OUR INTERNATIONAL BUSINESS

OUR INTERNATIONAL GROWTH IS SUBJECT TO SPECIAL RISKS AND WE MAY NOT BE ABLE TO
EFFECTIVELY MANAGE OUR INTERNATIONAL GROWTH.

We have acquired and developed, and expect to continue to acquire and
develop, properties in foreign countries. Because local markets affect our
operations, our international investments are subject to economic fluctuations
in the foreign locations in which we invest. In addition, our international
operations are subject to the usual risks of doing business abroad such as
revisions in tax treaties or other laws governing the taxation of our foreign
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 of these developments may occur. Further, we have
entered, and may in the future 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

47

resolving disputes that may arise. And 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 or at all.

Further, our business has grown rapidly and continues to grow through
international 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 pay dividends on, and the market price of,
our stock could be adversely affected.

ACQUIRED PROPERTIES MAY BE LOCATED IN NEW MARKETS, WHERE WE MAY FACE RISKS
ASSOCIATED WITH INVESTING IN AN UNFAMILIAR MARKET.

We have acquired and may continue to acquire properties in international
markets that are new to us. When we acquire properties located in these markets,
we may face risks associated with a lack of market knowledge or understanding of
the local economy, forging new business relationships in the area and
unfamiliarity with local government and permitting procedures. We work to
mitigate such risks through extensive diligence and research and associations
with experienced partners, however there can be no guarantee that all such risks
will be eliminated.

WE ARE SUBJECT TO RISKS FROM POTENTIAL FLUCTUATIONS IN EXCHANGE RATES BETWEEN
THE U.S. DOLLAR AND THE CURRENCIES OF THE FOREIGN COUNTRIES IN WHICH WE
INVEST.

We are pursuing, and intend to continue to pursue, growth opportunities in
international markets. As we invest in countries where the U.S. dollar is not
the national currency, we are subject to foreign currency risks from the
potential fluctuations in exchange rates between the U.S. dollar and the
currencies of those foreign countries. A significant depreciation in the value
of the currency of one or more foreign countries where we have a significant
investment may materially affect our results of operations. We attempt to
mitigate any such effects by borrowing under our multi-currency credit facility
in the currency of the country we are investing in and, under certain
circumstances, by putting in place foreign currency put option contracts hedging
exchange rate fluctuations. For leases denominated in foreign currencies, we may
use derivative financial instruments to manage the foreign exchange risk. We
cannot, however, assure you that our efforts will successfully neutralize all
foreign currency risks.

DEBT FINANCING RISKS

WE COULD INCUR MORE DEBT, INCREASING OUR DEBT SERVICE.

It is our policy to incur debt, either directly or through our
subsidiaries, only if it will not cause our share of total debt-to-total market
capitalization ratio to exceed approximately 45%. The aggregate amount of
indebtedness that we may incur under our policy increases directly with an
increase in the market price per share of our capital stock. Further, our
management could alter or eliminate this policy without stockholder approval. If
we change this policy, then we could become more highly leveraged, resulting in
an increase in debt service that could adversely affect the cash available for
distribution to our stockholders.

WE FACE RISKS ASSOCIATED WITH THE USE OF DEBT TO FUND ACQUISITIONS AND
DEVELOPMENTS, INCLUDING REFINANCING RISK.

As of December 31, 2003, we had total debt outstanding of $2.6 billion. We
guarantee the operating partnership's obligations with respect to the senior
debt securities referenced in our financial statements. We are subject to risks
normally associated with debt financing, including the risk that our cash flow
will be insufficient to meet required payments of principal and interest. We
anticipate that we will repay only a small portion of the principal of our debt
prior to maturity. Accordingly, we will likely need to refinance at least a
portion of our outstanding debt as it matures. There is a risk that we may not
be able to refinance existing debt or that the terms of any refinancing will not
be as favorable as the terms of our existing debt. 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 pay dividends to our stockholders 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

48

higher interest rates upon refinancing, then the interest expense relating to
that refinanced indebtedness would increase.

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 pay dividends on, and the market price of, our stock.

WE ARE DEPENDENT ON EXTERNAL SOURCES OF CAPITAL.

In order to qualify as a real estate investment trust, we are required each
year to distribute to our 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 are taxed on our income to
the extent it is not fully distributed. Consequently, we may not be able to fund
all future capital needs, including acquisition and development activities, from
cash retained from operations and must rely on third-party sources of capital.
Our ability to access private debt and equity capital on favorable terms or at
all is dependent 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 our capital
stock.

COVENANTS IN OUR DEBT AGREEMENTS COULD ADVERSELY AFFECT OUR FINANCIAL
CONDITION.

The terms of our credit agreements and other indebtedness require that we
comply with a number of customary financial and other covenants, such as
maintaining debt service coverage and leverage ratios and maintaining insurance
coverage. These covenants may limit flexibility in our operations, and our
failure to comply with these covenants could cause a default under the
applicable debt agreement even if we have satisfied our payment obligations.
Further, as of December 31, 2003, we had 42 non-recourse secured loans that are
cross-collateralized by 86 properties, totaling $920.6 million (not including
unamortized debt premium). If we default on any of these loans, we may then be
required to repay such 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 pay dividends on, and
the market price of, our stock. In addition, our credit facility 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 facility 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 pay dividends on, and the market price of,
our stock.

CONFLICTS OF INTEREST RISKS

SOME OF OUR DIRECTORS AND EXECUTIVE OFFICERS ARE INVOLVED IN OTHER REAL ESTATE
ACTIVITIES AND INVESTMENTS.

Prior to the consummation our initial public offering in 1997, some of our
executive officers and directors acquired interests in real estate-related
businesses and investments, which they still own. Our executive officers'
continued involvement in other real estate-related activities could divert their
attention from our day-to-day operations. Our executive officers have entered
into non-competition agreements with us 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 OUR EXECUTIVE OFFICERS AND DIRECTORS MAY HAVE CONFLICTS OF INTEREST
WITH US IN CONNECTION WITH OTHER PROPERTIES THAT THEY OWN OR CONTROL.

In October 1986, our predecessor-in-interest entered into a property and
asset management agreement with Inglewood Corporate Center Associates to manage
an office building, in which Messrs. Moghadam and Burke and Thomas W. Tusher,
also a director, held, directly and indirectly, 26.7%, 26.7% and 20% interests,
49

respectively. During 2003, Inglewood transferred to a third party such property
and asset management services. Until such time, Inglewood had been paying us
property and asset management fees, which totaled approximately $11,500 for the
period from January 1, 2003 through the date on which such management was
transferred during the second quarter of 2003. Also, during 2003, Mr. Tusher's
direct and indirect interests in Inglewood were redeemed for an amount equal to
the estimated liquidation value of such venture's assets. As a result, each of
Messrs. Moghadam and Burke now holds, directly and indirectly, a 33.3% interest
in Inglewood.

Certain of our executive officers and directors own interests in other
real-estate related businesses and investments, including retail development
projects, office buildings and de minimus holdings of the equity securities of
public and private real estate companies. We believe that these properties and
activities 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, 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, our executive
officers' and directors' continued involvement in these properties could divert
management's attention from our day-to-day operations. We will not acquire any
properties from our executive officers, directors or their affiliates unless the
transaction is approved by a majority of the disinterested and independent (as
defined by the rules of the New York Stock Exchange) members of our board of
directors with respect to that transaction.

OUR ROLE AS GENERAL PARTNER OF THE OPERATING PARTNERSHIP MAY CONFLICT WITH THE
INTERESTS OF OUR STOCKHOLDERS.

As the general partner of the operating partnership, we have fiduciary
obligations to the operating partnership's limited partners, the discharge of
which may conflict with the interests of our stockholders. In addition, those
persons holding limited partnership units will have the right to vote as a class
on certain amendments to the operating partnership's partnership agreement and
individually to approve certain amendments that would adversely affect their
rights. The limited partners may exercise these voting rights in a manner that
conflicts with the interests of our stockholders. In addition, under the terms
of the operating partnership's partnership agreement, holders of limited
partnership units will have certain approval rights with respect to certain
transactions that affect all stockholders but which they may not exercise in a
manner that reflects the interests of all stockholders.

50

RISKS ASSOCIATED WITH GOVERNMENT REGULATIONS

COMPLIANCE OR FAILURE TO COMPLY WITH THE AMERICANS WITH DISABILITIES ACT AND
OTHER SIMILAR REGULATIONS COULD RESULT IN SUBSTANTIAL COSTS.

Under the Americans with Disabilities Act, places of public accommodation
must meet certain federal requirements related to access and use by disabled
persons. Noncompliance could result in the imposition of fines by the federal
government or the award of damages to private litigants. If we are required to
make unanticipated expenditures to comply with the Americans with Disabilities
Act, including removing access barriers, then our cash flow and the amounts
available for dividends to our stockholders may be adversely affected. Our
properties are also subject to various federal, state and local regulatory
requirements, such as state and local fire and life-safety requirements. We
could incur fines or private damage awards if we fail to comply with these
requirements. While we believe that our properties are currently in material
compliance with these regulatory requirements, the requirements may change or
new requirements may be imposed that could require significant unanticipated
expenditures by us that will affect our cash flow and results of operations.

THE COSTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS AND REGULATIONS COULD EXCEED
OUR BUDGETS FOR THESE ITEMS.

Under various federal, state and local laws, ordinances and regulations, a
current or previous owner or operator of real estate may be liable for the costs
of investigation, removal or remediation of certain hazardous or toxic
substances or petroleum products at, on, under or in its property. The costs of
removal or remediation of such substances could be substantial. 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 the
environmental contamination.

Environmental laws also require that owners or operators of buildings
containing asbestos properly manage and maintain the asbestos, adequately inform
or train those who may come into contact with asbestos and undertake special
precautions, including removal or other abatement, in the event that asbestos is
disturbed during building renovation or demolition. These laws may impose fines
and penalties on building owners or operators who fail 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. Some of our
properties may contain asbestos-containing building materials.

In addition, 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, creating a potential
for the release of such hazardous or toxic substances. Further, certain of our
properties are on, adjacent to or near other properties that have contained or
currently contain petroleum products or other hazardous or toxic substances, or
upon which others have engaged, are engaged or may engage in activities that may
release such 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 that the acquisition will yield a superior
risk-adjusted return. In such an instance, we underwrite the costs of
environmental investigation, clean-up and monitoring into the acquisition cost
and obtain appropriate environmental insurance for the property. Further, 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.

At the time of acquisition, we subject all of our properties to a Phase I
or similar environmental assessments by independent environmental consultants
and we may have additional Phase II testing performed upon consultant's
recommendation. These environmental assessments have not revealed, and we are
not aware of, any environmental liability that we believe would have a material
adverse effect on our financial condition or results of operations taken as a
whole. Nonetheless, it is possible that the assessments did not reveal all
environmental liabilities and that there are material environmental liabilities
unknown to us, or that known environmental conditions may give rise to
liabilities that are greater than we anticipated.
51

Further, our properties' current environmental condition 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 unrelated third
parties. 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 pay dividends on,
and the market price of, our stock could be adversely affected.

FEDERAL INCOME TAX RISKS

OUR FAILURE TO QUALIFY AS A REAL ESTATE INVESTMENT TRUST WOULD HAVE SERIOUS
ADVERSE CONSEQUENCES TO OUR STOCKHOLDERS.

We elected to be taxed as a real estate investment trust under Sections 856
through 860 of the Internal Revenue Code commencing with our taxable year ended
December 31, 1997. We currently intend to operate so as to qualify as a real
estate investment trust under the Internal Revenue Code and believe that our
current organization and method of operation comply with the rules and
regulations promulgated under the Internal Revenue Code to enable us to continue
to qualify as a real estate investment trust. However, it is possible that we
have been organized or have operated in a manner that would not allow us to
qualify as a real estate investment trust, or that our future operations could
cause us to fail to qualify. Qualification as a real estate investment trust
requires us to satisfy numerous requirements (some on an annual and others on a
quarterly basis) established under highly technical and complex Internal Revenue
Code provisions for which there are only limited judicial and administrative
interpretations, and involves the determination of various factual matters and
circumstances not entirely within our control. For example, in order to qualify
as a real estate investment trust, we must derive at least 95% of our gross
income in any year from qualifying sources. In addition, we must pay dividends
to stockholders aggregating annually at least 90% of our real estate investment
trust taxable income (determined without regard to the dividends paid deduction
and by excluding capital gains) and must satisfy specified asset tests on a
quarterly basis. These provisions and the applicable treasury regulations are
more complicated in our case because we hold our assets through the operating
partnership. Legislation, new regulations, administrative interpretations or
court decisions could significantly change the tax laws with respect to
qualification as a real estate investment trust or the federal income tax
consequences of such qualification. However, we are not aware of any pending tax
legislation that would adversely affect our ability to qualify as a real estate
investment trust.

If we fail to qualify as a real estate investment trust in any taxable
year, then we will be required to pay federal income tax (including any
applicable alternative minimum tax) on our taxable income at regular corporate
rates. Unless we are entitled to relief under certain statutory provisions, we
would be disqualified from treatment as a real estate investment trust for the
four taxable years following the year in which we lost qualification. If we lose
our real estate investment trust status, then our net earnings available for
investment or distribution to stockholders would be significantly reduced for
each of the years involved. In addition, we would no longer be required to make
distributions to our stockholders.

CERTAIN PROPERTY TRANSFERS MAY GENERATE PROHIBITED TRANSACTION INCOME,
RESULTING IN A PENALTY TAX ON GAIN ATTRIBUTABLE TO THE TRANSACTION.

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 subject to a 100% penalty tax. Since we acquire properties for
investment purposes, we do not believe that our occasional transfers or
disposals of property are treated as prohibited transactions. 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 we would be required to pay a 100% penalty tax on any gain
allocable to us from the prohibited transaction. In addition, income from a
prohibited transaction might adversely affect our ability to satisfy the income
tests for qualification as a real estate investment trust for federal income tax
purposes.

52

RISKS ASSOCIATED WITH OUR DEPENDENCE ON KEY PERSONNEL

We depend on the efforts of our executive officers. While we believe that
we 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 pay
dividends on, and the market price of, our stock. We do not have employment
agreements with any of our executive officers.

RISKS ASSOCIATED WITH OWNERSHIP OF OUR STOCK

LIMITATIONS IN OUR CHARTER AND BYLAWS COULD PREVENT A CHANGE IN CONTROL.

Certain provisions of our charter and bylaws may delay, defer, or prevent a
change in control or other transaction that could provide the holders of our
common stock with the opportunity to realize a premium over the then-prevailing
market price for the common stock. To maintain our qualification as a real
estate investment trust for federal income tax purposes, not more than 50% in
value of our outstanding stock may be owned, actually or constructively, by five
or fewer individuals (as defined in the Internal Revenue Code to include certain
entities) during the last half of a taxable year after the first taxable year
for which a real estate investment trust election is made. Furthermore, our
common stock must be held by a minimum of 100 persons for at least 335 days of a
12-month taxable year (or a proportionate part of a short tax year). In
addition, if we, or an owner of 10% or more of our stock, actually or
constructively owns 10% or more of one of our customers (or a tenant of any
partnership in which we are a partner), then the rent received by us (either
directly or through any such partnership) from that tenant will not be
qualifying income for purposes of the real estate investment trust gross income
tests of the Internal Revenue Code. To help us maintain our qualification as a
real estate investment trust for federal income tax purposes, we prohibit the
ownership, actually or by virtue of the constructive ownership provisions of the
Internal Revenue Code, by any single person, of more than 9.8% (by value or
number of shares, whichever is more restrictive) of the issued and outstanding
shares of each of our common stock, series L preferred stock and series M
preferred stock. We also prohibit the ownership, actually or constructively, of
any shares of our series D, E, F, H, I, J and K preferred stock by any single
person so that no such person, taking into account all of our stock so owned by
such person, including any common stock or other series of preferred stock, may
own in excess of 9.8% of our issued and outstanding capital stock. We refer to
this limitation as the "ownership limit". Shares acquired or held in violation
of the ownership limit will be transferred to a trust for the benefit of a
designated charitable beneficiary. Any person who acquires shares in violation
of the ownership limit will not be entitled to any dividends on the shares or be
entitled to vote the shares or receive any proceeds from the subsequent sale of
the shares in excess of the lesser of the price paid for the shares or the
amount realized from the sale. A transfer of shares in violation of the above
limits may be void under certain circumstances. The ownership limit may have the
effect of delaying, deferring, or preventing a change in control and, therefore,
could adversely affect our stockholders' ability to realize a premium over the
then-prevailing market price for the shares of our common stock in connection
with such transaction.

Our charter authorizes us to issue additional shares of common and
preferred stock and to establish the preferences, rights and other terms of any
series or class of preferred stock that we issue. Although our board of
directors has no intention to do so at the present time, it could establish a
series or class of preferred stock that could have the effect of delaying,
deferring, or preventing a transaction, including a change in control, that
might involve a premium price for the common stock or otherwise be in the best
interests of our stockholders.

Our charter and bylaws and Maryland law also contain other provisions that
may impede various actions by stockholders without approval of our board of
directors, which in turn may delay, defer, or prevent a transaction, including a
change in control. Those provisions in our charter and bylaws include:

- directors may be removed only for cause and only upon a two-thirds vote
of stockholders;

- our board can fix the number of directors within set limits (which limits
are subject to change by our board), and fill vacant directorships upon
the vote of a majority of the remaining directors, even though less than
a quorum, or in the case of a vacancy resulting from an increase in the
size of the board, a majority of the entire board;

- stockholders must give advance notice to nominate directors or propose
business for consideration at a stockholders' meeting; and
53

- the request of the holders of 50% or more of our common stock is
necessary for stockholders to call a special meeting.

Those provisions provided for under Maryland law include:

- a two-thirds vote of stockholders is required to amend our charter; and

- stockholders may only act by written consent with the unanimous approval
of all stockholders entitled to vote on the matter in question.

In addition, our board could elect to adopt, without stockholder approval,
certain other provisions under Maryland law that may impede a change in control.

VARIOUS MARKET CONDITIONS AFFECT THE PRICE OF OUR STOCK.

