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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 September 30, 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 October 25, 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

Item 1. Financial Information

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 nine months ended September 30, 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 September 30, 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 and Nine Months Ended September 30, 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 Nine Months Ended September 30, 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 September 30, 2004, we owned a controlling interest in a portfolio of 53 operating office buildings. As of September 30, 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.

On June 30, 2004, CarrAmerica Realty Corporation, a self-administered and self-managed real estate investment trust, contributed substantially all of it assets to CarrAmerica Realty Operating Partnership, L.P. in exchange for units of common and preferred partnership interest in CarrAmerica Realty Operating Partnership, L.P. CarrAmerica Realty Operating Partnership, L.P. assumed substantially all of CarrAmerica Realty Corporation’s liabilities (CarrAmerica Realty Corporation and CarrAmerica Realty Operating Partnership, L.P. collectively referred to hereafter as “CarrAmerica”). Our general partner is CarrAmerica Realty GP Holdings, LLC. (the “General Partner”), a wholly owned subsidiary of CarrAmerica. Our General Partner owned a 1.0% interest in us at September 30, 2004. Our limited partners are CarrAmerica Realty LP Holdings, LLC a wholly owned subsidiary of CarrAmerica, which owned an approximate 91.15% interest in us at September 30, 2004, and various other individuals and entities, which collectively owned an approximate 7.85% interest in us at September 30, 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 cost accounting procedures to allocate certain costs on a specific identification basis and to allocate general expenses to

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Notes to Consolidated Financial Statements

(Unaudited)

subsidiaries based on their respective assets. Costs allocated on a specific identification basis include labor and related costs, information technology expenses, and professional fees. 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 September 30, 2004 and 2003 were $1.4 million and $66,000, respectively, and $4.1 million and $176,000 for the nine months ended September 30, 2004 and 2003, respectively.

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 September 30, 2004. The weighted average interest rate of our fixed rate mortgages, excluding the notes payable to affiliate, was 7.51% as of September 30, 2004. During the nine months September 30, 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 September 30, 2004 of $25.8 million) bears interest at 8.5%, requires monthly principal and interest payments of $242,000, is secured by a deed of trust to real property, 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, is secured by deeds of trust to five parcels of real property and assignment of leases and rents, and matures on March 27, 2007. The third note requires interest only payments equal to 100 basis points over 30-day LIBOR (2.84% as of September 30, 2004). The outstanding loan balance as of September 30, 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.

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CARRAMERICA REALTY, L.P. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

Debt maturities at September 30, 2004 were as follows:

On June 30, 2004, CarrAmerica entered into a new $500.0 million, three year unsecured revolving credit facility with JPMorgan Chase Bank as administrative agent for a syndicate of banks. We are an unconditional guarantor of borrowings under this facility. The facility replaced and was used to repay all amounts outstanding under CarrAmerica’s previous unsecured senior credit facility. CarrAmerica may increase the facility to $700.0 million by request at any time within 24 months of the closing, provided the funding commitments are increased accordingly. The facility can be extended one year at CarrAmerica’s option. The facility carried an interest rate of 65 basis points over 30-day LIBOR, or 2.49% as of September 30, 2004. As of September 30, 2004, $143.0 million was drawn on the credit facility, $35.9 million in letters of credit were outstanding, and CarrAmerica had $321.1 million available for borrowing

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

As of September 30, 2004, CarrAmerica was in compliance with all of its loan covenants. 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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CARRAMERICA REALTY, L.P. AND SUBSIDIARIES

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 $1.4 billion and $1.1 billion as of September 30, 2004 and 2003, respectively. These notes are in the following form:

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 and are unconditionally guaranteed by us. CarrAmerica used the proceeds from the notes to pay down its unsecured credit facility.

$150.0 million of senior unsecured notes maturing on July 1, 2004 were repaid on that date.

CarrAmerica issued $200.0 million principal amount of senior unsecured notes in August 2004 with net proceeds of approximately $197.2 million. The notes bear interest at 5.125% per annum payable semi-annually beginning March 1, 2005. The notes mature on September 1, 2011 and are unconditionally guaranteed by us. CarrAmerica used the proceeds from the notes to pay down its unsecured credit facility.

