10-K 1 f70594e10-k.txt FORM 10-K FISCAL YEAR ENDED DECEMBER 31,2000 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER: 1-12528 SPIEKER PROPERTIES, INC. -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter)

(650) 854-5600 ---------------------------- (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act:

Indicated by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicated by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K. [ ] As of March 16, 2001, the aggregate market value of the voting stock held by non-affiliates of the registrant was $3,754,500,291. The aggregate market value was computed with reference to the closing price on the New York Stock Exchange on such date. This calculation does not reflect a determination that persons are affiliates for any other purpose. As of March 16, 2001, 65,969,927 shares of Common Stock ($.0001 par value) were outstanding. 1 2 TABLE OF CONTENTS FORM 10-K

LOCATION OF EXHIBIT INDEX: The index of exhibits is contained in Part IV herein on page number 51 This document consists of 84 pages, plus exhibits attached hereto. 2 3 PART I This Annual Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company's actual results could differ materially from those set forth in the forward-looking statements as a result of various factors, including general real estate investment risks, competition, risks associated with acquisition and development activities and financing, environmental matters, general uninsured losses and seismic activity. OVERVIEW As used herein, the terms "we", "us", "our", or the "Company" refer collectively to Spieker Properties, Inc., Spieker Properties, L.P. (the "Operating Partnership"), and consolidated entities. We are one of the largest owners and operators of office and industrial properties located in selected West Coast markets. These markets are primarily located in greater Seattle, Washington; greater Portland, Oregon; Northern California and Southern California. We are a self-managed and self-administrated real estate investment trust, or REIT. We were formed to continue and expand the real estate activities, including the acquisition, development, management and leasing of the properties, of our predecessor firm, which launched in 1970. With the contributions of the properties from Spieker Partners, we commenced operations with the completion of our initial public offering in November 1993. Substantially all of our business activities are conducted through the Operating Partnership in which we owned an approximate 88.2% general and limited partnership, interest at December 31, 2000. As of December 31, 2000, we owned 37.7 million square feet of commercial real estate, which was 97.4% occupied. The portfolio mix consists of 24.9 million square feet of office property and 12.8 million square feet of industrial property. We acquired six office properties totaling 1.5 million square feet and completed the development of fourteen properties totaling 2.0 million square feet during the year. In the development pipeline at year-end, we had six office and one industrial properties totaling 1.7 million square feet, which were 69.0% preleased. BUSINESS STRATEGY Our principal objective is to increase shareholder value by achieving sustainable, long-term growth in Funds from Operations per share through maximizing the return on each dollar of capital invested and building value in the portfolio by the following focused and consistent business strategies. Quality Office and Industrial Properties With over 30 years of experience in owning and operating commercial properties, our management team possesses the in-depth knowledge necessary to assess the attributes that determine a property's long-term viability. We own and invest in high quality office and industrial properties that possess qualities that are competitive in the marketplace in both the short and long-term. We focus on differentiating our properties from those of nearby competitors to maximize their allure to potential customers. Important differentiating characteristics in our office buildings include efficient suite layouts, ample glass lines, well designed and maintained common areas, and convenient elevators and parking. Further differentiation is achieved through amenities and services provided such as on-site management offices, conference rooms, health clubs, and broadband services. Distribution properties are designed with ample clear heights, multiple dock facilities, appropriate truck staging, and high-capacity sprinkler systems. In our light industrial and R&D properties we also use landscaping and exterior glass walls to increase attractiveness. Flexible, Multi-Tenant Properties We focus on properties which will appeal to a broad range of potential tenants. These properties are easily divisible and can accommodate new tenants of various sizes. This flexibility also enables us to meet the needs of existing tenants by accommodating their expansion and contraction needs. In addition to flexibility, we also focus on multi-tenant usage of our properties. Our experience is that multi-tenant properties help maintain high occupancy rates, particularly when market conditions are less favorable, as well as helping control the cost of re-tenanting space. 3 4 Invest in Growing Regions We seek to invest in regions with diverse and active economies that possess strong prospects for sustained long-term economic growth. We believe that California and the Pacific Northwest possess attributes such as, the ability to attract new capital, growing populations with a well-educated employee base, excellent universities and quality of life, and well-developed infrastructures that will contribute to continued economic growth. Within these growing regions we focus our activities in the major metropolitan areas of Seattle, Portland, San Francisco, San Jose, Sacramento, Los Angeles County, Orange County and San Diego, which have proven to be desired locations for a large number of businesses. Submarket Concentration In the specific local submarkets in which we operate, we seek to be one of the more significant commercial landlords in that submarket. We believe that we have achieved significant market penetration within a number of submarkets in which we operate. By achieving concentrated market positions, we can offer prospective tenants a variety of property options and can accommodate the growth of existing tenants. This strategy also gives us a measure of control over the rental rates achieved and capital expenditures incurred in leasing space. Superior Level of Service We believe in providing a superior level of service to our customers, which will allow them to focus on their business rather than on property issues. To achieve this level of service, our office property managers and customer service personnel are located on-site, providing tenants with convenient direct access to a team that can respond quickly to the customer's needs. These on-site teams enable the properties to be well maintained and convey a sense of quality, order and security. This superior level of service and ultimate customer satisfaction translates to lower customer turnover, higher occupancy levels and higher rental rates. Operating Efficiencies We recognize the importance of creating operating efficiencies that add value to the portfolio and to the shareholder by utilizing opportunities created by our submarket concentrations as well as leveraging our relative size and scale. By integrating properties in our submarkets, we have been able to pool our resources and maximize economies of scale, allowing our key operating personnel to concentrate their expertise on those specific markets and their particular local conditions. Minimizing project personnel requirements with the centralization of these properties has created additional cost savings. We have utilized our relative size and purchasing ability to put in place several vendor related efficiency programs. These programs have been designed to ensure consistency in the quality of products purchased and services provided, to create operational cost savings, and to allow for the tracking of purchasing trends for future purchasing consolidation opportunities. These programs significantly reduce the number of vendors with whom we now do business and put cost and time saving efficiencies in place that the project teams can utilize in managing their projects. Additional efficiencies have been created in our accounting processes by limiting the number of vendors' invoices that must be managed. Rent Growth The continued strength in the West Coast economy during 2000 fueled the demand for quality commercial space in our markets. Healthy demand paired with modest levels of new supply has translated to upward pressure on market rents. This pressure provided us with the opportunity to generate strong mark-to-market rent growth during the year. This rent growth, measured as the difference between effective (average) rents on renewed and re-leased leases and the expiring coupon rent on those same spaces, was 79.2% for 2000. At December 31, 2000, 68.0% of all leases in-place were scheduled to expire over the next four years. We expect to continue to capitalize on embedded rent growth, measured as the difference between existing in-place rents and current market rents, as these leases and future leases expire and as the spaces are either renewed or re-leased. There can be no 4 5 assurances, however that as market conditions change rents in the future, that we will be able to realize all of the embedded rent growth. Investment Activity We strategically invest in real estate either through acquiring or through tax-free trades into existing properties or through the development of new properties. When evaluating potential investments, in addition to both the physical and location attributes, we also consider short and long-term returns on capital, total cost compared to replacement cost, the level of in-place rents compared to current market rents and tenant mix. In assessing the viability of a potential development, we also consider market demand and competitive supply. Funding of our current investments was through cash flows generated from operations, the redeployment of capital from the disposition of non-strategic assets, borrowings from our unsecured credit facility and secured development facility, and from public unsecured debt financings. The following tables set forth our investment activity during 2000. 2000 ACQUISITIONS

(1) Represents total expected capitalized acquisition costs including closing and repositioning/rehab costs. 5 6 STABILIZED DEVELOPMENTS(1)

(1) We consider properties stabilized at the earlier of eighteen months after shell completion or when a 95.0% occupancy rate has been reached. Each of the stabilized development properties listed above, with the exception of sold properties, are included in our operating portfolio. (2) This property was sold in September 2000. (3) This property was sold in February 2001. 6 7 DEVELOPMENTS AND REDEVELOPMENTS IN PROCESS

