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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

FOR QUARTER ENDED March 31, 2004

COMMISSION FILE NO. 000-22741

CARRAMERICA REALTY, L.P.

(Exact name of registrant as specified in its charter)

1850 K Street, N.W., Washington, D.C. 20006

(Address or principal executive office) (Zip code)

Registrant’s telephone number, including area code (202) 729-1700

N/A

(Former name, former address and former fiscal year, if changed since last report)

Number of Partnership Units outstanding of each of the registrant’s

classes of Partnership Units as of April 28, 2004:

(# of shares) 14,362,972

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 twelve (12) months (or such shorter period that the Registrant was required to file such report) and (2) has been subject to such filing requirements for the past ninety (90) days.

YES x    NO ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

YES ¨    NO x

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Index

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Part I

The information furnished in our accompanying consolidated balance sheets, consolidated statements of operations and consolidated statements of cash flows reflects all adjustments which are, in our opinion, necessary for a fair presentation of the aforementioned financial statements for the interim periods.

The financial statements should be read in conjunction with the notes to the financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations. The results of operations for the three months ended March 31, 2004 are not necessarily indicative of the operating results to be expected for the full year.

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CARRAMERICA REALTY, L.P. AND SUBSIDIARIES

Consolidated Balance Sheets

As of March 31, 2004 and December 31, 2003

See accompanying notes to consolidated financial statements.

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CARRAMERICA REALTY, L.P. AND SUBSIDIARIES

Consolidated Statements of Operations

For the Three Months Ended March 31, 2004 and 2003

See accompanying notes to consolidated financial statements.

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CARRAMERICA REALTY, L.P. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the Three Months Ended March 31, 2004 and 2003

See accompanying notes to consolidated financial statements.

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CARRAMERICA REALTY, L.P. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

We are a Delaware limited partnership formed on March 6, 1996 for the purpose of owning, acquiring, developing and operating office buildings across the United States. As of March 31, 2004, we owned a controlling interest in a portfolio of 53 operating office buildings. As of March 31, 2004, we also owned a minority interest in 30 operating office buildings. The properties are located in Austin, Chicago, Dallas, Denver, Orange County/Los Angeles, Phoenix, San Francisco Bay Area, Salt Lake City, San Diego, Seattle and Washington, D.C.

Our general partner is CarrAmerica Realty GP Holdings, Inc. (the “General Partner”), a wholly owned subsidiary of CarrAmerica Realty Corporation (“CarrAmerica”), a self-administered and self-managed real estate investment trust. Our General Partner owned a 1.0% interest in us at March 31, 2004. Our limited partners are CarrAmerica Realty LP Holdings, Inc., a wholly owned subsidiary of CarrAmerica, which owned an approximate 90.6% interest in us at March 31, 2004, and various other individuals and entities, which collectively owned an approximate 8.4% interest in us at March 31, 2004.

The financial statements have been prepared using the accounting policies described in our 2003 annual report on Form 10-K. Our accounts and those of our controlled subsidiaries and affiliates are consolidated in the financial statements. We consolidate all entities in which we own a direct or indirect majority voting interest and where the minority holders do not have rights to participate in significant decisions that are made in the ordinary course of business. If applicable, we would consolidate any variable interest entity of which we are the primary beneficiary. We use the equity method to account for our investments in and our share of the earnings or losses of unconsolidated entities. These entities are not controlled by us. If events or changes in circumstances indicate that the fair value of an investment accounted for using the equity method has declined below its carrying value and we consider the decline to be “other than temporary,” the investment is written down to fair value and an impairment loss is recognized.

Management has made a number of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses in the financial statements, and the disclosure of contingent assets and liabilities. Estimates are required in order for us to prepare our financial statements in conformity with accounting principles generally accepted in the United States of America. Significant estimates are required in a number of areas, including evaluating the impairment of long-lived assets, allocating the purchase cost of acquired properties and evaluating the collectibility of accounts receivable. Actual results could differ from these estimates.

In accordance with its established practices, CarrAmerica allocates certain general and administrative expenses to its subsidiaries, including us. During the fourth quarter of 2003, CarrAmerica revised and refined its general and administrative costs accounting procedures to allocate certain costs on a specific identification basis and to allocate general expenses to subsidiaries based on their respective assets. In prior years, allocations of these expenses were based primarily on full-time equivalent employees. Expenses allocated to us by CarrAmerica for the three months ended March 31, 2004 and 2003 were $1.4 million and $52,000, respectively.

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CARRAMERICA REALTY, L.P. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

The financial statements reflect all adjustments, which are, in our opinion, necessary to reflect a fair presentation of results for the interim periods, and all adjustments are of a normal, recurring nature.

Certain reclassifications of prior period amounts have been made to conform to the current period’s presentation.

Our mortgages and notes payable are summarized as follows:

Mortgages payable are collateralized by properties and generally require monthly principal and/or interest payments. Mortgages payable mature at various dates from December 2004 through May 2017. The weighted average interest rate of fixed rate mortgages and notes payable was 7.89% at March 31, 2004. The weighted average interest rate of our fixed rate mortgages, excluding the notes payable to affiliate, was 7.54% as of March 31, 2004. During the three months ended March 31, 2004 we repaid two mortgages related to one of our operating properties, Sorenson Research Park, X, in the amount of $3.3 million, and made scheduled repayments on the remaining mortgages.

We have three loans with CarrAmerica. The first note (balance at March 31, 2004 of $26.2 million) bears interest at 8.5%, requires monthly principal and interest payments of $242,000 and matures on May 31, 2011. The second is a $12.0 million loan that bears interest at 8.5%, requires monthly interest only payments of $85,000 and matures on March 27, 2007. The third note requires interest only payments equal to 100 basis points over 30-day LIBOR (2.09% as of March 31, 2004). The outstanding loan balance as of March 31, 2004 was $7.5 million. The note allows additional amounts to be drawn on the anniversary date of the note up to a maximum of $27.0 million and matures on December 31, 2017.

Debt maturities at March 31, 2004 were as follows:

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Notes to Consolidated Financial Statements

(Unaudited)

In June 2001, CarrAmerica closed on a three-year $500 million unsecured credit facility with J.P. Morgan Chase, as agent for a group of banks which expires in June 2004. We are an unconditional guarantor of borrowings under this facility. CarrAmerica can extend the life of the facility for one year at its option. The interest rate on the unsecured credit facility is 70 basis points over 30-day LIBOR or 1.79% as of March 31, 2004. As of March 31, 2004, $15.5 million was drawn on the credit facility, $3.2 million in letters of credit were outstanding and CarrAmerica had $481.3 million available for borrowing. CarrAmerica is currently negotiating with its lenders regarding a new credit facility and expects to have the new credit facility in place in the latter half of the second quarter of 2004. We will guarantee the new credit facility.

CarrAmerica’s unsecured credit facility contains financial and other covenants with which it must comply. Some of these covenants include:

As of March 31, 2004, CarrAmerica was in compliance with all of its loan covenants; however, CarrAmerica’s ability to draw on its unsecured credit facility or incur other unsecured debt in the future could be restricted by the loan covenants. During the second quarter of 2003, CarrAmerica amended its credit agreement to increase its maximum ratio of aggregate unsecured debt to tangible fair market value of its unencumbered assets (unencumbered leverage ratio) from 50% to 55% to allow for continuing covenant compliance. As of March 31, 2004, CarrAmerica’s unencumbered leverage ratio was 49.3%. CarrAmerica’s unencumbered leverage ratio is most significantly impacted by two key factors: the purpose for which it incurs any additional unsecured debt and the performance of its operating properties. Incurring additional unsecured debt to acquire additional unencumbered assets does not impact its unencumbered leverage ratio as significantly as incurring additional unsecured debt for other purposes. The tangible fair market value of CarrAmerica’s unencumbered properties is calculated based on their operating income and its unencumbered leverage ratio could increase if the operating income of its unencumbered properties decreases. If CarrAmerica’s unencumbered leverage ratio increases further, it could impact its business and operations, including limiting its ability to incur additional unsecured debt, draw on its unsecured line of credit, which is CarrAmerica’s primary source of short term liquidity, acquire leveraged properties or invest in properties through joint ventures.

Failure to comply with any of the covenants under CarrAmerica’s unsecured credit facility or other debt instruments could result in a default under one or more of its debt instruments. This could cause CarrAmerica’s lenders to accelerate the timing of payments and would therefore have a material adverse effect on CarrAmerica’s and our business, operations, financial condition or liquidity.

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Notes to Consolidated Financial Statements

(Unaudited)

We have unconditionally guaranteed unsecured notes issued by CarrAmerica to institutional and other investors. The aggregate principal amount of the unsecured notes was $1.3 billion and $1.1 billion as of March 31, 2004 and 2003, respectively. These notes are in the following form:

The table below summarizes property sale for the three months ended March 31, 2004:

We dispose of assets from time to time that are inconsistent with our long-term strategic or return objectives. During the three months ended March 31, 2004, we disposed of our Tower of the Hills property, recognizing a gain of $0.1 million. We have no continuing involvement with the Tower of the Hills property after the sale and, accordingly, the gain on this sale and the operating results of this property are classified as discontinued operations. We had previously recognized an impairment loss of $3.0 million on this property in the fourth quarter of 2003. During the three months ended March 31, 2003, we did not dispose of any operating properties.

Operating results of the Tower of the Hills property are summarized as follows:

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Management’s Discussion and Analysis

The discussion that follows is based primarily on our consolidated financial statements as of March 31, 2004 and December 31, 2003 and for the three months ended March 31, 2004 and 2003 and should be read along with the consolidated financial statements and related notes. The ability to compare one period to another may be significantly affected by acquisitions completed, development properties placed in service and dispositions made during those periods.

As a result of the weak economic climate over the last several years, the office real estate markets were materially affected. The contraction of office workforces has reduced demand for office space and overall vacancy rates for office properties increased in all of our markets through 2002 and our operations were adversely impacted. In 2003, vacancy rates appeared to peak in many of our markets and some positive net absorption of space started to occur. With respect to our four largest markets, Washington, D.C., and Southern California experienced positive net absorption and decreasing vacancy rates in 2003. Within the Washington, D.C. region, Northern Virginia’s vacancy rates declined in 2003 while downtown Washington, D.C.’s vacancy rate increased slightly due to construction deliveries. However, with a vacancy rate of 8.4% at the end of 2003, downtown Washington, D.C. remained one of the healthiest markets in the United States. Northern California has continued to show negative net absorption and increased vacancy rates. We expect Northern California’s office rental market recovery to lag behind our other markets. However, because vacancy rates are still at high levels in most markets, we do not expect any material improvement in leasing conditions until later in 2004. The occupancy in our portfolio of stabilized operating properties was 88.2% at March 31, 2004 compared to 87.8% at December 31, 2003 and 89.2% at March 31, 2003. Market rental rates have declined in most markets from peak levels and there may be additional declines in some markets through the rest of 2004.

Critical Accounting Policies and Estimates

Critical accounting policies and estimates are those that are both important to the presentation of our financial condition and results of operations and require management’s most difficult, complex or subjective judgments. Our critical accounting policies and estimates relate to evaluating the impairment of long-lived assets, allocating the purchase cost of acquired properties, and evaluating the collectibility of accounts receivable.

We assess the useful lives of our assets on a regular basis. If events or changes in circumstances indicate that the carrying value of a rental property to be held and used or land held for development may be impaired, we perform a recoverability analysis based on estimated undiscounted cash flows to be generated from the property in the future. If the analysis indicates that the carrying value is not recoverable from future cash flows, the property and related assets such as tenant improvements and lease commissions, are written down to estimated fair value and an impairment loss is recognized. If we decide to sell rental properties or land holdings, we evaluate the recoverability of the carrying amounts of the assets. If the evaluation indicates that the carrying value is not recoverable from estimated net sales proceeds, the property is written down to estimated fair value less costs to sell and an impairment loss is recognized. Our estimates of cash flows and fair values of the properties are based on current market conditions and consider matters such as rental rates and occupancies for comparable properties, recent sales data for comparable properties and, where applicable, contracts or the results of negotiations with purchasers or prospective purchasers. Changes in estimated future cash flows due to changes in our plans or views of market and economic conditions could result in recognition of additional impairment losses which, under applicable accounting guidance, could be substantial.

We allocate the purchase cost of acquired properties to the related physical assets and in-place leases based on their fair values. The fair values of acquired office buildings are determined on an “if-vacant” basis considering a variety of factors, including the physical condition and quality of the buildings, estimated rental and absorption rates, estimated future cash flows and valuation assumptions consistent with current market conditions. The “if-vacant” fair value is allocated to land, where applicable, buildings, tenant improvements and equipment based on property tax assessments and other relevant information obtained in connection with the acquisition of the property.

The fair value of in-place leases includes the effect of leases with above or below market rents, where applicable, customer relationship value and the cost of acquiring existing tenants at the date of acquisition. Above market and below market in-place lease values are determined on a lease by lease basis based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (a) the

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contractual amounts to be paid under the lease and (b) our estimate of the fair market lease rate for the corresponding space over the remaining non-cancelable terms of the related leases. The capitalized below market lease values are amortized as an increase to rental income over the initial term and any below market renewal periods of the related leases. Capitalized above market lease values are amortized as a decrease to rental income over the initial term of the related leases. Customer relationship values are determined based on our evaluation of the specific characteristics of each tenant’s lease and our overall relationship with the tenant. Characteristics we consider include the nature and extent of our existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals. The value of customer relationship intangibles is amortized to expense over the lesser of the initial lease term and any expected renewal periods or the remaining useful life of the building. We determine the fair value of the cost of acquiring existing tenants by estimating the lease commissions avoided by having in-place tenants and avoided lost operating income for the estimated period required to lease the space occupied by existing tenants at the acquisition date. The cost of acquiring existing tenants is amortized to expense over the initial term of the respective leases. Should a tenant terminate its lease, the unamortized portion of the in-place lease value is charged to expense. Changes in the assumptions used in the allocation of the purchase cost among the acquired assets would affect the timing of recognition of the related revenue and expenses.

Our allowance for doubtful accounts receivable is established based on analysis of the risk of loss on specific accounts. The analysis places particular emphasis on past-due accounts and considers information such as the nature and age of the receivable, the payment history of the tenant or other debtor, the amount of security we hold, the financial condition of the tenant and our assessment of its ability to meet its lease obligations, the basis for any disputes and the status of related negotiations, etc. Our estimate of the required allowance, which is reviewed on a quarterly basis, is subject to revision as these factors change and is sensitive to the effects of economic and market conditions on our tenants, particularly in our largest markets. Bad debt expense was $55,000 and $394,000 for the three months ended March 31, 2004 and 2003, respectively. The decrease in the addition to our provision for uncollectible accounts in 2004 was due primarily to the reduction of delinquent tenants as marginal tenants’ leases were terminated or sublet and the effects of an improving economy.

RESULTS OF OPERATIONS

Operating results are summarized as follows:

Operating revenues decreased $1.2 million (4.6%) for the first quarter of 2004 compared to 2003. This decrease was due primarily to lower minimum base rents and recoveries from tenants which were partially offset by an increase in lease termination fees. Vacancy rates now appear to have peaked in many of our markets, and some positive net absorption of space is occurring. However, because vacancy rates are still at high levels in most markets, we do not expect any material improvement in leasing conditions until later in 2004.

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Management’s Discussion and Analysis

Our lease rollover by square footage at March 31, 2004 is as follows:

Property operating expenses decreased $0.2 million (2.2%) in the first quarter of 2004 from 2003 primarily as a result of a decrease in bad debt expense ($0.3 million). The decrease in our provision for uncollectible accounts as compared to 2003 was due primarily to the reduction of delinquent tenants as marginal tenants’ leases were terminated or sublet and the effects of an improving economy.

General and administrative expense increased $1.2 million (109.1%) in the three months ended March 31, 2004 compared to the same period in 2003. The increase was due primarily to increased allocations of expense from CarrAmerica, which increased approximately $1.3 million from 2003. During the fourth quarter of 2003, CarrAmerica revised and refined its general and administrative cost accounting procedures to allocate certain costs on a specific identification basis and to allocate general costs to subsidiaries based on their respective assets. In prior periods, allocations of these expenses were based primarily on full time equivalent employees. The change in allocation methodology resulted in an increase in expenses allocated to us in for the first quarter 2004 as compared with 2003.

Depreciation and amortization increased $0.6 million (8.1%) in the three months ended March 31, 2004, compared to the same period in 2003. The increase was due primarily to the increase in tenant improvements.

Interest expense increased $0.5 million (26.3%) in the three months ended March 31, 2004 compared to the same period in 2003. The increase was due primarily to increased interest on notes payable to affiliates ($0.6 million) relating to a loan made to us by CarrAmerica in 2003 which was partially offset by the reductions in mortgages and notes payable.

The table below summarizes our property sale for the three months ended March 31, 2004:

We dispose of assets from time to time that are inconsistent with our long-term strategic or return objectives. During the three months ended March 31, 2004, we disposed of our Tower of the Hills property, recognizing a gain of $0.1. We have no continuing involvement with the Tower of the Hills property after the sale and, accordingly, the gain on this sale and the operating results of this property are classified as discontinued

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operations. We had previously recognized an impairment loss of $3.0 million on this property in the fourth quarter of 2003. During the three months ended March 31, 2003 we did not dispose of any operating properties.

Operating results of the Tower of the Hills property are summarized as follows:

Consolidated Cash Flows

Consolidated cash flow information is summarized as follows:

Operations generated $9.4 million of net cash for the first three months of 2004 compared to $11.9 in 2003. The decrease in cash provided by operating activities was due primarily to the decline in our real estate operating income from $8.6 million in 2003 to $5.9 million in 2004. The level of net cash provided by operating activities is affected by the timing of receipt of revenues and payment of expenses.

Our investing activities provided net cash of $8.3 million in 2004 compared to using cash of $2.9 million in 2003. The net change in cash flows from investing activities in 2004 was due primarily to increases in proceeds from a sale of property ($10.5 million) and in distributions from unconsolidated entities ($0.4 million).

Our financing activities used net cash of $17.2 million for the first three months of 2004 and $10.7 million for the same period in 2003. The net change in cash flows from financing activities is primarily a result of the use of cash from the sale of our operating property in repayment of amounts due to affiliates. Also affecting the use of cash were recurring repayments of mortgages and notes payable.

LIQUIDITY AND CAPITAL RESOURCES

Our liquidity and capital resources are dependent upon CarrAmerica and its other affiliates. CarrAmerica’s primary sources of capital are real estate operations and its unsecured credit facility. As of March 31, 2004, CarrAmerica had $481.3 million available for borrowing under the unsecured credit facility. We and CarrAmerica derive substantially all of our revenue from tenants under leases at our properties. Our operating cash flow therefore depends materially on the rents that we are able to charge to our tenants, and the ability of these tenants to make their rental payments.

Our primary uses of cash are to fund distributions to Unitholders, to fund capital investments in our existing portfolio of operating assets, and to fund new acquisitions and our development activities. We regularly require capital to invest in our existing portfolio of operating assets in connection with large-scale renovations, routine capital improvements, deferred maintenance on properties we have recently acquired, and our leasing activities, including funding tenant improvements, allowances and leasing commissions. The amounts of the leasing-related expenditures can vary significantly depending on negotiations with tenants and the willingness of tenants to pay higher base rents over the life of the leases.

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Management’s Discussion and Analysis

During the remainder of 2004, we expect that we will have significant capital requirements, including the following items. There can be no assurances that our capital requirements will not be materially higher or lower than these expectations.

We expect to meet our capital requirements using cash generated by our real estate operations and borrowings from CarrAmerica.

We believe that we will generate sufficient cash flow from operations and have access to the capital resources necessary to expand and develop our business, to fund our operating and administrative expenses, to continue to meet our debt service obligations and to pay Unitholder distributions. However, as a result of general economic downturns, if CarrAmerica’s credit rating is downgraded, or if our properties do not perform as expected, we may not generate sufficient cash flow from operations or otherwise have access to capital on favorable terms, or at all. If we cannot raise the expected funds from the sale of properties and/or if we are unable to obtain capital from other sources, we may not be able to make required principal and interest payments, make strategic acquisitions or make necessary routine capital improvements with respect to our existing portfolio of operating assets. In addition, if a property is mortgaged to secure payment of indebtedness and we are unable to meet mortgage payments, the holder of the mortgage could foreclose on the property, resulting in loss of income and asset value. An unsecured lender could also attempt to foreclose on some of our assets in order to receive payment. In most cases, very little of the principal amount we borrow is repaid prior to the maturity of the loan. We may refinance that debt when it matures, or we may pay off the loan. If principal amounts due at maturity cannot be refinanced, extended or paid with proceeds of other capital transactions, such as new equity capital, our cash flow may be insufficient to repay all maturing debt. Prevailing interest rates or other factors at the time of a refinancing (such as possible reluctance of lenders to make commercial real estate loans) may result in higher interest rates and increased interest expense.

CarrAmerica is our principal source of liquidity. CarrAmerica’s primary external source of liquidity is its credit facility. CarrAmerica has a three-year, $500.0 million unsecured credit facility expiring in June 2004 with J.P. Morgan Chase, as agent for a group of banks. CarrAmerica can extend the life of the facility an additional year at its option. The facility carries an interest rate of 70 basis points over 30-day LIBOR, or 1.79% as of March 31, 2004. As of March 31, 2004, $15.5 million was drawn on the credit facility, $3.2 million in letters of credit were outstanding and $481.3 million was available for borrowing. CarrAmerica is currently negotiating with its lenders regarding a new credit facility and expect to have the new credit facility in place in the latter half of the second quarter of 2004. We will guarantee the new credit facility.

CarrAmerica’s unsecured credit facility contains financial and other covenants with which it must comply. Some of these covenants include:

As of March 31, 2004, CarrAmerica was in compliance with all of its loan covenants; however, CarrAmerica’s ability to draw on its unsecured credit facility or incur other unsecured debt in the future could be restricted by the loan covenants. During the second quarter of 2003, CarrAmerica amended its credit agreement to increase its maximum ratio of aggregate unsecured debt to tangible fair market value of its unencumbered assets (unencumbered leverage ratio) from 50% to 55% to allow for continuing covenant compliance. As of March 31, 2004, CarrAmerica’s unencumbered leverage ratio was 49.3%. CarrAmerica’s unencumbered leverage ratio is most significantly impacted by two key factors: the purpose for which it incurs any additional unsecured debt and the performance of its operating properties. Incurring additional unsecured debt to acquire additional unencumbered assets does not impact its unencumbered leverage ratio as significantly as incurring additional unsecured debt for other purposes. The tangible fair market value of CarrAmerica’s unencumbered properties is calculated based on

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their operating income and its unencumbered leverage ratio could increase if the operating income of its unencumbered properties decreases. If CarrAmerica’s unencumbered leverage ratio increases further, it could impact its business and operations, including limiting its ability to incur additional unsecured debt, draw on its unsecured line of credit, which is CarrAmerica’s primary source of short term liquidity, acquire leveraged properties or invest in properties through joint ventures.

Failure to comply with any of the covenants under CarrAmerica’s unsecured credit facility or other debt instruments could result in a default under one or more of its debt instruments. This could cause CarrAmerica’s lenders to accelerate the timing of payments and would therefore have a material adverse effect on CarrAmerica’s and our business, operations, financial condition or liquidity.

Our total debt March 31, 2004 is summarized as follows:

Our fixed rate debt bore an effective weighted average interest rate of 7.89% at March 31, 2004 and had a weighted average maturity of 4.6 years. The effective weighted average interest rate of our fixed rate debt, excluding our notes payable to affiliates, was 7.54% at March 31, 2004 and had a weighted average maturity of 2.3 years. Our variable rate note payable to affiliate at March 31, 2004 bore an interest rate of 100 basis points over 30-day LIBOR or 2.09%.

Capital Commitments

We regularly incur expenditures in connection with the re-leasing of office space, principally in the form of tenant improvements and leasing commissions. The amounts of these expenditures can vary significantly, depending on negotiations with tenants and the willingness of tenants to pay higher base rents over the life of the leases. We expect to pay for these capital expenditures out of cash from operations or, to the extent necessary, borrowings from CarrAmerica. We believe that these expenditures are generally recouped in the form of continuing lease payments.

Unconsolidated Investments and Joint Ventures

We have investments in real estate joint ventures in which we hold 21.2% to 49% interests. These investments are accounted for using the equity method and therefore the assets and liabilities of the joint ventures are not included in our financial statements. These joint ventures own and operate office buildings financed by non-recourse debt obligations that are secured only by the real estate and other assets of the joint ventures. We have no obligation to repay these non-recourse debt obligations and the lenders have no recourse to our other assets.

Our investments in these joint ventures are subject to risks not inherent in our majority owned properties, including:

We do not have any off-balance sheet arrangements, other than those disclosed in our contractual obligations or as a guarantee, with any unconsolidated investments or joint ventures that have or are reasonably likely to have a

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future material effect on our financial condition, changes in our financial condition, our revenue or expenses, our results of operations, our liquidity, our capital expenditures or our capital resources.

Guarantee Obligations

We have unconditionally guaranteed unsecured notes issued by CarrAmerica to institutional and other investors. The aggregate principal amount of the unsecured notes was $1.3 billion and $1.1 billion as of March 31, 2004 and 2003, respectively. These notes are in the following form:

CarrAmerica’s senior unsecured notes contain various covenants with which CarrAmerica must comply. The covenants include:

As of March 31, 2004, CarrAmerica was in compliance with its unsecured note covenants.

