UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


(Mark One)
þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended September 30, 2005
		or
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from to

Commission File Number: 1-13625

EOP OPERATING LIMITED PARTNERSHIP

(Exact name of registrant as specified in its charter)


Delaware		36-4156801
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Two North Riverside Plaza, Suite 2100, Chicago, Illinois (Address of principal executive offices)		60606 (Zip code)

(312) 466-3300

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

On October 31, 2005, 449,968,169 Units were outstanding.

TABLE OF CONTENTS


PART I -- FINANCIAL INFORMATION
	Item 1. Financial Statements.
EOP OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
	Item 3. Quantitative and Qualitative Disclosures About Market Risk.
	Item 4. Controls and Procedures.
	Item 1. Legal Proceedings.
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
	Item 6. Exhibits.
SIGNATURES
EXHIBIT INDEX
Schedule of Medium-Term InterNotes (Fixed Rate)
Statement of Computation of Ratio of Earnings to Fixed Charges
Certification of Chief Executive Officer
Certification of Chief Financial Officer
Section 906 Certifications of CEO and CFO

PART I — FINANCIAL INFORMATION


Item 1.	Financial Statements.

EOP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED BALANCE SHEETS


(Dollars in thousands, except per unit amounts)					September 30, 2005			December 31, 2004

					(Unaudited)
Assets:
	Investments in real estate				$	22,800,807		$	24,852,760
	Developments in process					532,431			40,492
	Land available for development					233,740			252,524
	Investments in real estate held for sale, net of accumulated depreciation					70,177			138,614
	Accumulated depreciation					(3,230,456	)		(3,144,214	)

		Investments in real estate, net of accumulated depreciation				20,406,699			22,140,176
	Cash and cash equivalents					145,913			107,126
	Tenant and other receivables (net of allowance for doubtful accounts of $7,105 and $6,908, respectively)					58,929			75,775
	Deferred rent receivable					489,546			478,184
	Escrow deposits and restricted cash					117,606			48,784
	Investments in unconsolidated joint ventures					971,574			1,117,143
	Deferred financing costs (net of accumulated amortization of $49,712 and $59,748, respectively)					59,637			61,734
	Deferred leasing costs and other related intangibles (net of accumulated amortization of $229,377 and $193,348, respectively)					463,467			450,625
	Prepaid expenses and other assets					187,352			191,992

				Total Assets	$	22,900,723		$	24,671,539


Liabilities, Minority Interests, Mandatorily Redeemable Preferred Units and Partners’ Capital:
Liabilities:
	Mortgage debt (net of (discounts) of $(11,704) and $(13,683), respectively)				$	1,752,908		$	2,609,067
	Unsecured notes (net of (discounts) of $(22,975) and $(38,362), respectively)					9,031,776			9,652,392
	Lines of credit					811,000			548,000
	Accounts payable and accrued expenses					496,631			556,851
	Distribution payable					228,822			2,652
	Other liabilities (net of (discounts) of $(26,332) and $(28,536), respectively)					451,950			484,378
	Commitments and contingencies					—			—

				Total Liabilities		12,773,087			13,853,340

Minority interests — partially owned properties						174,869			182,041

Mandatorily Redeemable Preferred Units:
	5.25% Series B Convertible, Cumulative Redeemable Preferred Units, liquidation preference $50.00 per unit, 5,989,930 and 5,990,000 issued and outstanding, respectively					299,497			299,500

Partners’ Capital:
	Preferred Units, 100,000,000 authorized:
			7.75% Series G Cumulative Redeemable Preferred Units, liquidation preference $25.00 per unit, 8,500,000 issued and outstanding			212,500			212,500
	Other Partners’ Capital:
		General Partner Capital				70,272			76,973
		Limited Partners’ Capital				9,429,173			10,112,024
		Deferred compensation				(817	)		(1,916	)
		Accumulated other comprehensive loss (net of accumulated amortization of $10,245 and $5,133, respectively)				(57,858	)		(62,923	)

				Total Partners’ Capital		9,653,270			10,336,658

				Total Liabilities, Minority Interests, Mandatorily Redeemable Preferred Units and Partners’ Capital	$	22,900,723		$	24,671,539

See accompanying notes.

EOP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


				For the three months ended						For the nine months ended
				September 30,						September 30,

(Dollars in thousands, except per unit amounts)				2005			2004			2005			2004

Revenues:
	Rental			$	589,520		$	575,188		$	1,757,034		$	1,719,423
	Tenant reimbursements				104,940			102,856			291,896			299,280
	Parking				29,380			26,924			85,468			80,510
	Other				9,440			13,695			85,712			48,746
	Fee income				5,314			3,220			13,788			10,129

		Total revenues			738,594			721,883			2,233,898			2,158,088

Expenses:
	Depreciation				165,444			150,978			489,633			447,579
	Amortization				24,600			17,075			68,030			49,013
	Real estate taxes				87,284			86,321			257,125			250,859
	Insurance				16,778			6,900			30,226			21,599
	Repairs and maintenance				80,879			78,935			232,787			225,208
	Property operating				116,863			101,996			319,313			292,958
	Ground rent				6,326			5,515			16,898			15,880
	Corporate general and administrative				16,866			13,190			49,257			38,208
	Impairment				—			46,436			81,042			46,436

		Total expenses			515,040			507,346			1,544,311			1,387,740

		Operating income			223,554			214,537			689,587			770,348

Other income (expense):
	Interest and dividend income				3,841			1,716			10,496			5,433
	Realized gain on settlement of derivatives and sale of marketable securities				154			4,737			157			28,753
	Interest:
		Expense incurred			(195,764	)		(206,773	)		(615,073	)		(618,152	)
		Amortization of deferred financing costs and prepayment expenses			(3,362	)		(2,746	)		(8,751	)		(7,051	)

			Total other income (expense)		(195,131	)		(203,066	)		(613,171	)		(591,017	)

Income before income taxes, allocation to minority interests, income from investments in unconsolidated joint ventures and gain on sales of real estate					28,423			11,471			76,416			179,331
Income taxes					(456	)		(1,135	)		(1,351	)		(2,198	)
Minority interests — partially owned properties					(2,442	)		(2,517	)		(7,969	)		(8,053	)
Income from investments in unconsolidated joint ventures (including gain on sales of real estate of $29, $0, $17,405 and $0, respectively)					10,683			12,664			48,882			37,629
Gain on sales of real estate					47,406			216			47,433			216

Income from continuing operations					83,614			20,699			163,411			206,925
Discontinued operations (including net gain (loss) on sales of real estate and provision for loss on properties held for sale of $27,565, $3,016, $(55,975) and $7,138, respectively)					29,543			(156,606	)		(149,347	)		(101,529	)

Income (loss) before cumulative effect of a change in accounting principle					113,157			(135,907	)		14,064			105,396
Cumulative effect of a change in accounting principle					—			—			—			(33,697	)

Net income (loss)					113,157			(135,907	)		14,064			71,699
Preferred distributions					(8,700	)		(8,701	)		(26,102	)		(30,393	)

Net income (loss) available to unitholders				$	104,457		$	(144,608	)	$	(12,038	)	$	41,306

Earnings (loss) per unit — basic:
	Income from continuing operations per unit			$	0.17		$	0.03		$	0.30		$	0.39

	Net income (loss) available to unitholders per unit			$	0.23		$	(0.32	)	$	(0.03	)	$	0.09

	Weighted average Units outstanding				452,847,362			448,766,905			451,549,093			448,900,112

Earnings (loss) per unit — diluted:
	Income from continuing operations per unit			$	0.16		$	0.03		$	0.30		$	0.39

	Net income (loss) available to unitholders per unit			$	0.23		$	(0.32	)	$	(0.03	)	$	0.09

	Weighted average Units outstanding and dilutive potential units				457,343,521			450,420,567			455,370,659			450,801,177

Distributions declared per Unit outstanding				$	0.50		$	0.50		$	1.50		$	1.50

Allocation of net income available to unitholders:
	General Partner			$	1,045		$	(1,446	)	$	(120	)	$	413
	Limited Partners				103,412			(143,162	)		(11,918	)		40,893

	Net income available to unitholders			$	104,457		$	(144,608	)	$	(12,038	)	$	41,306

See accompanying notes.

EOP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF NET COMPREHENSIVE INCOME (LOSS)

(Unaudited)


		For the three months					For the nine months
		ended September 30,					ended September 30,

(Dollars in thousands)		2005		2004			2005			2004

Net income (loss)		$	113,157	$	(135,907	)	$	14,064		$	71,699
Other comprehensive income (loss):
	Unrealized holding (losses) on $1.3 billion (notional amount) of forward starting interest rate swaps		—		—			—			(34,666	)
	Reversal of unrealized holding losses on settlement of $1.3 billion (notional amount) of forward starting interest rate swaps		—		—			—			45,114
	(Payments) in settlement of $800 million (notional amount) of forward starting interest rate swaps		—		—			—			(69,130	)
	Reclassification of ineffective portion of swap settlement payment to net income		—		—			—			212
	Amortization of net payments in settlement of forward starting interest rate swaps		1,704		1,704			5,111			3,503
	Unrealized holding gains (losses) from investments		19		(18	)		(46	)		(42	)
	Reclassification adjustment for realized (gains) included in net income (loss)		—		(31	)		—			(31	)

Net comprehensive income (loss)		$	114,880	$	(134,252	)	$	19,129		$	16,659

See accompanying notes.

EOP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


					For the three months ended						For the nine months ended
					September 30,						September 30,

(Dollars in thousands)					2005			2004			2005			2004

Operating Activities:
	Net income (loss)				$	113,157		$	(135,907	)	$	14,064		$	71,699
	Adjustments to reconcile net income (loss) to net cash provided by operating activities:
		Depreciation and amortization (including discontinued operations)				199,635			194,525			614,148			575,521
		Ineffective portion of swap settlement payment included in interest expense				—			—			—			212
		Compensation expense related to restricted shares and stock options				6,628			3,840			19,950			14,085
		Prepayment penalty on early extinguishment of debt in connection with a property disposition				—			—			448			—
		Income from investments in unconsolidated joint ventures				(10,683	)		(12,664	)		(48,882	)		(37,629	)
		Net distributions from unconsolidated joint ventures				19,834			22,226			43,444			47,242
		Net (gain) loss on sales of real estate and provision for loss on properties held for sale (including discontinued operations)				(74,971	)		(3,232	)		8,542			(7,354	)
		Gain on sale of investment in CT Convertible Trust I preferred shares				—			(2,302	)		—			(2,302	)
		Impairment (including discontinued operations)				—			229,170			180,856			229,170
		Cumulative effect of a change in accounting principle				—			—			—			33,697
		Provision for doubtful accounts				1,847			2,608			5,376			3,347
		Income allocated to minority interests (including discontinued operations)				2,442			2,649			38,409			8,780
		Changes in assets and liabilities:
			Decrease in rent receivable			14,421			5,912			14,930			16,420
			(Increase) in deferred rent receivable			(14,768	)		(19,254	)		(51,443	)		(71,640	)
			Decrease in prepaid expenses and other assets			37,392			21,703			13,890			72,775
			Increase (decrease) in accounts payable and accrued expenses			7,450			(9,307	)		(52,318	)		(67,311	)
			Increase (decrease) in other liabilities			14,861			1,042			(15,841	)		(18,972	)

				Net cash provided by operating activities		317,245			301,009			785,573			867,740

Investing Activities:
	Property acquisitions (including deposits made for property acquisitions)					(655,428	)		(219,110	)		(1,020,214	)		(338,591	)
	Property dispositions (including deposits received for property dispositions)					312,077			(1,578	)		1,620,855			231,891
	(Investments in) distributions from unconsolidated joint ventures					—			(220,833	)		62,301			(220,833	)
	Distributions from unconsolidated joint venture related to a debt financing					124,395			—			124,395			—
	Capital and tenant improvements					(90,945	)		(91,973	)		(241,908	)		(335,522	)
	Lease commissions and other costs					(39,723	)		(33,145	)		(93,473	)		(94,020	)
	Sale of investment in CT Convertible Trust I preferred shares					—			32,089			—			32,089
	Decrease in escrow deposits and restricted cash					453,859			36,212			587,489			83,423

		Net cash provided by (used for) investing activities				104,235			(498,338	)		1,039,445			(641,563	)

EOP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)

(Unaudited)


			For the three months ended						For the nine months ended
			September 30,						September 30,

(Dollars in thousands)			2005			2004			2005			2004

Financing Activities:
	Proceeds from mortgage debt			—			—			150			—
	Principal payments on mortgage debt			(534,356	)		(219,132	)		(889,877	)		(428,371	)
	Proceeds from unsecured notes			10,389			17,386			38,758			1,057,661
	Repayment of unsecured notes			(150,000	)		(30,000	)		(675,000	)		(880,000	)
	Proceeds from lines of credit			4,106,300			2,061,500			8,106,900			4,947,500
	Repayment of lines of credit			(3,988,300	)		(1,351,400	)		(7,843,900	)		(4,195,100	)
	Payments of loan costs and offering costs			(7,302	)		(13	)		(7,361	)		(1,561	)
	Settlement of interest rate swap agreements			(8,677	)		—			(8,677	)		(69,130	)
	Distributions to minority interests in partially owned properties			(1,457	)		(2,605	)		(9,317	)		(18,716	)
	Proceeds from exercise of stock options			16,832			4,307			138,374			44,110
	Distributions to unitholders			(227,382	)		(224,035	)		(454,140	)		(449,279	)
	Repurchase of Units through Equity Office’s common share repurchase program			(99,564	)		(360	)		(107,322	)		(36,943	)
	Redemption of Units			—			(668	)		(50,676	)		(2,534	)
	Repurchase of preferred units			—			—			—			(114,073	)
	Payment of preferred distributions			(8,047	)		(8,048	)		(24,143	)		(24,719	)

		Net cash (used for) provided by financing activities		(891,564	)		246,932			(1,786,231	)		(171,155	)

	Net (decrease) increase in cash and cash equivalents			(470,084	)		49,603			38,787			55,022
	Cash and cash equivalents at the beginning of the period			615,997			74,817			107,126			69,398

	Cash and cash equivalents at the end of the period		$	145,913		$	124,420		$	145,913		$	124,420

EOP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)

(Unaudited)


				For the three months ended						For the nine months ended
				September 30,						September 30,

(Dollars in thousands)				2005			2004			2005			2004

Supplemental Information:
	Interest paid during the period, including a reduction of interest expense for capitalized interest of $47, $767, $51 and $4,429, respectively			$	246,243		$	261,512		$	675,352		$	676,483

Non-Cash Investing and Financing Activities:
	Investing Activities:
		Escrow deposits used for property acquisitions		$	—		$	35,891		$	—		$	35,891

		Escrow deposits related to property dispositions		$	(489,115	)	$	(71,893	)	$	(639,439	)	$	(102,509	)

		Mortgage loan repayment as a result of a property disposition (including prepayment expense of $375 in 2004)		$	—		$	—		$	(13,386	)	$	(5,830	)

		Mortgage loan assumed upon acquisition of property		$	—		$	—		$	44,975		$	82,970

		Units issued in connection with a property acquisition		$	—		$	—		$	3,339		$	50

		Changes in accounts due to a like-kind exchange:
			Increase in investment in real estate due to property acquisition	$	—		$	130,203		$	—		$	130,203

			Decrease in investment in real estate due to property disposition	$	—		$	(130,865	)	$	—		$	(130,865	)

			Decrease in accumulated depreciation	$	—		$	9,137		$	—		$	9,137

			Decrease in other assets and liabilities	$	—		$	(1,770	)	$	—		$	(1,770	)

		Changes in accounts due to consolidation of existing interest in a property as a result of acquiring the remaining economic interest:
			Decrease in investment in unconsolidated joint ventures	$	—		$	—		$	—		$	(157,659	)

			Increase in investment in real estate	$	—		$	—		$	—		$	612,411

			Increase in accumulated depreciation	$	—		$	—		$	—		$	(44,440	)

			Increase in mortgage debt	$	—		$	—		$	—		$	(451,285	)

			Increase in other assets and liabilities	$	—		$	—		$	—		$	40,973

		Changes in accounts due to partial sale of real estate:
			Increase in investment in unconsolidated joint ventures	$	36,349		$	—		$	36,349		$	—

			Decrease in investment in real estate	$	(43,931	)	$	—		$	(43,931	)	$	—

			Decrease in accumulated depreciation	$	8,403		$	—		$	8,403		$	—

			Increase in other assets and liabilities	$	(940	)	$	—		$	(940	)	$	—

	Financing Activities:
		Mortgage loan repayment as a result of a property disposition (including prepayment expense of $375 in 2004)		$	—		$	—		$	13,386		$	5,830

		Mortgage loan assumed upon acquisition of property		$	—		$	—		$	(44,975	)	$	(82,970	)

		Units issued in connection with a property acquisition		$	—		$	—		$	(3,339	)	$	(50	)

EOP OPERATING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Our consolidated financial statements have been prepared pursuant to the Securities and Exchange Commission’s (“SEC”) rules and regulations. The following notes, which present interim disclosures as required by the SEC, highlight significant changes to the notes to our December 31, 2004 audited consolidated financial statements and should be read together with the financial statements and notes thereto included in our Form 10-K, as amended.


NOTE 1 —	BUSINESS OF EOP PARTNERSHIP

EOP Operating Limited Partnership (“EOP Partnership”) is a Delaware limited partnership. Our general partner is Equity Office Properties Trust, a Maryland real estate investment trust (“REIT”). The use of the word “we”, “us”, or “our” in this Form 10-Q refers to EOP Partnership, its subsidiaries and Equity Office Properties Trust (“Equity Office”), except where the context otherwise requires. Equity Office has elected to be taxed as a REIT for federal income tax purposes and generally will not be subject to federal income tax if it distributes 100% of its taxable income and complies with a number of organizational and operational requirements.

We are a fully integrated, self-administered and self-managed real estate company principally engaged, through our subsidiaries, in owning, managing, leasing, acquiring and developing office properties. As of September 30, 2005, we owned whole or partial interests in 607 office properties comprising approximately 113.1 million square feet in 18 states and the District of Columbia (“Total Office Portfolio”). Excluding partial interests not owned by us for certain properties owned in joint ventures, our share of the Total Office Portfolio is approximately 102.5 million square feet and is referred to as our “Effective Office Portfolio.” Our Effective Office Portfolio represents our economic interest in the office properties from which we derive the net income we recognize in accordance with GAAP. Properties that have been taken out of service and properties under development are not included in these property statistics. Throughout this report we disclose information for both the Total Office Portfolio and the Effective Office Portfolio. The table below shows the property statistics for each portfolio.


				Total Office Portfolio					Effective Office Portfolio

		Number of		Occupied					Occupied
		Buildings		Square Feet			Square Feet		Square Feet			Square Feet

Wholly-Owned Properties			543		76,298,077			85,853,754		76,298,077			85,853,754
Consolidated Joint Ventures			24		11,042,605			11,745,820		10,000,801			10,585,789
Unconsolidated Joint Ventures			40		13,568,770			15,495,702		5,240,395			6,061,563

	Total		607		100,909,452			113,095,276		91,539,273			102,501,106

Weighted Average Occupancy					89.2	%				89.3	%

Weighted Average Leased					91.4	%				91.3	%


NOTE 2 —	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


	Basis of Presentation

The consolidated financial statements represent our financial condition and results of operations and those of our subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Property holding entities and other subsidiaries of which we own 100% of the equity or receive all of the economics are consolidated. For those joint ventures of which we own less than 100% of the equity interest, we consolidate the property if we receive substantially all of the economics and have the direct or indirect ability to make major decisions. Major decisions are defined in the respective joint venture agreements and generally include participating and protective rights such as decisions regarding major leases, encumbering the entities

EOP OPERATING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

with debt and whether to dispose of the entities. We also consolidate certain property holding entities and other subsidiaries in which we own less than a 100% equity interest when the entity is a variable interest entity and we are the primary beneficiary (as defined in Financial Accounting Standards Board (“FASB”) Interpretation 46(R) Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51, as revised (“FIN 46(R)”)).