(1) These properties were added to the development pipeline in 2000. (2) Represents redevelopment of property acquired. Employees As of December 31, 2000, we had 607 employees. Fully-Integrated Real Estate Management Capabilities We have a philosophy of maintaining in-house resources to add value to our properties through the entire cycle of acquisition, development and ownership. We believe our key in-house resource is our fully integrated sub-regional teams. These teams, led by officers with extensive real estate experience, have the collective ability to design, construct, market, lease and manage our properties. This eliminates the need for third-party managers and limits the utilization of outside parties to list our properties. We believe the depth of experience and detailed knowledge of sub-regional markets that this integration provides gives our teams a significant market advantage. Training and Retention Our training and retention of a talented group of officers and employees has been an important factor in our success. We expend significant efforts in the training of new employees in fundamental real estate skills, as well as in the continuing education of existing employees. Our officers, including the executive officers, are also involved in the education program, which reinforces the program's importance to our personnel. In addition to training, we provide our employees with profit sharing, 401(k) contribution matches and competitive health plans. We also provide up to date technology for our employees to perform their jobs efficiently and effectively. We provide employees with leading edge computer resources, including modern hardware/software, 7 8 high speed connections to corporate data sources, internet connections, and internally designed interfaces to aid employees in timely decision making. Compensation Our officer compensation program includes cash bonuses, stock options, and restricted stock payments tied largely to growth in net operating income from existing properties under their management, as well as increased Funds from Operations from new acquisitions, and developments in their regions and other leadership based contributions. Non-officer compensation includes subjective bonuses and stock option grants based upon employee performance factors including tenant satisfaction and leasing success. We also grant stock options to all full-time employees upon the completion of one year of service. Accountability We have a philosophy of holding one senior officer or a small group of senior officers accountable, under the supervision and direction of our executive officers, for all phases of a property's development, from purchase, design and construction, through budgeting, leasing and ongoing management. We believe that this approach increases the likelihood of a project's success because of the senior officer's accountability, continuity of involvement in the project and resulting detailed knowledge of the property and its tenants, particularly as compared to a compartmentalized approach to the real estate business where individuals are responsible for only certain limited areas of a project. Tax Status We have elected to be taxed as a REIT for federal income tax purposes and believe that we have met the requirements for qualification and taxation as a REIT commencing with our taxable year ended December 31, 1993. As a REIT, we generally are not subject to corporate federal income tax on net income that we currently distribute to our shareholders, provided that we satisfy certain technical requirements relating to, among other things, the composition of our gross income and assets and the requirements to distribute at least 95% (90% beginning in 2001) of our "REIT taxable income" to shareholders. Risk Factors The following factors would cause our actual results to differ materially from current expectations. Our Properties May Not Generate Sufficient Income to Meet All of Our Obligations Real property investments are subject to varying degrees of risk. The yields available from investments in real estate depend on the amount of income and capital appreciation generated by the related properties. If our properties do not generate sufficient income to meet operating expenses, including debt service, ground lease payments, tenant improvements, third-party leasing commissions and other capital expenditures, our income and ability to make distributions to stockholders will be adversely affected. There is also the risk that as leases on our properties expire, tenants will enter into new leases on terms that are less favorable. In addition, real estate investments are relatively illiquid and, therefore, will tend to limit our ability to vary our portfolio promptly in response to changes in economic or other conditions. Adverse California Economic Conditions Could Hurt Our Performance The performance of the economy in each of the regions in which our properties are located affects occupancy, market rental rates and expenses and, consequently, has an impact on the income generated from our properties and their underlying values. The financial results of major local employers also may have an impact on the cash flow and value of our properties. In terms of rentable square feet, approximately 74% of our properties as of December 31, 2000, are located in California. As a result of this geographic concentration, the performance of the California economy and the commercial real estate market will affect the value of our properties in that area and, in turn, our value as a company. 8 9 Our Acquisition and Development Activities Present Risks Which May Adversely Affect Our Performance We intend to acquire existing commercial properties to the extent that they can be acquired on advantageous terms and meet our investment criteria. Acquisitions of commercial properties entail general investment risks associated with any real estate investment, including the risk that investments will fail to perform as expected or that estimates of the cost of improvements to bring an acquired property up to standards may prove inaccurate. We also intend to pursue commercial property development projects. These projects generally require various governmental and other approvals, and we cannot be sure that we will receive these approvals. Our development activities will entail certain risks, including: - The expenditure of funds on and devotion of management's time to projects which may not come to fruition. - The risk that construction costs of a project may exceed original estimates, possibly making the project uneconomical. - The risk that occupancy rates and rents at a completed project will be less than anticipated. - The risk that expenses at a completed development will be higher than anticipated. These risks may result in a reduction in the funds available for distribution to you as dividends. We Cannot Reinvest Our Earnings and Must Rely on Debt and Equity Financing for Acquisitions Because we operate as a real estate investment trust, we must distribute 95% of our real estate investment trust taxable income as dividends (90% effective January 1, 2001) and we cannot reinvest this income in our business. Therefore, we rely on equity and debt financing to support our acquisition and development activities which require a substantial up-front payment. We will be subject to the risks normally associated with debt financing, including the risk that our cash flow will be insufficient to meet required payments of principal and interest, the risk that existing indebtedness on our properties cannot be refinanced or that the terms of the refinancing will not be as favorable as the terms of existing indebtedness. In addition, investors risk that the book value of their shares of Common Stock purchased may be diluted by any future equity offerings used to finance acquisitions. We May be Responsible for Environmental Hazards We Did Not Cause Under various federal, state and local laws, we are liable for the costs of removal or remediation of certain hazardous or toxic substances on or in our properties. These laws often impose liability without regard to whether we knew of, or were responsible for, the presence of the hazardous or toxic substances. The presence of such substances, or our failure to properly remove such substances, may adversely affect our ability to sell or rent such property. We are not aware of any environmental liability that would have a material adverse effect on our business, assets or results of operations. However, there is always the chance that material environmental liabilities do exist, and if they did, they would have an adverse effect on our results of operations and cash flow. Earthquakes and Other Extraordinary Events May Cause Losses We carry comprehensive liability, fire, flood, extended coverage and rental loss insurance. There are, however, certain types of extraordinary losses which may be either uninsurable or not economically feasible to insure. Further, a substantial number of our properties are located in areas that are subject to earthquake activity. Although we have obtained limited earthquake insurance coverage, if a property sustains damage as a result of an earthquake, we may still incur substantial losses due to insurance deductibles and co-payments. Additionally, earthquake insurance may not be available for some properties, or if available, may not be available on terms acceptable to us. Should an uninsured loss occur, we could lose our investment in a number of our properties, as well as the rents generated from these properties. 9 10 RECENT DEVELOPMENTS On February 23, 2001, Equity Office Properties Trust and Spieker Properties, Inc. ("Spieker") jointly announced that Equity Office, EOP Operating Limited Partnership, a Delaware limited partnership of which Equity Office is the sole general partner, Spieker and the Operating Partnership had entered into an Agreement and Plan of Merger, dated as of February 22, 2001. The merger agreement provides for the merger of Spieker with and into Equity Office and for the merger of a newly-created limited liability company, all of the ownership interests of which are held by EOP Partnership (the "LLC"), with and into the Operating Partnership. In the merger of Spieker with and into Equity Office, holders of Spieker Common Stock will receive $13.50 in cash and 1.49586 Equity Office Common Shares for each share of Spieker Common Stock. Cash will be paid instead of the issuance of fractional shares. The exchange ratio is not subject to change and there is no "collar" or minimum trading price for the shares of Spieker Common Stock or the Equity Office Common Shares. The mergers are expected to be tax-free to Equity Office and Spieker. Spieker common stockholders will recognize income for federal income tax purposes only on the cash portion of the merger consideration. The mergers are subject to customary closing conditions, including the approval of the merger of Spieker with and into Equity Office by the common shareholders of Equity Office and the common stockholders of Spieker and the approval of the merger of Spieker with and into Equity Office and the merger of the LLC with and into the Operating Partnership, to the extent necessary, by the partners of EOP Partnership and the Operating Partnership. In connection with the execution of the merger agreement, certain officers and directors of Spieker, controlling in the aggregate approximately 0.8% of the outstanding shares of Spieker Common Stock and approximately 5.6% of the outstanding Spieker limited partnership interests (other than preferred units), have agreed, among other things, to vote their shares of Spieker Common Stock and Spieker partnership interests to approve the mergers. The parties anticipate that the mergers will close during the second quarter of 2001. Following the merger of Spieker with and into Equity Office, Warren E. Spieker, Jr., Chairman of the Board of Directors of Spieker, and Craig G. Vought and John A. Foster, the co-Chief Executive Officers of Spieker, will become trustees of Equity Office. On March 8, 2001, a purported class action complaint was filed in the Superior Court of the State of California, County of San Mateo, by an alleged Spieker stockholder. This complaint names as defendants Spieker and each member of its board of directors and principally alleges that the directors breached duties assertedly owed to Spieker's stockholders in connection with entering into the merger agreement. The plaintiffs in the lawsuit seek an injunction (1) against the defendants' agreement to the termination fee provisions of the merger agreement and (2) requiring an unspecified "fair and objective process to sell the company." Spieker believes that the lawsuit is without merit and intends to vigorously defend the lawsuit. 10 11 PROPERTIES Overview The following table sets forth pertinent data about our properties as of December 31, 2000. Our properties are managed in five reportable segments. These segments have been broken down into our nine identifiable markets. Significant information on these reportable segments can also be found in Note 13 of our consolidated financial statements.

(1) O - Office, I - Industrial. (2) Represents percentage of total portfolio net operating income for the twelve months ended December 31, 2000, net of properties sold. (3) Represents average annualized in-place net rents, per square foot of occupied space, as of December 31, 2000. 11 12 Occupancy Rates We continue to operate at consistently high occupancy levels. Occupancy levels are indicative of the strength of our local real estate markets, the continuing demand for space and the abilities of our local management teams to keep projects leased. 5-YEAR HISTORICAL YEAR END OCCUPANCY

(1) Historical rentable square footage may include occupancies for properties that have subsequently been sold. YEAR END OCCUPANCY RATES BY REGION

12 13 Lease Expirations The following tables set forth the lease expirations in summary and by product type for leases in-place as of January 1, 2001, assuming tenant renewal or termination options are not exercised. Lease Expirations

(1) Does not include month-to-month leases. (2) Annual base net rent represents amounts contractually due, adjusted for contractual increases, which may include taxes, insurance and common area maintenance. 13 14 Leasing Activity/Releasing Costs We continue to aggressively manage the cost of leasing commissions and tenant improvements, collectively referred to as capital expenditures, associated with the renewal and re-leasing of space. The relative strength of the local real estate markets, the type of property being leased, the length and the total value of the leases signed impact the amount of capital expenditures spent on leasing second generation space. Average capital expenditures per square foot of space leased has shown moderate growth over time. These increases, specifically related to higher labor and material costs, and higher leasing commissions, are directly correlated to a shift in our portfolio towards office properties, rapidly increasing market rents, and longer average lease terms. The following table highlights 2000 leasing activity and re-leasing costs by property type. Summary of 2000 Leasing Activity

(1) 1st generation is defined as previously unleased shell space. (2) Net of short-term leases. (3) Calculated based on 2nd generation space, excluding short-term and repositioning leases of 600,496 square feet. Tenant Profiles We have over 3,300 tenants, with the average tenant occupying approximately 11,000 square feet and paying an annual net rent of approximately $169,000 as of December 31, 2000. As set forth in the tables below, our tenant base is extremely diversified and none of our tenants represent greater than 2% of our total annualized net rents. Tenant Profile by Business Sector

(1) The calculated percentages are based on annualized net rents as of December 31, 2000, contributed by the defined sectors. Sector analysis is based on NAICS codes assigned to the tenants and our grouping of related NAICS codes. 14 15 Top 20 Tenants

(1) The top 50 tenants represent approximately 25.7% of our total annualized net rents and occupy approximately 7.8 million square feet, or 21.2% of our total occupied square footage. (2) Rankings based on percentage of total annualized net rents in-place as of December 31, 2000. Other Business Opportunities Although our primary business objective is to own, operate, acquire and develop property, we will continue to pursue other business opportunities which will maximize shareholder value. These opportunities would capitalize on our office portfolio and the depth and size of our tenant base. Our investment in BroadBand Office, Inc., which we formed with eight other real estate firms and a venture capital firm, has helped provide single-point access to advanced telecommunications services to our tenants. In May 2000 we joined other leading real estate companies across a broad range of property sectors to form another real estate technology company, Project Constellation. This company intends to form, incubate and sponsor real estate-related Internet, e-commerce and broadband enterprises; acquire interests in existing "best of breed" companies on a synergistic basis; and act as an opportunistic consolidator across property sectors in the emerging real estate technology area. Competition We compete with other real estate firms in our markets in attracting tenants, primarily on the basis of location, rental rates, services provided and the design and condition of the improvements. These competitors include domestic and foreign financial institutions, other REITs, life insurance companies, pension funds, trust funds, partnerships and individual investors. 15 16 The number of competitive commercial properties in a particular area could have a material effect on our ability to lease space in our properties or at newly developed or acquired properties and on the rents charged. Since we are also acquiring and actively developing properties in our markets we also face competition in our efforts to acquire or develop desirable real estate. CAPITAL STRUCTURE AND WORKING CAPITAL Our principal sources of funding our ongoing operations (including the leasing and build-out of existing space, as well as the acquisition, development, expansion and renovation of additional properties) and debt maturities are cash flows provided by operations, unsecured short-term borrowings, public and privately placed equity financing, public unsecured debt financing, the issuance of partnership units in the Operating Partnership, proceeds from the disposition of non-strategic assets, and the assumption of secured debt on properties acquired. We believe that our ability to access a variety of capital sources enables us to reduce our overall cost of capital and maintain a prudent capital structure. Our unsecured investment grade notes have fixed interest rates between 6.75% and 8.00% and maturity dates ranging from 2001 to 2027. Our mortgage loans have fixed interest rates between 7.00% and 9.88% and maturity dates ranging from 2001 to 2013. Capital Structure at December 31, 2000 Debt

Equity

(1) Value based on December 31, 2000, closing stock price of $50.125. (2) Value based on $25.00 per share liquidation preference. (3) Value based on $50.00 per share, units are convertible beginning in April 2008. 16 17 OTHER DISCLOSURES Environmental Matters Compliance with laws and regulations relating to the protection of the environment, including those regarding the discharge of materials into the environment, has not had any material effect upon our financial condition or results of operations. The 97 properties we owned at December 31, 1993, were each subject to a Phase I environmental audit or update during the twelve-month period ended during December 31, 1993. Certain of these properties were subject to Phase II environmental investigations and all buildings on such properties constructed prior to 1985 have been subject to asbestos detection investigations. In addition, for each of the properties acquired subsequent to December 31, 1993, and for each parcel of land purchased for development, a Phase I environmental audit or update was completed as part of the acquisition due diligence process. These investigations have not revealed any environmental condition that we believe would have a material effect on our business, assets or results of operations. Site assessments have revealed soil and ground water contamination at the Stender Way II property in Santa Clara, California. A third party is primarily bearing the costs relating to this environmental condition and we believe that our exposure, if any, is not material. Additionally, three properties located in Stanford Research Park in Palo Alto, California are subject to varying degrees of known environmental contamination. The remediation costs associated with this contamination have also been, and are expected to continue to be, borne by other parties. Furthermore, we have entered into indemnification agreements whereby we have been, and are to be, indemnified for liabilities arising from clean-up costs relating to these three properties. Environmental contamination has been found to have originated at Walsh at Lafayette, an industrial development project site in Santa Clara, California that we acquired in 1995. We have since developed a 320,505 square feet industrial building on this site. The relevant government agency has identified a third party as responsible for remediation, and the remediation process is continuing. We are being indemnified for environmental contamination on the Walsh at Lafayette property by the former owner of the property. Site assessments have revealed that soil and groundwater at our Montgomery Ward property in Pleasant Hill, California, have been contaminated with volatile organic compounds. The likely sources of this contamination are on-site underground storage tanks and a potential off-site contamination source. To date, no government agency has issued any directives requiring that a remediation plan be filed or the contamination be cleaned up. The Spieker partnership that transferred this property to us, referred to as the transferor, previously filed a lawsuit against the seller to enforce an indemnity agreement and against certain other potentially responsible parties to have those parties bear any clean-up costs. Settlement has been reached with certain of the defendants in the lawsuit, resulting in cash payments to the transferor and us. A trial involving the remaining defendants ended without any additional cash awards being made. Due to the nature of this environmental condition our expectation is that Montgomery Ward, who has recently declared bankruptcy, and other parties will be primarily responsible for the clean-up costs. We believe that our exposure, if any, for clean-up costs would not have a material adverse effect on our financial condition, results of operations or liquidity. Site assessments have revealed soil and groundwater contamination at the Arden Square property in Sacramento, California, and the Woodside Central property in Woodside, California, which have since been sold to Pacific Retail Trust. We agreed to indemnify the buyer for the contamination. However, we believe that the liabilities and clean-up costs associated with this contamination are covered by our pollution insurance policy, except to the extent of the deductible under such policy, which is immaterial to our overall financial position. Property owned by GAF Corporation and/or Mattel, Inc. in the vicinity of the Nimbus Corporate Center property in Beaverton, Oregon was discovered to have very high levels of soil and groundwater contamination. Monitoring is currently being conducted to determine the extent, if any, that such contamination may have affected the Nimbus Corporate Center property and whether any remedial action will be required. We believe that GAF, who has recently declared bankruptcy, Mattel and/or other third parties will be primarily responsible for the liabilities and remediation costs associated with this contamination, and that, in any event, any exposure we might have would be covered by our pollution insurance policy, except to the extent of the deductible under such policy, which is immaterial to our overall financial position. Site assessments have revealed soil and groundwater contamination at the Georgetown Center property in Seattle, Washington, and the City Commerce Park property in Seattle, Washington, which have since been sold to CalWest 17 18 Industrial Properties, LLC, a California limited liability company. We agreed to indemnify the buyer for the contamination. Monitoring will be conducted to determine the extent, if any, that such contamination may have affected the Georgetown Center property and the City Commerce Park property, and whether any remedial action will be required. Site assessments undertaken by the purchaser of our Benicia Industrial Park property in Benicia, California have revealed soil and groundwater contamination on portions of the property. The source(s) and extent of the contamination have not been defined and the purchaser's site assessment process is continuing. Based on the information available to us to date, we believe that potential liabilities and clean-up costs associated with this contamination, if any, will be covered by our pollution insurance policy, except to the extent of the deductible under such policy, which is immaterial to our overall financial position. We agreed to indemnify the buyer for the contamination. Although the environmental investigations conducted to date have not revealed any environmental liability that we believe would have a material adverse effect on our business, assets or results of operations, and we are not aware of any such liability, it is possible that these investigations did not reveal all environmental liabilities or that there are material environmental liabilities of which we are unaware. No assurances can be given that (1) future laws, ordinances, or regulations will not impose any material environmental liability, or (2) the current environmental condition of our properties has not been, or will not be affected by tenants and occupants of our properties, by the condition of other properties in the vicinity of our properties, or by third parties unrelated to us. 18 19 ITEM 1. BUSINESS Information related to this Item is located on pages 3-10. ITEM 2. PROPERTIES Information related to this Item is located on pages 11-16. ITEM 3. LEGAL PROCEEDINGS In the normal course of business, from time to time, we are involved in legal actions relating to the ownership and operations of our properties. In our opinion, the liabilities, if any, that may ultimately result from such legal actions are not expected to have a materially adverse effect on our consolidated financial position, results of operations or cash flows. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS We did not submit any matters to a vote of security holders in the fourth quarter of the fiscal year ended December 31, 2000. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS Our shares of Common Stock are traded on the New York Stock Exchange under the symbol SPK. MARKET INFORMATION Our Common Stock has been traded on the New York Stock Exchange since November 12, 1993. The high, low, and closing price per share of Common Stock for the four quarters of 2000 and the four quarters of 1999 are as follows:

On March 16, 2001, the closing price of our Common Stock on the NYSE was $56.20 per share. HOLDERS The approximate number of holders of record of the shares of our Common Stock was 504 as of March 16, 2001. 19 20 DIVIDENDS AND DISTRIBUTIONS Dividends and distributions declared for all classes of our stock were as follows:

(1) The sum of quarterly dividends in 2000 and 1999 varies from the total due to rounding. (2) As of March 31, 1999, all shares of our Class C Common Stock had been converted to Common Stock. Our future dividends will be at the discretion of our Board of Directors and will depend upon our actual Funds from Operations, our financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Internal Revenue Code, applicable legal restrictions and such other factors as our Board of Directors deems relevant. Although we intend to continue to make quarterly distributions to our stockholders, no assurances can be given as to the amounts of dividends, if any, distributed in the future. Our policy is to review our dividends on an annual basis. Subsequent to December 31, 2000, we have declared a dividend of $0.70 per share of Common Stock. ITEM 6. SELECTED FINANCIAL DATA The following table sets forth: - Consolidated operating data presented for the years ended December 31, 2000, 1999, 1998, 1997 and 1996. - Consolidated balance sheet data presented as of December 31, 2000, 1999, 1998, 1997 and 1996. This selected financial data should be read in conjunction with our consolidated financial statements (including the notes thereto) included in Item 8. 20 21 Summary Financial Information (amounts in thousands, except per share amounts) Year Ended December 31,

(1) Per share amounts based upon the Basic weighted average shares outstanding for the years ended December 31, 2000 through 1996 were as follows: 65,401,668 for 2000, 63,984,711 for 1999, 62,113,172 for 1998, 48,207,141 for 1997, and 34,438,317 for 1996, and the Diluted weighted average shares outstanding were 68,166,326 for 2000, 64,983,415 for 1999, 62,877,995 for 1998, 48,968,905 for 1997, and 34,691,140 for 1996. Diluted weighted average shares outstanding include the dilutive effect of stock options using the Treasury Stock method. (2) As of December 31, 1999, all shares have been converted into the Company's Common Stock. (3) Refer to "Funds from Operations" in Item-7 Management's Discussion and Analysis of Financial Condition and Results of Operations for discussion and definition of our Funds from Operations. In February 1995, the National Association of Real Estate Investment Trusts ("NAREIT") established its definition of Funds from Operations and requested that REITs adopt this new definition beginning in 1996. The new definition provides that the amortization of debt discount and deferred financing costs is no longer to be added back to net income to calculate Funds from Operations. In 1996 we substantially implemented the new NAREIT definition for calculating Funds from Operations. The amounts presented above for the year ended December 31, 1996, have been restated to reflect the new NAREIT definition. 21 22 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Statements contained in this Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," and elsewhere in this Form 10-K, which are not historical facts, may be forward-looking statements. These statements are subject to certain risks and uncertainties which could cause actual results to differ materially from those projected, including, but not limited to, those risks and special considerations set forth in our other SEC filings. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. OVERVIEW The year 2000 was a successful year for us as we continued to maximize the value of our real estate portfolio. Levels of demand in our markets remained high which contributed to higher effective rents and higher sustained occupancy levels. Our self-funding strategy allowed us to complete several value added asset acquisitions and to capitalize on and fund select development activities. We also continued to maintain a strong balance sheet with a flexible capital structure. This year provided significant opportunities to grow current and future earnings across our portfolio of properties. During 2000 our coupon to effective rent growth was 79.2% on the 9.1 million square feet of our re-leased or renewed space. This rent growth is measured as the difference between average rents on new and renewed leases as compared to the expiring coupon rent on those same spaces. We were also successful in extending the average lease term to 66.9 months from 59.0 months in 1999. Occupancy levels remained strong throughout the year at a twelve month average of 96.7%. As our market fundamentals remain solid, vacancy rates remain low, supply in our markets are kept at moderate levels, and given the meaningful gap between our in-place and market rents, we feel that we will continue to have positive rent growth opportunities enabling us to meet expected growth targets going forward. However, given the current unpredictability in our economy, this large measure of growth rate may not be sustainable in the near future. The availability of quality, well-located West Coast properties continued to be limited. During the year we found several select opportunities to acquire assets that fit well with our overall strategy of providing long-term value. We acquired six office properties totaling 1.5 million square feet (the "2000 Acquisitions") for a total investment of $317.3 million. Three office properties were added in the Pacific Northwest totaling 1.0 million square feet for a total investment of $179.6 million, two office properties were added in the Peninsula/North Bay region totaling 0.3 million square feet for a total investment of $79.6 million, and one office property was added in Southern California totaling 0.2 million square feet for a total investment of $58.1 million. Total expected capitalized costs on these acquisitions, including initial costs, closing costs, repositioning and rehab costs once completed, will be approximately $325.3 million. These acquisitions were funded by the sale or trade of other assets from our portfolio as detailed below. We continued to identify assets within our portfolio that exhibit lower growth potential or that do not fit our long-term business strategy. Once identified, these assets were subsequently traded or sold and the proceeds were utilized for asset acquisitions or used to fund our development pipeline. During 2000, we identified 41 properties and 7 land parcels totaling approximately 6.3 million square feet ("the Dispositions"). The majority of these assets were industrial properties located throughout our West Coast markets, the highest concentration being in the East Bay/Sacramento market. Net proceeds of $382.0 million were generated from these asset dispositions. Development activity during 2000 was more focused. During the year, we added three projects totaling 1.0 million square feet to our development pipeline for a total estimated cost of approximately $291.4 million. Although this is a significant amount of square footage, we focused on fewer total projects. These projects are located in markets where the economic environment is favorable, supply is well constrained and preleasing activity is strong. In total at December 31, 2000 we had developments and redevelopments in process, which were 69.0% preleased, of approximately 1.7 million square feet for an estimated cost of $424.8 million. Five of these properties, or approximately 0.8 million square feet are expected to stabilize during 2001. During 2001, we anticipate some development starts, but market fundamentals will be closely watched and analyzed before further investment is made. Finally, we completed fourteen properties, adding 2.0 million square feet to our stabilized portfolio for a total investment of $345.9 million. Estimated returns on these developments average approximately 12.1%. 22 23 During 2000, we added overall financial flexibility to the balance sheet. We issued $200.0 million of investment grade rated 10-year unsecured notes which extended the average maturity of our debt outstanding and we replaced our line of credit with a new $400.0 million unsecured credit facility. We also obtained a $100.0 million secured development facility for the sole purpose of funding certain developments. RECENT DEVELOPMENTS On February 23, 2001, Equity Office Properties Trust and Spieker Properties, Inc. ("Spieker") jointly announced that Equity Office, EOP Operating Limited Partnership, a Delaware limited partnership of which Equity Office is the sole general partner, Spieker and the Operating Partnership had entered into an Agreement and Plan of Merger, dated as of February 22, 2001. The merger agreement provides for the merger of Spieker with and into Equity Office and for the merger of a newly-created limited liability company, all of the ownership interests of which are held by EOP Partnership (the "LLC"), with and into the Operating Partnership. In the merger of Spieker with and into Equity Office, holders of Spieker Common Stock will receive $13.50 in cash and 1.49586 Equity Office Common Shares for each share of Spieker Common Stock. Cash will be paid instead of the issuance of fractional shares. The exchange ratio is not subject to change and there is no "collar" or minimum trading price for the shares of Spieker Common Stock or the Equity Office Common Shares. The mergers are expected to be tax-free to Equity Office and Spieker. Spieker common stockholders will recognize income for federal income tax purposes only on the cash portion of the merger consideration. The mergers are subject to customary closing conditions, including the approval of the merger of Spieker with and into Equity Office by the common shareholders of Equity Office and the common stockholders of Spieker and the approval of the merger of Spieker with and into Equity Office and the merger of the LLC with and into the Operating Partnership, to the extent necessary, by the partners of EOP Partnership and the Operating Partnership. In connection with the execution of the merger agreement, certain officers and directors of Spieker, controlling in the aggregate approximately 0.8% of the outstanding shares of Spieker Common Stock and approximately 5.6% of the outstanding Spieker limited partnership interests (other than preferred units), have agreed, among other things, to vote their shares of Spieker Common Stock and Spieker partnership interests to approve the mergers. The parties anticipate that the mergers will close during the second quarter of 2001. Following the merger of Spieker with and into Equity Office, Warren E. Spieker, Jr., Chairman of the Board of Directors of Spieker, and Craig G. Vought and John A. Foster, the co-Chief Executive Officers of Spieker, will become trustees of Equity Office. On March 8, 2001, a purported class action complaint was filed in the Superior Court of the State of California, County of San Mateo, by an alleged Spieker stockholder. This complaint names as defendants Spieker and each member of its board of directors and principally alleges that the directors breached duties assertedly owed to Spieker's stockholders in connection with entering into the merger agreement. The plaintiffs in the lawsuit seek an injunction (1) against the defendants' agreement to the termination fee provisions of the merger agreement and (2) requiring an unspecified "fair and objective process to sell the company." Spieker believes that the lawsuit is without merit and intends to vigorously defend the lawsuit. 23 24 RESULTS OF OPERATIONS Comparison of 2000 to 1999 The following comparison is of our consolidated operations for the year ended December 31, 2000 to the year ended December 31, 1999 (amounts in tables are presented in millions).

Rental revenues for 2000 increased by $106.7 million. $69.7 million, or 65.3% of the rental revenue increase is due to revenues generated by the "1999 Core Portfolio", defined as properties owned at January 1, 1999 and still owned at December 31, 2000. Increases in the 1999 Core Portfolio rental revenues during 2000 were attributed to higher rollover rental rates realized on the re-leasing and renewal of second generation space and higher maintained occupancy levels. During 2000, we completed 1,404 lease transactions for the renewal and re-lease of 9.1 million square feet of second generation space. Rollover effective rent growth on these leases was, on average, 79.2% higher than the previous rents received on those same spaces. The 1999 acquisitions contributed $9.8 million, or 9.2%, to the rental revenue increase for 2000. During 1999, we acquired five office properties totaling 0.8 million square feet for a total investment of $134.3 million. The 1999 acquisitions were acquired at various dates throughout the year, therefore we recognized a full year's results in 2000 as compared to a partial year's results in the year of acquisition. The 2000 Acquisitions contributed $17.9 million, or 16.8 %, to the rental revenue increase for 2000. The Developments contributed 38.0 million, or 35.6%, to the rental revenue increase for 2000. The increase in income is due to the increases in occupancy on the developments either completed or still in the development pipeline. The Developments include properties completed and added to our portfolio of stabilized properties, as well as properties currently in the development pipeline. We consider properties "stabilized" at the earlier of eighteen months after shell completion or when a 95.0% occupancy rate has been reached. The increases in rental revenues are partially offset by a decrease of $28.7 million attributable to the Dispositions. Total net proceeds of $382.0 million and a book gain of $140.1 million were recognized on these properties and parcels.

Interest and other income increased $3.3 million or 55.0% in 2000. This increase resulted from higher third party management and construction fees along with higher average cash balances year over year. Average cash balances for the year ended December 31, 2000 were $36.2 million as compared to the $27.3 million in 1999. 24 25

The overall increase in rental expenses and real estate taxes (collectively referred to as "property operating expenses") is primarily a result of growth in the total square footage of our portfolio of office properties as well as higher compensation costs included in rental expenses. These increases are consistent with the increases in rental revenue. Rental revenues net of property operating expenses, referred to as "net operating income," are presented in the following table:

For the year ended December 31, 2000, 81.9% of our net operating income was generated by office properties as compared with 74.1% for 1999. 25 26

Interest expense increased in 2000 due to the net effect of higher interest expense related to new note offerings which replaced outstanding balances on our floating-rate facilities, a decrease in capitalized interest in relation to the Developments in process during the year, and offset by lower outstanding mortgage balances. The average debt outstanding was $2.0 billion in 2000 and 1999. Depreciation and amortization expenses increased by $26.4 million for 2000 as a result of the 2000 and 1999 Acquisitions and the Developments. General and administrative expenses increased by $5.3 million for 2000 as a result of an increased number of employees and continued upward wage pressures experienced on the West Coast. Our 2000 general and administrative expenses remained consistent with 1999 levels on a percentage of revenue basis. The increase in income from operations before disposition of real estate and minority interests of $44.4 million for the year ended December 31, 2000 is primarily due to rent increases in the 1999 Core Portfolio and the 1999 Acquisitions, the addition of the 2000 Acquisitions, and the Development projects becoming occupied during the year. 26 27 Comparison of 1999 to 1998 The following comparison is of our consolidated operations for the year ended December 31, 1999 to the year ended December 31, 1998 (amounts in tables are presented in millions).

Rental revenues for 1999 increased by $95.4 million. $32.5 million, or 34.1%, of the rental revenue increase is due to revenues generated by the 1998 Core Portfolio, defined as properties owned at January 1, 1998 and still owned at December 31, 1999. Properties acquired during 1998, the 1998 Acquisitions, contributed $30.1 million, or 31.6%, to the rental revenue increase for the year. During 1998, we invested $884.8 million in acquiring properties totaling 6.3 million square feet. These properties were acquired at various dates throughout the year and a full year's results in 1999 were recognized as compared to a partial year's results in 1998. Increases in the 1998 Core Portfolio rental revenues and to some extent the 1998 Acquisitions rental revenues during 1999 were attributable to higher rollover rental rates realized on the releasing and renewal of second generation space. During 1999, we completed 1,326 lease transactions for the renewal and re-lease of 8.0 million square feet of second generation space. Rollover effective rent growth on these leases was, on average, 36.5% higher than the previous rents received on those same spaces. The Developments contributed $27.9 million, or 29.2%, to the rental revenue increases for 1999. The increase in income is due to the increases in occupancy on the developments either completed or still in the development pipeline. During 1999 we added to our stabilized portfolio of properties eleven properties totaling 1.9 million square feet for a total investment of $166.9 million. The 1999 Acquisitions contributed $8.1 million of the rental revenues for 1999. During 1999 we acquired five office properties totaling 807,037 square feet for a total investment of $134.3 million. Increases in rental revenues were partially offset by a decrease of $3.2 million attributable to the 1999 Dispositions. During 1999, the Company disposed of fifteen properties and two land parcels, for a total sales price of $184.8 million recognizing a book gain of $48.6 million. The gains generated from these sales were re-deployed into the purchase of the 1999 Acquisitions, into asset purchases subsequent to December 31, 1999, and to fund the development pipeline. We also recognized income from the sale of a mortgage and a gain on condemnation of a land parcel of $20.2 million.

Interest and other income decreased due to the reduction in interest income from mortgage loans made to Spieker Northwest, Inc. in relation to SNI's 1997 acquisition of non-core assets. The majority of these assets were disposed of during 1998. Additional decreases were due to lower cash balances year over year and from the reduction of mortgage interest income from a mortgage held by us, which was repaid by the borrower. Average cash balances for the year ended December 31, 1999 were $27.3 million as compared to $33.9 million in 1998. 27 28

The overall increase in rental expenses and real estate taxes (collectively referred to as "property operating expenses") is primarily a result of the growth in the square footage of our portfolio of office properties, as well as an increased number of employees resulting in higher compensation costs included in rental expenses. The increases experienced are consistent with the increase in rental revenue. Rental revenues net of property operating expenses, referred to as "net operating income", is presented in the following table:

For the year ended December 31, 1999, 74.1% of our net operating income was generated by office properties as compared with 69.1% for 1998. 28 29

Interest expense increased due to a higher total average outstanding debt balance in 1999. This increase is the net effect of additions to interest expense from additional note offerings which occurred during 1999, offset by lower balances outstanding under the Facility combined with an increase in capitalized interest in relation to the Developments. The average outstanding debt was $2.0 billion in 1999 and $1.8 billion in 1998. Depreciation and amortization expense increased by $16.9 million for 1999 as compared with 1998, due to the addition of the 1999 Acquisitions, the 1998 Acquisitions, and the Developments. General and administrative expenses increased by $4.2 million for 1999 as compared with 1998 as a result of the increased number of employees and wage pressures experienced on the West Coast. During 1999, general and administrative expenses were consistent with 1998 levels on a percentage of revenue basis. The increase in income from operations before disposition of real estate and minority interests of $31.6 million for the year ended December 31, 1999 is primarily due to rent increases in the 1998 Core Portfolio and the 1998 Acquisitions, the addition of the 1999 Acquisitions, and the Development projects becoming occupied during the year. LIQUIDITY AND CAPITAL RESOURCES

The increase in cash provided by operating activities is due to the increased net operating income resulting from the 1999 Core Portfolio, the 1999 and 2000 Acquisitions, and the Developments. During 2000 the volume of our investing activity increased. However, the cash used for investing activities was slightly lower due to the net effect of our acquisition and disposition activity year over year. Cash used for financing activities increased by $73.9 million for 2000. The change is consistent with our ability to fund part of our investment activity with the proceeds from asset dispositions. During 2000, our financing activities consisted of obtaining $200.0 million in gross proceeds from the issuance of unsecured notes, the subsequent payoff of $100.0 million of our unsecured notes that came due in December 2000, and the re-payment of $40.6 million in mortgage loans and principal payments. Additionally, payments of dividends and distributions increased by $21.1 million from $218.9 million in 1999 to $240.0 million for 2000. This increase is due to the greater number of common and preferred shares outstanding 29 30 and the 14.8% increase in the common share and operating partnership unit distribution rate of $2.80 per share and unit for 2000 from $2.44 per share and unit in 1999. Our principal sources of funding for acquisitions, development, expansion and renovation of the properties and for debt maturities are cash flow provided by operations, unsecured and secured short-term borrowings, public and privately placed equity financing, public unsecured debt financing, the issuance of partnership units in the Operating Partnership, proceeds from dispositions, and the assumption of secured debt on properties acquired. We believe that our liquidity and our ability to access capital and proceeds from disposition of non-strategic assets are adequate to continue to meet liquidity requirements for the foreseeable future. At December 31, 2000, we had no material commitments for capital expenditures related to the renewal or re-leasing of space. We believe that the cash provided by operations and our facilities provide sufficient sources of liquidity to fund capital expenditure costs associated with the renewal or re-leasing of space. In May 1999, the Operating Partnership issued $400.0 million of investment grade rated unsecured notes in two tranches as follows: $200.0 million of 6.8% notes due May 1, 2004, priced to yield 6.83% and $200.0 million of 7.25% notes due May 1, 2009, priced to yield 7.27%. We used the net proceeds of approximately $397.0 million from these offerings to reduce amounts outstanding under the facilities. In conjunction with the issuance of the May 1999 Notes, we hedged our exposure to pricing benchmarks so that the net cost to us was 6.74% for the 2004 notes and 7.18% for the 2009 notes. We were released from any further obligations under the hedge transaction upon issuance of the May 1999 Notes. In December 2000, the Operating Partnership issued $200.0 million of investment grade rated unsecured notes at 7.65% due December 15, 2010 priced to yield 7.66%. Net proceeds of approximately $198.2 million were used to pay off $100.0 million of unsecured notes which matured in December 2000, to pay down the credit facility, and to fund development activity. As of December 31, 2000, the Operating Partnership had $1.9 billion of investment grade rated, unsecured debt securities outstanding. The debt securities have interest rates that vary from 6.75% to 8.00% and maturity dates that range from 2001 to 2027. We are currently in compliance with all of the covenants in the unsecured note agreements. On November 14, 2000 we amended our $250.0 million unsecured credit facility. The amended facility, which matures in November 2003, increases our borrowing capacity to $400.0 million with an interest rate of LIBOR plus 0.70%. The previous facility carried interest at LIBOR plus 0.80%. The amended facility includes an annual administrative fee of $50.0 and an annual facility fee of 0.20%. At December 31, 2000, there was no outstanding balance under this facility. We also maintain a $100.0 million secured development facility (consisting of revolving commitments of $91.0 million and $9.0 million) which matures in April 2003. The development facility carries interest at LIBOR plus 1.25% for $91.0 million of the commitment and LIBOR plus 3.50% for the remaining $9.0 million of the commitment. It also includes an annual administrative fee of $35.0 and an unused facility fee of 0.25%. As of December 31, 2000, the amount drawn on the development facility was $56.6 million of the $91.0 million commitment and $5.0 million of the $9.0 million commitment. The facilities are subject to financial covenants concerning leverage, interest coverage and certain other ratios. We are currently in compliance with all of the covenants of the facilities. We also have $56.7 million of mortgages outstanding at December 31, 2000. The mortgages have interest rates varying from 7.00% to 9.88% and maturity dates from 2001 to 2013. The mortgages are secured by a first or second deed of trust on the related properties and generally require monthly principal and interest payments. We also have $6.9 million of assessment bonds outstanding as of December 31, 2000. We have the capacity pursuant to shelf registration statements to issue up to approximately $663.8 million in equity securities, and the Operating Partnership has the capacity to issue up to $213.5 million in debt securities. 30 31 FUNDS FROM OPERATIONS We consider Funds from Operations to be a useful financial measure of the operating performance of an equity REIT. Together with net income and cash flows, Funds from Operations provides investors with an additional basis to evaluate the ability of a REIT to incur and service debt, and to fund acquisitions, developments, and other capital expenditures. Funds from Operations does not represent net income or cash flows from operations as defined by generally accepted accounting principles, or GAAP, and Funds from Operations should not be considered as an alternative to net income as an indicator of our operating performance or as an alternative to cash flows as a measure of liquidity. Funds from Operations does not measure whether cash flows are sufficient to fund all of our cash needs including principal amortization, capital improvements, and distributions to stockholders. Funds from Operations does not represent cash flows from operating, investing, or financing activities as defined by GAAP. Further, Funds from Operations as disclosed by other REITs may not be comparable to our calculation of Funds from Operations, as described below. Pursuant to the National Association of Real Estate Investment Trusts' revised definition of Funds from Operations, the Operating Partnership calculates Funds from Operations by adjusting income from operations before disposition of real estate calculated in accordance with GAAP, for real estate related depreciation and amortization, dividends and distributions on units and shares, other equity interests that are not convertible into shares of Common Stock and certain other non-cash items. We do not add back the depreciation of corporate items, such as computers, furniture and fixtures, or the amortization of deferred financing costs or debt discount. However, we eliminate the effect of straight-lined rents, as defined under GAAP, in our FFO calculation, as management believes this presents a more meaningful picture of rental income over the reporting period. Funds from Operations per share is calculated based on weighted average shares outstanding, assuming the conversion of dilutive Series A Preferred Stock, all Limited Partnership units outstanding, and the dilutive effect of stock option equivalents computed using the Treasury Stock method. The tables below set forth our calculation of Funds from Operations for 2000 and 1999. 31 32 STATEMENT OF FUNDS FROM OPERATIONS (amounts in thousands)

STATEMENT OF FUNDS FROM OPERATIONS (amounts in thousands)

The sum of quarterly funds from operations data in 2000 and 1999 varies from the annual data due to rounding. 32 33 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information below summarizes the market risks associated with our fixed and variable rate debt outstanding as of December 31, 2000. The following table presents debt balances outstanding and related weighted average interest rates by year of maturity. EXPECTED MATURITY DATE (in millions)

(1) Represents 97.0% of all debt outstanding. (2) Represents 3.0% of all debt outstanding. As of December 31, 2000, the estimated fair value of our fixed rate debt was approximately $1,994.0 million, and the carrying amount of our variable rate debt approximated fair value. Our fixed and variable rate debt is described in "Management's Discussion and Analysis of Financial Condition and Results of Operations." At December 31, 2000, we had no interest rate caps or swaps. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The response to this item is submitted as a separate section of this Form 10-K. See Item 14. ITEM 9. CHANGES IN DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. 33 34 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth certain information concerning our directors and executive officers as of December 31, 2000.

Biographical information concerning our directors and executive officers is set forth below. FRANK A. ALEXANDER, President, Peninsula/North Bay Region, is responsible for overseeing the acquisition, development, and management activities of our San Francisco Peninsula and North Bay region. Prior to his current role, Mr. Alexander served as Senior Vice President of our North Bay region and was responsible for developing office and industrial projects totaling approximately 1.5 million square feet and acquiring over 2.3 million square feet of properties included in our current core portfolio. Prior to joining our predecessor in 1987, Mr. Alexander began his real estate career with the Trammell Crow Company in 1986. Mr. Alexander received a Bachelor of Science in Engineering from Brown University and a Masters in Business Administration from The Wharton School of Business. 34 35 CARY D. ANDERSON, Vice President, serves as our Principal Accounting Officer and directs our accounting functions. His responsibilities include implementing and monitoring accounting policies and internal controls and overseeing the preparation of consolidated financial statements. Mr. Anderson joined our predecessor in 1990, serving as Operations Controller. Mr. Anderson received a Bachelor of Science from San Jose State University. He is a Certified Public Accountant. RICHARD J. BERTERO has served as a Director since December 1993. Mr. Bertero is a partner in Hogland, Bogart and Bertero, a San Francisco Bay Area real estate firm. Mr. Bertero was associated with the RREEF Funds as a founding partner from 1975 until his retirement in 1992. At RREEF, he was instrumental in many aspects of RREEF's development over the years, including the acquisition and disposition of commercial properties and portfolio management. He served on RREEF's policy committee as well as on the investment committee. Prior to his employment at RREEF, Mr. Bertero had been associated with Coldwell Banker for ten years. He is a graduate of the University of California at Berkeley. JOHN G. DAVENPORT, President, Southern California Region, is responsible for overseeing the acquisition, development and management activities of our Southern California region. Prior to his current role, Mr. Davenport served as Regional Senior Vice President of the Southern California region. Mr. Davenport has developed office, industrial, and R&D projects totaling approximately 3.0 million square feet and has acquired over 11.0 million square feet of properties included in our current core portfolio in both Northern and Southern California. He was one of the founding partners with our predecessor during its formation in 1987 and began his career in real estate with the Trammell Crow Company in 1983. Mr. Davenport received a Bachelor of Science in Mechanical Engineering from the University of California at Berkeley and a Masters in Business Administration from Harvard Graduate School of Business Administration. JAMES C. EDDY, President, Pacific Northwest Region, is responsible for overseeing the acquisition, development, and management activities of our Pacific Northwest region, where we manage and lease over 13.0 million square feet of office and industrial properties in Washington and Oregon. Prior to his current role, Mr. Eddy served as Regional Senior Vice President of the Pacific Northwest region and was responsible for developing office and industrial projects totaling over 3.5 million square feet, and acquiring over 4.0 million square feet of properties included in our current core portfolio. He was one of the founding partners with our predecessor during its formation in 1987 and began his career in real estate with the Trammell Crow Company in 1979. Mr. Eddy received a Bachelor of Arts from Stanford University and a Masters in Business Administration from the University of Santa Clara. JOHN A. FOSTER, Co-Chief Executive Officer, is responsible for the strategic direction of and long-term planning for the company. Mr. Foster also oversees the management of our portfolio. Prior to his current role, Mr. Foster served as Chief Investment Officer and was responsible for the management and oversight of our acquisition, development and divestment activities. Before becoming Chief Investment Officer, Mr. Foster served as Regional Senior Vice President and was responsible for our operations in the Silicon Valley area of Northern California, including new development, acquisitions and property management. Prior to joining our predecessor in 1987, Mr. Foster began his real estate career with the Trammell Crow Company in 1985. Mr. Foster is a current member and past president of NAIOP (National Association of Industrial and Office Parks) - Silicon Valley Chapter. Prior to joining Spieker, he was employed by AT&T and Bain & Co. Mr. Foster received a Bachelor of Arts from Kalamazoo College and a Masters in Business Administration from Stanford University. JOHN K. FRENCH, Vice Chairman, has served as a Director since August 1993. Mr. French is responsible for leading our commitment to continuing education as well as developing ways to improve corporate productivity. Prior to his current role, Mr. French served as Chief Operating Officer and was responsible for overseeing the leasing, marketing and management of 40.0 million square feet of commercial property. He was one of the founding partners with our predecessor during its formation in 1987 and began his career in real estate with the Trammell Crow Company in 1974. Mr. French has overseen the development and acquisition of more than 70 properties representing over 8.0 million square feet of commercial property in Northern California and Idaho. Prior to graduate school, Mr. French served as a captain and naval aviator in the U.S. Marine Corps. He received a Bachelor of Arts from Harvard College and a Masters in Business Administration from Harvard Graduate School of Business Administration. ELI KHOURI III, Chief Investment Officer, is responsible for directing our strategic investment activity. In this capacity, Mr. Khouri has been directly involved in the assemblage of our current portfolio through acquisition and 35 36 development of over $4 billion of assets. His responsibilities further include raising capital for investment activity through the disposition of properties. He is also responsible for institutional relationships, operating partnership transactions, financial underwriting and new business integration. Mr. Khouri has been with the company since 1991. Prior to joining the company's investment group, Mr. Khouri was responsible for executing development projects, including one of our affiliate's largest build-to-suit. He received a Bachelor of Science in Civil Engineering from Stanford University. HAROLD M. MESSMER, JR. has served as a Director since December 1993. Mr. Messmer is Chairman and Chief Executive Officer of Robert Half International, Inc., the world's largest staffing services firm specializing in professional personnel. Prior to joining Robert Half in 1985, Mr. Messmer was Chief Executive Officer of Cannon Mills Company, a member of the office of the chairman of Castle & Cooke, Inc. and a member of the Castle & Cooke board of directors. He was formerly a partner of the law firm of O'Melveny & Myers. He currently serves on the board of directors of Airborne Freight Corporation and Health Care Property Investors, Inc. He is a graduate of Loyola University and the New York University School of Law. DAVID M. PETRONE has served as a Director since December 1993. Mr. Petrone is Chairman of Housing Capital Company. Until 1992, Mr. Petrone was Vice Chairman of Wells Fargo and Company. Mr. Petrone was previously President and CEO of Wells Fargo Realty Advisors as well as President and CEO of Wells Fargo Mortgage and Equity Trust, a publicly held REIT with assets of $500 million. During his tenure with Wells Fargo he also became head of wholesale banking as well as its senior lending officer. Mr. Petrone serves on the Board of Directors of Jacobs Engineering, Alexandria Real Estate Equities, Inc. and Finelite, Inc. He received a Bachelor of Science and a Masters in Business Administration from the University of Oregon, where he serves as a trustee. STUART A. ROTHSTEIN, Chief Financial Officer, is responsible for the management and control of our financial matters and capital market activities. Since joining the company in 1994, Mr. Rothstein has been responsible for raising over $4 billion of capital in various public and private market transactions. He is also responsible for financial strategy, all communication with investors and sellside analysts, budgeting/financial analysis, investor relations, corporate communications and risk management. Prior to joining the company, Mr. Rothstein was employed at Price Waterhouse. He received a Bachelor of Science from Pennsylvania State University and a Masters in Business Administration from Stanford University. Mr. Rothstein is a Certified Public Accountant. JOSEPH D. RUSSELL, JR., President, Silicon Valley Region, is responsible for overseeing the acquisition, development, and management activities of our Silicon Valley region. Prior to his current role, Mr. Russell served as Regional Senior Vice President of the Silicon Valley region and was responsible for developing office, industrial and R&D projects totaling approximately 2.0 million square feet, and acquiring over 3.5 million square feet of properties included in our current core portfolio. Prior to joining our predecessor in 1990, Mr. Russell held various marketing positions at IBM Corporation. He serves on the board of directors of NAIOP, Silicon Valley Chapter. Mr. Russell received a Bachelor of Science in Business Administration from the University of Southern California and a Masters in Business Administration from Harvard Graduate School of Business Administration. PETER H. SCHNUGG, President, East Bay/Sacramento Region, is responsible for overseeing the acquisition, development, and management activities of our East Bay/Sacramento region, where we own, manage, and lease over 10.0 million square feet of office and industrial properties. Prior to his current role, Mr. Schnugg served as Regional Senior Vice President of the North East Bay, Sacramento and Peninsula region and was responsible for developing office and industrial projects totaling over 3.0 million square feet, and acquiring over 7.0 million square feet of properties included in our current core portfolio. He was one of the founding partners with our predecessor during its formation in 1987 and began his career in real estate with the Trammell Crow Company in 1983. Mr. Schnugg received a Bachelor of Arts from the University of California at Berkeley and a Masters in Business Administration from Stanford University. DENNIS E. SINGLETON, Vice Chairman, has served as a Director since August 1993. He is responsible for leading our efforts to build a brand identity, as well as for increasing the value-added services we provide to our tenants. Additionally, Mr. Singleton is involved with identifying and analyzing strategic portfolio acquisition and operating opportunities. Prior to his current role, Mr. Singleton served as Chief Financial Officer and Chief Investment Officer. He was one of the founding partners with our predecessor during its formation in 1987 and began his career in real estate with the Trammell Crow Company in 1972. Mr. Singleton has overseen the development and acquisition of more than 28.0 million square feet of commercial properties representing an investment of over $3 36 37 billion. Mr. Singleton received a Bachelor of Science from Lehigh University and a Masters in Business Administration from Harvard Graduate School of Business Administration. WARREN E. "NED" SPIEKER, JR. has served as Chairman of the Board of Directors since August 1993, and Chief Executive Officer from August 1993 to September 1999, and oversees all of our acquisition, development and financing activities, establishes corporate policy and provides overall strategic direction. He began his career in the real estate industry in 1967 and joined Trammell Crow Company in 1970 and served as a board member and the managing partner of the Northwest region. During his partnership with Trammell Crow, Mr. Spieker oversaw or was responsible for the development or acquisition of 18.0 million square feet of commercial space, and since that time has directed the growth of Spieker Properties by an additional 30.0 million square feet. Mr. Spieker received a Bachelor of Science in Business Administration from the University of California at Berkeley. Mr. Spieker is the Chairman of the Board of Governors and a member of the Executive Committee of the National Association of Real Estate Investment Trusts, Inc. WILLIAM S. THOMPSON, JR. has served as a Director since December 1993. Mr. Thompson is Managing Director and Chief Executive Officer of PIMCO and serves as Chairman of PIMCO's Executive Committee. Additionally, he is President of Allianz Asset Management (AAM), PIMCO's parent company, and serves as a member of AAM's International Executive Committee. Mr. Thompson joined PIMCO seven years ago, having previously spent 18 years with Salomon Brothers, including two years in Tokyo, Japan as Chairman of Salomon Brothers Asia Ltd. He had 28 years of investment experience and holds a bachelor's degree in Engineering from the University of Missouri-Columbia and an MBA from the Harvard Graduate School of Business. CRAIG G. VOUGHT, Co-Chief Executive Officer, is responsible for overseeing our overall strategic direction as well as capital market and investment activities. Previously, Mr. Vought served as the Chief Financial Officer and Executive Vice President and was responsible for raising over $3 billion of capital in various public and private offering transactions. Mr. Vought joined our predecessor in 1987 and, during that time, developed nearly 1.0 million square feet of commercial property. He began his real estate career with the Trammell Crow Company in 1986 and has also held positions at Chase Manhattan Bank and E.F. Hutton & Co. Mr. Vought received a Bachelor of Arts from Trinity College and a Masters in Business Administration from The Wharton School of Business. Meetings and Committees of the Board of Directors During 2000, there were four meetings of the board of directors and six unanimous written consents. Each director attended all of the meetings of the board, except Mr. French did not attend the June 7 meeting. Each director attended all of the meetings of committees of the board on which he served (whether in person or telephonically) during 2000. The board has standing audit, compensation, nominating, non-executive stock incentive plan and stock incentive plan committees. The audit committee consists of Richard J. Bertero and David M. Petrone. The audit committee recommends the appointment of the firm of certified public accountants to audit the financial statements for the fiscal year for which they are appointed, reviews audit reports, takes such action as may be deemed appropriate with respect to such audit reports, and monitors the effectiveness of the audit effort, the financial and accounting organization and its system of internal accounting controls. The audit committee met two times during 2000. The compensation committee consists of Harold M. Messmer, Jr., Warren E. Spieker, Jr. and William S. Thompson, Jr. The compensation committee establishes and reviews annually our general compensation policies applicable to executive officers, reviews and approves the level of compensation of the Co-Chief Executive Officers and other executive officers, reviews and advises the board concerning the performance of the Co-Chief Executive Officers and other employees whose compensation is within the review jurisdiction of the compensation committee, reviews and advises the board concerning regional and industry-wide compensation practices and trends, and recommends benefit plans from time to time. The compensation committee met three times during 2000. The nominating committee consists of Richard J. Bertero and David M. Petrone. The nominating committee advises and makes recommendations on matters concerning directorship and corporate governance practices. The nominating committee was formed in June 2000. 37 38 The stock incentive plan committee consists of Harold M. Messmer, Jr. and William S. Thompson, Jr. The stock incentive plan committee administers the Spieker Properties, Inc. Amended and Restated 1993 Stock Incentive Plan as it pertains to executive officers and reports to the board of directors regarding that plan from time to time, or whenever called upon to do so. During 2000 the stock incentive plan committee met four times and acted by unanimous written consent three times. The non-executive stock incentive plan committee consists of Dennis E. Singleton, John K. French and Warren E. Spieker, Jr. The non-executive stock incentive plan committee administers the Spieker Properties, Inc. Amended and Restated 1993 Stock Incentive Plan as it pertains to non-executive officers and other employees and reports to the board of directors regarding the plan from time to time, or whenever called upon to do so. The non-executive stock incentive plan committee conducted six meetings by written consent during 2000. Relationships Among Directors or Executive Officers There are no family relationships among any of our directors or executive officers. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act requires our directors, executive officers and persons who beneficially own more than 10% of our common stock to file with the Securities and Exchange Commission and New York Stock Exchange initial reports of ownership and changes in ownership of common stock. These persons are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file. To our knowledge, based solely on our review of the copies of such reports received, we believe that during its fiscal year ended December 31, 2000, all reporting persons, with the exception of Mr. Thompson who filed a Form 4 after the filing period, complied with all applicable filing requirements. 38 39 ITEM 11. EXECUTIVE COMPENSATION The following tables set forth information concerning compensation of our chief executive officers and each of our other executive officers for the fiscal years indicated. All stock options were granted at an exercise price equal to at least the fair market value on the date of grant. SUMMARY COMPENSATION TABLE

(1) Mr. Warren E. Spieker, Jr. served as Chairman of the Board and Chief Executive Officer until September 29, 1999 at which time he became Chairman of the Board and President. Mr. Spieker did not serve as Chief Executive Officer at anytime during 2000. He received a base salary of $225,000 and chose to waive any short-term incentive compensation for 2000. According to the executive compensation disclosure rules adopted by the Securities Exchange Commission in 1992, Mr. Spieker's compensation is not required to be reported in this year's tables because he no longer holds the title of Chief Executive Officer and his compensation for 2000 fiscal year does not place him as one of the top five executive officers. (2) Mr. Foster served as Executive Vice President and Chief Investment Officer until September 29, 1999 at which time he was elected Co-Chief Executive Officer. (3) Mr. Vought served as Executive Vice President and Chief Financial Officer until September 29, 1999 at which time he was elected Co-Chief Executive Officer. (4) Messrs. Russell, Schnugg, and Eddy served as regional senior vice presidents until September 29, 1999 at which time they were elected regional presidents. (5) Mr. Rothstein was elected Chief Financial Officer September 29, 1999. (6) Amounts in the year 2000, reflect contributions to the 401(k) Retirement Plan and executive life insurance premiums paid by us. Amounts in the year 1999, reflect contributions to the 401(k) Retirement Plan and executive life insurance premiums paid by us; and also includes the value of grants of restricted shares of common stock of BroadBand Office, Inc. received by us in connection with our investment in this company. These grants vest over four years. (7) Includes forgiveness of $40,000 of principal and $8,140 of imputed interest (at an imputed rate of 6.51% per year) pursuant to a second mortgage loan agreement between the company and Mr. Rothstein. See "Certain Relationships and Related Transactions -- Indebtedness of Management." 39 40 Restricted Stock Grants Restricted stock grants generally reflect the fair market value of the common stock on the date of grant and may be granted under the Spieker Properties, Inc. Amended and Restated 1993 Stock Incentive Plan or directly by us. Restricted stock grants granted January 2, 2001 for 2000 performance reflect the fair market value of the award on December 31, 2000. Shares of restricted stock vest in equal installments over four years beginning one year after the date of grant. Dividends are payable on the restricted shares to the extent and on the same date as dividends are paid on the common stock. The following table sets forth the number of shares underlying the restricted stock grants over the last three fiscal years, along with total unvested restricted stock holdings as of December 31, 2000 and their fair market value based on the per share closing price of $50.125 on December 31, 2000. The values do not reflect diminution of value attributable to the restrictions on such stock.

(1) Consists of restricted stock granted on January 2, 2001 for services performed in 2000. The closing stock price on date of grant was $50.1875. Mr. Eddy's grant consists of 1,993 shares granted on January 2, 2001 and 290 shares granted on August 1, 2000 for services performed in 2000. (2) Consists of restricted stock granted on February 1, 2000 for services performed in 1999. (3) Consists of 972 shares of restricted stock granted on August 25, 1998 and 11,179 shares granted on February 1, 1999 for services performed in 1998. (4) Consists of 4,513 shares of restricted stock granted on August 28, 1998 and 517 shares granted on February 1, 1999 for services performed in 1998. (5) Total unvested restricted share value includes all unvested stock holdings by each of the named officers and may be greater than the sum of the grants made in the past three years. 40 41 Option Grants in Last Fiscal Year The following table provides certain information with respect to stock options granted during 2000 to each of our executive officers under the Spieker Properties, Inc. Amended and Restated 1993 Stock Incentive Plan. Twenty percent of these options become exercisable one year after grant and an additional 20% becomes exercisable each year thereafter.

(1) Calculated using the binomial pricing model. The assumptions used in determining the present value of the option grant using this methodology are as follows: option term of 10 years; risk-free rate of 6.2%; five-year volatility of 0.1902; 5.62% dividend yield; exercise price of $45.00; closing price of common stock on date of grant of $45.00; and a 3% reduction factor for the risk of forfeiture due to vesting restrictions. The actual value, if any, that an executive officer may realize will depend on the continued employment of the executive officer holding the option through its vesting period, and the excess of the market price over the exercise price on the date the option is exercised. There is no assurance that the value realized by an executive officer will be at or near the value estimated by the binomial pricing model, which is based on assumptions as to variables such as stock price volatility, future dividend yield, and interest rates. 41 42 Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values The following table sets forth certain information concerning the exercise of stock options and the number of shares of common stock covered by the stock options held by our Co-Chief Executive Officers and our other named executive officers as of December 31, 2000. The realized value is the difference between the sales price of the shares less the exercise price per share of common stock, multiplied by the number of shares acquired upon exercise. The value of unexercised in-the-money options is based on the closing price of the common stock on December 31, 2000 of $50.125 minus the exercise price, multiplied by the number of shares underlying the options.

Compensation of Directors Each of the independent directors receives an annual fee of $22,000, a meeting fee of $1,000 for each board of directors meeting attended and for each committee meeting which is scheduled separately from a regular board meeting, and reimbursement of expenses incurred in attending meetings. Directors who also are officers or employees do not receive any such director fees. Pursuant to the Spieker Properties, Inc. 1993 Amended and Restated Directors' Stock Option Plan, each independent director, upon joining the board, receives an initial grant of options to purchase 2,500 shares of common stock at an exercise price equal to 100% of the fair market value of the common stock at the date of the grant of such options. Each such director who is serving on December 31 of each calendar year thereafter, and who has served for more than one year, will automatically receive an annual grant of options to purchase 4,000 shares of common stock at an exercise price equal to 100% of the fair market value of the common stock at the date of the grant of such options. Employment Agreements and Change of Control Policy We have no employment agreement with any of our executive officers and directors. We have adopted a special severance policy which provides that if the employment of any participant is terminated for any reason within two years after a change in control (except for a termination for cause or a voluntary resignation by the participant without a good reason), then we will pay the participant a lump sum severance benefit payment equal to two years to three years compensation, depending on the participant's position. In 2000, the Board approved an amendment to the severance policy that provides that in the event of termination after a change in control, the chairman of the board would receive a lump sum severance payment equal to that provided the chief executive officer or the highest payment made to either of the co-chief executive officers. To determine severance benefit payments, compensation includes: - The participant's highest annual rate of base salary, plus - Average annual bonus earned by the participant during the last two completed fiscal years, plus - The average of the fair market value of the shares of restricted stock granted to the participant during the past two completed fiscal years, plus - Medical, dental, disability, and life insurance plan coverage. Medical, dental, disability and life insurance benefits may be offset by new employment. We will automatically reimburse a participant for any excise tax payments under the policy that are imposed by Section 4999 of the 42 43 Internal Revenue Code of 1986, as amended. Excise tax reimbursement payments will not be paid if a reduction of up to 10% of the participant's payments under the policy would avoid an excise tax to be levied. In that case, the participant's payments would be reduced by up to 10% and no excise tax reimbursement will be paid. In September 2000, the board of directors amended the severance policy to also provide the participant a lump sum cash payment for any unpaid salary and bonus earned through the date of termination as well as a prorated bonus for the fiscal year in which the termination occurs. The board of directors approved the amendment to ensure that the severance policy is fair and competitive. Messrs. Foster, Vought, Russell, Schnugg, Rothstein and Eddy have been designated as plan participants as well as other senior executives. Compensation Committee Interlocks and Insider Participation The compensation committee of the board of directors is comprised of Harold M. Messmer, Jr., Warren E. Spieker, Jr., and William S. Thompson, Jr. Until September 29, 1999, Mr. Spieker was the chief executive officer. No other interlocking relationship existed in 2000 or presently exists between any member of the compensation committee or stock incentive plan committee and any member of the board of directors or compensation committee of any other corporation. Significant transactions and relationships between us and our officers and directors are set forth below in the section entitled "Certain Relationships and Related Transactions." Report of the Compensation Committee on Executive Compensation Notwithstanding anything to the contrary set forth in any of our previous filings under the Securities Act of 1933 or the Securities Exchange Act of 1934 that might incorporate future filings or this report, the following report and the performance graph which follows shall not be deemed to be incorporated by reference into any such filings. For services performed in 2000, executive compensation primarily consisted of four key elements: - Base salary, - Bonuses, - Grants of stock options under the Amended and Restated 1993 Stock Incentive Plan, and - Grants of restricted stock under the Amended and Restated 1993 Stock Incentive Plan or directly by us. In December 1993, the board of directors established the compensation committee and the stock incentive plan committees of the board of directors (together, the "Committees"). The compensation committee has responsibility for developing, administering and monitoring the compensation policies applicable to the executive officers. The stock incentive plan committee has responsibility for administering the Amended and Restated 1993 Stock Incentive Plan, under which grants may be made to executive officers and other key employees. The Committees have retained the services of an independent compensation consultant to assist the Committees in their evaluation of the key elements of the compensation program. The compensation consultant provides advice to the Committees with respect to competitive practices and the reasonableness of compensation paid to the executives. The Committees review surveys and other data supplied by the consultant in the course of their deliberations relating to compensation proposals. The Committees believe that our most direct competitors for executive talent are not necessarily all of the companies that would be included in the National Association of Real Estate Investment Trusts, Inc. ("NAREIT") Equity Index in the stock price performance chart that compares stockholder returns. Some, but not all, of the companies included in the stock price performance chart are included in the compensation surveys. The Committees review the available competitive data, evaluate the particular needs of the company, and evaluate each executive's performance to arrive at a decision regarding compensation programs. EXECUTIVE COMPENSATION PHILOSOPHY. The Committees believe that a fundamental goal of the executive compensation program should be to provide incentives to create value for stockholders. In addition, the Committees believe that the executive compensation program should attract, retain, and motivate a quality, performance-oriented management team. It should create a strong and direct link between stock performance and executive compensation. Executive total compensation levels should be positioned between the middle and upper quartiles of real estate development and REIT organizations of comparable size and organizational structure. Compensation should be weighted more on the variable components to allow for premium pay for superior financial results and below-average pay for below-average financial results. The program should create a significant and meaningful long-term 43 44 incentive tied to long-term growth, financial success, and increasing stockholder value. For 2000, the Committees placed 13% to 20% of the executive officers' total compensation on base salary and 80% to 87% on the combination of short-term and long-term incentive compensation awards. The Committees believe that company performance should be measured on the basis of both quantitative and qualitative assessments. Quantitative measures include performance in areas such as growth in funds from operations (FFO), net operating income growth, operating margins, return on invested capital, return on investor equity, total return to shareholders, and portfolio occupancy rates. Qualitative measures include performance in the areas such as asset quality, asset management, risk management, tenant retention, financing strategy, market strategy, management strength, special projects and teamwork. These quantitative and qualitative measures are not formally weighted for purposes of determining salaries or incentive awards. Section 162(m) of the Internal Revenue Code denies a deduction for compensation in excess of $1 million paid to certain executive officers, unless certain performance, disclosure, and stockholder approval requirements are met. Option grants under the Amended and Restated 1993 Stock Incentive Plan are intended to qualify as "performance-based" compensation not subject to the Section 162(m) deduction limitation. The Committees' present intention is to qualify, to the extent reasonable, a portion of the executive officers' compensation for deductibility under applicable tax laws. However, the Committees reserve the right to design programs that recognize a full range of performance criteria important to the company's success, even where compensation payable under such programs may not be deductible. BASE SALARIES. Base salaries for all of the executive officers are reviewed annually and may be increased by the compensation committee in accordance with certain criteria determined primarily on the basis of growth in revenues, funds from operations ("FFO") per share of common stock, new acquisitions, and on the basis of other factors, which include individual performance, execution of the strategic plan, the functions performed by the executive officer, and changes in the compensation peer group in which the company competes for executive talent. The weight given the factors by the compensation committee may vary from individual to individual. The compensation committee, however, intends to reward executive officers for their achievements primarily through the short-term and long-term incentive compensation awards discussed below. With respect to base salaries, the compensation committee generally tries to target base salary levels at or below the 50th percentile of real estate development and REIT organizations of comparable size and organization structure. Consistent with this philosophy, all executive officer salaries are in the lowest quartile for 2000. SHORT-TERM INCENTIVE COMPENSATION AWARDS. All officers, including the executive officers, are eligible to participate in the short-term incentive plan. Each year, the compensation committee establishes a pool from which short-term incentive payments are made. In 2000, 100% of the pool maximum was paid out to executive officers for 2000 performance. Annual incentive awards are paid after assessing company, region, department, and individual performance. Payments for each individual are weighted differently among company, region, department and individual performance objectives, depending on the position. The co-chief executive officers' weighting is 100% on company performance. The weighting for other senior officers is 75% on company performance and 25% on region or department performance. Company performance is measured on the basis of achieving targeted FFO objectives, which are reviewed and approved by the compensation committee. Region performance is measured on stabilized contributions to FFO from new acquisitions and developments and the performance of existing property portfolio net operating income with consideration of individual market factors, capital expenditures, overhead costs and other factors that may affect performance in any given year. Department performance measures are based on the achievement of specific strategic objectives of the company. Individual performance measures are assessed in a subjective manner and may include company leadership, tenant satisfaction, contributions to the company as a whole and community involvement. The compensation committee may also make its decision based on criteria such as FFO growth performance relative to the office/industrial/mixed-use REIT market segments, asset quality, asset management, risk management, tenant retention, financing strategy, market strategy, management strength and teamwork. The compensation committee believes that a fixed compensation formula may not adequately reflect all aspects of the performance of the company and of an individual executive officer. Therefore, the compensation committee has retained a high degree of flexibility in structuring the short-term incentive compensation plan to ensure that the 44 45 longer-term interests of stockholders are considered. This allows the compensation committee to subjectively evaluate each executive officer's individual performance and contribution to the company's overall financial and operational success. These subjective factors are not weighted. Minimum objectives are established for company performance and such objectives basically represent a net FFO growth and cash dividend that will ensure a satisfactory return to stockholders. Generally, the company portion of an award is not paid if such objectives are not achieved. The compensation committee determines the award for the Chairman and Co-Chief Executive Officers and approves the awards for other participants. The Chairman and the Co-Chief Executive Officers, with the assistance of an internal committee, determines the awards for all other participants on the basis of their achievement of specific objectives and a subjective assessment of the individual's contributions. The compensation committee approved the target performance objectives and the pool. Bonus awards to executive officers for 2000 reflect performance results during the year. Actual 2000 FFO exceeded preestablished target objectives due to market conditions and improved leasing in the company's development and core portfolio. 2000 FFO growth of 27.2% represented the 99th percentile performance of other equity REITs and the 99th percentile for the office/industrial/mixed-use sector equity REITs. The compensation committee also noted our better-than-expected same-store net operating income growth, operating margins and returns on new developments. In addition, we were able to maintain high portfolio occupancy rates of 97.4%, establish one of the highest levels of preleasing among our office/industrial peers, and continue to decrease dependence on outside financing through capital recycling strategies. LONG-TERM INCENTIVE COMPENSATION AWARDS. The Amended and Restated 1993 Stock Incentive Plan, which was approved by stockholders, is administered by the stock incentive plan committee. The Amended and Restated 1993 Stock Incentive Plan provides for grants of nonqualified stock options, incentive stock options, restricted shares, dividend equivalents, performance shares and performance units to key executives and employees. The stock incentive plan committee may make grants under the Amended and Restated 1993 Stock Incentive Plan based on a number of factors, including: - Company performance, - The executive officer's or key employee's position in the company, - His or her performance and responsibilities, - The extent to which he or she already holds an equity stake in the company, - Equity participation levels of comparable executives and key employees at other companies in the compensation peer group, - Total compensation levels of comparable executives and key employees at other companies in the compensation peer group, and - Individual contribution to the success of the company's financial performance. In addition, the size, frequency, and type of long-term incentive grants are determined on the basis of past granting practices, fair market value of the company's stock, tax consequences of the grant to the individual and the company, accounting impact, and the number of shares available for issuance. However, the plan does not provide any formulaic method for weighing these factors, and a decision to grant an award is based primarily upon the stock incentive plan committee's evaluation of the past as well as the future anticipated performance and responsibilities of each individual. Stock options generally are granted on an annual basis at 100% of current fair market value of our common stock and will only be of value to the executive officer or key employee if the stock price increases over time. The 2000 stock option grants reflect the compensation philosophy to place greater emphasis on the variable components of the compensation program. The 2000 grants of options vest ratably at 20% per year after one year from the date of grant. Executive officers were also granted restricted stock during 2000 in recognition of exceptional performance, to place greater emphasis on stock-based incentives, and to retain exceptional executive talent. Restricted shares vest ratably at 25% per year after one year from the date of grant. In the event of a change in control, corporate 45 46 transaction, or subsidiary disposition (each as defined by the Plan), all outstanding options and restricted shares become fully vested. CO-CHIEF EXECUTIVE OFFICER COMPENSATION. Messrs. Foster and Vought were appointed Co-Chief Executive Officer in September 1999. Compensation for Messrs. Foster and Vought for fiscal year 2000 was determined on the same general basis as discussed above for the executive officers. Base salary and award levels under the Amended and Restated 1993 Stock Incentive Plan and the short-term incentive plan are reviewed annually for Messrs. Foster and Vought. In 2000, Messrs. Foster and Vought each received a base salary of $250,000 (an 11.1% increase over 1999 levels), which places their salaries in the lowest quartile of the compensation paid to chief executive officers of real estate development and REIT organizations of comparable size and organizational structure. The 11.1% salary increase was in recognition of competitively low salary levels and superior operating performance for the prior year. Consistent with the company's compensation philosophy to leverage incentive compensation, Mr. Foster's and Mr. Vought's base salary levels will continue to be in the lowest quartile of competitive practices for 2001. The Committees awarded Messrs. Foster and Vought a bonus of $950,000 each on the basis of exceptional company performance. We exceeded our 2000 FFO objectives, have recorded 20 consecutive quarters of double digit FFO per share growth, and reported the highest year-over-year growth in our history. We significantly outperformed the office/industrial/mixed-use REIT market segments in FFO growth and delivered a 45.5% total return to shareholders which represented approximately the 95th to 90th percentiles of all equity REITs and the office/industrial/mixed-use equity REIT segment, respectively. Total return to shareholders averaged for the past three years also approximated the 90th percentile of all equity REITs and the office/industrial/ mixed-use equity REIT segment. In addition, we delivered better-than-expected same-store net operating income growth, operating margins, and returns on new developments. We were also able to maintain high portfolio occupancy rates of 97.4%, maintain one of the highest levels of preleasing among our office/industrial peers, and decrease dependence on outside financing by surpassing planned dispositions to provide funds for development and acquisitions. Based on the stock incentive plan committee's criteria, our performance as described above, and in recognition of cash compensation that is significantly below competitive levels, Messrs. Foster and Vought were each awarded 11,956 shares of restricted stock for 2000 performance. Mr. Foster and Mr. Vought were also each awarded options to purchase 50,000 shares of common stock during 2000. Mr. Foster's and Mr. Vought's compensation in 2000 was leveraged 87% toward incentives directly tied to shareholder value creation. In 2000, the company contributed $5,000 to the 401(k) accounts for Messrs. Foster and Vought under the terms and conditions of that plan and made no profit sharing contributions in accordance with the provisions of that plan. The Co-Chief Executive Officers received no further grants of restricted shares of common stock of BroadBand Office, Inc. Messrs. Foster and Vought do not participate in or otherwise influence deliberations of the Committees relating to their compensation. SECTION 401(k) PLAN. In 1994, we adopted a tax-qualified cash and deferred profit-sharing plan (the "401(k) Plan"). Under the 401(k) Plan, which covers all company employees after they have completed 12 months of service, employees may reduce their current compensation by up to 15% of their total salary plus bonus, up to a maximum of $10,500 for the 2000 calendar year, and have the amount of the reduction contributed to the 401(k) Plan. We also contribute to the 401(k) Plan an additional amount equal to 5% of such employee's compensation or the maximum contribution allowable by law. In addition, we may make profit sharing and discretionary contributions at the end of each year. As of October 1, 1996, we exclude officers from participation in the profit sharing contribution. Beginning after twelve months of service, our contributions on the employee's behalf vests at a rate of 20% per year. For fiscal year 2000, we made contributions to the 401(k) Plan of $30,000 to the Co-Chief Executive Officers and the other executive officers. STOCK INCENTIVE PLAN COMMITTEE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS OF THE BOARD OF DIRECTORS William S. Thompson, Jr. William S. Thompson, Jr. Harold M. Messmer, Jr. Harold M. Messmer, Jr. Warren E. Spieker, Jr. 46 47 Stock Price Performance Graph The following graph compares cumulative total stockholder return on our common stock from December 31, 1995 through December 31, 2000 to the cumulative total return on the Standard & Poor's 500 Stock Index ("S&P 500") and the Equity REIT Total Return Index prepared by NAREIT. The graph assumes that the value of the investment in our common stock was $100 at December 31, 1995 and that all dividends were reinvested. The common stock's price on December 31, 1995 was $25.125. The stockholder return shown on the following graph is not necessarily indicative of future performance. Total return assumes reinvestment of dividends before consideration of income taxes. [PERFORMANCE GRAPH]