CarrAmerica issued $225.0 million of senior unsecured notes in March 2004. The notes bear interest at 3.625% per annum payable semi-annually beginning October 1, 2004. The notes mature on April 1, 2009. CarrAmerica used the proceeds from the notes to pay down its unsecured credit facility.

$150.0 million of senior unsecured notes mature in July 2004. CarrAmerica expects to pay the unsecured notes at the scheduled maturity date from its credit facility or other borrowings. We repaid $6.0 million of fixed rate mortgage debt and notes payable in the first quarter of 2004.

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Building and Lease Information

The following table sets forth information about each wholly-owned property as of March 31, 2004:

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FORWARD-LOOKING STATEMENTS

Statements contained in this Form 10-Q which are not historical facts may be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 21E of the Exchange Act. Such statements (none of which is intended as a guarantee of performance) are subject to certain risks and uncertainties, which could cause our actual future results, achievements or transactions to differ materially from those projected or anticipated. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this Form 10-Q is filed with the SEC. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements, including, but not limited to, the risks described in our annual report on Form 10-K for the year ended December 31, 2003. Such factors include, among others:

For further discussion of these and other factors that could impact our future results, performance, achievements or transactions, see the documents we file from time to time with the Securities and Exchange Commission, and in particular, the section titled “The Company – Risk Factors” in CarrAmerica’s Annual Report on Form 10-K.

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Any significant changes in our market risk that have occurred since the filing of our Annual Report on Form 10-K for the year ended December 31, 2003 are summarized in the Liquidity and Capital Resources section of the Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Evaluation was performed under the supervision of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness as of March 31, 2004 of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15 of the rules promulgated under the Securities and Exchange Act of 1934, as amended. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective.

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Part II

OTHER INFORMATION

On May 8, 2003, Broadband Office, Inc. (“Broadband Office”) and the official committee of unsecured creditors of Broadband Office filed a complaint in the United States Bankruptcy Court for the District of Delaware against a group of REITs, real estate operating companies and individuals, including CarrAmerica and its subsidiaries, including us, relating to the formation, management and capitalization of Broadband Office. CarrAmerica was an equity investor in and customer of Broadband Office, which filed for bankruptcy protection on May 9, 2001. The complaint, among other things, alleges breaches of fiduciary duties by us and CarrAmerica, seeks to recharacterize CarrAmerica’s investment as a holder of common stock to be one as a general unsecured creditor and/or as a general partner responsible jointly with all other alleged general partners for the outstanding debts of the corporation, and also seeks recovery of alleged preference payments made to CarrAmerica and its subsidiaries, including us. The plaintiffs seek relief in an amount in excess of $300 million jointly and severally from all defendants. On October 29, 2003, CarrAmerica and we filed a motion to dismiss all claims asserted in the complaint. Due to the inherent uncertainties of the judicial process and the early stage of this action, we are unable to either predict the outcome of or estimate a range of potential loss associated with, this litigation. We and CarrAmerica dispute the plaintiff’s claims and intend to vigorously defend this matter. While we believe that the outcome of this matter will not have a material effect on our financial position or overall trends in results of operations, litigation is subject to inherent uncertainties. If this matter is not resolved in our favor, there exists the possibility it could have a material adverse impact on our financial condition and results of operations when the matter is resolved.

We are party to a variety of other legal proceedings arising in the ordinary course of business. All of these matters, taken together, are not expected to have a material adverse impact on us. Based on currently available facts, we believe that the disposition of matters that are pending or asserted will not have a material adverse effect on our consolidated financial position, results of operations or liquidity.

Current Report on Form 8-K filed on March 22, 2004 regarding the Terms Agreement between CarrAmerica Realty Corporation and J.P. Morgan Securities Inc., Citigroup Global Markets Inc., Goldman, Sachs & Co., Morgan Stanley & Co. Incorporated, Wachovia Capital Markets, LLC, Legg Mason Wood Walker, Incorporated, Piper Jaffray & Co., PNC Capital Markets, Inc., SunTrust Capital Markets, Inc. and Wells Fargo Brokerage Services, LLC, which amends and incorporates by reference that certain Underwriting Agreement, dated January 8, 2002, by and between the Company and J.P. Morgan Securities Inc., in connection with a proposed public offering of $225,000,000 of 3.625% Senior Notes due 2009.

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SIGNATURES

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

Date: May 4, 2004

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