The table below summarizes our property sale for the nine months ended September 30, 2004:

We dispose of assets from time to time that are inconsistent with our long-term strategic or return objectives. During the nine months ended September 30, 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 nine months ended September 30, 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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Notes to Consolidated Financial Statements

(Unaudited)

During the third quarter of 2004, we transferred a note receivable of $7.4 million from CarrAmerica Development, Inc. to CarrAmerica as payment for amounts due to CarrAmerica

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Management’s Discussion and Analysis

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The discussion that follows is based primarily on our consolidated financial statements as of September 30, 2004 and December 31, 2003 and for the three and nine months ended September 30, 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 had 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. To date in 2004, the positive trend of reduced vacancy rates and positive net absorption has continued in most of our markets. As a result of improved job growth, leasing activity is up significantly, and we believe that rental rates have started to stabilize in most of our markets. However, because vacancy rates are still at high levels in most markets, we do not expect any material improvement in rental economics for the next twelve months. . In several of the healthier markets, such as Washington, D.C. and Southern California, rental rate increases are beginning to occur.

Due to the improving market conditions described above and the elimination of most of our poor credit quality tenants through lease defaults and terminations in 2002, 2003 and the first half of 2004 our average occupancy in most markets has started to stabilize in the second half of 2004. The occupancy in our portfolio of operating properties decreased to 84.0% at September 30, 2004 compared to 87.8% at December 31, 2003 and 89.4% at September 30, 2003.

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, land held for development or lease intangibles may be impaired, we perform a recoverability analysis based on estimated undiscounted cash flows to be generated from the property or tenant, as applicable, 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, or lease intangibles 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

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Management’s Discussion and Analysis

(using an interest rate which reflects the risks associated with the leases acquired) of the difference between (a) the 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 $86,000 and $405,000 for the three months ended September 30, 2004 and 2003, respectively, and $328,000 and $1,060,000 for the nine months ended September 30, 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 tenant accounts 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 $2.8 million (11.0%) for the third 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. The decrease in minimum base rents is due primarily to lower weighted average occupancy rates in 2004. Operating revenues decreased $6.2 million (7.9%) for the nine months ended September 30, 2004 compared to same period in 2003 for the same reasons. 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 rental economics for the next twelve months. While market rental rates have stabilized, rental rates on in-place leases in certain markets remain significantly above current market rental rates.

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Management’s Discussion and Analysis

Our lease rollover by square footage at September 30, 2004 is as follows:

Property operating expenses decreased $0.4 million (4.4%) in the third quarter of 2004 as compared with the same period in 2003 and decreased $0.5 million (1.8%) for the first nine months of 2004 compared with the same period in 2003. The decreases were due primarily to the decrease in bad debt expense.

General and administrative expense increased $1.0 million (90.9%) in the three months ended September 30, 2004 compared to the same period in 2003 and $3.2 million (94.1%) for the first nine months of 2004 compared to the same period in 2003. The increases were due primarily to increased allocations of expense from CarrAmerica, which increased approximately $1.3 million in the third quarter 2004 from the third quarter 2003 and $3.9 million for the first nine months of 2004 compared to the same period in 2003. During the fourth quarter of 2003, CarrAmerica revised and refined its general and administrative cost accounting procedures to allocate labor and related costs, information technology expenses and professional fees 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 for the third quarter and first nine months of 2004 compared to the same periods in 2003. Management believes the allocation method being used is reasonable.

Depreciation and amortization decreased $0.4 million (4.8%) in the three months ended September 30, 2004, compared to the same period in 2003 and decreased $0.4 million (1.7%) for the nine months ended September 30, 2004 compared to the same period in 2003. The decreases were due primarily to lower amortization of tenant leasing costs due to higher vacancies.

Interest expense decreased $0.1 million (4.2%) in the three months ended September 30, 2004 compared to the same period in 2003. Interest expense decreased $0.5 million (6.8%) in the nine months ended September 30, 2004 compared to the same period in 2003. The decrease in the three months ended September 30, 2004 compared to the same period in 2003 was due primarily to a decrease in volume ($0.1million), as our weighted average outstanding debt balance decreased from $113.8 million to $106.9 million as a result of the repayment of two mortgages related to one of our operating properties, Sorenson Research Park X, in the amount of $3.3 million, and scheduled repayments on the remaining mortgages. The decrease in the nine months ended September 30, 2004 was due primarily to a decrease in volume ($0.7 million), as our weighted average outstanding debt balances decreased from $116.8 million to $105.8 million as a result of the repayment of two mortgages related to one of our operating properties, Sorenson Research Park X, in the amount of $3.3 million, and scheduled repayments on the remaining mortgages, which was partially offset by an increase in rates ($0.2 million).