We are the controlling partner in various consolidated entities having a minority interest book value of approximately $92.8 million at September 30, 2005. The organizational documents of these entities contain provisions that require the entities to be liquidated through the sale of their assets upon reaching the future date specified in each respective agreement. As controlling partner, we have an obligation to cause these property owning entities to distribute proceeds of liquidation to the minority interest partners in these partially owned properties only if the net proceeds received by the entities from the sale of its assets warrant a distribution based on the agreements. In accordance with the disclosure provisions of Statement of Financial Accounting Standards No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (“FAS 150”), we estimate the value of minority interest distributions would have been approximately $147 million (“Settlement Value”) had the entities been liquidated as of September 30, 2005. This Settlement Value is based on the estimated third party consideration realizable by the entities upon a hypothetical disposition of the properties and is net of all other assets and liabilities and yield maintenance (or prepayment penalties) associated with the hypothetical repayment of any mortgages encumbering the properties, that would have been due. The amount of any actual distributions to minority interest holders in our partially owned properties is very difficult to predict due to many factors, including the inherent uncertainty of real estate sales. If the entities’ underlying assets are worth less than the underlying liabilities, we have no obligation to remit any consideration to the minority interest holders in partially owned properties.


	Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.


	Unaudited Interim Statements

The consolidated financial statements as of and for the three and nine months ended September 30, 2005 and 2004 and related footnote disclosures are unaudited. In the opinion of management, such financial statements reflect all adjustments necessary for fair presentation of the results of the interim periods. All such adjustments are of a normal and recurring nature.


	Reclassifications

Certain reclassifications have been made to the previously reported 2004 statements in order to provide comparability with the 2005 statements reported herein. These reclassifications have not changed the 2004 results of operations or combined partners’ capital and mandatorily redeemable preferred units.


	Share Based Employee Compensation Plans

Effective January 1, 2003, we adopted Statement of Financial Accounting Standards No. 123, Accounting for Stock Based Compensation (“FAS 123”), which requires a fair value based accounting method for determining compensation expense associated with the issuance of share options and other equity awards. The following table illustrates the unaudited effect on net income (loss) available to unitholders and earnings

EOP OPERATING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

(loss) per unit if the fair value based method had been applied to all outstanding and unvested share options for the three and nine months ended September 30, 2005 and 2004. Compensation expense related to restricted share awards is not presented in the table below because the expense amount is the same under Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and FAS 123 and, therefore, is already reflected in net income (loss).


		For the						For the
		three months ended						nine months ended
		September 30,						September 30,

(Dollars in thousands, except per unit amounts)		2005			2004			2005			2004

Historical net income (loss) available to unitholders		$	104,457		$	(144,608	)	$	(12,038	)	$	41,306
Add back compensation expense for share options included in historical net income (loss) available to unitholders			1,879			1,208			5,216			4,069
Deduct compensation expense for share options determined under fair value based method			(1,884	)		(2,226	)		(5,717	)		(7,403	)

Pro forma net income (loss) available to unitholders		$	104,452		$	(145,626	)	$	(12,539	)	$	37,972

Earnings (loss) per unit — basic:
	Historical net income (loss) available to unitholders per unit	$	0.23		$	(0.32	)	$	(0.03	)	$	0.09

	Pro forma net income (loss) available to unitholders per unit	$	0.23		$	(0.32	)	$	(0.03	)	$	0.08

Earnings (loss) per unit — diluted:
	Historical net income (loss) available to unitholders per unit	$	0.23		$	(0.32	)	$	(0.03	)	$	0.09

	Pro forma net income (loss) available to unitholders per unit	$	0.23		$	(0.32	)	$	(0.03	)	$	0.08

In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (“FAS 123(R)”), which replaced FAS 123. We expect to adopt FAS 123(R) on January 1, 2006 using the modified prospective method. The adoption of this standard is expected to have an immaterial effect on the financial statements. Had we adopted FAS 123(R) in prior periods, the impact of that standard would have approximated the impact of FAS 123 as described in the disclosure of pro forma net income (loss) and earnings (loss) per unit above.


	Impact of a New Accounting Standard

In May 2005, the FASB issued FAS No. 154, “Accounting Changes and Error Corrections — A Replacement of APB Opinion No. 20 and FAS Statement No. 3” (“FAS 154”). FAS 154 changes the requirements for the accounting and reporting of a change in accounting principle by requiring retrospective application to prior periods’ financial statements of the change in accounting principle, unless it is impracticable to do so. FAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. We do not expect the adoption of FAS 154 to have any impact on our financial statements.

EOP OPERATING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

In June 2005, the FASB ratified the consensus in EITF Issue No. 04-5, Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights (“EITF 04-5”), which provides guidance in determining whether a general partner controls a limited partnership. EITF 04-5 states that the general partner in a limited partnership is presumed to control that limited partnership. The presumption may be overcome if the limited partners have either (1) the substantive ability to dissolve the limited partnership or otherwise remove the general partner without cause or (2) substantive participating rights, which provide the limited partners with the ability to effectively participate in significant decisions that would be expected to be made in the ordinary course of the limited partnership’s business and thereby preclude the general partner from exercising unilateral control over the partnership. If the criteria in EITF 04-5 are met, the consolidation of existing joint ventures accounted for under the equity method may be required. Our adoption of EITF 04-5 is expected to have no effect on net income or shareholders’ equity. EITF 04-5 is effective June 30, 2005 for new or modified limited partnership arrangements and effective January 1, 2006 for existing limited partnership arrangements.


NOTE 3 —	ACQUISITIONS

We acquired the following properties during the nine months ended September 30, 2005:


							Total Office Portfolio and Effective
							Office Portfolio
			Acquisition		Number of
Property		Location	Date		Buildings		Square Feet		Purchase Price

									(Dollars in thousands)
First Quarter 2005 Acquisitions:
Office properties:
	Summit at Douglas Ridge I	Roseville, CA		01/21/2005		1		92,941	$	25,000
	Park 22	Austin, TX		03/22/2005		3		203,716		35,650
Vacant land:
	Two Main Place	Portland, OR		03/14/2005		—		—		7,600

		Total First Quarter Acquisitions				4		296,657		68,250

Second Quarter 2005 Acquisitions:
Office properties:
	11111 Sunset Hills Road (a/k/a XO Building)(a)	Reston, VA		05/04/2005		1		216,469		50,700
	Summit at Douglas Ridge II(b)	Roseville, CA		05/20/2005		—		—		18,650
	Shorebreeze I & II(c)	Redwood City, CA		06/09/2005		2		230,853		56,500
	Research Park Plaza I & II	Austin, TX		06/16/2005		2		271,882		55,000
	Golden Gate Plaza	Novato, CA		06/30/2005		2		114,364		24,499
	Woodside Office Center	Novato, CA		06/30/2005		1		89,031		23,950
	1179 North McDowell	Petaluma, CA		06/30/2005		1		53,846		9,200
	Parkway Plaza (a/k/a 3850 & 3880 Brickway)	Santa Rosa, CA		06/30/2005		2		126,585		23,734
	Oak Valley Business Center	Santa Rosa, CA		06/30/2005		3		129,523		24,450

		Total Second Quarter Acquisitions				14		1,232,553		286,683

EOP OPERATING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)


							Total Office Portfolio and Effective
							Office Portfolio
			Acquisition		Number of
Property		Location	Date		Buildings		Square Feet		Purchase Price

									(Dollars in thousands)
Third Quarter 2005 Acquisitions:
Office properties:
	25 Mall Road	Burlington, MA		07/07/2005		1		277,647		54,750
	The Lakes	Santa Rosa, CA		07/19/2005		5		135,332		21,505
	333 Twin Dolphin Plaza	Redwood City, CA		07/28/2005		1		185,285		52,700
	Stonebridge Plaza II	Austin, TX		08/19/2005		1		193,131		36,800
	Clocktower Square(d)	Palo Alto, CA		09/27/2005		4		97,133		41,250
	1095 Avenue of the Americas(e)	New York, NY		09/29/2005		—		—		504,600

		Total Third Quarter Acquisitions				12		888,528		711,605

		Total				30		2,417,738	$	1,066,538


(a)		The purchase price for 11111 Sunset Hills Road includes the assumption of approximately $22.5 million of mortgage debt at a fixed coupon rate of 6.12% maturing in July 2008. The all-in effective interest rate of this mortgage debt is 4.97%.

(b)		Summit at Douglas Ridge II, which consists of one building comprising approximately 93,349 square feet, is currently a development property and, therefore, not included in the total number of buildings or total square footage statistics.

(c)		The purchase price for Shorebreeze I & II includes the assumption of approximately $22.4 million of mortgage debt at a fixed coupon rate of 4.19% and the issuance of 108,190 partnership units in EOP Partnership (“Units”) valued at approximately $3.3 million. The mortgage debt assumed matures in March 2007 and has an all-in effective interest rate of 5.43%.

(d)		This property is subject to a ground lease.

(e)		1095 Avenue of the Americas, which consists of one building comprising approximately 1,020,000 square feet, is classified as a development and, therefore, not included in the total number of buildings or total square feet owned by us as of September 30, 2005.


NOTE 4 —	GAINS/ LOSSES ON SALES OF REAL ESTATE, PROVISIONS FOR LOSS ON ASSETS HELD FOR SALE AND IMPAIRMENTS


	Gains on Sales of Real Estate

We recognized approximately $78.5 million and $182.4 million of gains on sales of real estate during the three months and nine months ended September 30, 2005, respectively, and approximately $3.5 million and

EOP OPERATING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

$15.2 million of gains on sales of real estate during the three months and nine months ended September 30, 2004, respectively, after allocations to minority interest partners, as shown below:


		For the three months				For the nine months
		ended September 30,				ended September 30,

		2005		2004		2005			2004

		(Dollars in thousands)
Gains on partial sales of real estate included in Income from Continuing Operations		$	47,406	$	216	$	47,433		$	216
Gains on sales of real estate included in Discontinued Operations			31,098		3,311		147,288			15,151
Minority interests’ share in gains on sales of real estate included in allocation to minority interests in partially owned properties			—		—		(29,699	)		(214	)
Our share of gains on sales of real estate classified as income from unconsolidated joint ventures			29		—		17,405			—

	Our share of the gains on sales of real estate	$	78,533	$	3,527	$	182,427		$	15,153


	Losses on Sales of Real Estate, Provisions for Loss on Assets Held for Sale and Impairments

In September 2005, we recognized non-cash charges of approximately $3.5 million related to losses on assets sold during the third quarter 2005 and provisions for loss to write-down the carry valuing of assets deemed held for sale to their fair value less costs to sell in accordance with Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long Lived Assets (“FAS 144”). The fair value less costs to sell for these assets was determined based on the sales price and estimated transaction costs.

In June 2005 we recognized a non-cash charge of approximately $367.0 million, or $0.81 per diluted unit, related to the reduction in the intended holding period for assets that we intend to sell in 2005 or thereafter, losses on assets that were sold during the second quarter and losses on assets held for sale. The fair values of these assets were calculated either by discounting estimated future cash flows and sales proceeds or based on the sales price contained in the respective sales contracts.

In March 2005, we recognized a provision for loss of approximately $13.5 million to write-down the carrying value of properties deemed held for sale at March 31, 2005 to their fair value less costs to sell. The fair value less costs to sell for these assets was determined based on the sales price and estimated transaction costs.

In September 2004, after an in-depth review of our portfolio on an asset-by-asset basis, we reduced our intended holding period for 96 non-core assets comprising approximately 17.7 million square feet because of our intent to sell these assets over a five-year period, as market conditions warrant. Based on our analysis of the future cash flows of each asset over the shortened holding period, we determined that 46 of the assets comprising approximately 2.8 million square feet were permanently impaired. The difference between the fair value (calculated either by discounting estimated future cash flows and sales proceeds or utilizing market comparables) and the net book value was approximately $229.2 million which was reflected as a non-cash impairment charge in the third quarter of 2004.

EOP OPERATING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

The table below summarizes the non-cash impairment charges and provisions for loss on assets held for sale during the three months and nine months ended September 30, 2005 and 2004:


			For the three months ended						For the nine months ended
			September 30,						September 30,

			2005			2004			2005			2004

			(Dollars in thousands)
Impairment deducted from Income from Continuing Operations			$	—		$	(46,436	)	$	(81,042	)	$	(46,436	)
Discontinued Operations:
	Impairment			—			(182,734	)		(99,814	)		(182,734	)
	(Loss) on sales of real estate			(523	)		(295	)		(166,451	)		(8,013	)
	Provisions for (loss) on properties held for sale			(3,010	)		—			(36,812	)		—

		Total non-cash charge	$	(3,533	)	$	(229,465	)	$	(384,119	)	$	(237,183	)


	Sales of Real Estate

We sold the following properties during the nine months ended September 30, 2005:


							Total Office Portfolio				Effective Office Portfolio
			Disposition		Number of
Property		Location	Date		Buildings		Square Feet		Sales Price		Square Feet		Sales Price

									(Dollars in				(Dollars in
									thousands)				thousands)
First Quarter 2005 Dispositions:
	Northland Plaza(a)	Bloomington, MN		01/04/2005		1		296,967	$	43,000		296,967	$	43,000
	Meier Central North (buildings 13 and 14)(b)	Santa Clara, CA		01/20/2005		—		—		1,986		—		1,986
	Water’s Edge(c)	Playa Vista, CA		02/01/2005		2		243,433		97,714		213,004		85,500
	One Devon Square, Two Devon Square and Three Devon Square	Wayne, PA		02/11/2005		3		142,493		23,000		142,493		23,000
	Meier Central South (building 12)(b)	Santa Clara, CA		02/22/2005		—		—		2,867		—		2,867
	One Valley Square, Two Valley Square, Three Valley Square, Four and Five Valley Square, Oak Hill Plaza, Walnut Hill Plaza and Four Falls(d)	Suburban Philadelphia, PA		03/02/2005		8		863,124		136,000		863,124		136,000
	Oak Creek I(b)	Milpitas, CA		03/15/2005		—		—		2,850		—		2,850
	Meier Central North (building 15)(b)	Santa Clara, CA		03/24/2005		—		—		2,350		—		2,350

		Total First Quarter Dispositions				14		1,546,017		309,767		1,515,588		297,553

Second Quarter 2005 Dispositions:
	545 E. John Carpenter Freeway and 909 Lake Carolyn Parkway	Irving, TX		04/01/2005		2		729,949		68,500		729,949		68,500
	70-76 Perimeter Center	Atlanta, GA		04/05/2005		4		62,102		11,055		62,102		11,055

EOP OPERATING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)


							Total Office Portfolio				Effective Office Portfolio
			Disposition		Number of
Property		Location	Date		Buildings		Square Feet		Sales Price		Square Feet		Sales Price

									(Dollars in				(Dollars in
									thousands)				thousands)
	Meier Central South (building 11)	Santa Clara, CA		04/18/2005		1		33,672		4,400		33,672		4,400
	Colonnade I, II & III	Dallas, TX		04/26/2005		3		984,254		153,500		984,254		153,500
	LL&E Tower	New Orleans, LA		05/04/2005		1		545,157		45,000		545,157		45,000
	Preston Commons and Sterling Plaza(e)	Dallas, TX		05/20/2005		4		721,351		138,381		360,676		69,190
	Oak Creek II(b)	Milpitas, CA		05/25/2005		—		—		3,575		—		3,575
	Concar	San Mateo, CA		05/26/2005		2		218,985		111,555		175,100		78,156
	The Solarium	Greenwood Village, CO		05/27/2005		1		162,817		15,800		162,817		15,800
	Point West I — Response Road and Point West III — River Park Dr.	Sacramento, CA		06/13/2005		2		118,973		16,200		118,973		16,200
	Sierra Point	Brisbane, CA		06/15/2005		1		99,150		15,000		99,150		15,000
	BP Tower and garage	Cleveland, OH		06/24/2005		1		1,277,488		141,250		1,277,488		141,250
	301 Howard Street (includes 195 Beale land)	San Francisco, CA		06/24/2005		1		307,396		70,000		307,396		70,000
	Foundry Square II	San Francisco, CA		06/24/2005		1		502,424		133,000		502,424		133,000
	Parkside Towers	Foster City, CA		06/24/2005		2		398,460		73,000		398,460		73,000
	San Rafael Corporate Center	San Rafael, CA		06/24/2005		2		155,318		43,000		155,318		43,000
	San Rafael Land	San Rafael, CA		06/24/2005		—		—		10,000		—		10,000
	Shoreline Technology Park	Mountain View, CA		06/28/2005		12		726,508		199,500		726,508		199,500
	Seaport Centre	Redwood City, CA		06/28/2005		13		465,955		74,000		465,955		74,000
	Seaport Plaza	Redwood City, CA		06/28/2005		2		159,350		32,000		159,350		32,000
	1871 The Alameda	San Jose, CA		06/28/2005		1		44,287		9,250		44,287		9,250
	5813 Shellmound/5855 Christie	Emeryville, CA		06/28/2005		2		56,898		7,100		56,898		7,100
	Baybridge Office Plaza	Emeryville, CA		06/28/2005		1		79,358		5,900		79,358		5,900

		Total Second Quarter Dispositions				59		7,849,852		1,380,966		7,445,292		1,278,376

Third Quarter 2005 Dispositions:
	201 Mission Street and 580 California(f)	San Francisco, CA		07/06/2005		—		—		217,000		597,226		162,750
	The Orchard	Sacramento, CA		07/14/2005		1		65,392		10,700		65,392		10,700
	Stadium Towers Land and Retail Building	Anaheim, CA		07/18/2005		1		6,800		3,000		6,800		3,000
	Texaco Center and 601 Garage	New Orleans, LA		07/25/2005		1		629,428		49,000		629,428		49,000
	Meier Mountain View (buildings 5-10, 17 and 20)(g)	Mountain View, CA		07/27/2005		7		242,658		34,200		242,658		34,200
	Ravendale at Central	Mountain View, CA		07/27/2005		2		80,450		10,100		80,450		10,100
	Bayside Corporate Center	Foster City, CA		07/27/2005		2		84,925		7,000		84,925		7,000

EOP OPERATING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)


						Total Office Portfolio				Effective Office Portfolio
		Disposition		Number of
Property	Location	Date		Buildings		Square Feet		Sales Price		Square Feet		Sales Price

								(Dollars in				(Dollars in
								thousands)				thousands)
Ridder Park	San Jose, CA		07/27/2005		1		83,841		19,600		83,841		19,600
Vintage Park Industrial and Vintage Park Office Building III	Foster City, CA		07/27/2005		6		162,094		25,200		162,094		25,200
Creekside I and II	San Jose, CA		07/27/2005		4		241,019		38,988		241,019		38,988
Aspect Telecommunications	San Jose, CA		07/27/2005		1		76,806		5,612		76,806		5,612
Redwood Shores	Redwood City, CA		07/27/2005		1		78,022		8,600		78,022		8,600
2500 City West, Brookhollow Central, Intercontinental Center and San Felipe Plaza	Houston, TX		08/04/2005		6		2,526,454		280,500		2,526,454		280,500
Meier Central South (buildings 1-4)	Santa Clara, CA		08/10/2005		4		83,831		8,104		83,831		8,104
Meier Central North (buildings 16 and 19)	Santa Clara, CA		08/10/2005		2		66,640		6,320		66,640		6,320
Meier Sunnyvale	Sunnyvale, CA		08/10/2005		1		22,400		2,279		22,400		2,279
Borregas Avenue	Sunnyvale, CA		08/10/2005		1		39,897		4,216		39,897		4,216
3045 Stender Way(b)	Santa Clara, CA		08/10/2005		—		—		2,506		—		2,506
Cupertino Business Center	Cupertino, CA		08/24/2005		2		64,680		10,400		64,680		10,400
Eighty Eighty Central, 9400 NCX and North Central Plaza Three	Dallas, TX		08/31/2005		3		1,009,838		95,358		1,009,838		95,358
Norris Tech Center	San Ramon, CA		09/21/2005		3		260,825		44,690		260,825		44,690

	Total Third Quarter Dispositions				49		5,826,000		883,373		6,423,226		829,123

			Total		122		15,221,869	$	2,574,106		15,384,106	$	2,405,052


(a)		This property was classified as held for sale at December 31, 2004 and written down to its estimated fair value less costs to sell, which approximated the fair value at the time of sale.

(b)		These properties, which consist of seven office buildings comprising approximately 176,131 square feet, were previously taken out of service and were no longer included in building and square footage statistics.

(c)		We disposed of our 87.5% interest in this property. The sales price shown for this property for the Total Office Portfolio is derived by grossing up the sales price for the sale of our 87.5% interest to 100%.

(d)		In connection with the sale of the Walnut Hill Plaza office property, we repaid approximately $13.4 million of mortgage debt that encumbered the property.

(e)		We disposed of our 50% ownership interest in these properties. We accounted for our 50% interest in the properties under the equity method.

(f)		We sold a 75% interest in these two office properties which comprise 796,301 square feet. These two buildings will remain in our building count for the Total Office Portfolio and the Effective Office Portfolio and the total square feet of these buildings will remain in our Total Office Portfolio statistics. However, the square feet included in the Effective Office Portfolio will be reduced to reflect our remaining 25% ownership interest. The sales price shown for these properties for the Total Office Portfolio is derived by grossing up the sales price for the sale of our 75% interest to 100%.

EOP OPERATING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)


(g)		Meier Mountain View building 17, which consists of one building and 27,790 square feet, was previously taken out of service and is not included in the seven buildings and 242,658 square feet.


	Properties Held for Sale

In accordance with FAS 144, the following properties were classified as held for sale as of September 30, 2005:

Effective Office

Total Office Portfolio

Portfolio

Disposition

Number of

Property

Location

Date

Buildings

Square Feet

Sales Price

Square Feet

Sales Price

(Dollars in

thousands)

Four Forest Plaza and Lakeside Square

Dallas, TX

10/14/2005

791,652

75,000

791,652

75,000

The net income (loss) for properties sold and properties held for sale is reflected in the consolidated statements of operations as Discontinued Operations for the periods presented. Below is a summary of the results of operations for properties classified as Discontinued Operations:


				For the						For the
				three months ended						nine months ended
				September 30,						September 30,

(Dollars in thousands)				2005			2004			2005			2004

Property operating revenues				$	13,434		$	78,605		$	137,598		$	249,586

Expenses:
	Depreciation and amortization				3,644			23,436			40,909			74,405
	Property operating				7,563			29,785			55,686			92,603
	Ground rent				15			1,297			2,055			3,273
	Impairment				—			182,734			99,814			182,734

		Total expenses			11,222			237,252			198,464			353,015

			Operating income (loss)		2,212			(158,647	)		(60,866	)		(103,429	)

Other income (expense):
	Interest income				22			99			263			116
	Interest expense and amortization of deferred financing costs and prepayment expenses				(256	)		(942	)		(2,269	)		(4,593	)

		Total other income (expense)			(234	)		(843	)		(2,006	)		(4,477	)

Income (loss) before income taxes, allocations to minority interests, gain/(loss) on sales of real estate and provision for (loss) on properties held for sale					1,978			(159,490	)		(62,872	)		(107,906	)
Income taxes					—			—			(60	)		(34	)
Income allocated to minority interests — partially owned properties (including gains on sales of real estate of $0, $0, $29,699 and $214, respectively)					—			(132	)		(30,440	)		(727	)
Gain on sales of real estate					31,098			3,311			147,288			15,151
(Loss) on sales of real estate					(523	)		(295	)		(166,451	)		(8,013	)
Provision for (loss) on properties held for sale					(3,010	)		—			(36,812	)		—

Net income (loss)				$	29,543		$	(156,606	)	$	(149,347	)	$	(101,529	)

Property net operating income from discontinued operations				$	5,871		$	48,820		$	81,912		$	156,983

EOP OPERATING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)


NOTE 5 —	INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES

Several properties are owned by us and other unaffiliated parties in joint ventures, which we account for using the equity method. Combined summarized financial information for our unconsolidated joint ventures is as follows:


			September 30,		December 31,
(Dollars in thousands)			2005		2004

Balance Sheets:
	Assets:
	Real estate, net of accumulated depreciation		$	3,153,680	$	3,068,975
	Other assets			346,397		343,075

		Total Assets	$	3,500,077	$	3,412,050

	Liabilities and Partners’ and Shareholders’ Equity:
	Mortgage debt		$	1,178,132	$	931,976
	Other liabilities			139,378		138,010
	Partners’ and shareholders’ equity			2,182,567		2,342,064

		Total Liabilities and Partners’ and Shareholders’ Equity	$	3,500,077	$	3,412,050

Our share of historical partners’ and shareholders’ equity			$	906,493	$	1,032,664
Net excess of cost of investments over the net book value of underlying net assets (net of accumulated depreciation of $22,143 and $22,797, respectively)(a)				65,081		84,479

Carrying value of investments in unconsolidated joint ventures			$	971,574	$	1,117,143

Our share of unconsolidated non-recourse mortgage debt			$	484,073	$	361,032


(a)		This amount represents the aggregate difference between the Company’s historical cost basis and the basis reflected at the joint venture level, which is typically amortized over the life of the related asset. The basis differentials occur primarily upon the transfer of assets that were previously owned by the Company into a joint venture or the acquisition of partial interests in joint ventures by us. In addition, certain acquisition, transaction and other costs may not be reflected in the net assets at the joint venture level.

EOP OPERATING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)


				For the				For the
				three months ended				nine months ended
				September 30,				September 30,

(Dollars in thousands)				2005		2004		2005		2004

Statements of Operations:
	Revenues			$	130,859	$	112,386	$	387,609	$	334,387

	Expenses:
		Interest expense and loan cost amortization			13,909		10,923		39,554		33,112
		Depreciation and amortization			33,093		26,949		95,991		80,025
		Operating expenses, ground rent and general and administrative expenses			61,011		44,886		180,128		135,331

			Total expenses		108,013		82,758		315,673		248,468

	Net income before gain on sale of real estate				22,846		29,628		71,936		85,919
	Gain on sale of real estate				107		—		39,652		—

	Net income			$	22,953	$	29,628	$	111,588	$	85,919

Our share of:
	Net income			$	10,683	$	12,664	$	48,882	$	37,629

	Interest expense and loan cost amortization			$	5,444	$	4,353	$	15,347	$	16,647

	Depreciation and amortization (real estate related)			$	12,787	$	11,386	$	37,555	$	32,196

	Gain on sale of real estate			$	29	$	—	$	17,405	$	—


NOTE 6 —	LEASE TERMINATION

In January 2005, we executed an amendment to a lease that reduced a tenant’s space at the 1301 Avenue of the Americas office property, located in New York, NY, from approximately 564,000 square feet to approximately 250,000 square feet. In connection with this amendment, the tenant agreed to pay a total lease termination fee of approximately $46.9 million, which the tenant paid in monthly installments throughout 2005, with the final amount due of approximately $37.4 million paid in September 2005. After deducting approximately $2.5 million of deferred rent receivable, lease termination income of approximately $44.4 million was recognized in the first quarter of 2005.

EOP OPERATING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)


NOTE 7 —	MORTGAGE DEBT

During the nine months ended September 30, 2005, the following transactions occurred:


			(Dollars in thousands)

Balance at December 31, 2004(a)			$	2,622,750
	Scheduled principal amortization prior to maturity			(19,324	)
	Repayment of debt encumbering the following properties:
		Sixty State Street		(71,962	)
		Island Corporate Center		(12,312	)
		San Mateo BayCenter II		(9,520	)
		1740 Technology		(15,684	)
		One Market		(171,689	)
		Central Park		(55,030	)
	Repaid upon sale of property (see Note 4)			(13,386	)
	Assumed through property acquisitions (see Note 3)			44,975
	Washington Mutual Tower refinancing(b)			150

Balance at June 30, 2005(a)				2,298,968
	Scheduled principal amortization prior to maturity			(8,011	)
	Assumption of debt encumbering the 1301 Avenue of the Americas property			(526,345	)

Balance at September 30, 2005(a)			$	1,764,612


(a)		Excludes net discounts on mortgage debt.

(b)		We refinanced the mortgage debt encumbering the Washington Mutual Tower office property. The new mortgage has a principal balance of approximately $79.25 million, bears interest at a fixed coupon rate of 4.55% and matures in June 2010. The prior mortgage had a principal balance of approximately $79.1 million, bore interest at a fixed coupon rate of 7.53% and was scheduled to mature in November 2005. The effective interest rate on the new debt is 4.56% as compared to 7.77% on the prior mortgage.

Prior to the disposition of the San Felipe Plaza office property in the third quarter 2005, the property was encumbered by a 5.81% mortgage note with an outstanding principal balance of $47.8 million scheduled to mature in 2013. The lender agreed to substitute the 1300 North 17th Street office property, located in Arlington, Virginia, as replacement collateral. As a result, no prepayment penalty was incurred. The terms of the mortgage note were otherwise unchanged as a result of this transaction.

EOP OPERATING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)


NOTE 8 —	UNSECURED DEBT

During the nine months ended September 30, 2005, the following transactions occurred:


	Unsecured Notes — Issued:


Original Term	Month of Issuance	Amount			Coupon Rate		Effective Rate(a)		Year of Maturity

		(Dollars in thousands)
2 Years to 4 Years	January	$	6,221			3.45% - 4.15%		3.76% - 4.39%		2007 - 2009
2 Years to 4 Years	February		3,220			3.70% - 4.15%		4.01% - 4.39%		2007 - 2009
3 Years to 5 Years	March		4,997			4.05% - 4.75%		4.33% - 5.00%		2008 - 2010
2 Years to 4 Years	April		7,672			4.30% - 4.80%		4.61% - 5.04%		2007 - 2009
2 Years to 6 Years	June		6,426			4.10% - 4.63%		4.41% - 4.87%		2007 - 2011
3 Years to 4 Years	July		4,722			4.40% - 4.55%		4.68% - 4.79%		2008 - 2009
3 Years to 6 Years	September		5,739			4.40% - 4.70%		4.68% - 4.92%		2008 - 2011
	Less issuance costs		(239	)

	Net Proceeds	$	38,758


	Unsecured Notes — Repaid:


Month Repaid		Amount		Coupon Rate			Effective Rate(a)

		(Dollars in thousands)
February		$	125,000		6.88	%		6.40	%
February			400,000		6.63	%		4.99	%
July			100,000		8.00	%		6.49	%
September			50,000		7.36	%		7.69	%

	Total	$	675,000


(a)		Includes the effect of settled interest rate protection and interest rate swaps, offering and transaction costs and premiums and discounts.


	Term Loan Facility

In February 2005, we obtained a $250 million unsecured term loan facility, which bore interest at LIBOR plus 35 basis points (the spread was subject to change based on our credit rating) and was scheduled to mature in February 2006. We repaid and terminated the term loan facility in July 2005.


	Line of Credit

In August 2005, we entered into a $1.25 billion revolving line of credit facility, bearing interest at LIBOR plus 47.5 basis points plus an annual facility fee of 15 basis points and maturing in August 2009. We have one option to extend the maturity date for an additional 12-month period. The extension fee is equal to 15 basis points on $1.25 billion, or $1.875 million. The existing $1.0 billion line of credit scheduled to mature in May 2006 terminated in August 2005 effective with the first funding of the new $1.25 billion line of credit.

EOP OPERATING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)


NOTE 9 —	FIXED-TO-FLOATING INTEREST RATE SWAPS

In March 2004, we entered into fixed-to-floating interest rate swaps in the notional amount of $1.0 billion to hedge the $1.0 billion of unsecured notes also issued in March 2004. We were the variable interest rate payer and the counterparty was the fixed rate payer. The swaps effectively converted the unsecured notes to a variable interest rate based on LIBOR plus 43 basis points plus an additional 79 basis points for loan costs. These fixed-to-floating interest rate swaps were terminated in 2005. By converting the $1.0 billion of unsecured notes from fixed rate debt to variable rate debt, we effectively reduced interest expense by approximately $16.0 million during the period that these fixed-to-floating rate swaps were in place. The swaps were considered perfectly effective fair value hedges because the periodic settlement dates and other key terms corresponded to the dates and other key terms of the hedged unsecured notes. In June 2005, we terminated one of these fixed-to-floating interest rate swaps in the notional amount of $250 million at no cost to us. In September 2005, we paid approximately $8.7 million to terminate the remaining $750 million of interest rate swaps. This amount was recorded to deferred financing costs and is being amortized to interest expense over the remaining term of the $1.0 billion unsecured notes. These terminations effectively converted the $1.0 billion of unsecured notes issued in March 2004 back to a fixed interest rate.

The fixed-to-floating interest rate swaps and the hedged unsecured notes were reflected on the consolidated balance sheets at market value. The market value of the swaps at December 31, 2004 represented a liability to us of approximately $29.5 million and was included in other liabilities. The corresponding market adjustment to the hedged unsecured notes was recorded as a discount on the unsecured notes. There are no swaps outstanding at September 30, 2005.


NOTE 10 —	IMPACT OF HURRICANE KATRINA

In August 2005, One Lakeway Center, Two Lakeway Center, and Three Lakeway Center located in Metairie, LA sustained extensive damage due to Hurricane Katrina. As a result, we incurred approximately $10.6 million of property damage, which is classified as insurance expense, and approximately $1.9 million of lost rental revenue during the three months ended September 30, 2005. We may incur up to an additional $2.0 million of lost rental revenue during the fourth quarter 2005 based on the anticipated re-opening dates of each respective building. These losses are not covered by third-party insurance because they fall within the self-insurance amounts as discussed in Note 14.

EOP OPERATING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)


NOTE 11 —	PARTNERS’ CAPITAL AND MANDATORILY REDEEMABLE PREFERRED UNITS


	Units

The following table presents the changes in the issued and outstanding Units since December 31, 2004:


Outstanding at December 31, 2004		451,337,142
	Issued to Equity Office upon exercise of share options	4,523,769
	Repurchased and retired under Equity Office’s open market repurchase program (at an average purchase price of $30.04 per unit)	(29,100	)
	Repurchased and retired under Equity Office’s Supplemental Retirement Savings Plan (at an average purchase price of $31.26 per unit)	(220,176	)
	Repurchased in 2004 under Equity Office’s Supplemental Retirement Savings Plan, but retired in 2005 (at an average purchase price of $29.63 per unit)	(25,728	)
	Units redeemed for cash	(1,657,098	)
	Issued to Equity Office related to restricted shares issued, net of cancellations	781,567
	Issued to Equity Office upon conversion of 70 Series B Preferred Units	98
	Units issued in connection with a property acquisition (see Note 3 to the financial statements)	108,190
	Units issued as compensation for Equity Office’s Board of Trustees fees	4,687

Outstanding at June 30, 2005		454,823,351
	Issued to Equity Office upon exercise of share options	602,650
	Repurchased and retired under Equity Office’s open market repurchase program (at an average purchase price of $32.89 per unit)	(3,004,700	)
	Repurchased and retired under Equity Office’s Supplemental Retirement Savings Plan (at an average purchase price of $35.06 per unit)	(20,896	)
	Issued to Equity Office related to restricted shares issued, net of cancellations	(39,703	)
	Units issued as compensation for Equity Office’s Board of Trustees fees	7,359

Outstanding at September 30, 2005		452,368,061


	Distributions

The following distributions were declared with respect to the third quarter 2005:


	Distribution
	Per Unit		Date Paid	Unitholder Record Date

Units	$	0.50	October 17, 2005	September 30, 2005
Series B Preferred Units	$	0.65625	August 15, 2005	August 1, 2005
Series G Preferred Units	$	0.484375	September 15, 2005	September 1, 2005

EOP OPERATING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

NOTE 12 — EARNINGS (LOSS) PER UNIT

The following table sets forth the computation of basic and diluted earnings (loss) per unit:


			For the three months ended						For the nine months ended
			September 30,						September 30,

(Dollars in thousands, except per unit amounts)			2005			2004			2005			2004

Numerator:
	Income from continuing operations		$	83,614		$	20,699		$	163,411		$	206,925
	Preferred distributions			(8,700	)		(8,701	)		(26,102	)		(30,393	)

	Income from continuing operations available to unitholders			74,914			11,998			137,309			176,532
	Discontinued operations (including net gain (loss) on sales of real estate and provision for loss on properties held for sale of $27,565, $3,016, $(55,975) and $7,138, respectively)			29,543			(156,606	)		(149,347	)		(101,529	)
	Cumulative effect of a change in accounting principle			—			—			—			(33,697	)

	Numerator for basic and diluted earnings (loss) per unit — net income (loss) available to unitholders		$	104,457		$	(144,608	)	$	(12,038	)	$	41,306

Denominator:
	Denominator for basic earnings (loss) per unit — weighted average Units outstanding			452,847,362			448,766,905			451,549,093			448,900,112
	Effect of dilutive potential units:
		Units issuable upon exercise of Equity Office share options and restricted shares		4,496,159			1,653,662			3,821,566			1,901,065

	Denominator for diluted earnings (loss) per unit — weighted average Units outstanding and dilutive potential units			457,343,521			450,420,567			455,370,659			450,801,177

Earnings (loss) per unit — basic:
	Income from continuing operations available to unitholders		$	0.17		$	0.03		$	0.30		$	0.39
	Discontinued operations			0.07			(0.35	)		(0.33	)		(0.23	)
	Cumulative effect of a change in accounting principle			—			—			—			(0.08	)

	Net income (loss) available to unitholders(a)		$	0.23		$	(0.32	)	$	(0.03	)	$	0.09

EOP OPERATING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)


		For the three months ended					For the nine months ended
		September 30,					September 30,

(Dollars in thousands, except per unit amounts)		2005		2004			2005			2004

Earnings (loss) per unit — diluted:
	Income from continuing operations available to unitholders	$	0.16	$	0.03		$	0.30		$	0.39
	Discontinued operations		0.06		(0.35	)		(0.33	)		(0.23	)
	Cumulative effect of a change in accounting principle		—		—			—			(0.07	)

	Net income (loss) available to unitholders(a)	$	0.23	$	$(0.32	)	$	(0.03	)	$	0.09


(a)		Net income (loss) available to unitholders per unit may not total the sum of the per unit components due to rounding.

The following securities were not included in the diluted earnings (loss) per unit computation because they would have had an antidilutive effect:


				For the three months ended				For the nine months ended
				September 30,				September 30,
		Weighted Average
Antidilutive Securities		Exercise Price		2005		2004		2005		2004

Share options		$	29.10		—		15,659,766		—		—
Share options		$	32.99		—		—		530,371		—
Share options		$	29.14		—		—		—		15,115,409
Series B Preferred Units(b)		$	35.70		8,389,256		8,389,354		8,389,267		8,389,354

	Total				8,389,256		24,049,120		8,919,638		23,504,763


(b)		The amounts shown represent the resulting Units upon conversion.

EOP OPERATING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

NOTE 13 — SEGMENT INFORMATION

As discussed in Note 1, our primary business is the ownership and operation of office properties. We have one segment which is office properties. The primary financial measure that our chief operating decision makers use for our office properties is property net operating income, which represents rental revenue, tenant reimbursements, parking and other operating revenues less real estate taxes, insurance, repairs and maintenance and property operating expense (all as reflected in the accompanying consolidated statements of operations). We believe that property net operating income is helpful to investors as a supplemental measure of our operating performance because it is a direct measure of the actual operating results of our properties. Total assets consists primarily of the assets in our office properties operating segment. There are other assets such as corporate furniture, fixtures, and equipment that are not associated with the office property segment, but these assets are immaterial.


			For the three months ended						For the nine months ended
			September 30,						September 30,

(Dollars in thousands)			2005			2004			2005			2004

Property Operating Revenues:
	Rental		$	589,520		$	575,188		$	1,757,034		$	1,719,423
	Tenant reimbursements			104,940			102,856			291,896			299,280
	Parking			29,380			26,924			85,468			80,510
	Other(a)			9,440			13,695			85,712			48,746

		Total Property Operating Revenues		733,280			718,663			2,220,110			2,147,959

Property Operating Expenses:
	Real estate taxes			87,284			86,321			257,125			250,859
	Insurance			16,778			6,900			30,226			21,599
	Repairs and maintenance			80,879			78,935			232,787			225,208
	Property operating			116,863			101,996			319,313			292,958

		Total Property Operating Expenses		301,804			274,152			839,451			790,624

		Property Net Operating Income from Continuing Operations	$	431,476		$	444,511		$	1,380,659		$	1,357,335

Property Operating Margin from Continuing Operations(b)				58.8	%		61.9	%		62.2	%		63.2	%

Reconciliation of Property Net Operating Income from Continuing Operations to Income from Continuing Operations:
Property Net Operating Income from Continuing Operations			$	431,476		$	444,511		$	1,380,659		$	1,357,335
Add: Fee income				5,314			3,220			13,788			10,129
Less:
	Depreciation			(165,444	)		(150,978	)		(489,633	)		(447,579	)
	Amortization			(24,600	)		(17,075	)		(68,030	)		(49,013	)
	Ground rent			(6,326	)		(5,515	)		(16,898	)		(15,880	)
	Corporate general and administrative			(16,866	)		(13,190	)		(49,257	)		(38,208	)
	Impairment			—			(46,436	)		(81,042	)		(46,436	)

EOP OPERATING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)


		For the three months ended						For the nine months ended
		September 30,						September 30,

(Dollars in thousands)		2005			2004			2005			2004

Operating Income			223,554			214,537			689,587			770,348
Less:
	Other expenses		(195,131	)		(203,066	)		(613,171	)		(591,017	)
	Income taxes		(456	)		(1,135	)		(1,351	)		(2,198	)
	Minority interest — partially owned properties		(2,442	)		(2,517	)		(7,969	)		(8,053	)
Add:
	Income from investments in unconsolidated joint ventures (including gain on sales of real estate of $29, $0, $17,405 and $0, respectively)		10,683			12,664			48,882			37,629
	Gain on sales of real estate		47,406			216			47,433			216

Income from Continuing Operations		$	83,614		$	20,699		$	163,411		$	206,925


(a)		Other income consists primarily of income from early lease terminations and ancillary income from tenants.

(b)		Defined as Property Net Operating Income from Continuing Operations divided by Total Property Operating Revenues.

NOTE 14 — COMMITMENTS AND CONTINGENCIES


	Concentration of Credit Risk

We maintain cash and cash equivalents at financial institutions. The combined account balances at each institution typically exceed FDIC insurance coverage and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. We believe this risk is not significant.


	Environmental

As an owner of real estate, we are subject to various environmental laws of federal and local governments. Our compliance with existing laws has not had a material adverse effect on our financial condition and results of operations, and we do not believe it will have a material adverse effect in the future. However, we cannot predict the impact of unforeseen environmental contingencies or new or changed laws or regulations on our properties, properties we have sold, or on properties that we may acquire.


	Litigation

We are not presently subject to material litigation nor, to our knowledge, is any material litigation threatened against us, other than routine actions for negligence and other claims and administrative proceedings arising in the ordinary course of business, some of which are expected to be covered by liability insurance and all of which collectively are not expected to have a material adverse effect on our financial condition, results of operations, or liquidity.


	Property Acquisitions

We signed agreements to acquire the Waterfall Towers, Parkpoint Business Center, Redwood Business Park I, Redwood Business Park II, Redwood Business Park III, Redwood Business Park IV, Redwood Business Park V and Fountaingrove I office properties comprising approximately 0.7 million square feet

EOP OPERATING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

located in the San Francisco, California region for approximately $134.2 million (including the assumption of approximately $73.4 million of mortgage debt). These acquisitions closed during the fourth quarter of 2005.

We signed an agreement to acquire the 300 W. 6th Street office property comprising approximately 0.4 million square feet located in Austin, Texas for approximately $131.7 million. This acquisition closed during the fourth quarter of 2005.

We signed an agreement to acquire the Fountaingrove II office property located in the San Francisco, California region upon completion of construction for approximately $8.9 million. This property will comprise approximately 40,000 square feet. This acquisition is subject to certain contingencies and is expected to close in the second quarter of 2006.

We signed an agreement to acquire the 124 West 42nd Street office property comprising approximately 37,000 square feet located in New York, New York for approximately $12.4 million. This acquisition is subject to certain contingencies and is expected to close in the fourth quarter of 2005.


	Contingencies

Certain joint venture agreements contain buy/sell options in which each party has the option to acquire the interest of the other party but do not generally require that we buy our partners’ interests. We have one joint venture which allows our unaffiliated partners, at their election, to require that we buy their interests during a specified future time period commencing in 2009 based on a formula contained in the agreement. In addition, we have granted options to each of three tenants to purchase the property it occupies. In accordance with Statement of Accounting Standards No. 5 Accounting for Contingencies, we have not recorded a liability or the related asset that would result from the acquisition in connection with the above potential obligations because the probability of our unaffiliated partners requiring us to buy their interest is not currently determinable and we are unable to estimate the amount of the payment required for that purpose.

Approximately 195 of our properties, consisting of approximately 28.2 million square feet, are subject to restrictions on taxable dispositions under tax protection agreements entered into with some of the contributors of the properties. The carrying value of these properties was approximately $6.0 billion at September 30, 2005. The restrictions on taxable dispositions are effective for periods expiring at different times through 2021. The terms of these tax protection agreements generally prevent us from selling the properties in taxable transactions unless we indemnify the contributing partners for their income tax liability on the portion of the gain on sale allocated to them as a result of the property’s value at the time of its contribution to us or, in some cases, to our predecessor. We do not believe that the tax protection agreements materially affect the conduct of our business or our decisions whether to dispose of restricted properties during the restriction period because we generally hold these and our other properties for investment purposes, rather than for sale. Historically, however, where we have deemed it to be in our unitholders’ best interests to dispose of restricted properties, we have typically done so through transactions structured as tax-deferred transactions under section 1031 of the Internal Revenue Code.

We anticipate structuring most future dispositions of restricted properties as transactions intended to qualify for tax-deferred treatment. We therefore view the likelihood of incurring any such material indemnification obligations to be remote. Were we to dispose of a restricted property in a taxable transaction, we generally would be required to pay to a partner that is a beneficiary of one of the tax protection agreements an amount based on the amount of income tax the partner would be required to pay on the incremental gain allocated to such partner as a result of the built-in gain that existed with respect to such property at the time of its contribution to us, or in some cases, to our predecessor. In some cases there is a further requirement to reimburse any additional tax liability arising from the indemnification payment itself. The exact amount that would be payable with respect to any particular taxable sale of a restricted property would depend on a number

EOP OPERATING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

of factors, many of which can only be calculated at the time of any future sale, including the sale price of the property at the time of the sale, the partnership’s basis in the property at the time of the sale, the partner’s basis in the assets at the time of the contribution, the partner’s applicable rate of federal, state and local taxation at the time of the sale, and the timing of the sale itself.


	Insurance

Property Damage, Business Interruption, Earthquake and Terrorism: We are responsible for losses up to certain levels as described below for property damage, business interruption, earthquake, terrorism and other events prior to third-party insurance coverage. Accordingly, any losses incurred up to our loss exposure amounts or in excess of third-party coverage limitations will be reflected in our financial statements as insurance expense. The insurance coverage provided through third-party insurance carriers is subject to coverage limitations. For each type of insurance coverage described below, should an uninsured or underinsured loss occur, we could lose all or a portion of our investment in, and anticipated cash flows from, one or more of the properties. In addition, there can be no assurance that third-party insurance carriers will be able to maintain reinsurance sufficient to cover any losses that may be incurred.


	EOP Partnership	Third-Party
Type of Insurance Coverage	Loss Exposure/Deductible	Coverage Limitation

Property damage and business interruption(a)	$50 million per occurrence and $75 million annual aggregate exposure (which includes amounts paid for earthquake loss), plus $1 million per occurrence deductible	$1.0 billion per occurrence(c)
Earthquake(a)(b)	$75 million per occurrence and annual aggregate exposure (which includes amounts paid for property damage and business interruption loss), plus $1 million per occurrence deductible	$325 million in the aggregate per year(c)
Acts of terrorism(d)	$4.3 million per occurrence deductible (plus 10% of each and every loss with a maximum per occurrence exposure of $36.8 million which includes the $4.3 million deductible)	$825 million per occurrence(e)


(a)		We retain up to $75 million annual aggregate loss throughout the portfolio. In the event of a loss in excess of the per occurrence or annual aggregate amount, the third-party insurance carriers would be obligated to cover the losses up to the stated coverage amounts in the table above.

(b)		The amount of the third party insurance relating to earthquakes is based on maximum probable loss studies performed by independent third parties. The maximum annual aggregate payment amount for earthquake loss is $325 million, inclusive of our loss exposure of $75 million plus $1 million per occurrence deductible. There can be no assurance that the actual losses suffered in the event of an earthquake would not exceed the amount of such insurance coverage.

(c)		These amounts include our loss exposure/deductible amount.

(d)		This coverage includes nuclear, chemical and biological events under the Terrorism Insurance Act of 2002 (“TRIA”). TRIA will expire December 31, 2005 and there is a risk it will not be extended past that date or extended on its current terms. Should the act not be extended or not extended on its current terms, the structure, terms or conditions (including premiums and coverage) of our terrorism insurance program would likely be affected for future periods. We may be unable to secure replacement coverage on comparable terms and conditions.

EOP OPERATING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)


		This coverage does not apply to non-TRIA events (which are terrorism events that are not committed by a foreigner or a foreign country). We maintain separate insurance with a $325 million annual aggregate limit subject to a deductible of $1 million for non-TRIA events. This separate coverage for non-TRIA events excludes nuclear, biological and chemical events.

(e)		This amount is in excess of our deductible amounts.

Pollution: We have pollution and remediation insurance coverage for both sudden and gradual events. Limits for this exposure are $2 million per loss and $10 million aggregate per year subject to a deductible of $100,000.

Workers Compensation, Automobile Liability and General Liability: We have per occurrence deductible amounts for workers compensation of $500,000, auto liability of $250,000 and general liability of $1,000,000.


NOTE 15 —	SUBSEQUENT EVENTS

The following transactions occurred subsequent to September 30, 2005, through November 7, 2005:

1. We acquired the following properties:


							Total Office Portfolio and
							Effective Office Portfolio

			Acquisition		Number of		Square		Purchase
Property	Location		Date		Buildings		Feet		Price

									(Dollars in
									thousands)
300 W. 6th Street		Austin, TX		10/04/2005		1		446,637	$	131,685
Waterfall Towers(a)		Santa Rosa, CA		10/11/2005		3		90,671		16,800
Redwood Business Park I(b)		Petaluma, CA		10/28/2005		4		101,201		16,531
Redwood Business Park II(c)		Petaluma, CA		10/28/2005		5		169,389		29,781
Redwood Business Park V(d)		Petaluma, CA		10/28/2005		1		57,587		9,640
Fountaingrove I		Santa Rosa, CA		10/28/2005		1		37,428		9,872
Redwood Business Park III (including vacant land)(e)		Petaluma, CA		11/02/2005		2		144,000		26,648
Redwood Business Park IV (including vacant land)(f)		Petaluma, CA		11/02/2005		1		66,656		13,750
Parkpoint Business Center(g)		Santa Rosa, CA		11/02/2005		5		67,869		11,225

	Total					23		1,181,438	$	265,932


(a)		The purchase price for the Waterfall Towers office properties includes the assumption of approximately $7.7 million of mortgage debt at a fixed coupon rate of 6.08% maturing in January 2013.

(b)		The purchase price for the Redwood Business Park I office properties includes the assumption of approximately $10.4 million of mortgage debt at a fixed coupon rate of 7.41% maturing in August 2011.

(c)		The purchase price for the Redwood Business Park II office properties includes the assumption of approximately $18.2 million of mortgage debt at a fixed coupon rate of 7.41% maturing in August 2011.

(d)		The purchase price for the Redwood Business Park V office property includes the assumption of approximately $6.4 million of mortgage debt at a fixed coupon rate of 7.41% maturing in August 2011.

(e)		The purchase price for the Redwood Business Park III office property includes the assumption of approximately $15.1 million of mortgage debt at a fixed coupon rate of 7.46% maturing in August 2011.

EOP OPERATING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)


(f)		The purchase price for the Redwood Business Park IV office property includes the assumption of approximately $8.2 million of mortgage debt at a fixed coupon rate of 7.41% maturing in August 2011.

(g)		The purchase price for the Parkpoint Business Center office property includes the assumption of approximately $7.4 million of mortgage debt at a fixed coupon rate of 5.53% maturing in January 2015.

2. On November 3, 2005, we signed an agreement to acquire the 211 Perimeter office property comprising approximately 0.2 million square feet located in the Atlanta, GA region for approximately $28.0 million. This acquisition is subject to certain contingencies and is expected to close in the fourth quarter of 2005.

3. On October 19, 2005, we made a $50.0 million investment in junior mezzanine debt as part of a debt refinancing on the 375 Park Avenue office property located in New York, NY. The mezzanine debt bears interest at a rate of 8.95% and matures in August 2015. We will account for this investment as a note receivable.

4. We disposed of whole or partial interests in the following properties:


								Total Office Portfolio				Effective Office Portfolio

				Disposition		Number of		Square				Square
Property		Location		Date		Buildings		Feet		Sales Price		Feet		Sales Price

										(Dollars in				(Dollars in
										thousands)				thousands)
Office Properties:
	Four Forest Plaza and Lakeside Square		Dallas, TX		10/14/2005		2		791,652	$	75,000		791,652	$	75,000
	2 Oliver Street — 147 Milk Street		Boston, MA		10/18/2005		1		270,302		53,000		270,302		53,000

		Total					3		1,061,954	$	128,000		1,061,954	$	128,000

5. We obtained and fully drew upon a $500 million unsecured term loan facility, which bears interest at LIBOR plus 45 basis points (the spread is subject to change based on our credit rating) and is scheduled to mature in October 2006.

6. We repurchased 8,296,900 common shares under our open market repurchase program at an average purchase price of $29.82 per share for approximately $247.4 million.

7. Equity Office’s Board of Trustees increased the amount of common shares authorized for repurchase under its previously announced common share repurchase program by an additional $500 million during the period through May 31, 2006.


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

Forward-Looking Statements

This Quarterly Report on Form 10-Q includes certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management’s present expectations and beliefs about future events. As with any projection or forecast, these statements are inherently susceptible to uncertainty and changes in circumstances. Important factors that could cause actual results to differ materially from those reflected in such forward-looking statements and that should be considered in evaluating this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) and the outlook of EOP Partnership include, but are not limited to, the following: declines in overall activity in our markets and increases in expenses have adversely affected our operating results and are expected to continue to adversely affect our operating results until market and other conditions improve; in order to continue to pay distributions to our unitholders at current levels, we must borrow funds or sell assets; we expect to be a net seller of real estate in 2005, which has and will further reduce our income from continuing operations and funds from operations and has and may result in gains or losses on sales of real estate and impairment charges; our ability to dispose of assets on terms we find acceptable will be subject to market conditions we do not control; we may not be successful in closing all of our pending investment transactions; our properties face significant competition; we face potential adverse effects from tenant bankruptcies or insolvencies; competition for acquisitions or an oversupply of properties for sale could adversely affect us; and an earthquake or terrorist act could adversely affect our business and such losses, or other potential losses, may not be fully covered by insurance.

These and other risks and uncertainties are detailed from time to time in our filings with the SEC, including Form 8-K filed on March 29, 2005 and Form 8-K filed on May 20, 2005. We are under no obligation to, and expressly disclaim any obligation to, update or alter our forward-looking statements, whether as a result of changes, new information, subsequent events or otherwise.

The following discussion should be read together with our consolidated financial statements and notes thereto.

Overview

This MD&A begins with an Executive Summary which includes a description of our business and key factors and trends that affect our business and is then organized as follows:


	•	Results of Operations


	Period-to-period comparison of our results of operations for the three and nine months ended September 30, 2005 and 2004.


	•	Liquidity and Capital Resources


	A discussion of our liquidity and capital resources, including distributions to our unitholders, contractual obligations, debt financing, equity securities, market risk, capital improvements, tenant improvements, leasing costs, developments, inflation, cash flows and additional items for 2005.


	•	Funds From Operations (“FFO”)


	A reconciliation of this non-GAAP financial measure to net income (loss), the most directly comparable GAAP measure.

Executive Summary

Equity Office Properties Trust (“Equity Office”), our general partner, is the largest publicly traded owner and manager of office properties in the United States based upon equity market capitalization and square feet. We own, manage, lease, acquire and develop office properties. At September 30, 2005, we had a national office portfolio comprised of whole or partial interests in 607 office buildings located in 18 states and the District of Columbia. Based on our Effective Office Portfolio, which consists of approximately

102.5 million square feet, approximately 41% and 59% of our properties are located in central business districts and suburban locations, respectively. We owned buildings in 26 markets, and in 105 submarkets, including our 17 core markets which are Atlanta, Austin, Boston, Chicago, Denver, Los Angeles, New York, Oakland/ East Bay, Orange County, Portland, Sacramento, San Diego, San Francisco, San Jose, Seattle, Stamford and Washington D.C. We believe our core markets generally offer or are characterized by the following: a strong opportunity for us to be a market leader; an ability to leverage our operating platform; sufficient market size for us to achieve scale and grow; an intellectual and cultural infrastructure; and a highly educated workforce.

We operate our properties using a portfolio-based model as compared to more traditional real estate owners who operate on a property-by-property basis. We believe this approach allows us to operate efficiently while providing a high level of service to our tenants. Our operating model, which includes centralized regional offices and procurement functions, allows us increased opportunities to provide a wide range of office solutions to our tenants with local, regional or national space needs. It also allows us the opportunity to streamline our operations, improve customer service, retain tenants, increase occupancy and manage operating expenses.

The following factors affect our business and are important factors to consider when reviewing our financial and operating results:


	•	our acquisition and disposition activity and our use of the proceeds from dispositions;

	•	the economic environment including inflation and office job growth;

	•	our operating and leasing results; and

	•	our liquidity and capital resources.


	Acquisition and Disposition Activity

Over the last year we have taken steps to reposition our portfolio for long-term growth. In order to achieve this goal, we have taken advantage of the current strong asset-sale environment and announced a program to dispose of up to approximately $3 billion of assets in non-core markets and non-strategic assets in core markets. During the first nine months of 2005, we sold approximately $2.4 billion of assets comprising approximately 15.6 million square feet. We expect that upon completion of our announced disposition program, our portfolio will be comprised of largely Class A buildings in diverse geographic markets. More than 90% of our assets based on total square feet are currently located in our 17 core markets. Although we do not currently have a program in place to dispose of more than the announced disposition portfolio, we will continue to take advantage of market opportunities and expect to engage in further sales on an ongoing basis from time to time based on market conditions.

For the nine months ended September 30, 2005, our net income and FFO have been negatively impacted by asset sales. Our income from continuing operations has decreased and we have incurred gains and losses and impairment charges, some of which were material, as a result of assets sold and assets we intend to sell. FFO excludes gains from sales of properties, but impairment charges, provisions for losses on properties held for sale and losses on properties sold reduce FFO. See Note 4 to the financial statements for more information regarding the gains, losses and impairment charges recognized during 2005 and 2004. Although we may incur additional charges as a result of asset sales, we do not expect the charges to be substantial for our previously announced $3.0 billion disposition program based on our current disposition plans. In addition, we anticipate that the total amount of the future gains on assets we intend to sell and the gains on the assets we have sold for our previously announced $3.0 billion disposition program after the second quarter 2005 will exceed the second quarter 2005 non-cash impairment charge of approximately $180.9 million.

We expect to continue, as market conditions permit, to invest the capital from our dispositions into acquisitions in targeted growth markets at acceptable returns. While the current commercial real estate market has provided us with favorable valuations for assets we have sold, this same market has also created an extremely competitive atmosphere for acquiring properties. The properties we have acquired this year, including a redevelopment property, have occupancy rates lower than our weighted average portfolio occupancy rate. We acquired these properties, however, because they are located in our core markets and have

important competitive factors that we believe will make them attractive investments and will be accretive to our earnings over the long term.

We may also continue to use the disposition proceeds for reinvestments in our existing portfolio, debt repayments, distributions to our shareholders, and repurchases of our common shares. Year-to-date through September 30, 2005, we have used proceeds from asset sales, in part, for approximately $1.1 billion in acquisitions, to repay approximately $1.6 billion of mortgage debt and unsecured notes with a weighted average coupon interest rate of 7.4%, and to repurchase approximately 3.0 million Common Shares for a total consideration of $99.7 million and 1.7 million Units for approximately $50.7 million.

As a result of this significant level of dispositions and the manner in which we have used the proceeds, we have experienced and may continue to experience moderate earnings dilution. Ultimately, the amount and duration of this dilution will depend upon our use of the disposition proceeds over time. We believe the short-term earnings dilution is outweighed by our improved prospects for long-term growth.


	Economic Environment, Inflation and Office Job Growth

Over the past few years an economic slowdown coupled with slow employment growth and increased office vacancy in the United States has adversely impacted our financial results. As the economy recovers, these trends are beginning to reverse in most of our markets with office vacancy declining and rental rates improving, primarily because of an increase in office job growth and an increase in positive net absorption of office space. However, we are also experiencing rising utility and construction costs, interest rates, and inflation, all of which have an adverse impact on us, and more broadly, on the overall economy.

Office job growth is a principal driver of demand for our properties. Office job growth in our top 20 markets increased in the current quarter and has now been positive for over two years. That compares to annual job losses in 2001 through 2003. Net absorption in many of these markets has been positive for over two years. In addition, nationwide construction activity, an important market variable driving supply of office space, is less than one-half of its 2002 peak. However, construction activity is beginning to increase in several of our markets.

In most of our markets, occupancy continues to improve and vacancy rates are declining. Vacancy rates have declined in most of our markets for the last two years. We expect that between now and year-end 2005 vacancy rates in our top 20 markets will continue to decrease with the largest occupancy gains in Class A and suburban office space. Class A vacancy rates are now below vacancy rates in Class B and C properties. Vacancy rates in suburban markets are continuing to decline from their peak, which occurred in the first quarter 2003. In addition, sublease space continues to decline from its peak in 2002 in our top 20 markets. The reduced amount of sublease space means that future net absorption will mainly reduce direct vacancy rates.

The market recovery we have started to experience will take some time to translate into improved deal economics and enhanced operating results for office property owners. Therefore, assuming the recovery is sustained, we expect a gradual improvement from the conditions we experienced over the past few years with uneven recoveries in different markets.


	Operating and Leasing Results

As the economy and office markets recover, we have seen improvement in many of our markets. Although rental rates on our new leases and occupancy have been improving, the impact on our financial results have been significantly offset by the rent roll down on expiring leases and increasing expenses. Our operating expenses and general and administrative expenses have increased primarily because of increased utility costs, increases in payroll and severance expenses, consulting fees partially associated with the implementation of a new accounting system and the shared services center, and most recently the costs incurred for damage to our properties in New Orleans from Hurricane Katrina. Although some of these expenses relate to specific events, we expect that other expenses, such as utilities, may increase from current levels. As a result of our expenses (some but not all of which may be non-recurring) increasing more than our

revenues, our property net operating income and property operating margins have been adversely impacted. Should this trend continue, our financial results will continue to be adversely impacted.

The total square feet for tenants who took occupancy during the nine months ended September 30, 2005 and 2004 was approximately 16.3 million and 16.7 million, respectively. Our occupancy was 89.2% as of September 30, 2005 an increase from 87.7% at the end of 2004 and 86.3% at the end of 2003. Approximately two-thirds of the increase in occupancy since December 31, 2004 was due to selling properties with low occupancy. We expect our ending occupancy at December 31, 2005 to be above 90%. We expect occupancy in early 2006 to decline slightly due to several large expiring leases, but to recover to approximately 91% by year-end 2006.

Rental rates declined during the first nine months of 2005 and 2004 by approximately 14.1% and 17.1%, respectively, on a cash basis as new leases replaced expiring and terminated leases. Market rents began a downward trend beginning in 2001 as vacancy rates increased across the nation. While we have been able to increase rental rates in select areas, we expect it to take time for rental rates to improve across the portfolio. We estimate that rental rates on our leases that are scheduled to expire in 2005 and 2006 are approximately 10% to 15% above current market. This roll down in rents to current market levels adversely affects our rental revenues, and until market rental rates increase substantially from their current levels, we expect this rent roll down to continue to adversely affect our rental revenues.

In order to retain tenants and obtain new tenants we incur significant tenant improvement and leasing costs which have been at historically high levels since 2003. We expect these costs to average slightly above $20 per square foot in 2005 and we expect the costs for 2006 to be slightly higher than the level anticipated for 2005.

We had approximately 2.7 million square feet of early lease terminations which took effect in the first nine months of 2005 which compares to approximately 2.9 million square feet in the comparable period 2004. While it is difficult to predict future terminations, we expect the number on a square footage basis to decline in 2005 as compared to 2004 as we are seeing more planned terminations versus defaults. We expect income from early lease terminations to be slightly higher in 2005 than 2004 primarily because of one unusually large termination fee in the first quarter 2005.


	Liquidity and Capital Resources

As discussed later in the Liquidity and Capital Resources section, our net cash flow provided by operating activities has by itself been insufficient to meet all of our cash requirements including investments made in our properties in the form of capital improvements, tenant improvements and leasing costs as well as distributions to our unitholders. If our net cash from operating activities and our cash requirements, including tenant improvements and leasing costs, continue at these levels, and if Equity Office’s Board of Trustees continues to declare distributions on its Common Shares at current levels, we expect that a shortfall will continue in 2005 and 2006 and that we will cover the shortfall with proceeds primarily from asset sales and financing activities.


	Key Transactions Completed During the Nine Months Ended September 30, 2005


	Investing Activities


	•	We sold whole or partial interests in assets comprising approximately 15.6 million square feet for approximately $2.4 billion,

	•	we acquired approximately $1.1 billion of assets including development properties and a vacant land parcel, and

	•	obtained mortgage financing for the Yahoo! Center, of which we own a 50% interest and account for under the equity method. This transaction includes a $250 million note with a coupon interest rate of 5.27% maturing in October 2015. Our share of the principal balance is $125 million.


	Financing Activities


	•	We entered into a $1.25 billion revolving line of credit facility, bearing interest at LIBOR plus 47.5 basis points plus an annual facility fee of 15 basis points and maturing in August 2009. The previously existing $1.0 billion line of credit scheduled to mature in May 2006 terminated in August 2005 effective with the first funding of the new $1.25 billion line of credit,

	•	obtained and subsequently repaid and terminated a $250 million term loan facility, which bore interest at LIBOR plus 35 basis points,

	•	repaid $675 million of unsecured notes and approximately $875.9 million of mortgage debt that had an average coupon interest rate of 7.40%,

	•	paid approximately $8.7 million to terminate $1.0 billion of interest rate swaps that had converted certain fixed rate unsecured notes to a floating rate, and

	•	repurchased 3,033,800 common shares at an average purchase price of $32.87 per share for approximately $99.7 million under our open market repurchase program and repurchased 1,656,410 Units at an average purchase price of $30.59 per Unit for approximately $50.7 million.


	Other


	•	We recorded $182.4 million of gains on asset sales and recorded non-cash charges of approximately $384.1 million on assets sold and assets we intend to sell and

	•	recorded approximately $44.4 million of income from a single lease termination.

Results of Operations


	*Trends in Occupancy and Rental Rates*

Below is a summary of leasing activity for tenants taking occupancy in the periods presented. Our 10 largest markets in terms of our property net operating income from continuing operations for the three months ended September 30, 2005 in order from greatest to least are Boston, San Francisco, New York, San Jose, Seattle, Los Angeles, Chicago, Washington D.C., Orange County and Atlanta. These markets accounted for approximately 82.6% of our property net operating income from continuing operations in the third quarter of 2005.


			For the three months ended						For the nine months ended
			September 30,						September 30,

Office Property Data:			2005			2004			2005			2004

10 Largest Markets:
	Portion of Total Office Portfolio based on square feet at end of period			74.8	%		70.1	%		74.8	%		70.1	%
	Occupancy at end of period			89.2	%		86.4	%		89.2	%		86.4	%
	Gross square footage for tenants whose lease term commenced during the period			4,326,506			3,457,834			11,917,802			10,778,239
	Weighted average annual rent per square foot for tenants whose lease term commenced during the period:
		GAAP basis (a,b)	$	26.44		$	25.54		$	28.54		$	26.36
		Cash basis (b,c)	$	25.59		$	24.86		$	27.34		$	25.55
	Gross square footage for expiring and terminated leases during the period			3,759,066			2,984,694			11,204,564			10,412,385
	Weighted average annual rent per square foot for expiring and terminated leases during the period:
		GAAP basis(a)	$	30.29		$	29.93		$	31.39		$	30.24
		Cash basis(c)	$	31.04		$	30.89		$	32.21		$	31.28
Total Office Portfolio:
	Occupancy at end of period			89.2	%		86.7	%		89.2	%		86.7	%
	Gross square footage for tenants whose lease term commenced during the period			5,575,587			5,028,416			16,275,329			16,685,427
	Weighted average annual rent per square foot for tenants whose lease term commenced during the period:
		GAAP basis (a,b)	$	25.71		$	24.28		$	26.68		$	23.97
		Cash basis (b,c)	$	24.89		$	23.41		$	25.69		$	23.42
	Gross square footage for expiring and terminated leases during the period			5,009,972			4,295,973			15,631,862			16,054,528
	Weighted average annual rent per square foot for expiring and terminated leases during the period:
		GAAP basis(a)	$	29.13		$	27.79		$	29.11		$	27.19
		Cash basis(c)	$	29.90		$	28.61		$	29.89		$	28.04


(a)		Based on the average annual base rent per square foot over the lease term and current estimated tenant reimbursements, if any.


(b)		Weighted average annual rent per square foot for new office leases for tenants whose lease term commenced during the period may lag behind market because leasing decisions typically are made anywhere from one month to 12 or more months prior to taking occupancy.

(c)		Based on the monthly contractual rent when the lease commenced, expired or terminated multiplied by 12 months. For new and renewal leases, if the monthly contractual rent when the lease commenced is $0 then the rental rate represents the first monthly rent payment due multiplied by 12 months (“Annualized Cash Rent”). The contractual rent amounts include total base rent and estimated expense reimbursements from tenants before any adjustments for rent abatements and contractual increases or decreases in rent. We believe Annualized Cash Rent is a useful measure because this information can be used for comparison to current market rents as published by various third party sources.


	*Period-to-Period Comparisons*

Below is a summary of changes in our Total Office Portfolio and our Effective Office Portfolio:


					Square Feet

					Total Office			Effective Office
Properties owned as of:		Buildings			Portfolio			Portfolio

December 31, 2003			684			122,254,925			113,641,117
	Consolidation of Sun America Center		1			780,063			524,772
	Acquisitions		27			3,315,232			3,104,028
	Developments placed in service		2			298,689			298,689
	Dispositions		(5	)		(567,765	)		(1,922,755	)
	Properties taken out of service(a)		(11	)		(469,771	)		(469,771	)
	Building Remeasurements		—			101,872			103,663

December 31, 2004			698			125,713,245			115,279,743
	Acquisitions		4			296,657			296,657
	Dispositions		(14	)		(1,546,017	)		(1,515,588	)
	Building Remeasurements		—			28,384			28,384

March 31, 2005			688			124,492,269			114,089,196
	Acquisitions		14			1,232,553			1,232,553
	Dispositions		(59	)		(7,849,852	)		(7,445,292	)
	Building Remeasurements		—			42,435			44,004

June 30, 2005			643			117,917,405			107,920,461
	Acquisitions		12			888,528			888,528
	Development placed in service (Cambridge Science Center)		1			115,340			115,340
	Dispositions		(49	)		(5,826,000	)		(6,423,226	)
	Building Remeasurements		—			3			3

September 30, 2005			607			113,095,276			102,501,106


(a)	Properties taken out of service represent office properties we are no longer attempting to lease and may be sold in the future or redeveloped.


	Results of Operations

The financial data presented in the consolidated statements of operations show significant changes in revenues and expenses from period-to-period. Our period-to-period financial data may not be comparable because we acquire and dispose of properties on an ongoing basis. The following tables show condensed consolidated results attributable to the properties that were acquired or placed in service on or before the

beginning of each comparable prior period (the “Same Store Portfolio”) and the changes in the total condensed consolidated statements of operations, which includes corporate level items (the “Total Company”).


	*Comparison of the three months ended September 30, 2005 to the three months ended September 30, 2004*

The table below represents selected operating information for the Total Company and for the Same Store Portfolio. The Same Store Portfolio consists of 514 consolidated office properties and 30 unconsolidated joint venture properties acquired or placed in service on or prior to July 1, 2004.


				Total Company												Same Store Portfolio

										Change												Change

(Dollars in thousands)				2005			2004			$			%			2005			2004			$			%

Revenues:
	Property operating revenues			$	733,280		$	718,663		$	14,617			2.0	%	$	706,013		$	701,523		$	4,490			0.6	%
	Fee income				5,314			3,220			2,094			65.0			—			—			—			—

		Total revenues			738,594			721,883			16,711			2.3			706,013			701,523			4,490			0.6

Expenses:
	Depreciation and amortization				190,044			168,053			21,991			13.1			173,916			160,201			13,715			8.6
	Real estate taxes				87,284			86,321			963			1.1			82,593			83,683			(1,090	)		(1.3	)
	Insurance				16,778			6,900			9,878			143.2			16,304			6,488			9,816			151.3
	Repairs and maintenance				80,879			78,935			1,944			2.5			76,822			75,908			914			1.2
	Property operating				116,863			101,996			14,867			14.6			112,525			98,709			13,816			14.0
	Ground rent				6,326			5,515			811			14.7			6,159			5,446			713			13.1
	General and administrative(a)				16,866			13,190			3,676			27.9			—			—			—			—
	Impairment				—			46,436			(46,436	)		(100.0	)		—			22,607			(22,607	)		(100.0	)

		Total expenses			515,040			507,346			7,694			1.5			468,319			453,042			15,277			3.4

			Operating income		223,554			214,537			9,017			4.2			237,694			248,481			(10,787	)		(4.3	)

Other income (expense):
	Interest and dividend income				3,841			1,716			2,125			123.8			1,436			652			784			120.2
	Realized gain on sale of marketable securities				154			4,737			(4,583	)		(96.7	)		—			—			—			—
	Interest expense(b)				(199,126	)		(209,519	)		10,393			(5.0	)		(37,810	)		(52,930	)		15,120			(28.6	)

		Total other income (expense)			(195,131	)		(203,066	)		7,935			(3.9	)		(36,374	)		(52,278	)		15,904			(30.4	)

Income before income taxes, allocation to minority interests and income from investments in unconsolidated joint ventures					28,423			11,471			16,952			147.8			201,320			196,203			5,117			2.6
	Income taxes				(456	)		(1,135	)		679			59.8			(6	)		(4	)		(2	)		50.0
Minority Interests:
	Partially owned properties				(2,442	)		(2,517	)		75			(3.0	)		(2,442	)		(2,517	)		75			(3.0	)
Income from investments in unconsolidated joint ventures					10,683			12,664			(1,981	)		(15.6	)		8,904			10,395			(1,491	)		(14.3	)
Gain on sales of real estate					47,406			216			47,190			21,847.2			—			—			—			—

Income from continuing operations					83,614			20,699			62,915			304.0			207,776			204,077			3,699			1.8
Discontinued operations					29,543			(156,606	)		186,149			(118.9	)		—			—			—			—

Net income (loss)				$	113,157		$	(135,907	)	$	249,064			(183.3	)%	$	207,776		$	204,077		$	3,699			1.8	%


		Total Company												Same Store Portfolio

								Change												Change

(Dollars in thousands)		2005			2004			$			%			2005			2004			$			%

Selected Items from Continuing Operations:
	Property net operating income(c)	$	431,476		$	444,511		$	(13,035	)		(2.9	)%	$	417,769		$	436,735		$	(18,966	)		(4.3	)%

	Deferred rental revenue	$	13,400		$	14,648		$	(1,248	)		(8.5	)%	$	11,177		$	13,580		$	(2,403	)		(17.7	)%

	Income from early lease terminations	$	4,515		$	8,235		$	(3,720	)		(45.2	)%	$	4,516		$	8,080		$	(3,564	)		(44.1	)%

Property Operating Margins:(c,d)
	With income from early lease terminations		58.8	%		61.9	%		(3.1	)%					59.2	%		62.3	%		(3.1	)%
	Without income from early lease terminations		58.6	%		61.4	%		(2.8	)%					58.9	%		61.8	%		(2.9	)%


(a)		Corporate general and administrative expense is not allocated to the Same Store Portfolio because these expenses are not directly incurred in connection with any specific property.

(b)		Interest expense (including amortization of deferred financing costs and prepayment expenses) for the Same Store Portfolio represents interest expense on property secured mortgage debt and does not include interest expense on the unsecured notes or the line of credit.

(c)		Represents segment data. See Note 13 to the financial statements for more information.

(d)		Property operating margins are determined by dividing property operating revenues less real estate taxes, insurance, repairs and maintenance and property operating expenses by property operating revenues. Included in property operating revenues are rental revenue, tenant reimbursements, parking and other income, which includes income from early lease terminations.


	Property Operating Revenues

Property operating revenues in the Same Store Portfolio increased slightly primarily because of an increase in occupancy and rent increases. The third quarter 2005 was the first quarter in nearly four years that the impact of occupancy growth and rent increases exceeded the effect of the rent roll down. Occupancy increased from 87.9% at June 30, 2004 to approximately 90.0% at September 30, 2005. The increase was also partially offset by approximately $1.9 million of rent loss in three buildings in New Orleans that were affected by Hurricane Katrina.

Property operating revenues in the Total Company increased primarily because of property acquisitions and developments placed in service, which increased property operating revenues by approximately $24.3 million and the increase in the Same Store Portfolio, as explained above. The increase in property operating revenues was partially offset by the partial sales of properties in 2005 and 2004 (which are not classified as discontinued operations), which decreased property revenues by approximately $12.5 million.


	Depreciation and Amortization

Depreciation and amortization expense in the Same Store Portfolio increased because of capital and tenant improvements placed in service since the beginning of the prior period and an increase in deferred leasing costs.

Depreciation and amortization expense in the Total Company increased because of property acquisitions and developments placed in service, which increased depreciation and amortization expense by approximately $11.8 million, and the increases in the Same Store Portfolio, as explained above. The increase was partially offset by the partial sales of properties in 2005 and 2004 (which are not classified as discontinued operations), which decreased depreciation and amortization expense by approximately $3.2 million.


	Real Estate Taxes

Real estate taxes in the Same Store Portfolio decreased primarily because of property tax refunds for properties located in San Francisco. We anticipate real estate taxes to continue to fluctuate based on changes in property assessments and tax rates.

Real estate taxes increased in the Total Company primarily because of property acquisitions which accounted for approximately $3.5 million. The increase in real estate tax expense was partially offset by the partial sale of properties in 2005 and 2004 (which are not classified as discontinued operations), which decreased real estate tax expense by approximately $1.4 million and the decrease in the Same Store Portfolio of approximately $1.1 million.


	Insurance

Insurance expense for the Total Company and the Same Store Portfolio increased due to Hurricane Katrina damage to the One Lakeway Center, Two Lakeway Center and Three Lakeway Center office properties of approximately $10.6 million. See Note 10 and 14 to the financial statements for more information.


	Repairs and Maintenance

Repairs and maintenance expense remained relatively stable in the Same Store Portfolio. Repairs and maintenance expense increased in the Total Company because of property acquisitions and developments placed in service, which accounted for approximately $3.5 million. This increase was partially offset by the partial sales of properties in 2005 and 2004 (which are not classified as discontinued operations), which decreased repairs and maintenance expense by approximately $2.5 million.


	Property Operating

Property operating expense increased for the Same Store Portfolio primarily due to an increase in utilities expense of approximately $6.3 million due to higher utility rates and increased occupancy, approximately $1.3 million of consulting fees associated with the implementation of a new accounting system and shared services center, severance costs of approximately $1.4 million, and increases in payroll expenses of approximately $4.0 million. Property operating expenses, such as utilities, may continue to increase if utility rates and the occupancy levels of our properties continue to increase. We anticipate that utility costs may increase significantly in the coming quarters when compared to historical costs, a portion of which will be recoverable from tenants.

Property operating expenses in the Total Company increased because of increases in the Same Store Portfolio, as explained above, and property acquisitions and developments placed in service, which accounted for approximately $4.4 million of the increase, partially offset by the partial sales of properties in 2005 and 2004 (which are not classified as discontinued operations) of approximately $3.2 million.


	General and Administrative Expenses

General and administrative expenses for the Total Company increased because of consulting fees, higher payroll expense and expenses related to restricted share awards and stock options.


	Impairment

For a discussion of the impairment charge refer to Note 4 to the financial statements.


	Realized Gain on Sale of Marketable Securities

In the third quarter 2004 we sold various securities and recognized an approximate $4.7 million gain.


	Interest Expense

Interest expense in the Same Store Portfolio decreased because of mortgage debt repayments. Interest expense for the Total Company decreased because of the repayment of higher interest rate debt with proceeds from asset sales and the issuance of new debt at lower interest rates. This decrease was partially offset by higher interest expense on variable rate debt and a decrease in capitalized interest expense due to a decrease in development activity (capitalized interest has the effect of reducing overall interest expense). As a result of the settlement of the interest rate swaps during 2005, over 90% of our total debt is currently at a fixed interest rate.


	Income from Investments in Unconsolidated Joint Ventures

Income from investments in unconsolidated joint ventures in the Total Company and the Same Store Portfolio decreased primarily because of a decrease in income from early lease terminations, a decrease in occupancy, the effect of the rent roll down and an increase in interest expense on variable rate debt.


	Gains on Sales of Real Estate

The gain in 2005 of $47.4 million relates to the partial sale of our interests in 201 Mission and 580 California located in San Francisco, California. In accordance with SFAS 144, the net income from these properties, which includes the gain on sale, is not classified as discontinued operations because we maintain an ongoing involvement with the operation of these properties. The gain in 2004 for the Total Company relates to the sale of our approximate 3% interest in the Four Oaks office property located in Houston, Texas.


	Discontinued Operations

Discontinued operations represents the net income of the properties we sold in 2004 and 2005 and also the properties classified as held for sale as of September 30, 2005. See Note 4 to the financial statements for more information.


	*Comparison of the nine months ended September 30, 2005 to the nine months ended September 30, 2004*

The table below represents selected operating information for the Total Company and for the Same Store Portfolio. The Same Store Portfolio consists of 510 consolidated office properties and 30 unconsolidated joint venture properties acquired or placed in service on or prior to January 1, 2004.


				Total Company												Same Store Portfolio

										Change												Change

(Dollars in thousands)				2005			2004			$			%			2005			2004			$			%

Revenues:
	Property operating revenues			$	2,220,110		$	2,147,959		$	72,151			3.4	%	$	2,011,490		$	2,016,399		$	(4,909	)		(0.2	)%
	Fee income				13,788			10,129			3,659			36.1			—			—			—			—

		Total revenues			2,233,898			2,158,088			75,810			3.5			2,011,490			2,016,399			(4,909	)		(0.2	)

Expenses:
	Depreciation and amortization				557,663			496,592			61,071			12.3			498,527			460,694			37,833			8.2
	Real estate taxes				257,125			250,859			6,266			2.5			225,654			230,219			(4,565	)		(2.0	)
	Insurance				30,226			21,599			8,627			39.9			28,003			19,948			8,055			40.4
	Repairs and maintenance				232,787			225,208			7,579			3.4			216,427			211,189			5,238			2.5
	Property operating				319,313			292,958			26,355			9.0			299,885			277,398			22,487			8.1
	Ground rent				16,898			15,880			1,018			6.4			16,398			15,673			725			4.6
	General and administrative(a)				49,257			38,208			11,049			28.9			—			—			—			—
	Impairment				81,042			46,436			34,606			74.5			60,863			22,607			38,256			169.2

		Total expenses			1,544,311			1,387,740			156,571			11.3			1,345,757			1,237,728			108,029			8.7

			Operating income		689,587			770,348			(80,761	)		(10.5	)		665,733			778,671			(112,938	)		(14.5	)

Other income (expense):
	Interest and dividend income				10,496			5,433			5,063			93.2			3,575			2,299			1,276			55.5
	Realized gain on settlement of derivatives and sale of marketable securities				157			28,753			(28,596	)		(99.5	)		—			—			—			—
	Interest expense(b)				(623,824	)		(625,203	)		1,379			(0.2	)		(114,773	)		(134,630	)		19,857			(14.7	)

		Total other income (expense)			(613,171	)		(591,017	)		(22,154	)		3.7			(111,198	)		(132,331	)		21,133			(16.0	)

Income before income taxes, allocation to minority interests and income from investments in unconsolidated joint ventures					76,416			179,331			(102,915	)		(57.4	)		554,535			646,340			(91,805	)		(14.2	)
Income taxes					(1,351	)		(2,198	)		847			(38.5	)		(374	)		(323	)		(51	)		15.8
Minority Interests:
	Partially owned properties				(7,969	)		(8,053	)		84			(1.0	)		(7,969	)		(8,053	)		84			(1.0	)
Income from investments in unconsolidated joint ventures					48,882			37,629			11,253			29.9			24,251			31,933			(7,682	)		(24.1	)
Gain on sale of real estate					47,433			216			47,217			21,859.7			—			—			—			—

Income from continuing operations					163,411			206,925			(43,514	)		(21.0	)		570,443			669,897			(99,454	)		(14.8	)
Discontinued operations					(149,347	)		(101,529	)		(47,818	)		47.1			—			—			—			—

Income before cumulative effect of a change in accounting principle					14,064			105,396			(91,332	)		(86.7	)		570,443			669,897			(99,454	)		(14.8	)
Cumulative effect of a change in accounting principle					—			(33,697	)		33,697			(100.0	)		—			(33,697	)		33,697			(100.0	)

Net income				$	14,064		$	71,699		$	(57,635	)		(80.4	)%	$	570,443		$	636,200		$	(65,757	)		(10.3	)%

Selected Items from Continuing Operators:
	Property net operating income(c)			$	1,380,659		$	1,357,335		$	23,324			1.7	%	$	1,241,521		$	1,277,645		$	(36,124	)		(2.8	)%

	Deferred rental revenue			$	45,667		$	56,374		$	(10,707	)		(19.0	)%	$	29,605		$	50,751		$	(21,146	)		(41.7	)%

	Income from early lease terminations			$	65,517		$	33,139		$	32,378			97.7	%	$	17,825		$	28,366		$	(10,541	)		(37.2	)%

Property Operating Margins:(c,d)
	With income from early lease terminations				62.2	%		63.2	%		(1.0	)%					61.7	%		63.4	%		(1.7	)%
	Without income from early lease terminations				61.0	%		62.6	%		(1.6	)%					61.4	%		62.8	%		(1.4	)%


(a)		Corporate general and administrative expense is not allocated to the Same Store Portfolio because these expenses are not directly incurred in connection with any specific property.


(b)		Interest expense (including amortization of deferred financing costs and prepayment expenses) for the Same Store Portfolio represents interest expense on property secured mortgage debt and does not include interest expense on the unsecured notes or the line of credit.

(c)		Represents segment data. See Note 13 to the financial statements for more information.

(d)		Property operating margins are determined by dividing property operating revenues less real estate taxes, insurance, repairs and maintenance and property operating expenses by property operating revenues. Included in property operating revenues are rental revenue, tenant reimbursements, parking and other income, which includes income from early lease terminations.


	Property Operating Revenues

Property operating revenues in the Same Store Portfolio decreased primarily because of a decrease in income from early lease terminations of approximately $10.5 million and approximately $1.9 million of rent loss in three buildings in New Orleans that were affected by Hurricane Katrina and the effect of the rent roll down. This decrease was partially offset by an increase in occupancy and rent increases. Occupancy increased from 87.7% at the end of 2003 to approximately 89.9% at September 30, 2005.

Property operating revenues in the Total Company increased primarily because of property acquisitions, developments placed in service and the consolidation of 1301 Avenue of the Americas which increased property operating revenues by approximately $113.7 million. The increase in property operating revenues was partially offset by the partial sales of properties in 2005 and 2004 (which are not classified as discontinued operations), which decreased property revenues by approximately $30.7 million, and the decreases in the Same Store Portfolio, as explained above.


	Depreciation and Amortization

Depreciation and amortization expense in the Total Company increased because of property acquisitions, developments placed in service and the consolidation of 1301 Avenue of the Americas which increased depreciation and amortization expense by approximately $29.5 million, and the increases in the Same Store Portfolio, as explained above. The increase was partially offset by the partial sales of properties in 2005 and 2004 (which are not classified as discontinued operations), which decreased depreciation and amortization expense by approximately $6.7 million.


	Real Estate Taxes

Real estate taxes in the Same Store Portfolio decreased primarily due to property tax refunds for properties located in California partially offset by increases in Boston, Chicago and other regions. We anticipate real estate taxes to continue to fluctuate based on changes in property assessments and tax rates.

Real estate taxes increased in 2005 in the Total Company because of property acquisitions, developments placed in service and the consolidation of 1301 Avenue of the Americas, which increased real estate tax expense by approximately $13.0 million. The increase was partially offset by the partial sale of properties in 2005 and 2004 (which are not classified as discontinued operations), which decreased real estate tax expense by approximately $3.2 million, and the decrease in the Same Store Portfolio, as explained above.


	Insurance


	Repairs and Maintenance

Repairs and maintenance expense increased in the Same Store Portfolio primarily due to cleaning expense, which increased because of higher contractual rates and increased occupancy, and higher payroll costs for building engineers. Repairs and maintenance expense increased in the Total Company because of increases in the Same Store Portfolio, as explained above, property acquisitions and developments placed in service, which accounted for approximately $7.6 million. This increase was partially offset by the partial sales of properties in 2005 and 2004 (which are not classified as discontinued operations), which decreased repairs and maintenance expense by approximately $5.2 million.


	Property Operating

Property operating expense increased for the Same Store Portfolio primarily due to an increase in utilities expense of approximately $11.7 million due to higher utility rates and increased occupancy, approximately $1.9 million of consulting fees associated with the implementation of a new accounting system and shared services center, severance costs of approximately $1.1 million, and increases in payroll expenses of approximately $9.4 million. Property operating expenses, such as utilities, may continue to increase if utility rates and the occupancy levels of our properties continue to increase. We anticipate that utility costs may increase significantly in the coming quarters when compared to historical costs, a portion of which will be recoverable from tenants.

Property operating expenses in the Total Company increased because of increases in the Same Store Portfolio, as explained above, and property acquisitions and developments placed in service, which accounted for approximately $10.8 million of the increase, partially offset by the partial sales of properties in 2005 and 2004 of approximately $6.8 million (which are not classified as discontinued operations).


	General and Administrative Expenses

General and administrative expenses for the Total Company increased because of consulting fees, higher payroll expense and expenses related to restricted share awards and stock options.


	Impairment

For a discussion of the impairment charge refer to Note 4 to the financial statements.


	Realized Gain on Settlement of Derivatives and Sale of Marketable Securities

In the third quarter 2004 we sold various securities and recognized an approximate $4.7 million gain. In the second quarter 2004 we settled $500 million of forward-starting interest rate swaps and recognized an approximate $24.0 million gain. The swaps were entered into in 2003 to hedge an anticipated unsecured note offering expected to take place in June 2004, which did not occur.


	Interest Expense

Interest expense in the Same Store Portfolio decreased because of mortgage debt repayments. Interest expense for the Total Company decreased slightly because of the repayment of higher interest rate debt with proceeds from asset sales and the issuance of new debt at lower interest rates. This decrease was partially offset by higher interest expense on variable rate debt and a decrease in capitalized interest expense due to a decrease in development activity (capitalized interest has the effect of reducing overall interest expense). As a result of the settlement of the interest rate swaps during 2005, over 90% of our total debt is currently at a fixed interest rate.


	Income from Investments in Unconsolidated Joint Ventures

Income from investments in unconsolidated joint ventures in the Same Store Portfolio decreased primarily because of a decrease in income from early lease terminations, a decrease in occupancy, the effect of the rent roll down and an increase in interest expense on variable rate debt. The Total Company increased

primarily because of the gain on sale of our interest in two properties of approximately $17.4 million which occurred in the second quarter 2005 and the acquisition of a 50% interest in the Yahoo! Center in July 2004, as well as partial sales of 1601 Market, 1700 Market, 201 Mission and 580 California, which accounted for approximately $4.3 million of an increase partially offset by the decrease in the Same Store Portfolio as explained above.


	Gains on Sales of Real Estate


	Discontinued Operations


	Cumulative Effect of a Change in Accounting Principle

Under the provisions of FIN 46(R), we consolidated the assets, liabilities and results of operations of SunAmerica Center effective January 1, 2004, and recorded a cumulative effect of a change in accounting principle resulting in a loss of approximately $33.7 million.

Liquidity and Capital Resources


	*Liquidity*

Our net cash provided by operating activities is primarily dependent upon the occupancy level of our properties, the rental rates on our leases, the collectibility of rent from our tenants and the level of operating and other expenses. Our net cash provided by operating activities, our lines of credit, and proceeds from asset sales have been our primary sources of liquidity to fund our cash requirements, which include investments made in our properties in the form of capital improvements, tenant improvements and leasing costs, distributions to our unitholders, including Equity Office, repurchases of our securities, as well as amounts needed for acquisitions and development costs. The impact of asset sales has been significant in 2005 and is further discussed below.

Our ability to draw upon our lines of credit is dependent in part on our compliance with various financial and other covenants. A material adverse change in our net cash provided by operating activities may affect the financial performance covenants under our lines of credit and unsecured notes. If we fail to meet our financial performance and other various covenants and are unable to reach a satisfactory resolution with our lenders, our lines of credit could become unavailable to us, the maturity dates for our unsecured notes could be accelerated, and the interest charged on the lines of credit could increase. Moody’s, Standard & Poor’s and Fitch provide credit ratings on our unsecured notes and preferred stock. If either Standard & Poor’s or Fitch downgrades our credit ratings, the interest rate charged on our lines of credit will increase. In addition, the interest rate associated with any future financings is likely to be adversely impacted if our credit ratings decline.

more than the announced disposition portfolio, we will continue to take advantage of market opportunities and expect to engage in further sales on an ongoing basis from time to time based on market conditions.

We have several options for the proceeds from asset sales which include acquiring assets in our core markets, reinvestments in our existing portfolio, debt repayments, distributions to our unitholders, and repurchases of our units. Year-to-date through September 30, 2005, we have used proceeds from asset sales, in part, for approximately $1.1 billion in acquisitions, to repay approximately $1.6 billion of mortgage debt and unsecured notes with a weighted average coupon interest rate of 7.4%, to repurchase approximately 3.0 million Common Shares from Equity Office for a total consideration of $99.7 million and to repurchase approximately 1.7 million Units for approximately $50.7 million.

In order to qualify as a REIT for federal income tax purposes, Equity Office must distribute an amount equal to at least 90% of its taxable income (excluding capital gains) to its shareholders. Equity Office currently distributes amounts attributable to capital gains to its shareholders; however, these amounts can be retained by Equity Office and taxed at the corporate tax rate. Our partnership agreement generally requires us to distribute substantially all of the net cash from operations each quarter and to make reasonable efforts to distribute to Equity Office enough cash for it to meet the 90% distribution requirement. Accordingly, we currently intend, although we are not legally obligated, to continue to make regular quarterly distributions to holders of our Units and preferred units, at least at the level required for Equity Office to maintain its REIT status for federal income tax purposes. The declaration of distributions on capital shares is at the discretion of Equity Office’s Board of Trustees, which decision is made quarterly by Equity Office’s Board of Trustees based on then prevailing circumstances.

Reduced rental rates, reduced revenues as a result of asset sales and increased operating expenses have had the effect of reducing our net cash provided by operating activities. In addition, our tenant improvement and leasing costs have increased as compared to historical levels due to competitive market conditions for new and renewal leases. During 2004 and 2005, our net cash provided by operating activities was insufficient by itself to pay all our cash requirements including investments made in our properties in the form of capital improvements, tenant improvement and leasing costs and distributions to our shareholders and unitholders. We funded this shortfall primarily with proceeds from financing activities and asset sales.

If our net cash from operating activities and our cash requirements, including tenant improvements and leasing costs, continue at these levels, and if Equity Office’s Board of Trustees continues to declare distributions on its Common Shares at current levels, we expect that a shortfall will continue in 2005 and in 2006 and that we will cover the shortfall with proceeds primarily from asset sales and financing activities. Although we anticipate a shortfall during 2005 and 2006, we expect our cash needs will fluctuate throughout the year and are dependent on factors such as the timing of our distributions, our leasing activities and asset dispositions and acquisitions.

As of September 30, 2005, we had approximately $139 million of secured and unsecured debt maturing in 2005 and $964 million of secured and unsecured debt maturing in 2006, which excludes scheduled principal payments prior to maturity. Because REIT rules for federal income tax purposes require Equity Office to distribute at least 90% of its taxable income, we will not be able to retain sufficient cash to repay all of our debt as it comes due using only cash from operating activities. As a result, we will be required to repay most of our maturing debt with proceeds from asset sales and borrowings, although there can be no assurance that such dispositions or financings at acceptable terms will be available to us.

We believe that net cash provided by operating activities, draws under our lines of credit, proceeds from other financing sources that we expect to be available to us and proceeds from asset sales will together provide sufficient liquidity to meet our cash needs during 2005 and 2006.


	*Distributions*

In the third quarter 2005, distributions were paid on the preferred units as reflected below:


					Distributions

	Quarterly		Annualized		For the three		For the nine
	Distribution		Distribution		months ended		months ended
Security	Per Unit		Per Unit		September 30, 2005		September 30, 2005

					(Dollars in thousands)
Series B Preferred Units	$	0.65625	$	2.625	$	3,931	$	11,793
Series G Preferred Units	$	0.484375	$	1.9375	$	4,117	$	12,351

Equity Office’s Board of Trustees declared distributions on Units for the first, second and third quarter at the rate of $.50 per Unit per quarter.


	*Contractual Obligations*

As of September 30, 2005, we were subject to certain material contractual payment obligations as described in the table below. We were not subject to any material capital lease obligations.


	Payments Due by Period

			Remainder of
(Dollars in thousands)	Total		2005		2006		2007		2008		2009		Thereafter

Mortgage debt(a)	$	1,764,612	$	117,720	$	287,003	$	261,635	$	156,712	$	563,320	$	378,222
Unsecured notes(a)		9,054,751		—		652,924		988,543		489,522		861,957		6,061,805
Lines of Credit(b)		811,000		—		—		—		—		811,000		—
Series B Preferred Units		299,497		—		—		—		299,497		—		—
Share of mortgage debt of unconsolidated joint ventures		484,073		29,678		52,222		4,005		18,616		11,651		367,901
Consolidated operating lease obligations		1,329,102		5,480		22,217		22,056		22,168		22,224		1,234,957
Unconsolidated operating lease obligations		33,995		141		564		564		564		564		31,598

Total Contractual Obligations	$	13,777,030	$	153,019	$	1,014,930	$	1,276,803	$	987,079	$	2,270,716	$	8,074,483


(a)		Balance excludes net discounts and premiums.

(b)		In August 2005, we entered into a new $1.25 billion line of credit that matures in August 2009. The new line of credit replaces the line of credit that was scheduled to mature in 2006.


	Fixed-to-Floating Interest Rate Swaps

See the notes to the financial statements for information on fixed-to-floating interest rate swaps.


	Energy Contracts

In an ongoing effort to control energy costs, from time to time we enter into contracts for the purchase of gas or electricity for properties in states which have deregulated energy markets. Typically, the terms of the contracts range from of one to three years. Although all or a portion of the commodity price under these contracts is generally fixed, the amounts actually expended under these contracts will vary in accordance with actual energy usage or the timing of energy usage during the period. Our failure to purchase the amount of energy for which we have contractual commitments could result in penalties, depending on market conditions, some of which could be significant.


	Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements with any unconsolidated investments or joint ventures that we believe have or are reasonably likely to have a material effect on our financial condition, results of operations, liquidity or capital resources.


	Property Acquisitions

See Note 14 to the financial statements for information regarding any commitments to acquire properties.

Debt Financing


	Consolidated Debt

The table below summarizes our consolidated mortgage debt, unsecured notes and line of credit indebtedness:


					September 30,			December 31,
(Dollars in thousands)					2005			2004

Balance (includes discounts and premiums):
	Fixed rate:
		Mortgage debt			$	1,752,908		$	2,502,871
		Unsecured notes				8,786,776			8,439,016

			Total			10,539,684			10,941,887

	Variable rate:
		Mortgage debt				—			106,196
		Unsecured notes and lines of credit(a)				1,056,000			1,761,376

			Total			1,056,000			1,867,572

				Total	$	11,595,684		$	12,809,459

Percent of total debt:
	Fixed rate					90.9	%		85.4	%
	Variable rate(a)					9.1	%		14.6	%

		Total				100.0	%		100.0	%

Effective interest rate at end of period:
	Fixed rate:
		Mortgage debt				7.53	%		7.80	%
		Unsecured notes				6.80	%		6.87	%

			Effective interest rate			6.92	%		7.09	%

	Variable rate:
		Mortgage debt				—			5.53	%
		Unsecured notes and lines of credit				4.42	%		3.75	%

			Effective interest rate			4.42	%		3.85	%

				Total		6.70	%		6.61	%


(a)		The variable rate debt as of December 31, 2004 included $1.0 billion of fixed rate unsecured notes that were converted to variable rates through several interest rate swaps entered into in March 2004. These swaps were terminated at different times during the nine months ended September 30, 2005. The interest rates for the remaining variable rate debt are based on various spreads over LIBOR.

Mortgage Debt

During the nine months ended September 30, 2005, the following transactions occurred:


			(Dollars in thousands)

Balance at December 31, 2004(a)			$	2,622,750
	Scheduled principal amortization prior to maturity			(19,324	)
	Repayment of debt encumbering the following properties:
		Sixty State Street		(71,962	)
		Island Corporate Center		(12,312	)
		San Mateo BayCenter II		(9,520	)
		1740 Technology		(15,684	)
		One Market		(171,689	)
		Central Park		(55,030	)
	Repaid upon sale of property (see Note 4)			(13,386	)
	Assumed through property acquisitions (see Note 3)			44,975
	Washington Mutual Tower refinancing(b)			150

Balance at June 30, 2005(a)				2,298,968
	Scheduled principal amortization prior to maturity			(8,011	)
	Assumption of debt encumbering the 1301 Avenue of the Americas property			(526,345	)

Balance at September 30, 2005(a)			$	1,764,612


(a)		Excludes net discounts on mortgage debt.

(b)		We refinanced the mortgage debt encumbering the Washington Mutual Tower office property. The new mortgage has a principal balance of approximately $79.25 million, bears interest at a fixed coupon rate of 4.55% and matures in June 2010. The prior mortgage had a principal balance of approximately $79.1 million, bore interest at a fixed coupon rate of 7.53% and was scheduled to mature in November 2005. The effective interest rate on the new debt is 4.56% as compared to 7.77% on the prior mortgage.

The instruments encumbering the properties, among other limitations, restrict title transfer of the respective properties subject to the terms of the mortgage, prohibit additional liens, require payment of real estate taxes on the properties, require maintenance of the properties in good condition, require maintenance of insurance on the properties and include a requirement to obtain lender consent to enter into material tenant leases.


	Lines of Credit


	$1.25 Billion Revolving Credit Facility

In August 2005, we entered into a $1.25 billion revolving line of credit facility, bearing interest at LIBOR plus 47.5 basis points plus an annual facility fee of 15 basis points and maturing in August 2009. We have one option to extend the maturity date for an additional 12-month period. The extension fee is equal to 15 basis points on $1.25 billion, or $1.875 million. The previously existing $1.0 billion line of credit scheduled to mature in May 2006 terminated in August 2005 effective with the first funding of the new $1.25 billion line of credit. As of September 30, 2005, $811.0 million was outstanding under this facility.

We use our line of credit, together with net cash provided by operating activities and asset sales, to fund investments in our properties in the form of capital improvements, tenant improvement and leasing costs, distributions to our shareholders and unitholders, financing and investing activities and for other general working capital purposes. As a result of the nature and timing of the draws, the outstanding balance on our line of credit is subject to ongoing fluctuation and amounts outstanding under the line of credit may from time to

time be significant. We consider all such borrowings to be in the ordinary course of our business and expect fluctuations in the outstanding balance under the line of credit.


	Term Loan Facility


	Unsecured Notes

During the nine months ended September 30, 2005, we repaid $675.0 million of unsecured notes upon their maturity and issued approximately $39.0 million of unsecured notes.

The table below summarizes the unsecured notes outstanding as of September 30, 2005:


		Coupon			Effective			Principal
Original Term		Rate			Rate(a)			Balance		Maturity Date

								(Dollars in thousands)
Fixed interest rate:
6 Years			8.38	%		7.65	%	$	500,000		3/15/06
9 Years			7.44	%		7.74	%		50,000		9/01/06
10 Years			7.13	%		6.74	%		100,000		12/01/06
9 Years			7.00	%		6.80	%		1,500		2/02/07
9 Years			6.88	%		6.83	%		25,000		4/30/07
9 Years			6.76	%		6.76	%		300,000		6/15/07
10 Years			7.41	%		7.70	%		50,000		9/01/07
7 Years			7.75	%		7.91	%		600,000		11/15/07
10 Years			6.75	%		6.97	%		150,000		1/15/08
10 Years			6.75	%		7.01	%		300,000		2/15/08
10 Years			6.80	%		6.94	%		500,000		1/15/09
10 Years			7.25	%		7.14	%		200,000		5/01/09
11 Years			7.13	%		6.97	%		150,000		7/01/09
10 Years			8.10	%		8.22	%		360,000		8/01/10
6 Years			4.65	%		4.81	%		800,000		10/01/10
10 Years			7.65	%		7.20	%		200,000		12/15/10
10 Years			7.00	%		6.83	%		1,100,000		7/15/11
10 Years			6.75	%		7.02	%		500,000		2/15/12
10 Years			5.88	%		5.98	%		500,000		1/15/13
10 Years(b)			4.75	%		5.54	%		1,000,000		3/15/14
20 Years			7.88	%		8.08	%		25,000		12/01/16
20 Years			7.35	%		8.08	%		200,000		12/01/17
20 Years			7.25	%		7.54	%		250,000		2/15/18
30 Years			7.50	%		8.24	%		150,000		10/01/27
30 Years			7.25	%		7.31	%		225,000		6/15/28
30 Years			7.50	%		7.55	%		200,000		4/19/29
30 Years			7.88	%		7.94	%		300,000		7/15/31
EOP InterNotes(c)			4.29	%		4.55	%		73,251		11/15/06-9/15/11

	Total/ Weighted Average Unsecured Fixed Rate notes		6.68	%		6.80	%		8,809,751


			Coupon			Effective			Principal
Original Term			Rate			Rate(a)			Balance			Maturity Date

									(Dollars in thousands)
Variable Interest rate:
6 Years				4.10	%		4.23	%		200,000			10/01/10
10 Years				4.64	%		4.74	%		45,000			05/27/14

	Total/ Weighted Average Unsecured Variable Rate Notes			4.20	%		4.33	%		245,000

	Total/ Weighted Average			6.61	%		6.74	%		9,054,751

		Net Discount								(22,975	)

		Total							$	9,031,776


(a)		Includes the effect of settled interest rate protection and interest rate swaps, offering and transaction costs and premiums and discounts.

(b)		In March 2004, we entered into interest rate swap agreements that effectively converted these notes to a variable interest rate based on the 6-month LIBOR rate. $250 million of the interest rate swaps were terminated during June 2005 and the remaining $750 million were terminated in September 2005. The termination of the swaps effectively converted the notes back to a fixed interest rate.

(c)		The rates shown are weighted average rates. The coupon rates on the EOP InterNotes range from 3.30% to 5.25%. Including all offering expenses, the all-in effective rates of the EOP InterNotes range from 3.61% to 5.46%.

As of September 30, 2005, approximately $2.1 billion was available for issuance under two previously filed shelf registration statements totaling $7.0 billion.


	Restrictions and Covenants under Unsecured Indebtedness

The terms of our line of credit and unsecured notes contain various financial covenants which require satisfaction of certain ratios including total debt-to-total assets, secured debt-to-total assets, debt service coverage ratios, unencumbered asset to unsecured debt as well as other limitations. As of September 30, 2005, we believe we were in compliance with each of these financial covenants. If we fail to comply with any of these covenants, the indebtedness could become due and payable before its stated due date.

Set forth below are the financial covenants to which we are subject under our unsecured note indentures and our performance under each covenant as of September 30, 2005:


Covenants(a) (in each case as defined in the respective indenture)	Actual Performance

Debt to Adjusted Total Assets may not be greater than 60%		48	%
Secured Debt to Adjusted Total Assets may not be greater than 40%		9	%
Consolidated Income Available for Debt Service to Annual Debt Service Charge may not be less than 1.50:1		2.3
Total Unencumbered Assets to Unsecured Debt may not be less than 150%(a)		211	%


(a)		The unsecured notes we assumed in the merger with Spieker Partnership, of which approximately $1.2 billion are still outstanding at September 30, 2005, are subject to a minimum ratio of 165%.


	*Equity Securities*

The following table presents the changes in Equity Office’s issued and outstanding Common Shares and EOP Partnership’s Units (exclusive of Units owned by Equity Office) since December 31, 2004:


		Common Shares			Units			Total

Outstanding at December 31, 2004			403,842,441			47,494,701			451,337,142
	Issued upon exercise of share options		4,523,769			—			4,523,769
	Repurchased and retired under our open market repurchase program (at an average purchase price of $30.04 per share)		(29,100	)		—			(29,100	)
	Repurchased and retired under our Supplemental Retirement Savings Plan (at an average purchase price of $31.26 per share)		(220,176	)		—			(220,176	)
	Repurchased in 2004 under our Supplemental Retirement Savings Plan, but retired in 2005 (at an average purchase price of $29.63 per share)		(25,728	)		—			(25,728	)
	Units redeemed for Common Shares		1,163,525			(1,163,525	)		—
	Units redeemed for cash		—			(1,657,098	)		(1,657,098	)
	Restricted shares issued, net of cancellations		781,567			—			781,567
	Issued upon conversion of 70 Series B Preferred Shares		98			—			98
	Units issued in connection with a property acquisition (see Note 3 to the financial statements)		—			108,190			108,190
	Common Shares issued as compensation for Board of Trustees fees		4,687			—			4,687

Outstanding at June 30, 2005			410,041,083			44,782,268			454,823,351
	Issued upon exercise of share options		602,650			—			602,650
	Repurchased and retired under our open market repurchase program (at an average purchase price of $32.89 per share)		(3,004,700	)		—			(3,004,700	)
	Repurchased and retired under our Supplemental Retirement Savings Plan (at an average purchase price of $35.06 per share)		(20,896	)		—			(20,896	)
	Units redeemed for Common Shares		951,390			(951,390	)		—
	Restricted share cancellations, net of restricted shares issued		(39,703	)		—			(39,703	)
	Common Shares issued as compensation for Board of Trustees fees		7,359			—			7,359

Outstanding at September 30, 2005			408,537,183			43,830,878			452,368,061

Market Risk

Since December 31, 2004 there were no material changes in the information regarding market risk that was provided in the Form 10-K for the year ended December 31, 2004 except for the termination of our fixed to floating interest rate swaps in the notional amount of $1.0 billion. For information on the fixed-to-floating interest rate swaps see the notes to the financial statements.

Capital Improvements, Tenant Improvements and Leasing Costs


	*Capital Improvements*

Significant renovations and improvements, which improve or extend the useful life of our properties are capitalized. We categorize these capital expenditures as follows:


	•	Capital Improvements — costs for improvements that enhance the value of the property such as lobby renovations, roof replacement, significant renovations for Americans with Disabilities Act compliance, chiller replacement and elevator upgrades.

	•	Development and Redevelopment Costs — costs associated with the development or redevelopment of a property including tenant improvements, leasing costs, capitalized interest and operating costs incurred during completion of the property and incurred while the property is made ready for its intended use.

The table below shows the costs incurred for each type of improvement.


			For the three months ended September 30,

			2005				2004

					Unconsolidated				Unconsolidated
			Consolidated		Properties		Consolidated		Properties
(Dollars in thousands)			Properties		(our share)		Properties		(our share)

Capital Improvements:
	Capital improvements		$	12,411	$	1,596	$	6,305	$	1,034
	Development costs			1,977		—		1,599		—
	Redevelopment costs			—		—		901		—

		Total capital improvements	$	14,388	$	1,596	$	8,805	$	1,034


			For the nine months ended September 30,

			2005				2004

					Unconsolidated				Unconsolidated
			Consolidated		Properties		Consolidated		Properties
(Dollars in thousands)			Properties		(our share)		Properties		(our share)

Capital Improvements:
	Capital improvements		$	28,376	$	3,683	$	27,794	$	2,811
	Development costs			6,672		—		44,127		—
	Redevelopment costs			—		—		1,257		—

		Total capital improvements	$	35,048	$	3,683	$	73,178	$	2,811


	*Tenant Improvements and Leasing Costs*

Investments in our properties related to the renovation, alteration or build-out of existing office space, as well as related leasing costs, are capitalized and depreciated over the lease term. These tenant improvements may include, but are not limited to, floor coverings, ceilings, walls, HVAC, mechanical, electrical, plumbing and fire protection systems.

The amounts shown below represent the total tenant improvements and leasing costs for leases which commenced during the period, regardless of when such costs were actually paid.


			For the three months ended September 30,

			2005					2004

						Total Cost Per					Total Cost per
(Dollars in thousands)			Total Costs			Square Foot Leased		Total Costs			Square Foot Leased

*Consolidated Properties:*
Office Properties:
	Renewals		$	22,329		$	11.00	$	26,304		$	15.13
	Retenanted			77,614			25.94		73,702			27.04

		Total/Weighted Average		99,943			19.90		100,006			22.40

*Unconsolidated Joint Ventures:*
	Renewals			922	(a)		21.33		1,096	(a)		16.49
	Retenanted			7,109	(a)		38.41		3,321	(a)		42.26

		Total/Weighted Average		8,031	(a)		35.18		4,417	(a)		30.45

		Total/Weighted Average	$	107,974		$	20.57	$	104,423		$	22.66


			For the nine months ended September 30,

			2005					2004

						Total Cost Per					Total Cost per
(Dollars in thousands)			Total Costs			Square Foot Leased		Total Costs			Square Foot Leased

*Consolidated Properties:*
Office Properties:
	Renewals		$	92,159		$	13.44	$	72,527		$	11.10
	Retenanted			183,399			23.55		192,608			24.05

		Total/Weighted Average		275,558			18.82		265,135			18.23

*Unconsolidated Joint Ventures:*
	Renewals			2,048	(a)		13.31		9,794	(a)		20.03
	Retenanted			23,204	(a)		40.75		9,827	(a)		31.25

		Total/Weighted Average		25,252	(a)		34.91		19,621	(a)		24.42

		Total/Weighted Average	$	300,810		$	19.57	$	284,756		$	18.56


(a)		Represents our share of unconsolidated joint ventures tenant improvements and leasing costs for office properties.

The information above includes capital improvements incurred during the periods shown. Tenant improvements and leasing costs are reported for leases which commenced during the periods shown which is consistent with how we report our per square foot tenant improvements and leasing costs. The amounts included in the consolidated statements of cash flows represent the cash expenditures made during the period, regardless of when the leases commence. The differences between these amounts represent timing differences between the lease commencement dates and the actual cash expenditures. In addition, the figures below include expenditures for corporate furniture, fixtures and equipment, software, leasehold improvements and

other. The reconciliation between these amounts for the consolidated properties and the amounts disclosed in the consolidated statements of cash flows is as follows:


			For the three months ended
			September 30,

(Dollars in thousands)			2005		2004

Capital improvements			$	12,411	$	6,305
Tenant improvements and leasing costs:
	Office properties			99,943		100,006
	Industrial properties			—		1,502
Expenditures for corporate furniture, fixtures and equipment, software, leasehold improvements and other				8,839		1,477

	Subtotal			121,193		109,290
Development costs				1,977		1,599
Redevelopment costs				—		901
Timing differences				7,498		13,328

	Total capital improvements, tenant improvements and leasing costs		$	130,668	$	125,118

Selected items from the consolidated statements of cash flows:
	Capital and tenant improvements		$	90,945	$	91,973
	Lease commissions and other costs			39,723		33,145

		Total	$	130,668	$	125,118


			For the nine months ended
			September 30,

(Dollars in thousands)			2005		2004

Capital improvements			$	28,376	$	27,794
Tenant improvements and leasing costs:
	Office properties			275,558		265,135
	Industrial properties			—		4,440
Expenditures for corporate furniture, fixtures and equipment, software, leasehold improvements and other				16,823		7,029

	Subtotal			320,757		304,398
Development costs				6,672		44,127
Redevelopment costs				—		1,257
Timing differences				7,952		79,760

	Total capital improvements, tenant improvements and leasing costs		$	335,381	$	429,542

Selected items from the consolidated statements of cash flows:
	Capital and tenant improvements		$	241,908	$	335,522
	Lease commissions and other costs			93,473		94,020

		Total	$	335,381	$	429,542

Developments

We directly own the following properties which are under development. These developments are funded by working capital and our line of credit. Specifically identifiable direct acquisition, development and

construction costs were capitalized, including salaries and related costs, real estate taxes and interest incurred in developing the property. All figures stated below are as of September 30, 2005.


	Estimated
	Placed in								Costs		Total
	Service				Number of		Square		Incurred		Estimated
Property	Date(a)		Location		Buildings		Feet		To Date		Costs(b)

									(Dollars in thousands)
Summit at Douglas Ridge II		Q2 2005		Roseville, CA		1		93,349	$	18,978	$	22,995
Kruse Oaks II(c)		Q4 2006		Portland, OR		1		103,000		1,918		20,923
Bridge Pointe Corporate Center III		Q4 2006		San Diego, CA		2		150,000		5,663		36,291
1095 Avenue of the Americas(d)		Q3 2007		New York, NY		1		1,020,000		505,872		693,060

						5		1,366,349	$	532,431	$	773,269


(a)		The Estimated Placed in Service Date represents the date the certificate of occupancy was or is currently anticipated to be obtained. Subsequent to obtaining the certificate of occupancy, the property is expected to undergo a lease-up period.

(b)		The Total Estimated Costs represent 100% of the development’s estimated costs, including the acquisition cost of the land and building, if any. The Total Estimated Costs are subject to change upon, or prior to, the completion of the development and include amounts required to lease the property.

(c)		The land underlying this development is owned by a third party which we lease under a ground lease agreement.

(d)		On September 29, 2005 we acquired approximately 79% or 1,020,000 square feet, of 1095 Avenue of the Americas. Verizon, the sole tenant, currently occupies approximately 96.8% of the property and will be moving out in phases throughout 2006. We will redevelop the property as Verizon vacates the premises, and we anticipate the redevelopment to be completed in Q3 2007.

In addition to the developments described above, we own or have under option various land parcels available for development or for sale. These sites represent possible future development of up to approximately 12 million square feet of office space. These developments will be impacted by the timing and likelihood of success of the entitlement processes, both of which are uncertain. These various sites include, among others: Russia Wharf, Boston, MA; Reston Town Center, Reston, VA; Dulles Station, Herndon, VA; Prominence in Buckhead, Atlanta, GA; Perimeter Center, Atlanta, GA; Tabor Center, Denver, CO; La Jolla Centre, San Diego, CA; Orange Center, Orange, CA; Skyport Plaza, San Jose, CA; Foundry Square, San Francisco, CA; Station Landing, Walnut Creek, CA; City Center Bellevue, Bellevue, WA; 8th Street, Bellevue, WA; 175 Wyman, Waltham, MA; Parkshore Plaza, Folsom, CA; Commerce Plaza, Oakbrook, IL; and First and Main, Portland, OR.

There are no unconsolidated joint venture properties under development as of September 30, 2005.

Inflation

Substantially all of our office leases require the tenant to pay, as additional rent, all or a portion of real estate taxes and operating expenses. In addition, many of our office leases provide for fixed increases in base rent or escalations indexed to the Consumer Price Index or other measures. We believe that a significant portion of increases in property operating expenses will be offset, in part, by expense reimbursements and contractual rent increases described above.

Cash Flows

The table below summarizes the changes in our cash and cash equivalents as a result of operating, investing and financing activities for the following periods:


		For the three months ended						For the nine months ended
		September 30,						September 30,

(Dollars in thousands)		2005			2004			2005			2004

Cash and cash equivalents at the beginning of the period		$	615,997		$	74,817		$	107,126		$	69,398
	Net cash provided by operating activities		317,245			301,009			785,573			867,740
	Net cash provided by (used for) investing activities		104,235			(498,338	)		1,039,445			(641,563	)
	Net cash (used for) provided by financing activities		(891,564	)		246,932			(1,786,231	)		(171,155	)

Cash and cash equivalents at the end of the period		$	145,913		$	124,420		$	145,913		$	124,420


	Operating Activities

Cash provided by operating activities depends primarily on cash generated from lease payments from tenants in our properties. The decrease in net cash provided by operating activities in the nine month comparison is primarily due to reduced revenues as a result of asset sales and an increase in operating expenses. In addition, cash provided by operating activities in 2004 includes the collection of notes receivable and decreases in prepaid expenses in the prior period.


	Investing Activities

Net cash provided by and used for investing activities reflects the net impact of acquisitions and dispositions of properties and expenditures for investments made in our properties in the form of capital improvements, tenant improvements and lease costs. We also received amounts from escrow deposits representing proceeds from property dispositions.


	Financing Activities

Net cash used for and provided by financing activities generally includes cash provided by or used for debt transactions, distributions to our common and preferred unitholders and repurchases of our securities.

Additional Items for 2005


	Distributions Payable

Distributions payable increased by approximately $226.1 million to $228.8 million at September 30, 2005 compared to $2.7 million at December 31, 2004 because of the accrual for Unit distributions declared during the current quarter but not paid in the current quarter.

Critical Accounting Policies and Estimates

Refer to our 2004 Annual Report on Form 10-K for a discussion of our critical accounting policies, which includes allowance for doubtful accounts, impairment of long-lived assets, depreciation and amortization, and the fair value of financial instruments. There have been no material changes to these policies in 2005.

Subsequent Events

See the notes to the financial statements for transactions that occurred subsequent to September 30, 2005.

Funds From Operations (“FFO”)

FFO is a non-GAAP financial measure. We believe FFO, as defined by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”), to be an appropriate measure of performance for a real estate company, for the reasons, and subject to the qualifications, specified below.

The following table reflects the reconciliation of FFO to net income (loss), the most directly comparable GAAP measure, for the periods presented:


		For the three months ended September 30,

		2005						2004

					Per Weighted						Per Weighted
					Average						Average
(Dollars in thousands, except per unit amounts)		Dollars			Unit(b)			Dollars			Unit(b)

Reconciliation of net income (loss) to FFO(a):
Net income (loss)		$	113,157		$	0.25		$	(135,907	)	$	(0.30	)
Adjustments:
	Plus real estate related depreciation and amortization less gains and losses on sales of real estate, including our share of those items from unconsolidated joint ventures and adjusted for minority interests’ share in partially owned properties		123,233			0.27			194,048			0.43

FFO			236,390			0.52			58,141			0.13
Preferred distributions			(8,700	)		(0.02	)		(8,701	)		(0.02	)

FFO available to unitholders — basic		$	227,690		$	0.50	(c)	$	49,440		$	0.11	(c)


Adjustments to arrive at FFO available to	Net Income			FFO			Net Income			FFO
unitholders plus assumed conversions:
Net income (loss) and FFO	$	113,157		$	236,390		$	(135,907	)	$	58,141
Preferred distributions		(8,700	)		(8,700	)		(8,701	)		(8,701	)

Net income (loss) and FFO available to unitholders plus assumed conversions	$	104,457		$	227,690		$	(144,608	)	$	49,440

Weighted average Units and dilutive potential units		457,343,521			457,343,521			450,420,567			450,420,567

Net income (loss) and FFO available to unitholders plus assumed conversions per unit	$	0.23		$	0.50	(c)	$	(0.32	)	$	0.11	(c)


		Units and unit equivalents

Weighted average Units outstanding (used for both net income (loss) and FFO basic per unit calculation)			452,847,362	448,766,905
Effect of dilutive potential units:
	Share options and restricted shares		4,496,159	1,653,662

Weighted average Units and dilutive potential units used for net income (loss) available to unitholders and the calculation of FFO available to unitholders			457,343,521	450,420,567


		For the nine months ended September 30,

		2005						2004

					Per Weighted						Per Weighted
					Average						Average
(Dollars in thousands, except per unit amounts)		Dollars			Unit(b)			Dollars			Unit(b)

Reconciliation of net income to FFO(a):
Net income		$	14,064		$	0.03		$	71,699		$	0.16
Adjustments:
	Plus real estate related depreciation and amortization less gains and losses on sales of real estate, including our share of those items from unconsolidated joint ventures and adjusted for minority interests’ share in partially owned properties		439,271			0.97			577,940			1.29
	Plus cumulative effect of a change in accounting principle		—			—			33,697			0.08

FFO			453,335			1.00			683,336			1.52
Preferred distributions			(26,102	)		(0.06	)		(30,393	)		(0.07	)

FFO available to unitholders — basic		$	427,233		$	0.95	(c)	$	652,943		$	1.45	(c)


Adjustments to arrive at FFO available to	Net Income			FFO			Net Income			FFO
unitholders plus assumed conversions:
Net income and FFO	$	14,064		$	453,335		$	71,699		$	683,336
Preferred distributions		(26,102	)		(26,102	)		(30,393	)		(30,393	)

Net (loss) income and FFO available to unitholders plus assumed conversions	$	(12,038	)	$	427,233		$	41,306		$	652,943

Weighted average Units and dilutive potential units		455,370,659			455,370,659			450,801,177			450,801,177

Net (loss) income and FFO available to unitholders plus assumed conversions per unit	$	(0.03	)	$	0.94	(c)	$	0.09		$	1.45	(c)


		Units and unit equivalents

Weighted average Units outstanding (used for both net income and FFO basic per unit calculation)			451,549,093	448,900,112
Effect of dilutive potential units:
	Share options and restricted shares		3,821,566	1,901,065

Weighted average Units and dilutive potential units used for net (loss) income available to unitholders and the calculation of FFO available to unitholders			455,370,659	450,801,177


(a)		FFO is a non-GAAP financial measure. The most directly comparable GAAP measure is net income, to which it is reconciled. See definition below.

(b)		FFO per unit may not total the sum of the per unit components in the reconciliation due to rounding.

(c)		FFO for the three months ended September 30, 2005 and September 30, 2004 includes approximately $3.5 million and $229.2 million of non-cash charges relating to properties sold and properties we intend to


		sell, which is equivalent to $0.01 per unit and $0.51 per unit on a diluted basis, respectively. FFO for the nine months ended September 30, 2005 and September 30, 2004 includes approximately $384.1 million and $229.2 million of non-cash charges relating to properties sold and properties we intend to sell, which is equivalent to $0.84 per unit and $0.51 per unit on a diluted basis, respectively. These charges are not added back to net income when calculating FFO.

FFO Definition:

FFO is defined as net income (loss), computed in accordance with accounting principles generally accepted in the United States (“GAAP”), excluding gains and losses from sales of properties (but not impairments and provisions for losses on properties held for sale), plus real estate related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO on the same basis. We believe that FFO is helpful to investors as one of several measures of the performance of a real estate company. We further believe that by excluding the effect of depreciation, amortization and gains and losses from sales of real estate, all of which are based on historical costs and which may be of limited relevance in evaluating current performance, FFO can facilitate comparisons of operating performance between periods and between other equity REITs. Investors should review FFO, along with GAAP net income (loss), when trying to understand a real estate company’s operating performance. We compute FFO in accordance with standards established by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”), which may not be comparable to FFO reported by other real estate companies that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than we do. FFO does not represent cash generated from operating activities in accordance with GAAP, nor does it represent cash available to pay distributions and should not be considered as an alternative to net income (loss), determined in accordance with GAAP, as an indication of our financial performance, or to cash flow from operating activities, determined in accordance with GAAP, as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make cash distributions.


Item 3.	Quantitative and Qualitative Disclosures About Market Risk.

Quantitative and qualitative disclosures about market risk are incorporated herein by reference from Item 2.


Item 4.	Controls and Procedures.


	*Evaluation of Disclosure Controls and Procedures*

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of Equity Office’s management, including Equity Office’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon their evaluation Equity Office’s Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are effective as of such date to ensure that information required to be disclosed by us in our Exchange Act filings is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.


	*Changes in Internal Control over Financial Reporting*

There were no changes in our internal control over financial reporting identified in connection with the evaluation referred to above that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.

During the third quarter of 2005, we began the consolidation of our enterprise-wide accounts receivable processing function into a centralized shared services environment. We expect that this consolidation process will continue into the first quarter of 2006. Beginning fourth quarter 2005, we expect to implement an upgrade to our financial and accounting systems software that will affect primarily our processing of accounts

receivable and our lease administration function. The implementation of these systems upgrades and the migration to shared services will likely have a material effect on our internal control over financial reporting, but are not in response to an identified significant control deficiency or material weakness. While we believe that these changes will improve and strengthen our overall system of internal control, we recognize that there are inherent risks associated with implementing changes of this magnitude. We expect to modify our system of internal control over financial reporting for the impact of these planned system upgrades and structural changes, and ensure that our controls, as modified, are designed appropriately and operating effectively.

Part II — OTHER INFORMATION


Item 1.	Legal Proceedings.

Legal proceedings are incorporated herein by reference from “Item 1. — Financial Statements — Note 14 — Commitments and Contingencies.”


Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.

The following table summarizes repurchases of our Units during the third quarter 2005:


						Total Number of		Dollar Value of Units
						Units Purchased as		that May Yet be
						Part of Publicly		Purchased Under
		Total Number of		Average Price Paid		Announced Plans		the Plans or
Period		Units Purchased(a)		per Unit		or Programs		Programs

July 1 — 31			—	$	—		—		—
August 1 — 31			95,903		32.44		—		—
September 1 — 30			2,963,425		32.93		—		—

	Third quarter 2005		3,059,328	$	32.91		—		—


(a)		The number of Units purchased is comprised of the redemption of Units held by our limited partners, excluding Equity Office. Units redeemed in exchange for Common Shares are not considered a repurchase and are, therefore, excluded from the table above. At any time on or after the first anniversary of the date of issuance, our limited partners have the right to require EOP Partnership to redeem their Units, subject to certain limitations. Equity Office, on behalf of and as the general partner of EOP Partnership, has the right to cause the redemption obligation to be satisfied by issuance of an equivalent number of Common Shares, or by a cash payment equal to the value of such Common Shares. Also included in the total number of Units purchased are Units redeemed in response to repurchases made by Equity Office, including repurchases of Equity Office Common Shares in the open market (a) as part of its Common Share Repurchase Program, (b) as part of its Supplemental Retirement Savings Plan, (c) to fund shares purchased under its 1997 Employee Share Purchase Plan and (d) to fund fees paid in Equity Office Common Shares to each of its nonemployee trustees, except Mr. Zell, as well as Equity Office Common Shares surrendered to Equity Office to satisfy withholding obligations in connection with the vesting of restricted stock issued to employees.


Item 6.	Exhibits.

The exhibits required by this item are set forth on the Exhibit Index attached hereto.

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.


		EOP OPERATING LIMITED PARTNERSHIP

		By: EQUITY OFFICE PROPERTIES TRUST its general partner

Date: November 9, 2005		/s/ RICHARD D. KINCAID

		Richard D. Kincaid
		President and Chief Executive Officer of Equity Office Properties Trust, the general partner of EOP Operating Limited Partnership


Date: November 9, 2005		/s/ MARSHA C. WILLIAMS

		Marsha C. Williams
		Executive Vice President and Chief Financial Officer of Equity Office Properties Trust, the general partner of EOP Operating Limited Partnership

EXHIBIT INDEX


Exhibit
No.		Description	Location

	4.1	Indenture, dated August 29, 2000, by and between EOP Operating Limited Partnership and U.S. Bank National Association (formerly known as U.S. Bank Trust National Association)	Incorporated by reference to Exhibit 4.1 to EOP Operating Limited Partnership’s Registration Statement on Form S-3, as amended (SEC File No. 333-43530)
	4.2	First Supplemental Indenture, dated June 18, 2001, among EOP Operating Limited Partnership, Equity Office and U.S. Bank National Association (formerly known as U.S. Bank Trust National Association)	Incorporated by reference to Exhibit 4.2 to Equity Office’s Registration Statement on Form S-3, as amended (SEC File No. 333-58976)
	4.3	New Trustee Appointment Agreement, dated June 10, 2004, among EOP Operating Limited Partnership, Equity Office and BNY Midwest Trust Company	Incorporated by reference to Exhibit 4.5 to the Current Report on Form 8-K of EOP Operating Limited Partnership filed with the SEC on June 15, 2004
	4.4	Form of Medium-Term InterNote (Fixed Rate) and related Guarantee	Incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K of EOP Operating Limited Partnership filed with the SEC on June 15, 2004
	4.5	Schedule of Fixed Rate InterNotes issued from July 1, 2005 to September 30, 2005	Filed herewith
	12.1	Statement of Computation of Ratio of Earnings to Fixed Charges	Filed herewith
	31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended	Filed herewith
	31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended	Filed herewith
	32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith

EOP OPERATING LTD PARTNERSHIP 10-Q