As with other publicly-traded equity securities, the market price of our
stock will depend upon various market conditions that are not within our control
and may change from time to time, including:

- the extent of investor interest in us;

- the general reputation of real estate investment trusts and the
attractiveness of their equity securities in comparison to other equity
securities (including securities issued by other real estate-based
companies);

- general stock and bond market conditions, including changes in interest
rates on fixed income securities, that may lead prospective purchasers of
our stock to demand a higher annual yield from future dividends; and

- terrorist activity may adversely affect the markets in which our
securities trade, possibly increasing market volatility and causing the
further erosion of business and consumer confidence and spending.

Other factors such as governmental regulatory action and changes in tax
laws could also have a significant impact on the future market price of our
stock.

EARNINGS AND CASH DIVIDENDS, ASSET VALUE AND MARKET INTEREST RATES AFFECT THE
PRICE OF OUR STOCK.

As a real estate investment trust the market value of our equity
securities, in general, is based primarily upon the market's perception of our
growth potential and our current and potential future earnings and cash
dividends. Our equity securities' market value is based secondarily upon the
market value of our underlying real estate assets. For this reason, shares of
our stock may trade at prices that are higher or lower than our net asset value
per share. To the extent that we retain operating cash flow for investment
purposes, working capital reserves, or other purposes, these retained funds,
while increasing the value of our underlying assets, may not correspondingly
increase the market price of our stock. Our failure to meet the market's
expectations with regard to future earnings and cash dividends likely would
adversely affect the market price of our stock. Further, the distribution yield
on the stock (as a percentage of the price of the stock) relative to market
interest rates may also influence the price of our stock. An increase in market
interest rates might lead prospective purchasers of our stock to expect a higher
distribution yield, which would adversely affect our stock's market price.
Additionally, if the market price of our stock declines significantly, then we
might breach certain covenants with respect to our debt obligations, which could
adversely affect our liquidity and ability to make future acquisitions and our
ability to pay dividends to our stockholders.

IF WE ISSUE ADDITIONAL SECURITIES, THEN THE INVESTMENT OF EXISTING
STOCKHOLDERS WILL BE DILUTED.

We have authority to issue shares of common stock or other equity or debt
securities, and to cause the operating partnership to issue limited partnership
units, in exchange for property or otherwise. Existing stockholders have no
preemptive right to acquire any additional securities issued by the operating
partnership or us and any issuance of additional equity securities could result
in dilution of an existing stockholder's investment.

54

WE COULD CHANGE OUR INVESTMENT AND FINANCING POLICIES WITHOUT A VOTE OF
STOCKHOLDERS.

Subject to our current investment policy to maintain our qualification as a
real estate investment trust (unless a change is approved by our board of
directors under certain circumstances), our board of directors determines our
investment and financing policies, our growth strategy and our debt,
capitalization, distribution and operating policies. Although our board of
directors does not presently intend to revise or amend these strategies and
policies, they may do so at any time without a vote of stockholders. Any such
changes may not serve the interests of all stockholders and could adversely
affect our financial condition or results of operations, including our ability
to pay dividends to our stockholders.

SHARES AVAILABLE FOR FUTURE SALE COULD ADVERSELY AFFECT THE MARKET PRICE OF
OUR COMMON STOCK.

The operating partnership and AMB Property II, L.P. had 4,763,790 common
limited partnership units issued and outstanding as of December 31, 2003, which
may be exchanged generally one year after their issuance on a one-for-one basis
into shares of our common stock. In the future, the operating partnership or AMB
Property II, L.P. may issue additional limited partnership units, and we may
issue shares of common stock, in connection with the acquisition of properties
or in private placements. These shares of common stock and the shares of common
stock issuable upon exchange of limited partnership units may be sold in the
public securities markets over time, pursuant to registration rights that we
have granted, or may grant in connection with future issuances, or pursuant to
Rule 144. In addition, common stock issued under our stock option and incentive
plans may also be sold in the market pursuant to registration statements that we
have filed or pursuant to Rule 144. As of December 31, 2003, under our stock
option and incentive plans, we had reserved 16,761,873 shares of common stock
for issuance (not including shares that we have already issued), had outstanding
options to purchase 10,286,057 shares of common stock (net of forfeitures and
1,213,905 shares that we have issued upon the exercise of options) and had
974,222 restricted shares of common stock outstanding (net of 52,209 shares that
have been forfeited). Future sales of a substantial number of shares of our
common stock in the market or the perception that such sales might occur could
adversely affect the market price of our common stock. Further, the existence of
the operating partnership's limited partnership units and the shares of our
common stock reserved for issuance upon exchange of limited partnership units
and the exercise of options, and registration rights referred to above, may
adversely affect the terms upon which we are able to obtain additional capital
through the sale of equity securities.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss from adverse changes in market prices,
interest rates and foreign exchange 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 stockholders and unitholders, 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 interest rate fluctuations in connection with our credit facility
and other variable rate borrowings and our ability to incur more debt without
stockholder approval, thereby increasing our debt service obligations, which
could adversely affect our cash flows. As of December 31, 2003, we had no
interest rate caps or swaps. See "Item 2: 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 rate debt outstanding before unamortized debt premiums of $10.8 million
as of December 31, 2003 (dollars in thousands):

- ---------------

(1) Represents 85.3% of all outstanding debt.

(2) Represents 14.7% of all outstanding debt.

55

If market rates of interest on our variable rate debt increased by 10% (or
approximately 20 basis points), then the increase in interest expense on the
variable rate debt would be $0.8 million annually. As of December 31, 2003, the
estimated fair value of our fixed rate debt was $2,472.2 million based on our
estimate of current market interest rates.

As of December 31, 2003 and 2002, variable rate debt comprised 14.7% and
9.3%, respectively, of all our outstanding debt. Variable rate debt was $378.0
million and $206.1 million, respectively, as of December 31, 2003 and 2002. The
increase is due to a higher outstanding balance on our credit facility. This
increase in our outstanding variable rate debt increases our risk associated
with unfavorable interest rate fluctuations.

Financial Instruments. We record all derivatives on the balance sheet at
fair value as an asset or liability, with an offset to accumulated other
comprehensive income or income. For revenues or expenses denominated in
non-functional currencies, we may use derivative financial instruments to manage
foreign currency exchange rate risk. Our derivative financial instruments in
effect at December 31, 2003, were a forward contract hedging against adverse
foreign exchange fluctuations in the Mexican peso against the U.S. dollar and a
put option hedging against adverse equity fluctuations affecting the value of
stock warrants obtained from customers. The following table summarizes our
financial instruments as of December 31, 2003:

Foreign Operations. Our exposure to market risk also includes foreign
currency exchange rate risk. The U.S. dollar is the functional currency for our
subsidiaries operating in the United States and Mexico. The functional currency
for our subsidiaries operating outside North America is generally the local
currency of the country in which the entity is located, mitigating the effect of
foreign exchange gains and losses. Our subsidiaries whose functional currency is
not the U.S. dollar translate their financial statements into U.S. dollars.
Assets and liabilities are translated at the exchange rate in effect as of the
financial statement date. We translate income statement accounts using the
average exchange rate for the period and significant nonrecurring transactions
using the rate on the transaction date. Gains resulting from the translation are
included in accumulated other comprehensive income as a separate component of
stockholders' equity and totaled $0.7 million for the year ended December 31,
2003.

Our foreign subsidiaries may have transactions denominated in currencies
other than their functional currency. In these instances, non-monetary assets
and liabilities are reflected at the historical exchange rate, monetary assets
and liabilities are remeasured at the exchange rate in effect at the end of the
period and income statement accounts are remeasured at the average exchange rate
for the period. For the year ended December 31, 2003, losses from remeasurement
included in our results of operations were less than $0.1 million.

We also record gains or losses in the income statement when a transaction
with a third party, denominated in a currency other than the entity's functional
currency, is settled and the functional currency cash flows realized are more or
less than expected based upon the exchange rate in effect when the transaction
was initiated.

56

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See "Item 15: Exhibits, Financial Statement Schedules, and Reports of Form
8-K."

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

ITEM 9A. 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 U.S.
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 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 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.

As required by Rule 13a-15(b) of the Securities Exchange Act of 1934, as
amended, we carried out an evaluation, under the supervision and with the
participation of our management, including our chief executive officer,
president and chief financial officer, of the effectiveness of the design and
operation of our disclosure controls and procedures as of the end of the quarter
covered by this report. Based on the foregoing, our chief executive officer,
president and chief financial officer each concluded that our disclosure
controls and procedures were effective at the reasonable assurance level.

There have been no changes in our internal control over financial reporting
during our most recent fiscal quarter that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.

57

PART III

ITEMS 10, 11, 12, 13 AND 14.

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

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.

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.

58

(a)(3) EXHIBITS:

(b) REPORTS ON FORM 8-K:

AMB Property Corporation filed a Current Report on Form 8-K on October 7,
2003, in connection with its announcement of new dates for its third quarter
2003 earnings release.

AMB Property Corporation filed a Current Report on Form 8-K on October 29,
2003, in connection with its third quarter 2003 earnings release.

AMB Property Corporation filed a Current Report on Form 8-K on November 6,
2003, in connection with the issuance of $75.0 million in senior unsecured notes
by AMB Property, L.P. under its medium-term note program.

AMB Property Corporation filed a Current Report on Form 8-K on November 12,
2003, in connection with the pricing of its 6 3/4% Series M Cumulative
Redeemable Preferred Stock.

AMB Property Corporation filed a Current Report on Form 8-K on November 17,
2003, in connection with AMB Property II, L.P.'s issuance of Class B Common
Limited Partnership Units.

AMB Property Corporation filed a Current Report on Form 8-K/A on November
19, 2003, in connection with AMB Property II, L.P.'s issuance of Class B Common
Limited Partnership Units.

AMB Property Corporation filed a Current Report on Form 8-K on November 21,
2003, in connection with the issuance of $50.0 million in senior unsecured notes
by AMB Property, L.P. under its medium-term note program.

AMB Property Corporation filed a Current Report on Form 8-K on November 26,
2003, in connection with the issuance of its Series M Preferred Stock.

AMB Property Corporation filed a Current Report on Form 8-K on December 22,
2003, in connection with certain of its 2003 property acquisitions.

AMB Property Corporation filed a Current Report on Form 8-K on January 14,
2004, in connection with its fourth quarter 2003 earnings release.

AMB Property Corporation filed a Current Report on Form 8-K/A on February
25, 2004, to file audited financial statements and unaudited pro forma financial
information in connection with certain of its 2003 property acquisitions.

(c) EXHIBITS:

See Item 15(a)(3) above.

(d) FINANCIAL STATEMENT SCHEDULES:

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

63

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, AMB Property Corporation has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized on March 11,
2004.

AMB PROPERTY CORPORATION

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, hereby severally constitute Hamid R.
Moghadam, W. Blake Baird, Michael A. Coke and Tamra D. Browne, 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 to enable AMB Property Corporation 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.

65

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Stockholders of
AMB Property Corporation:

In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of stockholders' equity and of
cash flows present fairly, in all material respects, the financial position of
AMB Property Corporation and its subsidiaries as of December 31, 2003 and 2002,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 2003 in conformity with accounting
principles generally accepted in the United States of America. These financial
statements are the responsibility of the Company's management; 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, the
Company adopted Statement of Financial Accounting Standards ("SFAS") No. 150,
Accounting for Certain Financial Instruments with Characteristics of Both
Liabilities and Equity, in 2003 and the expense recognition provisions of SFAS
No. 123, Accounting for Stock-based Compensation, and SFAS No. 144, Accounting
for the Impairment or Disposal of Long Lived Assets, in 2002. In addition, as
discussed in Note 2 to the consolidated financial statements, the Company
restated its net income available to common stockholders for the year ended
December 31, 2001 for the application of Emerging Issues Task Force Topic No.
D-42, The Effect on the Calculation of Earnings per Share for the Redemption or
Induced Conversion of Preferred Stock.

PRICEWATERHOUSECOOPERS LLP

San Francisco, California
February 13, 2004

F-1

AMB PROPERTY CORPORATION

CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2003 AND 2002

The accompanying notes are an integral part of these consolidated financial
statements.
F-2

AMB PROPERTY CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

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

F-3

AMB PROPERTY CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

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

F-4

AMB PROPERTY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

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

F-5

AMB PROPERTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002

1. ORGANIZATION AND FORMATION OF THE COMPANY

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 primarily industrial
properties in key distribution markets throughout North America, Europe and
Asia. Unless the context otherwise requires, the "Company" means AMB Property
Corporation, the Operating Partnership and their other controlled subsidiaries.

As of December 31, 2003, the Company owned an approximate 94.5% general
partnership interest in the Operating Partnership, excluding preferred units.
The remaining 5.5% limited partnership interests are 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, limited liability companies and other entities. 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.

Through the Operating Partnership, the Company enters into co-investment
joint ventures with institutional investors. These co-investment joint ventures
provide the Company with an additional source of capital and income. As of
December 31, 2003, the Company had investments in six co-investment joint
ventures, which are consolidated for financial reporting purposes.

AMB Capital Partners, LLC, a Delaware limited liability company ("AMB
Capital Partners"), provides real estate investment services to clients and
co-investment joint venture clients on a fee basis. Headlands Realty
Corporation, a Maryland corporation, conducts a variety of businesses that
include incremental income programs 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. AMB Capital Partners, Headlands Realty Corporation and IMD
Holding Corporation are wholly-owned subsidiaries of the Company.

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

As of December 31, 2003, the Company owned 948 operating industrial
buildings and six retail and other properties, aggregating approximately 87.6
million rentable square feet, located in 34 markets throughout North America and
in France, Germany and Japan. The Company's strategy is to become a leading
provider of distribution properties in supply-constrained submarkets located
near key international passenger and cargo airports, highway systems and
seaports in major metropolitan areas of North America, Europe and Asia. These
markets are generally tied to global trade. As of December 31, 2003, the
industrial buildings, principally warehouse distribution buildings, encompassed
approximately 87.1 million rentable square feet and were 93.1% leased. As of
December 31, 2003, the retail centers, principally grocer-anchored community
shopping centers, encompassed approximately 0.5 million rentable square feet and
were 75.2% leased.

As of December 31, 2003, through AMB Capital Partners, the Company also
managed, but did not have an ownership interest in, industrial, retail and other
properties, totaling approximately 0.5 million rentable

F-6

AMB PROPERTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

square feet. In addition, the Company had investments in industrial operating
properties, totaling approximately 7.9 million rentable square feet, through
unconsolidated joint ventures. As of December 31, 2003, the Company also had
investments in industrial development projects, some of which were held for
sale, totaling approximately 5.5 million square feet.

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 Company, its wholly-owned qualified REIT and taxable REIT subsidiaries,
the Operating Partnership and joint ventures, in which the Company 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 Company also has non-controlling partnership interests
in 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.

Reclassifications. Certain items in the consolidated financial statements
for prior periods have been reclassified to conform to current classifications.

Foreign Operations. The U.S. dollar is the functional currency for the
Company's subsidiaries operating in the United States and Mexico. The functional
currency for the Company's subsidiaries operating outside North America is
generally the local currency of the country in which the entity is located. The
Company's subsidiaries whose functional currency is not the U.S. dollar
translate their financial statements into U.S. dollars. Assets and liabilities
are translated at the exchange rate in effect as of the financial statement
date. The Company translates income statement accounts using the average
exchange rate for the period and significant nonrecurring transactions using the
rate on the transaction date. Gains and losses resulting from the translation
are included in accumulated other comprehensive income as a separate component
of stockholders' equity.

The Company's foreign subsidiaries may have transactions denominated in
currencies other than their functional currency. In these instances,
non-monetary assets and liabilities are reflected at the historical exchange
rate, monetary assets and liabilities are remeasured at the exchange rate in
effect at the end of the period and income statement accounts are remeasured at
the average exchange rate for the period. Gains and losses from remeasurement
are generally included in the Company's results of operations.

The Company also records gains or losses in the income statement when a
transaction with a third party, denominated in a currency other than the
entity's functional currency, is settled and the functional currency cash flows
realized are more or less than expected based upon the exchange rate in effect
when the transaction was initiated.

Investments in Real Estate. Investments in real estate and leasehold
interests 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
Company's long-lived assets could occur in the future period in

F-7

AMB PROPERTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 earnings. As a result of recent leasing activity and the current
economic environment, the Company re-evaluated the carrying value of its
investments and recorded an impairment charge of $5.3 million, $2.9 million and
$18.6 million in 2003, 2002 and 2001, respectively, on certain of its
investments. The Company believes that there are no additional impairments of
the carrying values of its investments in real estate as of December 31, 2003.
Also during the year ended December 31, 2003, the Company recorded a reduction
of depreciation expense of $2.1 million to reflect the recovery, through the
settlement of a lawsuit, of capital expenditures paid in prior years.

In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 141, Business
Combinations. SFAS No. 141 requires the Company to record at acquisition an
intangible asset or liability for the value attributable to above or
below-market leases, in-place leases and lease origination costs. The
requirements are applicable to all acquisitions subsequent to July 1, 2001. The
Company regularly reviews the impact of above or below-market leases, in-place
leases and lease origination costs for all new acquisitions and records an
intangible asset or liability accordingly when deemed material. The adoption of
SFAS No. 141 did not have a material impact on the Company's financial position
or results of operations.

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):

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, 2003, 2002 and 2001, was $8.5 million,
$6.9 million and $13.7 million, respectively.

Expenditures for maintenance and repairs are charged to operations as
incurred. Maintenance expenditures include painting and repair costs. The
Company 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.