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Management’s Discussion and Analysis

The table below summarizes our property sale for the nine months ended September 30, 2004:

We dispose of assets from time to time that are inconsistent with our long-term strategic or return objectives. During the nine months ended September 30, 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 nine months ended September 30, 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 $27.4 million of net cash for the first nine months of 2004 compared to $35.9 million in 2003. The decrease in cash provided by operating activities was due primarily to the decline in our real estate operating income from $23.3 million in 2003 to $14.9 million in 2004. The level of net cash provided by operating activities is also affected by the timing of receipt of revenues and payment of expenses.

Our investing activities provided net cash of $5.1 million in 2004 compared to using cash of $3.4 million in 2003. The net change in cash flows from investing activities in 2004 was due primarily to an increase in proceeds from a sale of property ($10.5 million) and reduced costs of acquisition and development of rental property ($2.3 million) partially offset by a decrease in distributions from unconsolidated entities ($4.5 million).

Our financing activities used net cash of $32.5 million for the first nine months of 2004 and $34.1 million for the same period in 2003. The net change in cash flows from financing activities is primarily a result of lower repayments of amounts due to affiliates ($5.5 million), partially offset by higher repayments of mortgages and notes payable ($4.0 million). During the nine months ended September 30, 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.

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 September 30, 2004,

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Management’s Discussion and Analysis

$143.0 million was drawn on the credit facility, $35.9 million in letters of credit were outstanding, and CarrAmerica had $321.1 million available for borrowing. 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.

During the remainder of 2004 and 2005, 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, if as a result of general economic downturns, if CarrAmerica’s credit rating is downgraded, if rental rates on new leases are significantly lower than expiring leases, or if our properties do not otherwise 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. Any of these events could have a material adverse effect on our liquidity, financial condition, results of operations, and the trading prices of CarrAmerica’s securities. 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. On June 30, 2004, CarrAmerica entered into a new $500.0 million, three year unsecured revolving credit facility with JPMorgan Chase Bank as administrative agent for a syndicate of banks. We are an unconditional guarantor of borrowings under this facility. The facility replaced and was used to repay all amounts outstanding under CarrAmerica’s previous unsecured senior credit facility. CarrAmerica may increase the facility to $700.0 million by request at any time within 24 months of the closing, provided the funding commitments are increased accordingly. The facility can be extended one year at CarrAmerica’s option. The facility carried an interest rate of 65 basis points over 30-day LIBOR, or 2.49% as of September 30, 2004.

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

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Management’s Discussion and Analysis

As of September 30, 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. 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 September 30, 2004 is summarized as follows:

Our fixed rate debt bore an effective weighted average interest rate of 7.89% at September 30, 2004 and had a weighted average maturity of 3.9 years. The effective weighted average interest rate of our fixed rate debt, excluding our notes payable to affiliates, was 7.51% at September 30, 2004 and had a weighted average maturity of 1.9 years. Our variable rate note payable to affiliate at September 30, 2004 bore an interest rate of 100 basis points over 30-day LIBOR or 2.84%.

During the third quarter of 2004, we transferred a note receivable of $7.4 million from CarrAmerica Development, Inc. to CarrAmerica as payment for amounts due to CarrAmerica. This transfer resulted in a decrease in notes receivable and due to affiliates. Additionally, due to affiliates decreased as a result of repayments consistent with cash flows generated during 2004.

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.

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Management’s Discussion and Analysis

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 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 $1.4 billion and $1.1 billion as of September 30, 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 September 30, 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 matured on July 1, 2004 and were repaid on that date. We repaid $11.7 million of fixed rate mortgage debt and notes payable in the first nine months of 2004.

CarrAmerica issued $200.0 million principal amount of senior unsecured notes in August 2004 with net proceeds of approximately $197.2 million. The notes bear interest at 5.125% per annum payable semi-annually beginning March 1, 2005. The notes mature on September 1, 2011. CarrAmerica used the proceeds from the notes to pay down its unsecured credit facility.

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Management’s Discussion and Analysis

Building and Lease Information

The following table sets forth information about each wholly-owned property as of September 30, 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: