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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2005

Commission File Number: 001-13243

PAN PACIFIC RETAIL PROPERTIES, INC.

(Exact Name of Registrant as Specified in Its Charter)

Registrant’s telephone number, including area code: (760) 727-1002

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

As of April 27, 2005, the number of shares of the registrant’s common stock outstanding was 40,627,415.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PAN PACIFIC RETAIL PROPERTIES, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

See accompanying notes to consolidated financial statements.

PAN PACIFIC RETAIL PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except share data)

See accompanying notes to consolidated financial statements.

PAN PACIFIC RETAIL PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(continued)

PAN PACIFIC RETAIL PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(In thousands)

See accompanying notes to consolidated financial statements.

PAN PACIFIC RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of March 31, 2005 (unaudited) and December 31, 2004,

and for the three months ended March 31, 2005 and 2004 (unaudited)

(Tabular amounts are in thousands, except option and share data)

1. Management statement and general

Pan Pacific Retail Properties, Inc. (together with its subsidiaries, the “Company”) is an equity real estate investment trust (“REIT”) that owns, leases and manages neighborhood and community shopping centers. The Company believes it qualifies as a REIT under Sections 856 through 860 of the Internal Revenue Code.

The consolidated financial statements of the Company were prepared from the books and records of the Company without audit and in the opinion of management include all adjustments (consisting of only normal recurring accruals) necessary to present a fair statement of results for the interim periods presented. Certain reclassifications of 2004 amounts have been made in order to conform to the 2005 presentation. Readers of this quarterly report should refer to the audited consolidated financial statements of the Company for the year ended December 31, 2004, which are included in the Company’s 2004 Annual Report on Form 10-K, as certain disclosures which would substantially duplicate those contained in the audited consolidated financial statements have been omitted from this report.

The Company consolidates each entity it controls. Control is determined, where applicable, by the sufficiency of equity invested and the rights of the equity holders, and by the ownership of a majority of the voting interests, with consideration given to the existence of approval or veto rights granted to the minority shareholder. If the minority shareholder holds substantive participation rights, it overcomes the presumption of control by the majority voting interest holder. In contrast, if the minority shareholder simply holds protective rights (such as consent rights over certain actions), it does not overcome the presumption of control by the majority voting interest holder. With respect to the partnerships and limited liability companies, the Company determines control through a consideration of each parties’ financial interests in profits and losses and the ability to participate in major decisions such as the acquisition, sale or refinancing of principal assets.

As a result of the disclosure requirements of the Financial Accounting Standards Board’s SFAS No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure, the following table shows the Company’s pro forma net income had the Company determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123, Accounting for Stock-Based Compensation:

Pro forma net income reflects options granted since adoption of the 1997 Plan and the 2000 Plan.

PAN PACIFIC RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of March 31, 2005 (unaudited) and December 31, 2004,

and for the three months ended March 31, 2005 and 2004 (unaudited)

(Tabular amounts are in thousands, except option and share data)

2. Stock plans

In January 2005, the Company granted 75,000 shares of restricted stock to certain officers pursuant to the 2000 Stock Incentive Plan of Pan Pacific Retail Properties, Inc. (2000 Plan). The restricted shares vest based on performance and are accounted for in accordance with variable compensation plan accounting under APB 25. For these grants, the Company will record compensation expense over the vesting period, which is determined by the Company’s estimate of the number of shares that will ultimately vest based upon actual and estimated performance in comparison to the performance targets. Additionally, the Company granted 8,000 shares of restricted stock, which vest over three years from the date of grant, to four independent directors of the Board and 2,000 shares of restricted stock, which vest over two years from the date of grant, to one independent director of the Board pursuant to the 2000 Plan. As a result of these January 2005 grants, an additional $4,874,000 was added to deferred compensation.

In January 2005, deferred compensation was reduced by $41,000 as a result of the forfeiture of 834 shares of restricted stock.

In February 2004, the Company granted 46,250 shares of restricted stock and awarded 1,000 shares of stock under the 2000 Plan. As a result, an additional $2,342,000 was added to deferred compensation.

For the three months ended March 31, 2005 and 2004, $853,000 and $920,000, respectively, was recognized as compensation expense in general and administrative expense.

3. Earnings per share

The following is a reconciliation of the numerator and denominator for the calculation of basic and diluted earnings per share for the three months ended March 31, 2005 and 2004:

For the three months ended March 31, 2005, 72,138 operating subsidiary units were excluded from the calculation of diluted weighted-average shares because they were anti-dilutive. For the three months ended March 31, 2004, all stock options, both vested and unvested, and operating subsidiary units were dilutive and included in the calculation of diluted weighted-average shares.

PAN PACIFIC RETAIL PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of March 31, 2005 (unaudited) and December 31, 2004,

and for the three months ended March 31, 2005 and 2004 (unaudited)

(Tabular amounts are in thousands, except option and share data)

4. Operating subsidiary

In March 2005, a non-managing member of Pan Pacific (Portland), LLC tendered 25,000 units in exchange for $1,472,000 cash, or $58.88 per share.

5. Discontinued operations

We report each individual property as a component for determining discontinued operations. There were no property sales during the three months ended March 31, 2005. The operations of three properties sold during 2004 were reported as income from discontinued operations in 2004. The following is a summary of our income from discontinued operations for the three months ended March 31, 2005 and 2004:

6. Financial instruments subject to mandatory redemption

The Company is the general partner in a consolidated limited partnership which owns a shopping center. The limited partnership has a defined termination date of December 31, 2074. The limited partner is entitled to receive 25% of the liquidation proceeds after debts and creditor obligations of the partnership have been satisfied. If termination of the partnership occurred on March 31, 2005, the amount payable to the limited partner is estimated to be $3,675,000.

The Company is a general partner in a general partnership and a limited partnership which together own a shopping center. The general partnership has a defined termination date of April 1, 2070. The limited partnership has a defined termination date of December 31, 2069. The other general partner and the limited partner are entitled to receive 66% of the liquidation proceeds after debts and creditor obligations of the partnerships have been satisfied. If termination of the partnership occurred on March 31, 2005, the amounts payable to the other general partner and the limited partner are estimated to be $13,112,000.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Revision of Consolidated Statements of Income and Consolidated Statements of Cash Flows

Our consolidated statements of income and consolidated statements of cash flows have been revised, pursuant to SFAS No. 144, from those originally reported for the three months ended March 31, 2004 to separately reflect the results of discontinued operations for properties that have since been sold. The revision had no impact on our consolidated balance sheets. The revision had no impact on net income or net income per share of common stock for the three months ended March 31, 2004. See the discussions of discontinued operations in the “Results of Operations” section below.

Cautionary Language

The discussions in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 which reflect management’s current views with respect to future events and financial performance. Forward-looking statements are subject to risks and uncertainties. Factors that could cause actual results to differ materially from expectations include market valuations of our stock, financial performance and operations of our shopping centers, real estate conditions, execution of shopping center development programs, successful completion of renovations, completion of pending acquisitions, integration of completed acquisitions, changes in the availability of additional acquisitions, changes in local or national economic conditions, acts of terrorism or war and other risks detailed from time to time in reports filed with the Securities and Exchange Commission.

Critical Accounting Policies

The following discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, and the notes thereto, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these consolidated financial statements requires us to make a number of estimates and assumptions that affect the reported amounts and disclosures in the consolidated financial statements. On an ongoing basis, we evaluate our estimates and assumptions based upon historical experience and various other factors and circumstances. We believe that our estimates and assumptions are reasonable for our current circumstances; however, actual results may differ from these estimates and assumptions under different future conditions.

We believe that the estimates and assumptions that are most important to the portrayal of our financial condition and results of operations, in that they require our most subjective judgments, form the basis for the accounting policies deemed to be most critical. These critical accounting policies include our estimates of useful lives in calculating depreciation expense on our shopping center properties and the ultimate recoverability, or impairment, of each shopping center asset. If actual useful lives are different from our estimates this could result in changes to the results of our operations. Future adverse changes in market conditions or poor operating results of our shopping center properties could result in losses or an inability to recover the carrying value of the properties that may not be reflected in the properties’ current carrying value, thereby possibly requiring an impairment charge in the future.

Overview

We receive income primarily from rental revenue from shopping center properties, including recoveries from tenants, offset by operating and overhead expenses. Primarily as a result of our acquisition program, the financial data shows increases in total revenue and total expenses from period to period.

During the three months ended March 31, 2005, no non-strategic assets were sold. During the three months ended March 31, 2004, one non-strategic asset was sold. The cash proceeds were used to pay down our revolving credit facility.

We expect that the more significant part of our growth in the next year or two will come from additional acquisitions of properties and rent increases from the lease-up and re-tenanting initiatives of the assets acquired during 2005 and 2004.

Results of Operations

Comparison of the Three Months ended March 31, 2005 to the Three Months ended March 31, 2004

Total revenue increased by $7,535,000, or 11.0%, to $76,330,000 for the three months ended March 31, 2005, from $68,795,000 for the three months ended March 31, 2004.

Rental revenue, which includes base rent and percentage rent, increased by $5,379,000, or 10.0%, to $59,068,000 for the three months ended March 31, 2005, from $53,689,000 for the three months ended March 31, 2004. The increase in rental revenue resulted principally from the continued lease-up of the portfolio acquired through our 2003 acquisition of Center Trust Inc. and the acquisition of five other shopping center assets in 2004.

Recoveries from tenants, which represents reimbursements from tenants for property operating expenses and property taxes, increased by $2,329,000, or 17.3%, to $15,795,000 for the three months ended March 31, 2005, from $13,466,000 for the three months ended March 31, 2004. This increase resulted primarily from the acquisition of the Center Trust portfolio and the acquisition of the five shopping center assets in 2004. In addition, recoveries from tenants increased because recoverable expenses increased. Recoveries from tenants were 93.3% for the three months ended March 31, 2005 compared to 88.3% for the three months ended March 31, 2004. The increase in recovery percentage compared to the prior year period reflects the impact of the continued lease-up and re-leasing of the Center Trust portfolio. We expect that the recovery percentage will continue to increase slightly over time due to additional re-leasing and as occupancy rates increase for acquired assets.

Other income decreased by $158,000 to $1,313,000 for the three months ended March 31, 2005, from $1,471,000 for the three months ended March 31, 2004. The decrease resulted primarily from less termination fees in 2005 versus the comparable period in 2004.

Property operating expenses increased by $847,000, or 8.8%, to $10,444,000 for the three months ended March 31, 2005, from $9,597,000 for the three months ended March 31, 2004. The increase was primarily the result of increased common area costs, including general building expenses, parking lot expenses, security costs and cleaning costs, as well as greater insurance and legal costs. These increases were offset by a decrease in bad debt expense.

Property taxes increased by $828,000, or 14.7%, to $6,477,000 for the three months ended March 31, 2005, from $5,649,000 for the three months ended March 31, 2004. The increase in property taxes was primarily the result of the acquisition of five shopping center assets in 2004.

Depreciation and amortization increased by $2,985,000, or 27.5%, to $13,845,000 for the three months ended March 31, 2005, from $10,860,000 for the three months ended March 31, 2004. This was primarily due to depreciation and the amortization of the value of leases in place for properties acquired in 2004.

Interest expense increased by $1,382,000, or 9.1%, to $16,632,000 for the three months ended March 31, 2005, from $15,250,000 for the three months ended March 31, 2004. The increase was a result of additional amounts drawn on our revolving credit facility to finance property acquisitions during 2004. Interest expense also increased as a result of our issuance of $50,000,000 in aggregate principal amount of senior notes in May 2004 and our issuance of $50,000,000 in aggregate principal amount of senior notes in July 2004. The stated interest rate of 5.95% on the senior notes, and the related amortization of prepaid financing costs, are higher than our cost to borrow funds under our revolving credit facility which was paid down with the net proceeds of the notes offerings. In addition, our cost to borrow funds under our revolving credit facility has been increasing due to the Federal Reserve raising interest rates.

General and administrative expenses increased by $762,000, or 23.0%, to $4,068,000 for the three months ended March 31, 2005, from $3,306,000 for the three months ended March 31, 2004. This increase resulted primarily from an increase in bonus compensation accruals and an increase in audit and consultants expense related to Sarbanes-Oxley 404 compliance work. As a percentage of total revenue, general and administrative expenses were 5.3% for the three months ended March 31, 2005 as compared to 4.8% for the three months ended March 31, 2004.

Other expense decreased by $208,000 to $252,000 for the three months ended March 31, 2005, from $460,000 for the three months ended March 31, 2004. The decrease resulted primarily from a one-time adjustment related to our joint venture in North Coast Health Center during the three months ended March 31, 2004.

Discontinued operations for the three months ended March 31, 2004 of $695,000 reflects the operating results of three of four non-strategic assets that were sold during 2004. Included in this amount is gain on sale of $178,000.

Cash Flows

Comparison of the Three Months ended March 31, 2004 to the Three Months ended March 31, 2004

Net cash provided by continuing operating activities increased by $7,039,000 to $42,672,000 for the three months ended March 31, 2005, as compared to $35,633,000 for the three months ended March 31, 2004. The increase was primarily the result of operating income arising from properties acquired in 2004, an increase in accounts payable, accrued expenses and other liabilities, a decrease in other assets and a decrease in discontinued operations.

Net cash used in investing activities decreased by $46,010,000 to $13,412,000 for the three months ended March 31, 2005, as compared to net cash used in investing activities of $59,422,000 for the three months ended March 31, 2004. The decrease was primarily related to funds held in escrow pending property acquisitions included in the three months ended March 31, 2004. Additionally, net cash used in investing activities for 2005 included an increase in acquisitions of and additions to properties versus the comparable period in 2004.

Net cash used in financing activities increased by $50,988,000 to $27,071,000 for the three months ended March 31, 2005, as compared to net cash provided by financing activities of $23,917,000 for the three months ended March 31, 2004. The increase primarily resulted from a decrease in line of credit proceeds and line of credit payments and a decrease in note payable payments. Additionally, there was a repayment of senior notes during the three months ended March 31, 2004.

Liquidity and Capital Resources

Our total market capitalization at March 31, 2005 was approximately $3,365,069,000, based on the market closing price of our common stock at March 31, 2005 of $56.75 per share (assuming the conversion of 670,782 operating subsidiary units to common stock) and our debt outstanding of approximately $1,021,680,000 (exclusive of accounts payable and accrued expenses). As a result, our debt to total market capitalization ratio was approximately 30.4% at March 31, 2005. Our board of directors adopted a policy of limiting our indebtedness to approximately 50% of our total market capitalization. However, our board of directors may from time to time modify our debt policy in light of current economic or market conditions including, but not limited to, the relative costs of debt and equity capital, market conditions for debt and equity securities and fluctuations in the market price of our common stock. Accordingly, we may increase or decrease our debt to market capitalization ratio beyond the limit described above.

In September 2004, we entered into an amended and restated $300,000,000 revolving credit facility with a maturity date of March 2007. At March 31, 2005, we had $112,100,000 drawn on our revolving credit facility leaving $187,900,000 available to borrow. At our option, amounts borrowed under our revolving credit facility bear interest at either LIBOR plus 0.65% or a reference rate. The weighted average interest rate for short-term LIBOR contracts under our revolving credit facility at March 31, 2005 was 3.50%. We will continue to use our revolving credit facility to take advantage of select acquisition opportunities as well as to provide funds for general corporate purposes. The amended and restated revolving credit facility contains certain financial and other covenants which we believe we are in compliance with at March 31, 2005.

In May 2004, we issued $50,000,000 of 5.95% senior notes due June 1, 2014. In July 2004, we issued an additional $50,000,000 of the 5.95% senior notes due June 1, 2014. The net proceeds from the offerings were used to repay borrowings under our revolving credit facility. Consistent with senior notes previously issued by us, we are bound by certain financial ratio covenants which we believe we are in compliance with at March 31, 2005.

We may in the future enter into derivative financial instruments such as interest rate swaps, caps and treasury locks in order to mitigate our interest rate risk on a related financial instrument; however, we are not a party to any derivative financial instruments at March 31, 2005. Further, we do not enter into derivative or interest rate transactions for speculative or trading purposes nor do we enter into energy or commodity contracts.

We expect to make distributions from net cash provided by operations. Operating cash flows in excess of amounts to be used for distributions will be invested primarily in short-term investments such as collateralized securities of the United States government or its agencies, high-grade commercial paper and bank deposits or be used to pay down outstanding balances on our revolving credit facility, if any.

The following table provides recent historical distribution information:

We expect to meet our short-term liquidity requirements generally through our current working capital and net cash provided by operations. We believe that our net cash provided by operations will be sufficient to allow us to make the distributions necessary to enable us to continue to qualify as a REIT. We also believe that the foregoing sources of liquidity will be sufficient to fund our short-term liquidity needs for the foreseeable future.

We expect to meet our long-term liquidity requirements such as property acquisitions and developments, scheduled debt maturities, renovations, expansions and other non-recurring capital improvements through long-term secured and unsecured indebtedness, the issuance of additional equity or debt securities and the use of net proceeds from the disposition of non-strategic assets. We also expect to use funds available under our revolving credit facility to finance acquisition and development activities and capital improvements on an interim basis.

Off-Balance Sheet Arrangements

We are a 50% general partner of a joint venture that owns North Coast Health Center, a medical office building in Encinitas, California. During the second quarter of 2002, the joint venture entered into a loan agreement for $18,000,000, bearing interest at 7%, to purchase the building on the property. At March 31, 2005, the balance of the loan was $17,509,000. The loan is secured by the property and is not guaranteed by us. We account for this joint venture under the equity method. This unconsolidated debt is the only off-balance sheet financing to which we are a party.

Contractual Obligations and Contingent Liabilities

There were no material changes outside the normal course of our business in our contractual obligations and contingent liabilities from those reported in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2004.

Inflation

Substantially all of our leases provide for the recovery of all or a significant portion of all real estate taxes and operating expenses we incur. In addition, many of the leases provide for fixed base rent increases or indexed escalations (based on the consumer price index or other measures) and percentage rent. We believe that inflationary increases in expenses will be substantially offset by expense reimbursements, contractual rent increases and percentage rent.

Our revolving credit facility bears interest at a variable rate, which will be influenced by changes in short-term interest rates, and will be sensitive to inflation.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Market risk is the exposure to loss resulting from changes in interest rates, foreign currency exchange rates, commodity prices and equity prices. The primary market risk to which we are exposed is interest rate risk, which is sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors that are beyond our control.

Interest Rate Risk

As of March 31, 2005, we had $118,100,000 of outstanding floating rate debt under our revolving credit facility and our property secured bonds. In order to modify and manage the interest characteristics of outstanding debt and limit the effects of changes in interest rates on operations, we may use a variety of financial instruments. We were not a party to any hedging agreements with respect to our floating rate debt as of March 31, 2005. We do not enter into any transactions for speculative or trading purposes. We do not believe that our weighted average interest rate of 6.9% on our fixed rate debt is materially different from current fair market interest rates for debt instruments with similar risks and maturities. Additionally, we do not believe that the interest rate risk represented by our floating rate debt is material as of that date in relation to total assets of $2,010,674,000 and a market capitalization of $2,343,389,000 of our common stock and operating subsidiary units.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports 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 and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, 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 management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Also, we have investments in certain unconsolidated entities. 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) under the Securities Exchange Act of 1934, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective and were operating at the reasonable assurance level.

Changes in Internal Control

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

PART II – OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

The Company filed one Current Report on Form 8-K during the quarter ended March 31, 2005. The report dated March 25, 2005 reported under Item 1.01 the Company’s execution of amended employment agreements with each of Stuart A. Tanz, Jeffrey S. Stauffer, and Joseph B. Tyson.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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 on April 27, 2005.