Investments in Consolidated and Unconsolidated Joint Ventures. Minority
interests represent the limited partnership interests in the Operating
Partnership and interests held by certain third parties in several

F-8

AMB PROPERTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

real estate joint ventures, aggregating approximately 38.1 million square feet,
which are consolidated for financial reporting purposes. Such investments are
consolidated because the Company owns a majority interest or it exercises
significant control over major operating decisions such as approval of budgets,
selection of property managers, asset management, investment activity and
changes in financing. When the Company contributes properties to its joint
ventures, it recognizes a gain on the contributed properties acquired by the
third-party co-investors.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity ("SFAS 150").
This Statement establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. It requires that an issuer classify a financial instrument that is
within its scope as a liability (or an asset in some circumstances). SFAS 150
was effective beginning in the third quarter of 2003, however, the FASB deferred
the implementation of SFAS 150 as it applied to certain minority interests in
finite-lived entities indefinitely. The disclosure requirements for certain
minority interests in finite-lived entities still apply. The Company adopted the
requirements of SFAS 150 in the third quarter of 2003, and, considering the
aforementioned deferral, there was no impact on the Company's financial
position, results of operations or cash flows. However, the minority interests
associated with certain of the Company's consolidated joint ventures, those that
have finite lives under the terms of the partnership agreements, represent
mandatorily redeemable interests as defined in SFAS 150. As of December 31,
2003, the aggregate book value of these minority interests in the accompanying
consolidated balance sheet was $659.5 million and the Company believes that the
aggregate settlement value of these interests was approximately $729.2 million.
This amount is based on the estimated liquidation values of the assets and
liabilities and the resulting proceeds that the Company would distribute to its
joint venture partners upon dissolution, as required under the terms of the
respective partnership agreements. Subsequent changes to the estimated fair
values of the assets and liabilities of the consolidated joint ventures will
affect the Company's estimate of the aggregate settlement value. The partnership
agreements do not limit the amount that the minority partners would be entitled
to in the event of liquidation of the assets and liabilities and dissolution of
the respective partnerships. SFAS 150 was effective beginning in the third
quarter of 2003, however, the FASB deferred the implementation of SFAS 150 as it
applied to certain minority interests in finite-lived entities. The Company
adopted the disclosure requirements of SFAS 150 in the third quarter of 2003,
and, considering the aforementioned deferral, there was no impact on the
Company's financial position, results of operations or cash flows.

The Company has non-controlling limited partnership interests in
unconsolidated joint ventures. These investments are not consolidated because
the Company 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 Company accounts for the joint ventures using the
equity method of accounting. When the Company contributes properties to its
joint ventures in exchange for cash, it recognizes a gain representing the
portion of the contributed properties acquired by the third-party investors.

In December 2003, the FASB issued Interpretation No. 46R, Consolidation of
Variable Interest Entities ("FIN 46R"). FIN 46R requires a variable interest
entity to be consolidated by a company if that company is subject to a majority
of the risk of loss from the variable interest entity's activities or entitled
to receive a majority of the entity's residual returns or both. FIN 46R requires
disclosures about variable interest entities that a company is not required to
consolidate, but in which it has a significant variable interest. The
consolidation requirements apply to existing entities in the first reporting
period that ends after March 15, 2004. The Company will adopt the consolidation
requirements of FIN 46R in the first quarter of 2004 and does not believe that
any of its consolidated or unconsolidated joint ventures are variable interest
entities under the provisions of FIN 46R.

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.

F-9

AMB PROPERTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

Mortgages Receivable. Through a wholly-owned subsidiary, the Company holds
a mortgage loan receivable on AMB Pier One, LLC, an unconsolidated joint
venture. The Company also holds short-term mortgages on properties totaling
$30.1 million at December 31, 2003. The book value of the mortgages approximates
fair value.

Accounts Receivable. Accounts receivable includes all current accounts
receivable, net of allowances, other accruals and deferred rent receivable of
$50.4 million and $46.3 million as of December 31, 2003 and 2002, respectively.
The Company regularly reviews the credit worthiness of its customers and adjusts
its allowance for doubtful accounts, straight-line rent receivable balance and
tenant improvement and leasing costs amortization accordingly.

Concentration of Credit Risk. Other real estate companies compete with the
Company 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 Company's ability to lease space and on the amount of rent received. As
of December 31, 2003, the Company did not have any single tenant that accounted
for greater than 3.1% of annualized base rental revenues.

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, 2003 and 2002,
deferred financing costs were $18.6 million and $19.6 million, respectively, net
of accumulated amortization. Such amounts are included in other assets on the
accompanying consolidated balance sheets.

Financial Instruments. The Company 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.
For revenues or expenses denominated in nonfunctional currencies, the Company
may use derivative financial instruments to manage foreign currency exchange
rate risk. The Company's derivative financial instruments in effect at December
31, 2003 were a forward contract hedging against adverse foreign exchange
fluctuations in the Mexican peso against the U.S. dollar and stock warrants
obtained from customers.

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement No. 133
on Derivative Instruments and Hedging Activities. This Statement amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under FASB
Statement No. 133, Accounting for Derivative Instruments and Hedging Activities.
The Company adopted the requirements of SFAS 149 in the third quarter of 2003.
The adoption did not impact the Company's financial position, results of
operations or cash flows.

Debt. The Company's debt includes both fixed and variable rate secured
debt, unsecured fixed rate debt, unsecured variable rate debt and a credit
facility. Based on borrowing rates available to the Company at December 31,
2003, the book value and the estimated fair value of the fixed rate debt (both
secured and unsecured) were $2.2 billion and $2.5 billion, 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 as an offset to interest expense over the term of the
related debt instrument using the effective interest method. As of December 31,
2003 and 2002, the net unamortized debt

F-10

AMB PROPERTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

premium was $10.8 million and $9.8 million, respectively, and are included as a
component of secured debt on the accompanying consolidated balance sheets.

Rental Revenues and Allowance for Doubtful Accounts. The Company, 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.
The Company also records lease termination fees when a customer terminates its
lease by executing a definitive termination agreement with the Company and the
payment of the termination fee is not subject to any conditions that must be met
before the fee is due to the Company. In addition, the Company nets its
allowance for doubtful accounts against rental income for financial reporting
purposes. Such amounts totaled $5.6 million, $1.8 million and $5.2 million for
the years ended December 31, 2003, 2002 and 2001, respectively.

Private Capital Income. Private capital income consists primarily of
acquisition and development fees, asset management fees and priority
distributions earned by AMB Capital Partners from joint ventures and clients.
Private capital income also includes promoted interests and incentive fees from
the Operating Partnership's co-investment joint ventures. For the year ended
December 31, 2003, private capital income includes incentive distributions of
$2.5 million earned from AMB Partners II, L.P. ("Partners II").

Stock-based compensation expense. In 2002, the Company adopted the expense
recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation.
The Company values stock options using the Black-Scholes option-pricing model
and recognizes this value as an expense over the three to five-year vesting
periods. Under this standard, recognition of expense for stock options is
applied to all options granted after the beginning of the year of adoption.
Under SFAS No. 123, related stock-based compensation expense was $2.4 million
and $0.9 million in 2003 and 2002, respectively. The expense is included in
general and administrative expenses in the accompanying consolidated statements
of operations. Prior to 2002, the Company followed the intrinsic method set
forth in APB Opinion 25, Accounting for Stock Issued to Employees. 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 Company's pro forma net income
available to common stockholders would have been:

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

Loss on 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 Company
periodically reviewed its investments and management determined if the value of
such investments had been permanently impaired. During 2001, the Company
recognized losses on its investments in other companies totaling $20.8 million,
including its investment in Webvan Group, Inc. The Company 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 Company
had realized losses on 100% of its investments in such other companies. The
Company recognized no gains or losses in 2003 or 2002 related to its investments
in other companies.

F-11

AMB PROPERTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Discontinued Operations. The Company reported real estate dispositions as
discontinued operations separately as prescribed under the provisions of SFAS
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.
Beginning in 2002, SFAS No. 144 requires the Company to separately report as
discontinued operations the historical operating results attributable to
operating properties sold and held for disposition and the applicable gain or
loss on the disposition of the properties. The consolidated statements of
operations for prior periods are also adjusted to conform with this
classification. There is no impact on the Company's previously reported
consolidated financial position, net income or cash flows.

Preferred Stock and Unit Redemption Issuance Costs. In July 2003, the U.S.
Securities and Exchange Commission ("SEC") announced that it had revised its
position relating to the application of Emerging Issues Task Force Topic No.
D-42, The Effect on the Calculation of Earnings per Share for the Redemption or
Induced Conversion of Preferred Stock, ("Topic D-42"). As a result of this
announcement, original issuance costs related to preferred equity are to be
reflected as a reduction of net income available to common stockholders in
determining earnings per share for the period in which the preferred equity is
redeemed. The announcement requires retroactive application of the revised
position in previously issued financial statements. As a result, the Company's
financial statements for the year ending December 31, 2001, have been restated
to reflect a reduction in net income available to common stockholders of $3.2
million, representing the original issuance costs of AMB Property II, L.P.'s
series C preferred units, which were redeemed in December 2001. Diluted earnings
per share for the year ended December 31, 2001, was $1.43 compared to $1.47 as
previously reported. The SEC's revised position on Topic D-42 did not require
the Company to file amendments to previously filed reports and will not impact
any other previously reported periods.

3. TRANSACTIONS WITH AFFILIATES

AMB Capital Partners provides real estate investment services to clients on
a fee basis. The fees are recorded as private capital income in the accompanying
consolidated statements of operations. For the year ended December 31, 2003,
private capital income includes incentive distributions of $2.5 million earned
from Partners II. Headlands Realty Corporation conducts a variety of businesses
that include incremental income programs and development projects available for
sale to third parties. IMD Holding Corporation also conducts a variety of
businesses that include development projects available for sale to third
parties. On December 31, 2001, AMB Investment Management, Inc. ("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 the year ended December 31, 2003, the Company invested $533.9
million in 82 industrial buildings, aggregating approximately 6.5 million square
feet, of which the Company invested $238.3 million in 43 industrial buildings,
aggregating approximately 3.7 million square feet, through two of the Company's
co-investment joint ventures.

F-12

AMB PROPERTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

During 2003, the Company completed industrial developments valued at $105.7
million, aggregating approximately 1.6 million square feet. The Company also
initiated new industrial development projects in North America and Spain valued
at $226.4 million, aggregating approximately 4.9 million square feet. As of
December 31, 2003, the Company had in its development pipeline: (1) 16
industrial projects, which will total approximately 5.0 million square feet and
will have an aggregate estimated investment of $233.0 million upon completion
and (2) four development projects available for sale, which will total
approximately 0.6 million square feet and will have an aggregate estimated
investment of $38.8 million upon completion. As of December 31, 2003, the
Company and its Development Alliance Partners had funded an aggregate of $112.2
million and needed to fund an estimated additional $159.6 million in order to
complete current and planned projects. The Company's development pipeline
includes projects expected to be completed through the second quarter of 2006.

During 2002, the Company 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 Company's acquisitions included the investment of $166.5 million in 31
industrial buildings, aggregating approximately 3.1 million square feet, through
three of the Company's co-investment joint ventures.

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

5. GAINS FROM DISPOSITIONS OF REAL ESTATE, DEVELOPMENT SALES, AND DISCONTINUED
OPERATIONS

Gains from Dispositions of Real Estate. On February 19, 2003, the Company
contributed $94.0 million in operating properties, consisting of 24 industrial
buildings, aggregating approximately 2.4 million square feet, to its newly
formed unconsolidated joint venture, Industrial Fund I, LLC. The Company
recognized a gain of $7.4 million on the contribution, representing the portion
of the contributed properties acquired by the third-party investors in exchange
for cash.

In 2002, the Company divested itself of two industrial buildings and one
retail center, aggregating approximately 0.8 million square feet, for an
aggregate price of $50.6 million, with a resulting loss of $0.8 million. In June
2002, the Company also contributed $76.9 million in operating properties,
consisting of 15 industrial buildings, aggregating approximately 1.9 million
square feet, to its consolidated co-investment joint venture, AMB-SGP, L.P. The
Company recognized a gain of $3.3 million on the contribution, representing the
portion of the contributed properties acquired by the third-party investors to
the extent of cash proceeds received.

During 2001, the Company 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 the gain on
the Company's contributed properties of $17.8 million. During 2001, the Company
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 Company's historical cost
because the Company controls these ]joint ventures and, therefore, they were
under common control. The Company 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.

Development Sales. During 2003, the Company sold seven
development-for-sale and other projects, aggregating approximately 0.5 million
square feet, for an aggregate price of $74.8 million, resulting in an after-tax
gain of

F-13

AMB PROPERTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

$14.4 million. The other projects included the sale of the Company's purchase
right on Platinum Distribution Center and the sale of the North Bay Business
Center, which the Company purchased in October 2003.

During 2002, the Company sold seven development-for-sale projects,
aggregating approximately 0.2 million square feet, for an aggregate price of
$17.0 million, with a resulting gain of $1.2 million.

During 2001, the Company sold two development-for-sale projects,
aggregating approximately 0.3 million square feet, for an aggregate price of
$52.3 million, with a resulting gain of $17.3 million.

Discontinued Operations. The Company reported its property divestitures as
discontinued operations separately as prescribed under the provisions of SFAS
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.
Beginning in 2002, SFAS No. 144 requires the Company to separately report as
discontinued operations the historical operating results attributable to
operating properties sold and held for disposition and the applicable gain or
loss on the disposition of the properties. Although the application of SFAS No.
144 may affect the presentation of the Company's results of operations for the
periods that it has already reported in filings with the SEC, there will be no
effect on its previously reported financial position, net income or cash flows.

During 2003, the Company divested itself of 24 industrial buildings and two
retail centers, aggregating approximately 2.8 million square feet, for an
aggregate price of $272.3 million, with a resulting net gain of $42.9 million.

During 2002, the Company divested itself of 56 industrial buildings, one
retail center and an undeveloped land parcel, aggregating approximately 4.9
million square feet, for an aggregate price of $193.4 million, with a resulting
net gain of $10.6 million. In November 2002, the Company's joint venture partner
in Partners II increased its ownership in Partners II from 50% to 80% by
acquiring 30% of the Operating Partnership's interest in Partners II. The
Company recognized a gain of $6.3 million on the sale of the Operating
Partnership's 30% interest.

Properties Held for Divestiture. As of December 31, 2003, the Company had
decided to divest itself of one industrial building and one undeveloped land
parcel with a net book value of $11.8 million. The properties either are not in
the Company's core markets or do not meet its current strategic objectives. The
divestitures of the properties are subject to negotiation of acceptable terms
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):

F-14

AMB PROPERTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

As of December 31, 2003 and 2002, assets and liabilities attributable to
properties held for divestiture under the provisions of SFAS No. 144 consisted
of the following (dollars in thousands):

6. MORTGAGES RECEIVABLE

Through a wholly-owned subsidiary, the Company holds a mortgage loan
receivable on AMB Pier One, LLC, an unconsolidated joint venture. As of December
31, 2003 and 2002, the outstanding balance on the note was $13.0 million and
$13.1 million, respectively. The Company also holds various other mortgages
receivable from property sales. The Company's mortgages receivable at December
31, 2003 and 2002, consisted of the following:

- ---------------

(1) Represents the Company's ownership percentage in the co-investment joint
venture that holds the mortgage investment.

F-15

AMB PROPERTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. DEBT

As of December 31, 2003 and 2002, debt consisted of the following (dollars
in thousands):

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, 2003 and 2002, the total gross
investment book value of those properties securing the debt was $2.6 billion and
$2.6 billion, respectively, including $1.8 billion and $1.6 billion,
respectively, in consolidated joint ventures. All of the secured debt bears
interest at fixed rates, except for five loans with an aggregate principal
amount of $52.3 million as of December 31, 2003, which bear interest at variable
rates (weighted average interest rate of 3.2% as of December 31, 2003). The
secured debt has various covenants. Management believes that the Company and the
Operating Partnership were in compliance with their financial covenants as of
December 31, 2003 and 2002. As of December 31, 2003, the Company had 42
non-recourse, secured loans, which are cross-collateralized by 86 properties,
totaling $920.6 million (not including unamortized debt premiums).

In June 1998, the Operating Partnership issued $400.0 million of unsecured
senior debt securities. Interest on the unsecured senior debt securities is
payable semi-annually. The 2015 notes are putable and callable in September
2005. In August 2000, the Operating Partnership commenced a medium-term note
program and subsequently issued $400.0 million of medium-term notes, which are
guaranteed by the Company. In May 2002, the Operating Partnership commenced a
new medium-term note program for the issuance of up to $400.0 million in
principal amount of medium-term notes (unsecured senior debt securities). On
November 10, 2003, the Operating Partnership issued $75.0 million aggregate
principal amount of senior unsecured notes to Teachers Insurance and Annuity
Association of America. The Company guaranteed the principal amount and interest
on the notes, which mature on November 1, 2013, and bear interest at 5.53% per
annum. Teachers has agreed that until November 10, 2005, the Operating
Partnership can require Teachers to return the notes to it for cancellation for
an obligation of equal dollar amount under a first mortgage loan to be secured
by properties determined by the Operating Partnership, except that in the event
the ratings on Operating Partnership's senior unsecured debt are downgraded by
two ratings agencies to BBB-, the Operating Partnership will only have ten days
after the last of these downgrades to exercise this right. During the period

F-16

AMB PROPERTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

when the Operating Partnership can exercise its cancellation right and until any
mortgage loans close, Teachers has agreed not to sell, contract to sell, pledge,
transfer or otherwise dispose of, any portion of the notes. On November 21,
2003, the Operating Partnership issued $50.0 million aggregate principal amount
of floating rate senior unsecured notes. The Company guaranteed the principal
amount and interest on the notes, which mature on November 21, 2006, and bear
interest at a floating rate of 3-month LIBOR telerate plus 40 basis points. As
of December 31, 2003, $275.0 million of capacity remained under the May 2002
medium-term note program. The senior debt securities are subject to various
covenants. Management believes that the Company and the Operating Partnership
were in compliance with their financial covenants as of December 31, 2003 and
2002.

In December 2002, the Operating Partnership renewed its $500.0 million
unsecured credit facility. 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. The credit facility includes a multi-currency component, which was
amended effective July 10, 2003, to increase from $150.0 million to $250.0
million the amount that 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 and the
Operating Partnership has an investment grade credit rating). U.S. dollar
borrowings under the credit facility currently bear interest at LIBOR plus 60
basis points. Euro borrowings under the credit facility currently bear interest
at EURIBOR plus 60 basis points. Yen borrowings under the credit facility
currently bear interest at the Japanese Yen TIBOR rate 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 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 Company uses its unsecured
credit facility principally for acquisitions, funding our development activity
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 Company's
unencumbered properties. As of December 31, 2003, the outstanding balance on the
credit facility was $275.7 million and the remaining amount available was $171.6
million, net of outstanding letters of credit of $52.7 million (excluding the
additional $200.0 million of potential additional capacity). The outstanding
balance included borrowings denominated in Euros and Yen and translated to U.S.
dollars at December 31, 2003, of $83.1 million and $47.6 million, respectively.
Management believes that the Company and the Operating Partnership were in
compliance with their financial covenants at December 31, 2003.

In August 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. In April 2003, the Alliance Fund
II repaid the credit facility with capital contributions and secured debt
financing proceeds and terminated the credit facility.

F-17

AMB PROPERTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

As of December 31, 2003, the scheduled maturities of the Company's total
debt, excluding unamortized debt premiums, were as follows (dollars in
thousands):

8. LEASING ACTIVITY

Future minimum base rental income due under non-cancelable leases with
customers in effect as of December 31, 2003, was as follows (dollars in
thousands):

2004........................................................ $ 480,830
2005........................................................ 390,969
2006........................................................ 310,269
2007........................................................ 238,375
2008........................................................ 171,272
Thereafter.................................................. 420,000
----------
Total..................................................... $2,011,715
==========

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 $103.6 million, $108.0 million and $100.4 million for the years
ended December 31, 2003, 2002 and 2001, respectively. These amounts are included
as rental revenue and operating expenses in the accompanying consolidated
statements of operations. Some leases contain options to renew.

9. INCOME TAXES

The Company elected to be taxed as a REIT under the Code, commencing with
its taxable year ended December 31, 1997. To qualify as a REIT, the Company must
meet a number of organizational and operational requirements, including a
requirement that it currently distribute at least 90% of its taxable income to
its stockholders. It is management's current intention to adhere to these
requirements and maintain the Company's REIT status. As a REIT, the Company
generally will not be subject to corporate level federal income tax on net
income it distributes currently to its stockholders. As such, no provision for
federal income

F-18

AMB PROPERTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

taxes has been included in the accompanying consolidated financial statements.
If the Company fails to qualify as a REIT in any taxable year, it will be
subject to federal income taxes at regular corporate rates (including any
applicable alternative minimum tax) and may be ineligible to qualify as a REIT
for four subsequent taxable years. Even if the Company qualifies for taxation as
a REIT, the Company may be subject to certain state, local and foreign taxes on
its income and property and to federal income and excise taxes on its
undistributed taxable income. In addition, the Company is required to pay
federal and state income tax on its net taxable income, if any, from the
activities conducted by the Company's taxable REIT subsidiaries.

The following is a reconciliation of net income available to common
stockholders to taxable income available to common stockholders for the years
ended December 31, (dollars in thousands):

- ---------------

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

For income tax purposes, distributions paid to common stockholders consist
of ordinary income, capital gains or a combination thereof. For the years ended
December 31, 2003, 2002 and 2001, the Company elected to distribute all of its
taxable capital gain. Dividends paid or payable per common share for the years
ended December 31, were taxable as follows:

10. MINORITY INTERESTS IN CONSOLIDATED JOINT VENTURES AND PREFERRED UNITS

Minority interests in the Company represent the limited partnership
interests in the Operating Partnership and interests held by certain third
parties in several real estate joint ventures, aggregating approximately 38.1
million square feet, which are consolidated for financial reporting purposes.
Such investments are consolidated because the Company owns a majority interest
or exercises significant control over major operating decisions such as approval
of budgets, selection of property managers, asset management, investment
activity and changes in financing.

Through the Operating Partnership, the Company enters into co-investment
joint ventures with institutional investors. The Company's 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.

F-19

AMB PROPERTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company's co-investment joint ventures' total investments in properties
at December 31, 2003 and 2002 (dollars in thousands) were:

- ---------------

(1) Included 15 institutional investors as stockholders as of December 31, 2003.

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

(3) Included 13 institutional investors as stockholders as of December 31, 2003.

(4) AMB-AMS, L.P. is a commitment to form a co-investment partnership with two
Dutch pension funds advised by Mn Services NV.

(5) BPMT is Stichting Bedrijfspensioenfonds voor de Metaal en Technische
Bedrijfstakken and TNO is Stichting Pensioenfonds TNO.

On November 26, 2003, the Operating Partnership redeemed all 1,300,000 of
its outstanding 8 5/8% Series B Cumulative Redeemable Preferred Partnership
Units, for an aggregate redemption price of $65.6 million, including accrued and
unpaid dividends.

On July 14, 2003, AMB Property II, L.P., one of the Company's subsidiaries,
repurchased 66,300 of its outstanding 7.95% Series F Cumulative Redeemable
Preferred Limited Partnership Units from a single institutional investor. AMB
Property II, L.P. repurchased the units for an aggregate cost of $3.3 million,
including accrued and unpaid dividends.

On July 31, 2002, AMB Property II, L.P. 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.
repurchased 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 Preferred Limited 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,

F-20

AMB PROPERTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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, 2003 and 2002 (dollars in thousands):

F-21

AMB PROPERTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table distinguishes the minority interests' share of income,
including minority interests share of development profits, but excluding
minority interests share of discontinued operations (dollars in thousands):

11. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES

The Company's investment in unconsolidated joint ventures at December 31,
2003 and 2002, totaled $52.0 million and $64.4 million, respectively. The
Company's unconsolidated joint ventures' net equity investments at December 31,
2003 and 2002 (dollars in thousands) were:

On February 19, 2003, the Company formed Industrial Fund I, LLC, a joint
venture with Citigroup Global Investments Real Estate LP, LLC, a Delaware
limited liability company, and certain of its private investor clients. The
Company contributed $94.0 million in operating properties, consisting of 24
industrial buildings, aggregating approximately 2.4 million square feet, to
Industrial Fund I, LLC in which it retained a 15% interest. The Company
recognized a gain of $7.4 million on the contribution, representing the gain on
the contributed properties acquired by the third-party investors.

Under the agreements governing the joint ventures, the Company 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.

F-22

AMB PROPERTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company 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 Company's office space in San Francisco. The investment is not
consolidated because the Company 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 Company 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. STOCKHOLDERS' EQUITY

Holders of common limited partnership units of the Operating Partnership
and class B common limited partnership units of AMB Property II, L.P. have the
right, commencing generally on or after the first anniversary of the holder
becoming a limited partner of the Operating Partnership or AMB Property II,
L.P., as applicable (or such other date agreed to by the Operating Partnership
or AMB Property II, L.P. and the applicable unit holders), to require the
Operating Partnership or AMB Property II, L.P. to redeem part or all of their
common units or class B common units, as applicable, for cash (based upon the
fair market value, as defined in the applicable partnership agreement, of an
equivalent number of shares of common stock at the time of redemption) or the
Operating Partnership or AMB Property II, L.P. 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 or class B common limited partnership units, as applicable, 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. With each redemption or exchange
of the Operating Partnership's common units, the Company's percentage ownership
in the Operating Partnership will increase. Common limited partners and class B
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. During 2003, the Operating Partnership redeemed 226,145
of its common limited partnership units for cash and 2,000 of its common limited
partnership units for shares of the Company's common stock. In November 2003,
AMB Property II, L.P. issued 145,548 of its class B common limited partnership
units in connection with a property acquisition. During 2002, the Operating
Partnership redeemed 122,640 of its common limited partnership units for shares
of the Company's common stock.

During 2003, the Company repurchased and retired 812,900 shares of its
common stock for an aggregate purchase price of $21.2 million, including
commissions. During 2002, the Company repurchased and retired 2,651,600 shares
of its common stock for $69.4 million, including commissions. In December 2003,
the Company's board of directors approved a new two-year common stock repurchase
program for the repurchase of up to $200.0 million worth of common stock.

On November 25, 2003, the Company issued and sold 2,300,000 shares of 6.75%
Series M Cumulative Redeemable Preferred Stock for $25.00 per share. Dividends
are cumulative from the date of issuance and payable quarterly in arrears at a
rate per share equal to $1.6875 per annum. The series M preferred stock is
redeemable by the Company on or after November 25, 2008, subject to certain
conditions, for cash at a redemption price equal to $25.00 per share, plus
accumulated and unpaid dividends theron, if any, to the redemption date. The
Company contributed the net proceeds of $55.4 million to the Operating
Partnership, and in exchange, the Operating Partnership issued to the Company
2,300,000 6.75% Series M Cumulative Redeemable Preferred Units.

On June 23, 2003, the Company issued and sold 2,000,000 shares of 6.5%
Series L Cumulative Redeemable Preferred Stock for $25.00 per share. Dividends
are cumulative from the date of issuance and

F-23

AMB PROPERTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

payable quarterly in arrears at a rate per share equal to $1.625 per annum. The
series L preferred stock is redeemable by the Company on or after June 23, 2008,
subject to certain conditions, for cash at a redemption price equal to $25.00
per share, plus accumulated and unpaid dividends thereon, if any, to the
redemption date. The Company contributed the net proceeds of $48.0 million to
the Operating Partnership, and in exchange, the Operating Partnership issued to
the Company 2,000,000 6.5% Series L Cumulative Redeemable Preferred Units. The
Operating Partnership used the proceeds, in addition to proceeds previously
contributed to the Operating Partnership from other equity issuances, to redeem
all 3,995,800 shares of its 8.5% Series A Cumulative Redeemable Preferred Units
from the Company on July 28, 2003. The Company, in turn, used those proceeds to
redeem all 3,995,800 shares of its 8.5% Series A Cumulative Redeemable Preferred
Stock for $100.2 million, including accumulated and unpaid dividends through the
redemption date. During 2003, the Company recognized a reduction of net income
available to common stockholders of $3.7 million for the original preferred
stock issuance costs.

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.

The Company has authorized 100,000,000 shares of preferred stock for
issuance, of which the following series were designated as of December 31, 2003:
1,595,337 shares of series D preferred; 220,440 shares of series E preferred;
201,139 shares of series F preferred; 840,000 shares of series H preferred;
510,000 shares of series I preferred; 800,000 shares of series J preferred;
800,000 shares of series K preferred; 2,000,000 shares of series L preferred;
and 2,300,000 shares of series M preferred. The following table sets forth the
dividends and distributions paid per share or unit:

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, 2003, the Company had 10,286,057 non-qualified options outstanding
granted to certain directors, officers and

F-24

AMB PROPERTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

employees. Each option is exchangeable for one share of the Company's common
stock. As of December 31, 2003, the options had a weighted average exercise
price of $23.92 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 have 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 Company adopted the expense recognition provisions of SFAS No.
123, Accounting for Stock-Based Compensation. The Company 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 Company followed the
intrinsic method set forth in APB Opinion 25, Accounting for Stock Issued to
Employees. In accordance with SFAS No. 123, the Company will recognize the
associated expense over the three to five-year vesting periods. Under SFAS No.
123, related stock-based compensation expense was $2.4 million and $0.9 million
for the years ended December 31, 2003 and 2002, respectively. 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 and 2003 expense relates only to stock options granted in 2002 and
subsequent periods. Prior to January 1, 2002, the Company 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 Company has changed its method of accounting for stock options
beginning January 1, 2002. The Company 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 Company's pro
forma net income available to common stockholders would have been reduced by
$1.6 million, $2.4 million and $3.9 million and pro forma basic and diluted
earnings per share would have been reduced to $1.48 and $1.45; $1.37 and $1.34;
and $1.40 and $1.38, respectively, for the years ended December 31, 2003, 2002
and 2001.

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 2003, 2002 and 2001, respectively: dividend yields of 6.1%, 5.9%
and 6.4%; expected volatility of 17.7%, 13.3% and 14.9%; risk-free interest
rates of 3.4%, 4.0% and 5.2%; and expected lives of seven, seven and 10 years.

F-25

AMB PROPERTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

In 2003, 2002 and 2001, the Company issued 272,620, 204,072 and 238,790
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, 2003, 52,209 shares of restricted stock have been forfeited.
The 974,222 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 (the "401(k) Plan"), which is a continuation of the
401(k) Plan of the predecessor, to cover eligible employees of the Company and
any designated affiliates. During 2003 and 2002, the 401(k) Plan permitted
eligible employees of the Company 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 2003 and 2002, the Company matched 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 Company may also make
discretionary contributions to the 401(k) Plan. In 2003 and 2002, the Company
paid $0.4 million and $0.4 million, respectively, for its 401(k) match. No
discretionary contributions were made by the Company to the 401(k) Plan in 2003,
2002 and 2001.

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 Company may make discretionary matching
contributions to participant accounts at any time. The Company made no such
discretionary matching contributions in 2003, 2002 or 2001. The participant's
elective deferrals and any matching contributions are immediately 100% vested.
As of December 31, 2003 and 2002, the total amount of compensation deferred was
$6.5 million and $2.9 million, respectively.

F-26

AMB PROPERTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

14. INCOME PER SHARE

The Company's only dilutive securities outstanding for the years ended
December 31, 2003, 2002 and 2001 were stock options and restricted stock granted
under its Stock Incentive Plans. The effect on income per share was to increase
weighted average shares outstanding. Such dilution was computed using the
treasury stock method.

15. COMMITMENTS AND CONTINGENCIES

COMMITMENTS

Lease Commitments. The Company holds operating ground leases on land
parcels at its on-tarmac facilities, leases on office spaces for corporate use,
and a leasehold interest that it holds for investment purposes. The remaining
lease terms are from one to 37 years. Operating lease payments are being
amortized ratably over the terms of the related leases. Future minimum rental
payments required under non-cancelable operating leases in effect as of December
31, 2003, were as follows (dollars in thousands):

2004........................................................ $ 20,149
2005........................................................ 20,272
2006........................................................ 20,922
2007........................................................ 21,120
2008........................................................ 21,340
Thereafter.................................................. 283,965
--------
Total..................................................... $387,768
========

Standby Letters of Credit. As of December 31, 2003, the Company had
provided approximately $64.1 million in letters of credit, of which $52.7
million was provided under the Operating Partnership's $500.0 million unsecured
credit facility. The letters of credit were required to be issued under certain
ground lease provisions, bank guarantees and other commitments.

Guarantees. Other than disclosed elsewhere in this report, as of December
31, 2003, the Company had outstanding guarantees in the aggregate amount of
$50.2 million in connection with certain acquisitions, which are currently
expected to close in 2004.

Performance and Surety Bonds. As of December 31, 2003, the Company had
outstanding performance and surety bonds in an aggregate amount of $0.9 million.
These bonds were issued in connection with certain of its development projects
and were posted to guarantee certain tax obligations and the construction of
certain real property improvements and infrastructure, such as grading, sewers
and streets. Performance and surety bonds are commonly required by public
agencies from real estate developers. Performance and surety bonds are renewable
and expire upon the payment of the taxes due or the completion of the
improvements and infrastructure.

Promoted Interests and Other Contractual Obligations. Upon the achievement
of certain return thresholds and the occurrence of certain events, the Company
may be obligated to make payments to certain of joint venture partners pursuant
to the terms and provisions of their contractual agreements with the

F-27

AMB PROPERTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Operating Partnership. From time to time in the normal course of the Company's
business, the Company enters into various contracts with third parties that may
obligate it to make payments or perform other obligations upon the occurrence of
certain events.

CONTINGENCIES

Litigation. In the normal course of business, from time to time, the
Company 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 Company.

Environmental Matters. The Company monitors its properties for the
presence of hazardous or toxic substances. The Company is not aware of any
environmental liability with respect to the properties that would have a
material adverse effect on the Company'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 Company's results of
operations and cash flow.

General Uninsured Losses. The Company carries property and rental loss,
liability, flood, environmental and terrorism insurance. The Company 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 Company's
properties are located in areas that are subject to earthquake activity;
therefore, the Company 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 Company could lose its investment
in, and anticipated profits and cash flows from, a property.

Captive Insurance Company. In December 2001, the Company formed a
wholly-owned captive insurance company, Arcata National Insurance Ltd.
("Arcata"), which provides insurance coverage for all or a portion of losses
below the deductible under the Company's third-party policies. The Company
capitalized Arcata in accordance with the applicable regulatory requirements.
Arcata established annual premiums based on projections derived from the past
loss experience at the Company's properties. Annually, the Company engages an
independent third party to perform an actuarial estimate of future projected
claims, related deductibles 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 and deductibles, are less than premiums collected,
the excess may 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 Company believes that it has more comprehensive insurance
coverage at an overall lower cost than would otherwise be available in the
market.

F-28

AMB PROPERTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

16. QUARTERLY FINANCIAL DATA (UNAUDITED)

Selected quarterly financial results for 2003 and 2002 were as follows
(dollars in thousands, except share and per share amounts):

- ---------------

(1) Certain reclassifications have been made to the quarterly data to conform
with the annual presentation with no net effect to net income or net income
available to common stockholders.

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

F-29

AMB PROPERTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

- ---------------

(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 share
amounts.

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

17. SEGMENT INFORMATION

The Company mainly operates industrial properties and manages its business
by markets. Industrial properties represent more than 98% of the Company'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. The Company's geographic markets for industrial
properties are managed separately because each market requires different
operating, pricing and leasing strategies. The remaining 2% of the Company's
portfolio is comprised of retail and other properties located in Southeast
Florida, Atlanta, Boston and Baltimore. The Company 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

F-30

AMB PROPERTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

segments are the same as those described in the summary of significant
accounting policies. The Company evaluates performance based upon property net
operating income of the combined properties in each segment.

The industrial domestic target markets category includes Austin,
Baltimore/Washington D.C., Boston and Minneapolis. The industrial domestic
non-target markets category captures all of the Company's other U.S. markets,
except for those markets listed individually in the table. The international
target markets category includes France, Germany, Japan and Mexico. Summary
information for the reportable segments is as follows (dollars in thousands):

- ---------------

(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. For a reconciliation of NOI to net income, see the table below.

The Company considers NOI to be an appropriate supplemental performance
measure because NOI reflects the operating performance of the Company's real
estate portfolio on a segment basis and the Company uses NOI to make decisions
about resource allocations and to assess regional property level performance.
However, NOI should not be viewed as an alternative measure of the Company's
financial performance since it does not reflect general and administrative
expenses, interest expense, depreciation and amortization costs, capital
expenditures and leasing costs, or trends in development and construction
activities that could materially impact the Company's results from operations.
Further, the Company's NOI may not be

F-31

AMB PROPERTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

comparable to that of other real estate investment trusts, as they may use
different methodologies for calculating NOI. The following table is a
reconciliation from NOI to reported net income:

The Company's gross investment in real estate by market as of December 31
was:

F-32

AMB PROPERTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table is a reconciliation from gross investment in real
estate by market to total assets:

F-33

REPORT OF INDEPENDENT AUDITORS
ON FINANCIAL STATEMENT SCHEDULES

To the Board of Directors and Stockholders
of AMB Property Corporation:

Our audits of the consolidated financial statements referred to in our
report dated February 13, 2004, appearing on page F-1 in this Annual Report on
Form 10-K, also included an audit of the financial statement schedules listed in
Item 15(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
February 13, 2004

S-1

AMB PROPERTY CORPORATION

SCHEDULE III

CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION

AS OF DECEMBER 31, 2003

(in thousands, except number of buildings/centers)

NO. OF
PROPERTY BLDGS./CTRS. LOCATION TYPE ENCUMBRANCES
- -------- ------------ -------- ---- ------------

ATLANTA
Airport Plaza 3 GA IND $ 4,444
Airport South Business Park 7 GA IND 17,077
Amwiler-Gwinnett Industrial Portfolio 8 GA IND 5,454
Atlanta South Business Park 9 GA IND -
Atlantic Distribution Center 1 GA IND 3,822
Norcross/Brookhollow Portfolio 4 GA IND -
Northbrook Distribution Center 1 GA IND -
Shawnee Industrial 1 GA IND -
South Ridge at Hartsfield 1 GA IND 4,063
Southfield Industrial Portfolio 13 GA IND 34,088
Southfield Logistic Center 2 GA IND 11,220
Southside Distribution Center 1 GA IND 1,151
Suwanee Creek Distribution SGP 2 GA IND 13,569
Suwanee Creek OP 3 GA IND
Sylvan Industrial 1 GA IND -
CHICAGO
Addison Business Center 1 IL IND -
Alsip Industrial 1 IL IND -
AMB O'Hare Rosemont 14 IL IND 9,519
AMB Port O'Hare 2 IL IND 6,082
Arthur Distribution Center 1 IL IND 6,250
Bedford Warehouse 1 IL IND 2,777
Belden Avenue 3 IL IND 10,018
Bensenville Industrial Park 13 IL IND 36,717
Bridgeview Industrial 1 IL IND -
Chancellory Warehouse 1 IL IND 2,576
Chicago Industrial Portfolio 1 IL IND 1,548
Chicago Ridge Freight Terminal 1 IL IND -
Chicago/O'Hare Industrial Portfolio 5 IL IND 8,931
Elk Grove Village Industrial 10 IL IND 16,843
Executive Drive 1 IL IND -
Hamilton Parkway 1 IL IND -
Hintz Building 1 IL IND -
Itasca Industrial Portfolio 6 IL IND -
Melrose Park 1 IL IND -
NDP - Chicago 3 IL IND -
O'Hare Industrial Portfolio 13 IL IND -
Poplar Gateway Truck Terminal 1 IL IND -
Stone Distributing Center 1 IL IND 3,034
Thorndale Distribution 1 IL IND 5,549
Touhy Cargo Terminal 1 IL IND -
Windsor Court 1 IL IND -
Wood Dale Industrial (Includes Bonnie Lane) 5 IL IND 8,742
Yohan Industrial 3 IL IND 4,684
DALLAS/FT. WORTH
Addison Technology Center 1 TX IND -
Dallas Industrial (Formerly Texas Industrial Portfolio) 12 TX IND -
DFW Airfreight Portfolio 6 TX IND -
Greater Dallas Industrial Portfolio 5 TX IND -
Lincoln Industrial Center 1 TX IND -
Lonestar Portfolio 7 TX IND 16,501
Northfield Distribution Center 5 TX IND 16,522
Richardson Tech Center 2 TX IND 5,101
Valwood Industrial 2 TX IND 3,524
West North Carrier Parkway 1 TX IND 2,852
LOS ANGELES
Anaheim Industrial 1 CA IND -
Artesia Industrial Portfolio 25 CA IND 48,901
Aviation Logistics Center 8 CA IND -
Bell Ranch Distribution 5 CA IND -
Cabrillo Distribution Center 1 CA IND 12,750
Carson Industrial 12 CA IND -
Carson Town Center 2 CA IND
Chartwell Distribution Center 1 CA IND -
Del Amo Industrial Center 1 CA IND -
Eaves Distribution Center 3 CA IND 15,123
Ford Distribution Cntr 7 CA IND -
Fordyce Distribution Center 1 CA IND 7,485
Harris Business Center - AF I 10 CA IND 26,818
Harris Business Center - AF II 9 CA IND 32,992
Hawthorne LAX Cargo Center 1 CA IND 8,434
International Multifoods 1 CA IND -
L.A. County Industrial Portfolio 6 CA IND 22,809
LA Media Tech Center 2 CA IND -

INITIAL COST TO COMPANY
------------------------

BUILDING &
PROPERTY LAND IMPROVEMENTS
- -------- ---- ------------

ATLANTA
Airport Plaza $ 1,811 $ 5,093
Airport South Business Park 10,035 16,436
Amwiler-Gwinnett Industrial Portfolio 5,888 17,690
Atlanta South Business Park 8,047 24,180
Atlantic Distribution Center 1,519 4,679
Norcross/Brookhollow Portfolio 3,721 11,180
Northbrook Distribution Center 1,039 3,481
Shawnee Industrial 2,481 7,531
South Ridge at Hartsfield 2,096 4,008
Southfield Industrial Portfolio 13,585 35,730
Southfield Logistic Center 3,200 10,012
Southside Distribution Center 766 2,480
Suwanee Creek Distribution SGP 3,098 12,944
Suwanee Creek OP 1,693 10,386
Sylvan Industrial 1,946 5,905
CHICAGO
Addison Business Center 1,060 3,228
Alsip Industrial 1,200 3,744
AMB O'Hare Rosemont 3,197 8,995
AMB Port O'Hare 4,913 5,761
Arthur Distribution Center 2,726 5,216
Bedford Warehouse 1,354 3,225
Belden Avenue 5,491 13,655
Bensenville Industrial Park 20,799 62,438
Bridgeview Industrial 1,332 3,996
Chancellory Warehouse 1,566 2,006
Chicago Industrial Portfolio 762 2,285
Chicago Ridge Freight Terminal 3,705 3,576
Chicago/O'Hare Industrial Portfolio 4,816 9,603
Elk Grove Village Industrial 7,060 21,739
Executive Drive 1,399 4,236
Hamilton Parkway 1,554 4,703
Hintz Building 420 1,259
Itasca Industrial Portfolio 6,416 19,289
Melrose Park 2,936 9,190
NDP - Chicago 1,496 4,487
O'Hare Industrial Portfolio 6,248 18,778
Poplar Gateway Truck Terminal 4,551 3,152
Stone Distributing Center 2,242 3,266
Thorndale Distribution 4,130 4,216
Touhy Cargo Terminal 2,800 110
Windsor Court 766 2,338
Wood Dale Industrial (Includes Bonnie Lane) 2,869 9,166
Yohan Industrial 5,904 7,323
DALLAS/FT. WORTH
Addison Technology Center 899 2,696
Dallas Industrial (Formerly Texas Industrial Portfolio) 5,938 17,836
DFW Airfreight Portfolio 950 8,492
Greater Dallas Industrial Portfolio 5,633 18,414
Lincoln Industrial Center 671 2,052
Lonestar Portfolio 6,909 21,154
Northfield Distribution Center 6,446 20,087
Richardson Tech Center 1,524 5,887
Valwood Industrial 1,983 5,989
West North Carrier Parkway 1,375 4,165
LOS ANGELES
Anaheim Industrial 1,457 4,341
Artesia Industrial Portfolio 22,758 68,254
Aviation Logistics Center 22,141 19,178
Bell Ranch Distribution 6,904 12,915
Cabrillo Distribution Center 7,563 11,177
Carson Industrial 4,231 10,418
Carson Town Center 6,565 3,210
Chartwell Distribution Center 2,711 8,191
Del Amo Industrial Center 2,529 7,651
Eaves Distribution Center 11,893 12,708
Ford Distribution Cntr 24,557 22,046
Fordyce Distribution Center 4,340 8,335
Harris Business Center - AF I 19,273 26,288
Harris Business Center - AF II 20,772 31,050
Hawthorne LAX Cargo Center 2,775 8,377
International Multifoods 1,613 4,879
L.A. County Industrial Portfolio 9,430 29,242
LA Media Tech Center 4,588 12,531

GROSS AMOUNT CARRIED AT 12/31/03
-----------------------------------------
COSTS CAPITALIZED
SUBSEQUENT TO BUILDING & TOTAL COSTS (1)
PROPERTY ACQUISITION LAND IMPROVEMENTS (2)
- -------- ----------- ---- ------------ ---

ATLANTA
Airport Plaza $ 29 $ 1,811 $ 5,122 $ 6,933
Airport South Business Park 6,416 10,035 22,852 32,886
Amwiler-Gwinnett Industrial Portfolio 3,073 5,888 20,763 26,650
Atlanta South Business Park 2,127 8,047 26,307 34,354
Atlantic Distribution Center 155 1,519 4,834 6,353
Norcross/Brookhollow Portfolio 1,493 3,721 12,673 16,394
Northbrook Distribution Center 983 1,039 4,464 5,503
Shawnee Industrial 4,980 2,481 12,511 14,992
South Ridge at Hartsfield 33 2,096 4,041 6,137
Southfield Industrial Portfolio 6,506 13,585 42,235 55,820
Southfield Logistic Center 5,667 3,200 15,679 18,879
Southside Distribution Center - 766 2,480 3,246
Suwanee Creek Distribution SGP 2,283 3,098 15,228 18,326
Suwanee Creek OP 9,733 2,181 19,631 21,812
Sylvan Industrial 327 1,946 6,232 8,178
CHICAGO
Addison Business Center 248 1,060 3,475 4,535
Alsip Industrial 263 1,200 4,007 5,207
AMB O'Hare Rosemont 1,564 3,197 10,560 13,757
AMB Port O'Hare 981 4,913 6,743 11,656
Arthur Distribution Center 176 2,726 5,392 8,118
Bedford Warehouse 7 1,354 3,232 4,586
Belden Avenue 218 5,491 13,873 19,365
Bensenville Industrial Park 11,711 20,799 74,149 94,948
Bridgeview Industrial 96 1,332 4,092 5,424
Chancellory Warehouse 755 1,566 2,760 4,327
Chicago Industrial Portfolio 242 762 2,527 3,289
Chicago Ridge Freight Terminal 19 3,705 3,595 7,300
Chicago/O'Hare Industrial Portfolio 483 4,816 10,087 14,903
Elk Grove Village Industrial 3,510 7,060 25,249 32,308
Executive Drive 846 1,399 5,082 6,481
Hamilton Parkway 226 1,554 4,929 6,483
Hintz Building 308 420 1,567 1,987
Itasca Industrial Portfolio 3,193 6,416 22,482 28,898
Melrose Park 2,076 2,936 11,266 14,202
NDP - Chicago 776 1,496 5,264 6,759
O'Hare Industrial Portfolio 3,728 6,248 22,506 28,754
Poplar Gateway Truck Terminal 1 4,551 3,152 7,703
Stone Distributing Center - 2,242 3,266 5,508
Thorndale Distribution 227 4,130 4,443 8,572
Touhy Cargo Terminal 3,840 2,800 3,950 6,750
Windsor Court 102 766 2,440 3,206
Wood Dale Industrial (Includes Bonnie Lane) 559 2,869 9,724 12,594
Yohan Industrial 520 5,904 7,843 13,747
DALLAS/FT. WORTH
Addison Technology Center 590 899 3,286 4,185
Dallas Industrial (Formerly Texas Industrial Portfolio) 4,491 5,938 22,327 28,266
DFW Airfreight Portfolio 848 950 9,339 10,290
Greater Dallas Industrial Portfolio 1,490 5,633 19,904 25,536
Lincoln Industrial Center 277 671 2,328 2,999
Lonestar Portfolio 1,062 6,909 22,216 29,126
Northfield Distribution Center 189 6,446 20,276 26,722
Richardson Tech Center 1,452 1,524 7,339 8,863
Valwood Industrial 1,896 1,983 7,885 9,868
West North Carrier Parkway 1,267 1,375 5,432 6,807
LOS ANGELES
Anaheim Industrial 664 1,457 5,005 6,462
Artesia Industrial Portfolio 8,641 22,758 76,896 99,654
Aviation Logistics Center - 22,141 19,178 41,319
Bell Ranch Distribution 273 6,904 13,188 20,092
Cabrillo Distribution Center 22 7,563 11,199 18,762
Carson Industrial 4,088 4,231 14,507 18,738
Carson Town Center 10,250 6,565 13,459 20,025
Chartwell Distribution Center 153 2,711 8,344 11,055
Del Amo Industrial Center 31 2,529 7,682 10,211
Eaves Distribution Center 2,131 11,893 14,838 26,732
Ford Distribution Cntr 2,596 24,557 24,642 49,198
Fordyce Distribution Center 233 4,340 8,568 12,908
Harris Business Center - AF I 1,637 19,273 27,925 47,198
Harris Business Center - AF II 1,189 20,772 32,239 53,010
Hawthorne LAX Cargo Center 264 2,775 8,641 11,416
International Multifoods 1,011 1,613 5,890 7,503
L.A. County Industrial Portfolio 2,653 9,430 31,895 41,325
LA Media Tech Center 4,419 4,588 16,950 21,539

YEAR OF
ACCUMULATED CONSTRUCTION/ DEPRECIABLE LIFE
PROPERTY DEPRECIATION ACQUISITION (YEARS)
- -------- ------------ ----------- -------

ATLANTA
Airport Plaza $ 11 2003 5-40
Airport South Business Park 1,564 2001 5-40
Amwiler-Gwinnett Industrial Portfolio 4,386 1997 5-40
Atlanta South Business Park 4,907 1997 5-40
Atlantic Distribution Center 421 2000 5-40
Norcross/Brookhollow Portfolio 2,435 1997 5-40
Northbrook Distribution Center 900 2000 5-40
Shawnee Industrial 2,351 1999 5-40
South Ridge at Hartsfield 299 2001 5-40
Southfield Industrial Portfolio 3,277 1997 5-40
Southfield Logistic Center 1,537 2002 5-40
Southside Distribution Center 124 2001 5-40
Suwanee Creek Distribution SGP 1,021 1998 5-40
Suwanee Creek OP 2,065 1998 5-40
Sylvan Industrial 716 1999 5-40
CHICAGO
Addison Business Center 301 2000 5-40
Alsip Industrial 625 1998 5-40
AMB O'Hare Rosemont 1,015 1999 5-40
AMB Port O'Hare 40 2001 5-40
Arthur Distribution Center 406 2001 5-40
Bedford Warehouse 176 2001 5-40
Belden Avenue 1,595 1997 5-40
Bensenville Industrial Park 14,448 1997 5-40
Bridgeview Industrial 627 1997 5-40
Chancellory Warehouse 134 2002 5-40
Chicago Industrial Portfolio 417 1997 5-40
Chicago Ridge Freight Terminal 212 2001 5-40
Chicago/O'Hare Industrial Portfolio 720 2001 5-40
Elk Grove Village Industrial 2,038 1997 5-40
Executive Drive 1,054 1997 5-40
Hamilton Parkway 815 1997 5-40
Hintz Building 265 1998 5-40
Itasca Industrial Portfolio 4,551 1997 5-40
Melrose Park 2,220 1997 5-40
NDP - Chicago 1,016 1998 5-40
O'Hare Industrial Portfolio 4,087 1997 5-40
Poplar Gateway Truck Terminal 79 2002 5-40
Stone Distributing Center 27 2003 5-40
Thorndale Distribution 202 2002 5-40
Touhy Cargo Terminal 16 2002 5-40
Windsor Court 398 1997 5-40
Wood Dale Industrial (Includes Bonnie Lane) 758 1999 5-40
Yohan Industrial 116 2003 5-40
DALLAS/FT. WORTH
Addison Technology Center 661 1998 5-40
Dallas Industrial (Formerly Texas Industrial Portfolio) 4,852 1997 5-40
DFW Airfreight Portfolio 1,137 2000 5-40
Greater Dallas Industrial Portfolio 4,136 1997 5-40
Lincoln Industrial Center 478 1997 5-40
Lonestar Portfolio 961 1997 5-40
Northfield Distribution Center 901 2002 5-40
Richardson Tech Center 271 1997 5-40
Valwood Industrial 1,830 1997 5-40
West North Carrier Parkway 829 1997 5-40
LOS ANGELES
Anaheim Industrial 947 1997 5-40
Artesia Industrial Portfolio 14,344 1997 5-40
Aviation Logistics Center 120 2003 5-40
Bell Ranch Distribution 913 2001 5-40
Cabrillo Distribution Center 281 2002 5-40
Carson Industrial 1,833 1999 5-40
Carson Town Center 575 2000 5-40
Chartwell Distribution Center 763 2000 5-40
Del Amo Industrial Center 626 2000 5-40
Eaves Distribution Center 1,040 2001 5-40
Ford Distribution Cntr 1,652 2001 5-40
Fordyce Distribution Center 680 2001 5-40
Harris Business Center - AF I 2,613 2000 5-40
Harris Business Center - AF II 3,318 2000 5-40
Hawthorne LAX Cargo Center 658 2000 5-40
International Multifoods 976 1997 5-40
L.A. County Industrial Portfolio 2,138 1997 5-40
LA Media Tech Center 2,204 1998 5-40

AMB PROPERTY CORPORATION

SCHEDULE III

CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION

AS OF DECEMBER 31, 2003

(in thousands, except number of buildings/centers)

INITIAL COST TO COMPANY
------------------------------

NO. OF
PROPERTY BLDGS./CTRS. LOCATION TYPE ENCUMBRANCES LAND BUILDING
- -------- ------------ -------- ---- ------------ ---- --------

LAX Logistics Center 2 CA IND - 29,621,792 25,912,795
Los Nietos Business Center 4 CA IND 7,974 2,487,986 7,750,698
NDP - Los Angeles 6 CA IND - 5,947,872 17,843,617
Normandie Industrial 1 CA IND - 2,397,500 7,490,591
Northpointe Commerce 2 CA IND - 1,772,808 5,358,424
Park One at LAX, LLC - CA IND - 75,000,000 430,647
Pioneer Alburtis 5 CA IND 8,278 2,481,961 7,165,822
Slauson Distribution Center 8 CA IND 26,194 7,806,250 23,551,698
Stadium Business Park 9 CA IND - 3,768,357 11,345,070
Sunset Distribution Center 2 CA IND - 6,717,600 2,764,624
Systematics 1 CA IND - 911,002 2,773,005
Torrance Commerce Center 6 CA IND - 2,045,500 6,136,499
Van Nuys Airport Industrial 4 CA IND - 9,392,629 8,641,078
Walnut Drive 1 CA IND - 963,539 2,918,130
Watson Industrial Center 1 CA IND 4,530 1,712,500 5,321,189
Wilmington Avenue Warehouse 2 CA IND - 3,848,750 11,604,881
MIAMI
Beacon Centre - AF I 4 FL IND 17,070 7,229,000 22,238,131
Beacon Centre - OP 18 FL IND 66,690 31,703,625 96,681,490
Beacon Industrial Park 8 FL IND - 10,105,319 31,437,469
Blue Lagoon Business Park 2 FL IND - 4,944,965 14,874,894
Dolphin Distribution Center 1 FL IND - 1,581,353 3,602,404
Gratigny Distribution Center 1 FL IND - 1,551,162 2,380,417
Marlin Distribution Center 1 FL IND - 1,076,328 2,168,832
Miami Airport Business Center 6 FL IND - 6,400,000 19,633,781
Panther Distribution Center 1 FL IND - 1,839,585 3,251,847
Sunrise Industrial 4 FL IND 11,643 6,265,901 18,797,703
NO. NEW JERSEY/NEW YORK
AMB Meadowlands Park 8 NJ IND - 5,448,761 14,457,627
Dellamor 8 NJ IND 14,408 12,061,002 11,577,103
Dock's Corner 1 NJ IND 35,748 5,125,000 22,516,095
Fairmeadows Portfolio 17 NJ IND 25,129 18,614,941 27,901,136
Highway 17 2 NJ IND - 8,184,696 6,515,872
Interstate Crossdock 1 NJ IND - 12,712,080 19,294,805
Jamesburg 3 NJ IND 22,127 11,700,375 35,101,125
Linden Industrial 1 NJ IND - 900,000 2,752,580
Mahwah Corporate Center 5 NJ IND - 9,003,460 27,572,755
Meadow Lane 495 1 NJ IND - 837,500 2,594,372
Meadowlands AF II 4 NJ IND 12,212 6,755,000 13,092,539
Meadowlands Cross Dock 1 NJ IND - 1,109,703 3,484,837
Moonachie Industrial 2 NJ IND 5,451 2,730,525 5,227,704
Murray Hill Parkway 2 NJ IND - 1,670,000 2,567,541
Newark Airport I& II 2 NJ IND 3,617 1,755,000 5,399,692
Orchard Hill 1 NJ IND - 1,211,505 1,410,624
Porete Avenue Warehouse 1 NJ IND - 4,067,384 12,202,152
Skyland Crossdock 1 NJ IND - - 7,249,930
Teterboro Meadowlands 15 1 NJ IND 9,750 4,960,876 9,618,332
Two South Middlesex 1 NJ IND - 2,247,120 6,781,359
JFK Air Cargo - AF I 14 NY IND 18,807 10,210,000 29,730,221
JFK Air Cargo - OP 14 NY IND - 15,833,500 45,693,896
JFK Airport Park 1 NY IND - 2,349,500 7,250,550
ON TARMAC
AMB BWI Cargo Center 1 MD IND 2,749 - 6,366,872
AMB DAY Cargo Center 5 OH IND 6,625 - 7,162,674
AMB DFW Cargo Center 1 1 TX IND 15,949 - 19,683,283
AMB DFW Cargo Center 2 1 TX IND - - 4,286,411
AMB DFW Cargo Center East 3 TX IND 6,042 - 20,631,855
AMB IAD Cargo Center 1 VA IND 12,675 - 39,050,469
AMB IAH Cargo Center 1 TX IND 7,292 - 338,785
AMB JAX Cargo Center 1 FL IND 3,050 - 3,029,499
AMB JFK Cargo Center 75&77 2 NJ IND - - 30,964,930
AMB LAS Cargo Center 5 NV IND - - 24,071,896
AMB LAX Cargo Center 3 CA IND 7,337 - 13,444,679
AMB MCI Cargo Center 1 1 MO IND 5,035 - 5,793,199
AMB MCI Cargo Center 2 1 MO IND 9,150 - 8,134,000
AMB PDX Carto Center 2 OR IND - - 25,997
AMB PHL Air Cargo Center 1 PA IND - - 9,715,908
AMB RNO Cargo Center 2 NV IND - - 6,013,613
AMB SEA Air Cargo Center 314 1 WA IND 2,902 - 2,938,871
AMB SEA Cargo Center North 2 WA IND 4,616 - 15,593,688
AMB SEA Cargo Center South 1 WA IND - - 3,055,554
SAN FRANCISCO BAY AREA
Acer Distribution Center 1 CA IND - 3,146,277 9,478,832
Albrae Business Center 1 CA IND 7,730 6,298,500 6,227,312
Alvarado Business Center 5 CA IND 23,828 6,341,865 26,670,731

COSTS CAPITALIZED
SUBSEQUENT
INITIAL COST TO COMPANY (IMPROVEMENTS)
------------------------ -----------------------

BUILDING &
PROPERTY LAND IMPROVEMENTS LAND BUILDING LAND
- -------- ---- ------------ ---- -------- ----

LAX Logistics Center 29,622 24,513 - 14,822 -
Los Nietos Business Center 2,488 7,751 - 334,862 -
NDP - Los Angeles 5,948 17,844 - 2,491,026 -
Normandie Industrial 2,398 7,491 - 1,640,663 -
Northpointe Commerce 1,773 5,358 - 436,602 -
Park One at LAX, LLC 75,000 431 - 65,868 -
Pioneer Alburtis 2,482 7,166 - 780,843 -
Slauson Distribution Center 7,806 23,552 - 2,886,020 -
Stadium Business Park 3,768 11,345 - 1,317,052 -
Sunset Distribution Center 6,718 2,765 - 1,635,484 -
Systematics 911 2,773 - 620,167 -
Torrance Commerce Center 2,045 6,136 - 916,530 -
Van Nuys Airport Industrial 9,393 8,641 - 14,972,958 -
Walnut Drive 964 2,918 - 743,553 -
Watson Industrial Center 1,713 5,321 - 1,324,578 -
Wilmington Avenue Warehouse 3,849 11,605 - 2,662,975 -
MIAMI
Beacon Centre - AF I 7,229 22,238 - 1,063,272 -
Beacon Centre - OP 31,704 96,681 - 15,298,075 -
Beacon Industrial Park 10,105 31,437 - 5,656,201 -
Blue Lagoon Business Park 4,945 14,875 - 1,202,101 -
Dolphin Distribution Center 1,581 3,602 - - -
Gratigny Distribution Center 1,551 2,380 - 382,827 -
Marlin Distribution Center 1,076 2,169 - 310,979 -
Miami Airport Business Center 6,400 19,634 - 3,156,384 -
Panther Distribution Center 1,840 3,252 - - -
Sunrise Industrial 6,266 18,798 - 3,219,700 -
NO. NEW JERSEY/NEW YORK
AMB Meadowlands Park 5,449 14,458 - 3,905,591 -
Dellamor 12,061 11,577 - (197,238) -
Dock's Corner 5,125 22,516 8,547,484 19,869,618 8,547
Fairmeadows Portfolio 18,615 27,540 - 955,660 -
Highway 17 8,185 6,516 - (25,837) -
Interstate Crossdock 12,712 19,295 - 49,803
Jamesburg 11,700 35,101 - 1,789,313 -
Linden Industrial 900 2,753 - 472,917 -
Mahwah Corporate Center 9,003 27,573 - 573,976 -
Meadow Lane 495 838 2,594 - 281,909 -
Meadowlands AF II 6,755 13,093 - 1,899,703 -
Meadowlands Cross Dock 1,110 3,485 - 989,442 -
Moonachie Industrial 2,731 5,228 - 280,428 -
Murray Hill Parkway 1,670 2,568 - 5,173,102 -
Newark Airport I& II 1,755 5,400 - 483,360 -
Orchard Hill 1,212 1,411 - - -
Porete Avenue Warehouse 4,067 12,202 - 4,502,056 -
Skyland Crossdock - 7,250 - 252,931 -
Teterboro Meadowlands 15 4,961 9,618 - 1,273,467 -
Two South Middlesex 2,247 6,781 - 1,043,302 -
JFK Air Cargo - AF I 10,210 29,730 - 3,664,018 -
JFK Air Cargo - OP 15,834 45,694 - 4,112,057 -
JFK Airport Park 2,350 7,251 - 630,540 -
ON TARMAC
AMB BWI Cargo Center - 6,367 - 87,418 -
AMB DAY Cargo Center - 7,163 - 428,487 -
AMB DFW Cargo Center 1 - 19,683 - 3,869,299 -
AMB DFW Cargo Center 2 - 4,286 - 13,950,312 -
AMB DFW Cargo Center East - 20,632 - 281,476 -
AMB IAD Cargo Center - 39,050 - (209,555) -
AMB IAH Cargo Center - 339 - 8,951,420 -
AMB JAX Cargo Center - 3,029 - - -
AMB JFK Cargo Center 75&77 - 30,965 - 2,604,100 -
AMB LAS Cargo Center - 24,072 - 603,966
AMB LAX Cargo Center - 13,445 - 129,660 -
AMB MCI Cargo Center 1 - 5,793 - 164,251 -
AMB MCI Cargo Center 2 - 8,134 - - -
AMB PDX Carto Center - 26 - 9,887,351 -
AMB PHL Air Cargo Center - 9,716 - 289,576 -
AMB RNO Cargo Center - 6,014 - 192,170 -
AMB SEA Air Cargo Center 314 - 2,939 - - -
AMB SEA Cargo Center North - 15,594 - 82,483 -
AMB SEA Cargo Center South - 3,056 - 206,275 -
SAN FRANCISCO BAY AREA
Acer Distribution Center 3,146 9,479 - 2,478,092 -
Albrae Business Center 6,299 6,227 - 650,145 -
Alvarado Business Center 6,342 26,671 - 9,113,432 -

TOTAL GROSS AMOUNT CARRIED AT 12/31/03
-----------------------------------------
COSTS CAPITALIZED
SUBSEQUENT TO BUILDING & TOTAL COSTS (1)
PROPERTY ACQUISITION COSTS LAND IMPROVEMENTS (2)
- -------- ----------- ----- ---- ------------ ---

LAX Logistics Center 1,415 55,549,409 29,622 25,928 55,549
Los Nietos Business Center 335 10,573,546 2,488 8,086 10,574
NDP - Los Angeles 2,491 26,282,515 5,948 20,335 26,283
Normandie Industrial 1,641 11,528,754 2,398 9,131 11,529
Northpointe Commerce 437 7,567,834 1,773 5,795 7,568
Park One at LAX, LLC 66 75,496,515 75,000 497 75,497
Pioneer Alburtis 781 10,428,626 2,482 7,947 10,429
Slauson Distribution Center 2,886 34,243,968 7,806 26,438 34,244
Stadium Business Park 1,317 16,430,479 3,768 12,662 16,430
Sunset Distribution Center 1,635 11,117,708 6,718 4,400 11,118
Systematics 620 4,304,174 911 3,393 4,304
Torrance Commerce Center 917 9,098,529 2,045 7,053 9,099
Van Nuys Airport Industrial 14,973 33,006,665 9,393 23,614 33,007
Walnut Drive 744 4,625,222 964 3,662 4,625
Watson Industrial Center 1,325 8,358,267 1,713 6,646 8,358
Wilmington Avenue Warehouse 2,663 18,116,606 3,849 14,268 18,117
MIAMI
Beacon Centre - AF I 1,063 30,530,403 7,229 23,301 30,530
Beacon Centre - OP 15,298 143,683,190 31,704 111,980 143,683
Beacon Industrial Park 5,656 47,198,989 10,105 37,094 47,199
Blue Lagoon Business Park 1,202 21,021,960 4,945 16,077 21,022
Dolphin Distribution Center - 5,183,757 1,581 3,602 5,184
Gratigny Distribution Center 383 4,314,406 1,551 2,763 4,314
Marlin Distribution Center 311 3,556,139 1,076 2,480 3,556
Miami Airport Business Center 3,156 29,190,165 6,400 22,790 29,190
Panther Distribution Center - 5,091,432 1,840 3,252 5,091
Sunrise Industrial 3,220 28,283,304 6,266 22,017 28,283
NO. NEW JERSEY/NEW YORK
AMB Meadowlands Park 3,906 23,811,979 5,449 18,363 23,812
Dellamor (197 23,440,867 12,061 11,380 23,441
Dock's Corner 28,417 56,058,197 13,672 42,386 56,058
Fairmeadows Portfolio 1,317 47,471,737 18,615 28,857 47,472
Highway 17 (26 14,674,731 8,185 6,490 14,675
Interstate Crossdock 50 32,056,688 12,712 19,345 32,057
Jamesburg 1,789 48,590,813 11,700 36,890 48,591
Linden Industrial 473 4,125,497 900 3,225 4,125
Mahwah Corporate Center 574 37,150,191 9,003 28,147 37,150
Meadow Lane 495 282 3,713,781 838 2,876 3,714
Meadowlands AF II 1,900 21,747,242 6,755 14,992 21,747
Meadowlands Cross Dock 989 5,583,982 1,110 4,474 5,584
Moonachie Industrial 280 8,238,657 2,731 5,508 8,239
Murray Hill Parkway 5,173 9,410,643 1,670 7,741 9,411
Newark Airport I& II 483 7,638,052 1,755 5,883 7,638
Orchard Hill - 2,622,129 1,212 1,411 2,622
Porete Avenue Warehouse 4,502 20,771,592 4,067 16,704 20,772
Skyland Crossdock 253 7,502,861 - 7,503 7,503
Teterboro Meadowlands 15 1,273 15,852,675 4,961 10,892 15,853
Two South Middlesex 1,043 10,071,781 2,247 7,825 10,072
JFK Air Cargo - AF I 3,664 43,604,239 10,210 33,394 43,604
JFK Air Cargo - OP 4,112 65,639,453 15,834 49,806 65,639
JFK Airport Park 631 10,230,590 2,350 7,881 10,231
ON TARMAC
AMB BWI Cargo Center 87 6,454,290 - 6,454 6,454
AMB DAY Cargo Center 428 7,591,161 - 7,591 7,591
AMB DFW Cargo Center 1 3,869 23,552,582 - 23,553 23,553
AMB DFW Cargo Center 2 13,950 18,236,723 - 18,237 18,237
AMB DFW Cargo Center East 281 20,913,331 - 20,913 20,913
AMB IAD Cargo Center (210 38,840,914 - 38,841 38,841
AMB IAH Cargo Center 8,951 9,290,205 - 9,290 9,290
AMB JAX Cargo Center - 3,029,499 - 3,029 3,029
AMB JFK Cargo Center 75&77 2,604 33,569,030 - 33,569 33,569
AMB LAS Cargo Center 604 24,675,862 - 24,676 24,676
AMB LAX Cargo Center 130 13,574,339 - 13,574 13,574
AMB MCI Cargo Center 1 164 5,957,450 - 5,957 5,957
AMB MCI Cargo Center 2 - 8,134,000 - 8,134 8,134
AMB PDX Carto Center 9,887 9,913,348 - 9,913 9,913
AMB PHL Air Cargo Center 290 10,005,484 - 10,005 10,005
AMB RNO Cargo Center 192 6,205,783 - 6,206 6,206
AMB SEA Air Cargo Center 314 - 2,938,871 - 2,939 2,939
AMB SEA Cargo Center North 82 15,676,171 - 15,676 15,676
AMB SEA Cargo Center South 206 3,261,829 - 3,262 3,262
SAN FRANCISCO BAY AREA
Acer Distribution Center 2,478 15,103,201 3,146 11,957 15,103
Albrae Business Center 650 13,175,957 6,299 6,877 13,176
Alvarado Business Center 9,113 42,126,028 6,342 35,784 42,126

YEAR OF
ACCUMULATED CONSTRUCTION/ DEPRECIABLE LIFE
PROPERTY DEPRECIATION ACQUISITION (YEARS)
- -------- ------------ ----------- -------

LAX Logistics Center 163 2003 5-40
Los Nietos Business Center 622 1999 5-40
NDP - Los Angeles 3,210 1998 5-40
Normandie Industrial 996 2000 5-40
Northpointe Commerce 1,052 1997 5-40
Park One at LAX, LLC 11 2002 5-40
Pioneer Alburtis 673 1999 5-40
Slauson Distribution Center 2,213 2000 5-40
Stadium Business Park 2,266 1997 5-40
Sunset Distribution Center 56 2002 5-40
Systematics 628 1997 5-40
Torrance Commerce Center 1,302 1998 5-40
Van Nuys Airport Industrial 2,480 2000 5-40
Walnut Drive 594 1997 5-40
Watson Industrial Center 419 2001 5-40
Wilmington Avenue Warehouse 2,386 1999 5-40
MIAMI
Beacon Centre - AF I 2,069 2000 5-40
Beacon Centre - OP 11,979 2000 5-40
Beacon Industrial Park 6,335 1997 5-40
Blue Lagoon Business Park 2,817 1997 5-40
Dolphin Distribution Center 23 2003 5-40
Gratigny Distribution Center 106 2003 5-40
Marlin Distribution Center 53 2003 5-40
Miami Airport Business Center 3,039 1999 5-40
Panther Distribution Center 20 2003 5-40
Sunrise Industrial 2,885 1998 5-40
NO. NEW JERSEY/NEW YORK
AMB Meadowlands Park 1,832 2000 5-40
Dellamor 515 2002 5-40
Dock's Corner 3,531 1997 5-40
Fairmeadows Portfolio 90 2003 5-40
Highway 17 197 2002 5-40
Interstate Crossdock 700 2002 5-40
Jamesburg 6,022 1998 5-40
Linden Industrial 438 1999 5-40
Mahwah Corporate Center 4,275 1998 5-40
Meadow Lane 495 385 1999 5-40
Meadowlands AF II 1,202 2001 5-40
Meadowlands Cross Dock 631 2000 5-40
Moonachie Industrial 449 2001 5-40
Murray Hill Parkway 1,610 1999 5-40
Newark Airport I& II 694 2000 5-40
Orchard Hill 47 2002 5-40
Porete Avenue Warehouse 2,407 1998 5-40
Skyland Crossdock 268 2002 5-40
Teterboro Meadowlands 15 1,117 2001 5-40
Two South Middlesex 1,527 1997 5-40
JFK Air Cargo - AF I 4,084 2000 5-40
JFK Air Cargo - OP 5,571 2000 5-40
JFK Airport Park 837 2000 5-40
ON TARMAC
AMB BWI Cargo Center 542 2000 5-40
AMB DAY Cargo Center 749 2000 5-40
AMB DFW Cargo Center 1 3,096 1999 5-40
AMB DFW Cargo Center 2 2,031 1999 5-40
AMB DFW Cargo Center East 1,772 2000 5-40
AMB IAD Cargo Center 1,485 2002 5-40
AMB IAH Cargo Center 76 2000 5-40
AMB JAX Cargo Center 245 2000 5-40
AMB JFK Cargo Center 75&77 1,374 2002 5-40
AMB LAS Cargo Center 543 2003 5-40
AMB LAX Cargo Center 1,110 2000 5-40
AMB MCI Cargo Center 1 519 2000 5-40
AMB MCI Cargo Center 2 642 2000 5-40
AMB PDX Carto Center 630 2002 5-40
AMB PHL Air Cargo Center 889 2000 5-40
AMB RNO Cargo Center 146 2003 5-40
AMB SEA Air Cargo Center 314 - 2003 5-40
AMB SEA Cargo Center North 1,260 2000 5-40
AMB SEA Cargo Center South 303 2000 5-40
SAN FRANCISCO BAY AREA
Acer Distribution Center 2,436 1997 5-40
Albrae Business Center 399 2001 5-40
Alvarado Business Center 2,154 1997 5-40

AMB PROPERTY CORPORATION

SCHEDULE III

CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION

AS OF DECEMBER 31, 2003

(in thousands, except number of buildings/centers)

INITIAL COST TO COMPANY
------------------------------

NO. OF
PROPERTY BLDGS./CTRS. LOCATION TYPE ENCUMBRANCES LAND BUILDING
- -------- ------------ -------- ---- ------------ ---- --------

Brennan Distribution 1 CA IND 4,163 3,682,800 3,021,959
Central Bay 2 CA IND 6,951 3,895,500 7,400,325
Component Drive Industrial Portfolio 3 CA IND - 12,687,950 6,974,454
Concord Industrial Portfolio 10 CA IND 10,475 3,871,557 11,646,972
Dado Distribution 1 CA IND - 7,221,000 3,739,242
Diablo Industrial Park 12 CA IND 8,829 3,379,142 10,489,441
Doolittle Distribution Center 1 CA IND - 2,643,750 8,013,859
Dowe Industrial Center 2 CA IND - 2,664,628 8,033,885
Dublin Industrial Portfolio 1 CA IND - 2,980,000 9,041,844
East Bay Doolittle 1 CA IND - 7,128,000 11,023,443
East Bay Whipple 1 CA IND 6,894 5,333,300 8,126,092
East Grand Airfreight 2 CA IND 4,222 5,092,587 4,190,000
Edgewater Industrial Center 1 CA IND - 4,037,500 15,112,860
Fairway Drive Industrial 4 CA IND 12,195 4,213,760 13,949,212
Hayward Industrial - Hathaway 2 CA IND - 4,472,500 13,545,851
Hayward Industrial - Wiegman 1 CA IND 7,234 2,772,500 8,392,970
Junction Industrial Park 4 CA IND - 7,875,000 23,975,406
Laurelwood Drive 2 CA IND - 2,750,000 8,538,128
Lawrence SSF 1 CA IND - 2,870,000 5,520,697
Marina Business ParK 2 CA IND 4,312 3,280,497 4,315,715
Martin/Scott Industrial Portfolio 2 CA IND - 9,051,900 5,309,064
Milmont Page Business Center 3 CA IND 11,386 3,421,800 10,600,168
Moffett Business Center (MBC Industrial) 4 CA IND - 5,892,120 17,716,359
Moffett Distribution 7 CA IND 19,121 26,915,750 11,277,319
Moffett Park R&D Portfolio 14 CA IND - 14,804,853 44,462,151
Pacific Business Center 2 CA IND 8,642 5,417,120 16,291,360
Pardee Drive 1 CA IND 1,533 618,637 1,880,125
Silicon Valley R&D Portfolio* 5 CA IND - 6,699,883 20,186,155
South Bay Industrial 8 CA IND 17,709 14,992,112 45,016,335
Utah Airfreight 1 CA IND 17,433 18,753,032 8,381,257
Weigman Road 1 CA IND - 1,562,783 4,688,348
Williams & Bouroughs 4 CA IND 7,908 2,382,385 6,981,476
Willow Park Industrial Portfolio 21 CA IND - 25,590,368 76,771,105
Yosemite Drive 1 CA IND - 2,350,307 7,050,920
Zanker/Charcot Industrial 5 CA IND - 5,282,414 15,887,242
SEATTLE
Black River 1 WA IND 3,420 1,844,500 3,559,469
Earlington Business Park 1 WA IND 4,238 2,766,420 3,233,690
East Valley Warehouse 1 WA IND - 6,812,500 20,511,048
Gateway Corporate Center 9 WA IND 27,000 10,642,848 32,907,940
Gateway North 6 WA IND 14,000 5,270,204 16,295,596
Harvest Business Park 3 WA IND - 2,371,025 7,153,074
Kent Centre Corporate Park 4 WA IND - 3,041,774 9,165,322
Kingsport Industrial Park 7 WA IND - 8,100,769 23,812,240
NDP - Seattle 4 WA IND 11,854 3,993,219 11,773,486
Northwest Distribution Center 3 WA IND - 3,532,618 10,750,992
Puget Sound Airfreight 1 WA IND - 1,329,040 1,829,778
Renton Northwest Corp. Park 6 WA IND 24,245 25,958,996 14,791,812
SEA Logistics Center 1 3 WA IND - 9,217,736 18,968,499
SEA Logistics Center 2 3 WA IND 14,490 11,534,534 24,601,289
Seattle Airport Industrial 1 WA IND - 618,750 1,923,176
Trans-Pacific Industrial Park 11 WA IND 48,600 31,674,841 42,209,681
OTHER INDUSTRIAL MARKETS
Activity Distribution Center 4 CA IND - 3,736,151 11,248,452
Scripps Sorrento 1 CA IND - 1,110,131 3,330,393
Chancellor Square 3 FL IND 15,029 2,009,123 6,106,335
Presidents Drive 6 FL IND - 5,770,357 17,654,542
Sand Lake Service Center 6 FL IND - 3,482,611 10,584,711
Elmwood Business Park 5 LA IND - 4,162,500 12,487,500
Boston Industrial Portfolio 18 MA IND 10,031 16,706,924 52,013,374
Cabot Business Park 13 MA IND - 15,282,977 46,432,597
Cabot Business Park (KYDJ) 2 MA IND - 1,474,461 14,353,413
Cabot Business Park SGP 3 MA IND 16,423 5,499,111 16,969,412
Bennington Corporate Center 2 MD IND 5,854 2,671,358 8,181,283
B.W.I 2 MD IND 3,454 2,257,809 5,149,324
Columbia Business Center 9 MD IND 3,752 3,855,854 11,735,953
Corridor Industrial 1 MD IND 2,376 995,656 3,019,002
Crysen Industrial 1 MD IND 2,223 1,425,000 4,275,000
Gateway 58 3 MD IND - 3,255,934 9,940,375
Gateway Commerce Center 5 MD IND - 4,083,424 12,335,750
Greenwood Industrial 3 MD IND - 4,729,200 14,187,600
Meadowridge Industrial 3 MD IND - 3,715,800 11,147,400
Oakland Ridge Industrial Center 12 MD IND 4,236 3,296,724 19,207,349
Patuxent Alliance 8280 1 MD IND - 887,250 1,705,831
Patuxent Range Road 2 MD IND - 1,695,731 5,127,194

COSTS CAPITALIZED
SUBSEQUENT
INITIAL COST TO COMPANY (IMPROVEMENTS)
------------------------ -----------------------

BUILDING &
PROPERTY LAND IMPROVEMENTS LAND BUILDING LAND
- -------- ---- ------------ ---- -------- ----

Brennan Distribution 3,683 3,022 - 2,193,374 -
Central Bay 3,896 7,400 - 1,164,624 -
Component Drive Industrial Portfolio 12,688 6,974 - 760,577 -
Concord Industrial Portfolio 3,872 11,647 - 2,487,235 -
Dado Distribution 7,221 3,739 - 953,339 -
Diablo Industrial Park 3,379 10,489 - 1,143,921 -
Doolittle Distribution Center 2,644 8,014 - 678,394 -
Dowe Industrial Center 2,665 8,034 - 2,003,051 -
Dublin Industrial Portfolio 2,980 9,042 - 1,010,784 -
East Bay Doolittle 7,128 11,023 - 2,034,559 -
East Bay Whipple 5,333 8,126 - 1,634,874 -
East Grand Airfreight 5,093 4,190 - - -
Edgewater Industrial Center 4,038 15,113 - 4,482,180 -
Fairway Drive Industrial 4,214 13,949 - 2,465,768 -
Hayward Industrial - Hathaway 4,473 13,546 - 528,736 -
Hayward Industrial - Wiegman 2,773 8,393 - 405,897 -
Junction Industrial Park 7,875 23,975 - 1,651,688 -
Laurelwood Drive 2,750 8,538 - 568,534 -
Lawrence SSF 2,870 5,521 - 1,123,658 -
Marina Business ParK 3,280 4,316 - 46,980 -
Martin/Scott Industrial Portfolio 9,052 5,309 - 335,915 -
Milmont Page Business Center 3,422 10,600 - 3,073,434 -
Moffett Business Center (MBC Industrial) 5,892 17,716 - 3,281,411 -
Moffett Distribution 26,916 11,277 - 1,353,452 -
Moffett Park R&D Portfolio 14,805 44,462 - 9,448,014 -
Pacific Business Center 5,417 16,291 - 1,747,377 -
Pardee Drive 619 1,880 - 274,337 -
Silicon Valley R&D Portfolio* 6,700 20,186 - 4,778,780 -
South Bay Industrial 14,992 45,016 - 5,564,313 -
Utah Airfreight 18,753 8,381 - 315,884 -
Weigman Road 1,563 4,688 - 1,550,492 -
Williams & Bouroughs 2,382 6,981 - 3,309,005 -
Willow Park Industrial Portfolio 25,590 76,771 - 12,595,835 -
Yosemite Drive 2,350 7,051 - 752,720 -
Zanker/Charcot Industrial 5,282 15,887 - 2,412,856 -
SEATTLE
Black River 1,845 3,559 - 284,821 -
Earlington Business Park 2,766 3,234 - 326,403 -
East Valley Warehouse 6,813 20,511 - 5,695,694 -
Gateway Corporate Center 10,643 32,908 - 4,323,112 -
Gateway North 5,270 16,296 - 1,496,599 -
Harvest Business Park 2,371 7,153 - 1,196,908 -
Kent Centre Corporate Park 3,042 9,165 - 1,198,579 -
Kingsport Industrial Park 8,101 23,812 - 4,104,452 -
NDP - Seattle 3,993 11,773 - 1,109,735 -
Northwest Distribution Center 3,533 10,751 - 996,328 -
Puget Sound Airfreight 1,329 1,830 - 254,652 -
Renton Northwest Corp. Park 25,959 14,792 - 768,022 -
SEA Logistics Center 1 9,218 18,968 - 21,401 -
SEA Logistics Center 2 11,535 24,601 - - -
Seattle Airport Industrial 619 1,923 - 179,729 -
Trans-Pacific Industrial Park 31,675 42,210 - 530,947 -
OTHER INDUSTRIAL MARKETS
Activity Distribution Center 3,736 11,248 - 1,799,374 -
Scripps Sorrento 1,110 3,330 - 101,202 -
Chancellor Square 2,009 6,106 - 2,783,420 -
Presidents Drive 5,770 17,655 - 1,989,548 -
Sand Lake Service Center 3,483 10,585 - 2,804,895 -
Elmwood Business Park 4,163 12,488 - 1,933,665 -
Boston Industrial Portfolio 16,707 52,013 - 15,297,982 -
Cabot Business Park 15,283 46,433 1,045,533 3,589,818 1,046
Cabot Business Park (KYDJ) 1,474 14,353 348,862 8,054,922 349
Cabot Business Park SGP 5,499 16,969 756,724 1,424,675 757
Bennington Corporate Center 2,671 8,181 - 962,484 -
B.W.I 2,258 5,149 - 173,797 -
Columbia Business Center 3,856 11,736 - 2,116,943 -
Corridor Industrial 996 3,019 - 270,120 -
Crysen Industrial 1,425 4,275 - 993,365 -
Gateway 58 3,256 9,940 - 112,007 -
Gateway Commerce Center 4,083 12,336 - 1,244,703 -
Greenwood Industrial 4,729 14,188 - 2,250,149 -
Meadowridge Industrial 3,716 11,147 - 360,038 -
Oakland Ridge Industrial Center 3,297 19,207 - 7,074,601 -
Patuxent Alliance 8280 887 1,706 - 34,127 -
Patuxent Range Road 1,696 5,127 - 564,044 -

TOTAL GROSS AMOUNT CARRIED AT 12/31/03
-----------------------------------------
COSTS CAPITALIZED
SUBSEQUENT TO BUILDING & TOTAL COSTS (1)
PROPERTY ACQUISITION COSTS LAND IMPROVEMENTS (2)
- -------- ----------- ----- ---- ------------ ---

Brennan Distribution 2,193 8,898,133 3,683 5,215 8,898
Central Bay 1,165 12,460,449 3,896 8,565 12,460
Component Drive Industrial Portfolio 761 20,422,981 12,688 7,735 20,423
Concord Industrial Portfolio 2,487 18,005,764 3,872 14,134 18,006
Dado Distribution 953 11,913,581 7,221 4,693 11,914
Diablo Industrial Park 1,144 15,012,504 3,379 11,633 15,013
Doolittle Distribution Center 678 11,336,003 2,644 8,692 11,336
Dowe Industrial Center 2,003 12,701,564 2,665 10,037 12,702
Dublin Industrial Portfolio 1,011 13,032,628 2,980 10,053 13,033
East Bay Doolittle 2,035 20,186,002 7,128 13,058 20,186
East Bay Whipple 1,635 15,094,266 5,333 9,761 15,094
East Grand Airfreight - 9,282,587 5,093 4,190 9,283
Edgewater Industrial Center 4,482 23,632,540 4,038 19,595 23,633
Fairway Drive Industrial 2,466 20,628,740 4,214 16,415 20,629
Hayward Industrial - Hathaway 529 18,547,087 4,473 14,075 18,547
Hayward Industrial - Wiegman 406 11,571,367 2,773 8,799 11,571
Junction Industrial Park 1,652 33,502,094 7,875 25,627 33,502
Laurelwood Drive 569 11,856,662 2,750 9,107 11,857
Lawrence SSF 1,124 9,514,355 2,870 6,644 9,514
Marina Business ParK 47 7,643,192 3,280 4,363 7,643
Martin/Scott Industrial Portfolio 336 14,696,879 9,052 5,645 14,697
Milmont Page Business Center 3,073 17,095,402 3,422 13,674 17,095
Moffett Business Center (MBC Industrial) 3,281 26,889,890 5,892 20,998 26,890
Moffett Distribution 1,353 39,546,521 26,916 12,631 39,547
Moffett Park R&D Portfolio 9,448 68,715,018 14,805 53,910 68,715
Pacific Business Center 1,747 23,455,857 5,417 18,039 23,456
Pardee Drive 274 2,773,099 619 2,154 2,773
Silicon Valley R&D Portfolio* 4,779 31,664,818 6,700 24,965 31,665
South Bay Industrial 5,564 65,572,760 14,992 50,581 65,573
Utah Airfreight 316 27,450,173 18,753 8,697 27,450
Weigman Road 1,550 7,801,623 1,563 6,239 7,802
Williams & Bouroughs 3,309 12,672,866 2,382 10,290 12,673
Willow Park Industrial Portfolio 12,596 114,957,308 25,590 89,367 114,957
Yosemite Drive 753 10,153,947 2,350 7,804 10,154
Zanker/Charcot Industrial 2,413 23,582,512 5,282 18,300 23,583
SEATTLE
Black River 285 5,688,790 1,845 3,844 5,689
Earlington Business Park 326 6,326,513 2,766 3,560 6,327
East Valley Warehouse 5,696 33,019,242 6,813 26,207 33,019
Gateway Corporate Center 4,323 47,873,900 10,643 37,231 47,874
Gateway North 1,497 23,062,399 5,270 17,792 23,062
Harvest Business Park 1,197 10,721,007 2,371 8,350 10,721
Kent Centre Corporate Park 1,199 13,405,675 3,042 10,364 13,406
Kingsport Industrial Park 4,104 36,017,461 8,101 27,917 36,017
NDP - Seattle 1,110 16,876,440 3,993 12,883 16,876
Northwest Distribution Center 996 15,279,938 3,533 11,747 15,280
Puget Sound Airfreight 255 3,413,470 1,329 2,084 3,413
Renton Northwest Corp. Park 768 41,518,830 25,959 15,560 41,519
SEA Logistics Center 1 21 28,207,636 9,218 18,990 28,208
SEA Logistics Center 2 - 36,135,823 11,535 24,601 36,136
Seattle Airport Industrial 180 2,721,655 619 2,103 2,722
Trans-Pacific Industrial Park 531 74,415,469 31,675 42,741 74,415
OTHER INDUSTRIAL MARKETS
Activity Distribution Center 1,799 16,783,977 3,736 13,048 16,784
Scripps Sorrento 101 4,541,726 1,110 3,432 4,542
Chancellor Square 2,783 10,898,878 2,009 8,890 10,899
Presidents Drive 1,990 25,414,447 5,770 19,644 25,414
Sand Lake Service Center 2,805 16,872,217 3,483 13,390 16,872
Elmwood Business Park 1,934 18,583,665 4,163 14,421 18,584
Boston Industrial Portfolio 15,298 84,018,280 16,707 67,311 84,018
Cabot Business Park 4,635 66,350,925 16,329 50,022 66,351
Cabot Business Park (KYDJ) 8,404 24,231,658 1,823 22,408 24,232
Cabot Business Park SGP 2,181 24,649,922 6,256 18,394 24,650
Bennington Corporate Center 962 11,815,125 2,671 9,144 11,815
B.W.I 174 7,580,930 2,258 5,323 7,581
Columbia Business Center 2,117 17,708,750 3,856 13,853 17,709
Corridor Industrial 270 4,284,778 996 3,289 4,285
Crysen Industrial 993 6,693,365 1,425 5,268 6,693
Gateway 58 112 13,308,316 3,256 10,052 13,308
Gateway Commerce Center 1,245 17,663,877 4,083 13,580 17,664
Greenwood Industrial 2,250 21,166,949 4,729 16,438 21,167
Meadowridge Industrial 360 15,223,238 3,716 11,507 15,223
Oakland Ridge Industrial Center 7,075 29,578,674 3,297 26,282 29,579
Patuxent Alliance 8280 34 2,627,208 887 1,740 2,627
Patuxent Range Road 564 7,386,969 1,696 5,691 7,387

YEAR OF
ACCUMULATED CONSTRUCTION/ DEPRECIABLE LIFE
PROPERTY DEPRECIATION ACQUISITION (YEARS)
- -------- ------------ ----------- -------

Brennan Distribution 436 2001 5-40
Central Bay 800 2001 5-40
Component Drive Industrial Portfolio 653 2001 5-40
Concord Industrial Portfolio 2,415 1999 5-40
Dado Distribution 256 2001 5-40
Diablo Industrial Park 1,507 1999 5-40
Doolittle Distribution Center 920 2000 5-40
Dowe Industrial Center 1,825 1997 5-40
Dublin Industrial Portfolio 877 2000 5-40
East Bay Doolittle 1,039 2001 5-40
East Bay Whipple 663 2001 5-40
East Grand Airfreight 217 2003 5-40
Edgewater Industrial Center 1,962 2000 5-40
Fairway Drive Industrial 1,126 1997 5-40
Hayward Industrial - Hathaway 1,093 2000 5-40
Hayward Industrial - Wiegman 691 2000 5-40
Junction Industrial Park 3,667 1999 5-40
Laurelwood Drive 1,409 1997 5-40
Lawrence SSF 668 2001 5-40
Marina Business ParK 147 2002 5-40
Martin/Scott Industrial Portfolio 389 2001 5-40
Milmont Page Business Center 748 1997 5-40
Moffett Business Center (MBC Industrial) 3,778 1997 5-40
Moffett Distribution 844 2001 5-40
Moffett Park R&D Portfolio 13,329 1997 5-40
Pacific Business Center 3,136 1997 5-40
Pardee Drive 153 1999 5-40
Silicon Valley R&D Portfolio* 5,923 1997 5-40
South Bay Industrial 9,617 1997 5-40
Utah Airfreight 116 2003 5-40
Weigman Road 982 1997 5-40
Williams & Bouroughs 1,234 1999 5-40
Willow Park Industrial Portfolio 14,703 1998 5-40
Yosemite Drive 1,245 1997 5-40
Zanker/Charcot Industrial 3,343 1997 5-40
SEATTLE
Black River 377 2001 5-40
Earlington Business Park 172 2002 5-40
East Valley Warehouse 4,382 1999 5-40
Gateway Corporate Center 4,854 1999 5-40
Gateway North 2,106 1999 5-40
Harvest Business Park 1,665 1997 5-40
Kent Centre Corporate Park 2,097 1997 5-40
Kingsport Industrial Park 4,963 1997 5-40
NDP - Seattle 511 1998 5-40
Northwest Distribution Center 2,340 1997 5-40
Puget Sound Airfreight 122 2002 5-40
Renton Northwest Corp. Park 636 2002 5-40
SEA Logistics Center 1 120 2003 5-40
SEA Logistics Center 2 49 2003 5-40
Seattle Airport Industrial 235 2000 5-40
Trans-Pacific Industrial Park 546 2003 5-40
OTHER INDUSTRIAL MARKETS
Activity Distribution Center 2,485 1997 5-40
Scripps Sorrento 513 1998 5-40
Chancellor Square 2,353 1998 5-40
Presidents Drive 3,747 1997 5-40
Sand Lake Service Center 2,810 1998 5-40
Elmwood Business Park 2,425 1998 5-40
Boston Industrial Portfolio 11,999 1998 5-40
Cabot Business Park 9,340 1998 5-40
Cabot Business Park (KYDJ) 3,543 1998 5-40
Cabot Business Park SGP 626 2002 5-40
Bennington Corporate Center 1,123 2000 5-40
B.W.I 260 2002 5-40
Columbia Business Center 2,366 1999 5-40
Corridor Industrial 439 1999 5-40
Crysen Industrial 1,018 1998 5-40
Gateway 58 918 2000 5-40
Gateway Commerce Center 2,167 1999 5-40
Greenwood Industrial 2,759 1998 5-40
Meadowridge Industrial 1,751 1998 5-40
Oakland Ridge Industrial Center 4,736 1999 5-40
Patuxent Alliance 8280 124 2001 5-40
Patuxent Range Road 1,114 1997 5-40

AMB PROPERTY CORPORATION

SCHEDULE III

CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION

AS OF DECEMBER 31, 2003

(in thousands, except number of buildings/centers)

INITIAL COST TO COMPANY
------------------------------

NO. OF
PROPERTY BLDGS./CTRS. LOCATION TYPE ENCUMBRANCES LAND BUILDING
- -------- ------------ -------- ---- ------------ ---- --------

Preston Court 1 MD IND - 2,312,500 7,191,729
The Rotunda 2 MD IND 12,468 4,400,436 17,736,139
Santa Barbara Court 1 MD IND - 1,617,180 5,029,328
Technology I 2 MD IND - 1,656,543 5,049,270
Technology II 9 MD IND - 10,206,440 3,761,215
Braemar Business Center 2 MN IND - 1,566,262 4,612,500
Burnsville Business Center 1 MN IND - 932,111 2,796,334
Corporate Square Industrial 6 MN IND - 4,024,417 12,113,250
Edenvale Business Center 1 MN IND - 775,000 2,411,787
Minneapolis Distribution Portfolio 4 MN IND - 6,078,576 18,691,979
Mendota Heights 1 MN IND - 1,366,702 4,565,171
Minnetonka Industrial 10 MN IND 10,834 6,690,104 20,380,250
Minneapolis Industrial Portfolio IV 4 MN IND 7,214 4,937,910 14,853,729
Penn James Office Warehouse 2 MN IND - 1,990,880 6,012,641
Round Lake Business Center 1 MN IND - 875,000 2,625,000
Twin Cities 2 MN IND - 4,872,644 14,637,737
Chemway Industrial Portfolio 5 NC IND - 2,875,000 8,625,000
CLT Logistics Center 11 NC IND - 6,376,821 24,949,735
South Point Business Park 5 NC IND 8,329 3,130,017 10,452,133
Janitrol 1 OH IND - 1,796,556 5,389,667
Cascade Business Center 4 OR IND - 2,825,481 7,860,193
Wilsonville 1 OR IND - 3,406,951 13,493,049
Corporate Park/Hickory Hill 7 TN IND 15,723 6,788,750 20,366,250
Willow Lake Industrial Park 10 TN IND 19,488 12,414,740 35,990,213
Metric Center 5 TX IND - 10,967,959 32,943,878
TechRidge Phase II 1 TX IND 11,277 7,260,831 13,484,400
TechRidge Phase IA 3 TX IND 14,825 7,131,915 21,395,746
Beltway Distribution 1 VA IND - 4,800,000 15,158,982
Dulles Airport - Alliance 5 VA IND 20,869 3,655,700 6,929,967
Peninsula Business Center III 1 VA IND - 991,838 2,975,515
Mexico Guadalajara 5 Mexico IND 9,554,545 22,386,081
Mexico Mesquite Distribution Center 2 Mexico IND 16,994 4,191,520 246,703
Frankfurt Logistic Center 1 Germany IND - 19,874,616
Bourget Industrial 1 France IND 10,058,033 23,843,075
Paris Nord Dist I 1 France IND 2,863,694 4,722,728
Paris Nord Dist II 1 France IND 1,697,018 5,127,105
Japan Saitama Distribution Center 2 Japan IND 8,142,791 28,502,884
OTHER RETAIL MARKETS
Around Lenox 1 GA RET 9,092 3,462,000 13,848,000
Beacon Centre - Headlands 1 FL RET - 2,523,000 7,668,613
Charles and Chase 1 MD RET - 750,664 2,286,840
Mazzeo 1 MA RET 3,178 1,477,251 4,431,854
Palm Aire 1 FL RET - 2,278,531 9,719,567
--- ------------ -------------- --------------
Total 952 $ 1,353,101 $1,391,037,511 $3,288,396,223
=== ============ ============== ==============

COSTS CAPITALIZED
SUBSEQUENT
INITIAL COST TO COMPANY (IMPROVEMENTS)
------------------------ -----------------------

BUILDING &
PROPERTY LAND IMPROVEMENTS LAND BUILDING LAND
- -------- ---- ------------ ---- -------- ----

Preston Court 2,313 7,192 - 323,096 -
The Rotunda 4,400 17,736 - 3,487,386 -
Santa Barbara Court 1,617 5,029 - 880,789 -
Technology I 1,657 5,049 - 373,774 -
Technology II 10,206 3,761 - 30,154,977 -
Braemar Business Center 1,566 4,613 - 1,074,309 -
Burnsville Business Center 932 2,796 - 1,129,648 -
Corporate Square Industrial 4,024 12,113 - 2,482,516 -
Edenvale Business Center 775 2,412 - 959,502 -
Minneapolis Distribution Portfolio 6,079 18,692 - 4,338,292 -
Mendota Heights 1,367 4,565 - 2,453,412 -
Minnetonka Industrial 6,690 20,380 - 3,911,894 -
Minneapolis Industrial Portfolio IV 4,938 14,854 - 2,220,625 -
Penn James Office Warehouse 1,991 6,013 - 1,175,042 -
Round Lake Business Center 875 2,625 - 585,851 -
Twin Cities 4,873 14,638 - 6,560,754 -
Chemway Industrial Portfolio 2,875 8,625 - 1,051,471 -
CLT Logistics Center 6,377 24,950 - 41,794 -
South Point Business Park 3,130 10,452 - 1,711,620 -
Janitrol 1,797 5,390 - 365,135 -
Cascade Business Center 2,825 7,860 - 2,320,781 -
Wilsonville 3,407 13,493 - 61,784 -
Corporate Park/Hickory Hill 6,789 20,366 - 2,182,134 -
Willow Lake Industrial Park 12,415 35,990 - 14,258,248 -
Metric Center 10,968 32,944 - 1,733,774 -
TechRidge Phase II 7,261 13,484 - 229,293 -
TechRidge Phase IA 7,132 21,396 - 484,749 -
Beltway Distribution 4,800 15,159 - 5,532,668 -
Dulles Airport - Alliance 3,656 6,930 - 16,001,101 -
Peninsula Business Center III 992 2,976 - 358,931 -
Mexico Guadalajara 9,555 22,386 - 733,777 -
Mexico Mesquite Distribution Center 4,192 247 - 11,853,342 -
Frankfurt Logistic Center - 19,875 - 638,829 -
Bourget Industrial 10,058 23,843 308,654 1,232,024 309
Paris Nord Dist I 2,864 4,723 708,125 1,382,592 708
Paris Nord Dist II 1,697 5,127 393,752 2,602,134 394
Japan Saitama Distribution Center 8,143 28,503 - - -
OTHER RETAIL MARKETS
Around Lenox 3,462 13,848 - 4,873,716 -
Beacon Centre - Headlands 2,523 7,669 - 864,633 -
Charles and Chase 751 2,287 - 175,751 -
Mazzeo 1,477 4,432 - 231,158 -
Palm Aire 2,279 9,720 173,571 7,601,778 174
---------- ----------- ---------- ----------- ------
Total $1,391,038 $ 3,286,635 12,769,831 599,875,478 12,770
========== =========== ========== =========== ======

GROSS AMOUNT CARRIED AT 12/31/03
-----------------------------------------
COSTS CAPITALIZED
SUBSEQUENT TO BUILDING & TOTAL COSTS (1)
PROPERTY ACQUISITION LAND IMPROVEMENTS (2)
- -------- ----------- ---- ------------ ---

Preston Court 323 2,313 7,515 9,827
The Rotunda 3,487 4,400 21,224 25,624
Santa Barbara Court 881 1,617 5,910 7,527
Technology I 374 1,657 5,423 7,080
Technology II 30,155 10,206 33,916 44,123
Braemar Business Center 1,074 1,566 5,687 7,253
Burnsville Business Center 1,130 932 3,926 4,858
Corporate Square Industrial 2,483 4,024 14,596 18,620
Edenvale Business Center 960 775 3,371 4,146
Minneapolis Distribution Portfolio 4,338 6,079 23,030 29,109
Mendota Heights 2,453 1,367 7,019 8,385
Minnetonka Industrial 3,912 6,690 24,292 30,982
Minneapolis Industrial Portfolio IV 2,221 4,938 17,074 22,012
Penn James Office Warehouse 1,175 1,991 7,188 9,179
Round Lake Business Center 586 875 3,211 4,086
Twin Cities 6,561 4,873 21,198 26,071
Chemway Industrial Portfolio 1,051 2,875 9,676 12,551
CLT Logistics Center 42 6,377 24,992 31,368
South Point Business Park 1,712 3,130 12,164 15,294
Janitrol 365 1,797 5,755 7,551
Cascade Business Center 2,321 2,825 10,181 13,006
Wilsonville 62 3,407 13,555 16,962
Corporate Park/Hickory Hill 2,182 6,789 22,548 29,337
Willow Lake Industrial Park 14,258 12,415 50,248 62,663
Metric Center 1,734 10,968 34,678 45,646
TechRidge Phase II 229 7,261 13,714 20,975
TechRidge Phase IA 485 7,132 21,880 29,012
Beltway Distribution 5,533 4,800 20,692 25,492
Dulles Airport - Alliance 16,001 3,656 22,931 26,587
Peninsula Business Center III 359 992 3,334 4,326
Mexico Guadalajara 734 9,555 23,120 32,674
Mexico Mesquite Distribution Center 11,853 4,192 12,100 16,292
Frankfurt Logistic Center 639 - 20,513 20,513
Bourget Industrial 1,541 10,367 25,075 35,442
Paris Nord Dist I 2,091 3,572 6,105 9,677
Paris Nord Dist II 2,996 2,091 7,729 9,820
Japan Saitama Distribution Center - 8,143 28,503 36,646
OTHER RETAIL MARKETS
Around Lenox 4,874 3,462 18,722 22,184
Beacon Centre - Headlands 865 2,523 8,533 11,056
Charles and Chase 176 751 2,463 3,213
Mazzeo 231 1,477 4,663 6,140
Palm Aire 7,775 2,452 17,321 19,773
------- ---------- ----------- -----------
Total 614,406 $1,403,807 $ 3,888,272 $ 5,292,079
======= ========== =========== ===========

YEAR OF
ACCUMULATED CONSTRUCTION/ DEPRECIABLE LIFE
PROPERTY DEPRECIATION ACQUISITION (YEARS)
- -------- ------------ ----------- -------

Preston Court 1,331 1997 5-40
The Rotunda 3,571 1999 5-40
Santa Barbara Court 1,283 1997 5-40
Technology I 727 1999 5-40
Technology II 4,640 1999 5-40
Braemar Business Center 1,095 1998 5-40
Burnsville Business Center 925 1998 5-40
Corporate Square Industrial 2,985 1997 5-40
Edenvale Business Center 771 1998 5-40
Minneapolis Distribution Portfolio 4,134 1997 5-40
Mendota Heights 2,728 1998 5-40
Minnetonka Industrial 4,298 1998 5-40
Minneapolis Industrial Portfolio IV 3,416 1997 5-40
Penn James Office Warehouse 1,434 1997 5-40
Round Lake Business Center 641 1998 5-40
Twin Cities 4,221 1997 5-40
Chemway Industrial Portfolio 1,721 1998 5-40
CLT Logistics Center 156 2003 5-40
South Point Business Park 1,902 1998 5-40
Janitrol 916 1997 5-40
Cascade Business Center 1,859 1998 5-40
Wilsonville 2,008 1998 5-40
Corporate Park/Hickory Hill 3,534 1998 5-40
Willow Lake Industrial Park 12,418 1998 5-40
Metric Center 5,634 1997 5-40
TechRidge Phase II 944 2001 5-40
TechRidge Phase IA 1,768 2000 5-40
Beltway Distribution 3,631 1999 5-40
Dulles Airport - Alliance 663 2000 5-40
Peninsula Business Center III 479 1998 5-40
Mexico Guadalajara 580 2002 5-40
Mexico Mesquite Distribution Center 64 2003 5-40
Frankfurt Logistic Center 20 2003 5-40
Bourget Industrial 100 2003 5-40
Paris Nord Dist I 80 2002 5-40
Paris Nord Dist II 52 2002 5-40
Japan Saitama Distribution Center 59 2003 5-40
OTHER RETAIL MARKETS
Around Lenox 2,851 1998 5-40
Beacon Centre - Headlands 694 2000 5-40
Charles and Chase 289 1998 5-40
Mazzeo 673 1998 5-40
Palm Aire 2,125 1996 5-40
---------
Total $ 474,452
=========

- ---------------

(1) Reconciliation of total cost to consolidated balance sheet caption as of
December 31, 2003:

Total per Schedule III(3)................................... $5,292,079
Construction in process(4).................................. 199,628
----------
Total investments in properties........................... $5,491,707
==========

(2) As of December 31, 2003, the aggregate cost for federal income tax purposes
of investments in real estate was $5,201,590.

(3) A summary of activity for real estate and accumulated depreciation for the
year ended December 31, 2003, is as follows:

Investments in Properties:
Balance at beginning of year.............................. $4,922,782
Acquisition of properties................................. 523,994
Improvements, including development properties............ 264,272
Transfer basis adjustment................................. 23,388
Asset impairment.......................................... (5,251)
Divestiture of properties................................. (339,605)
Adjustment for properties held for divestiture............ 102,127
----------
Balance at end of year.................................... $5,491,707
==========
Accumulated Depreciation:
Balance at beginning of year.............................. $ 362,540
Depreciation expense, including discontinued operations... 133,842
Properties divested....................................... (27,937)
Adjustment for properties held for divestiture............ 6,007
----------
Balance at end of year.................................... $ 474,452
==========

(4) Includes $112.2 million of fundings for development projects as of
December 31, 2003.

S-2

EXHIBIT INDEX