47 48 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table shows the amount of our common stock beneficially owned as of March 16, 2001 for each director and each of our Named Executive Officers, all directors and such executive officers as a group, and each person known by us to hold more than 5% of the outstanding shares of our common stock. Beneficial ownership includes shares that are individually or jointly owned, as well as shares which the individual has sole or shared investment or voting authority. Beneficial ownership also includes shares which could be purchased by the exercise of options at or within 60 days of the record date, as well as units of limited partnership interests in Spieker Properties, L.P., which are exchangeable into one share of our common stock. The percentage of shares outstanding is calculated assuming that none of the partnership units or stock options held by any other person is exchanged or exercised for common stock.

* Less than 1% (1) Includes 2,364,863 shares of common stock that may be issued upon the conversion of all of Mr. Spieker's partnership units, 100,000 shares of common stock held directly, 28,206 shares of restricted common stock, 578,500 shares of common stock subject to options that are exercisable within 60 days of the record date and 1,450 shares of common stock owned by Mr. Spieker's wife and children and deemed beneficially owned by Mr. Spieker. (2) Includes 512,772 shares of common stock that may be issued upon conversion of all of Mr. French's partnership units, 4,700 shares of common stock held directly, 15,085 shares of restricted common stock and 329,000 shares of common stock subject to options that are exercisable within 60 days of the record date. (3) Includes 667,526 shares of common stock that may be issued upon the conversion of all of Mr. Singleton's partnership units, 35,500 shares of common stock held directly, 12,233 shares of restricted common stock, 280,500 shares of common stock subject to options that are exercisable within 60 days of the record date and 900 shares of common stock held by Mr. Singleton as custodian for his children. (4) Includes 143,141 shares of common stock that may be issued upon the conversion of all of Mr. Foster's partnership units, 194,100 shares of common stock subject to options that are exercisable within 60 days of the record date and 29,647 shares of restricted common stock. (5) Includes 104,493 shares of common stock that may be issued upon the conversion of all of Mr. Vought's partnership units, 359,500 shares of common stock subject to options that are exercisable within 60 days of the record date and 18,771 shares of restricted common stock. (6) Includes 14,924 shares of common stock that may be issued upon conversion of all of Mr. Russell's partnership units, 250 shares of common stock held directly in a 401k account, 15,160 shares of restricted common stock and 47,800 shares of common stock subject to options that are exercisable within 60 days of the record date. 48 49 (7) Includes 14,689 shares of common stock that may be issued upon conversion of all of Mr. Rothstein's partnership units, 1,372 shares of restricted common stock and 57,000 shares of common stock subject to options that are exercisable within 60 days of the record date. (8) Includes 101,228 shares of common stock that may be issued upon conversion of all of Mr. Schnugg's partnership units, 14,937 shares of restricted common stock and 100,017 shares of common stock subject to options that are exercisable within 60 days of the record date. (9) Includes 145,532 shares of common stock that may be issued upon conversion of all of Mr. Eddy's partnership units, 3,563 shares of restricted common stock and 120,300 shares of common stock subject to options that are exercisable within 60 days of the record date. (10) Includes 2,000 shares of common stock held directly and 13,500 shares of common stock subject to options that are exercisable within 60 days of the record date. (11) Includes 114,600 shares of common stock held directly and 3,650 shares of common stock held by Mr. Messmer's son. Mr. Messmer disclaims beneficial ownership of such 3,650 shares. (12) Includes 16,375 shares of common stock held directly and 4,000 shares of common stock subject to options that are exercisable within 60 days of the record date. (13) Includes 16,500 shares of common stock held directly, 13,500 shares of common stock subject to options that are exercisable within 60 days of the record date and 1,500 shares of common stock held by Mr. Thompson for his children. Mr. Thompson disclaims beneficial ownership of such 1,500 shares. (14) Includes 4,238,409 shares of common stock that may be issued upon the conversion of partnership units and 2,328,217 shares of common stock subject to options that are exercisable in the aggregate by all the directors and executive officers within 60 days of the record date. We also have outstanding 1,000,000 shares of Series A preferred stock, which is convertible into 1,219,512 shares of common stock. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS We own 95% of the non-voting preferred stock of Spieker Northwest, Inc. ("SNI"), which provides fee management and other services for properties not owned by the company, including certain properties in which Messrs. Spieker, French and Singleton have ownership interests. The fees charged by SNI for managing properties are comparable to the fees it charges for managing other properties. Messrs. Spieker, French, Singleton and Bruce E. Hosford own 100% of the voting stock of SNI and the remaining 5% of the non-voting preferred stock. For the year ended December 31, 2000, SNI had revenues of approximately $2,527,000, which were mainly offset by operating expenses, and it did not pay any dividends on its common or preferred stock. At the time of our 1993 initial public offering, we entered into land holding agreements with some of our executive officers with respect to vacant land parcels in which these executive officers hold ownership interest. The land holding agreements generally provide us with the option to purchase the land subject to the agreement for the lesser of a fixed price set forth in the land holding agreement or the fair market value as determined by appraisal. Indebtedness of Management On April 20, 2000, we made a loan to Mr. Rothstein, Chief Financial Officer, in the amount of $400,000, due April 10, 2010. The loan was made to promote the continued dedication of Mr. Rothstein to his duties and in recognition of his excellent performance. The loan was made in the form of a promissory note secured by a mortgage on real property, and Mr. Rothstein used the loan to acquire a personal residence. The first $200,000 of the note is non-interest bearing. This portion is reduced each year for five years, on October 15, beginning October 15, 2000, in the amount of $40,000, provided Mr. Rothstein remains in our employment for the entire year preceding the forgiveness date. The second $200,000 of the note is interest-bearing at a rate of 6.31% (monthly long-term AFR). As of March 16, 2001, $360,000 of the $400,000 loan was outstanding, $200,000 of which is interest-bearing at an interest rate of 6.31%. 49 50 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K

All other schedules are omitted because they are not required or the required information is shown in the consolidated financial statements or notes thereto. (b) REPORTS ON FORM 8-K Subsequent to the year ended December 31, 2000, we filed the following report on Form 8-K. (i) Form 8-K dated March 9, 2001, to report under "Item 5. Other Events" on the Agreement and Plan of Merger of Spieker Properties, Inc. with and into Equity Office Properties Trust. (c) EXHIBITS The exhibits cited in the following Index to Exhibits are filed herewith or are incorporated by reference to exhibits previously filed. 50 51

-------- * Indicates management contract or compensatory plan or arrangement. (1) Incorporated by reference to the identically numbered exhibit to our Registration Statement on Form S-11 (Registration No. 33-67906), which became effective November 10, 1993. (2) Incorporated by reference to the identically numbered exhibit to our Annual Report on Form 10-K for the year ended December 31, 1995. 51 52

---------- * Indicates management contract or compensatory plan or arrangement. 53 54 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors and Stockholders of Spieker Properties, Inc.: We have audited the accompanying consolidated balance sheets of Spieker Properties, Inc. (a Maryland corporation) and subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of operations, stockholders' equity and cash flows for the years ended December 31, 2000, 1999 and 1998. These financial statements and the schedule referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and the schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Spieker Properties, Inc. and subsidiaries as of December 31, 2000 and 1999, and the results of their operations and their cash flows for the years ended December 31, 2000, 1999 and 1998, in conformity with accounting principles generally accepted in the United States. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying schedule listed in the index to the financial statements is presented for purposes of complying with the Securities and Exchange Commission rules and is not a required part of the basic financial statements. This information has been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN, LLP San Francisco, California January 29, 2001 (except with respect to the matter discussed in Note 16, as to which the date is February 22, 2001) 54 55 SPIEKER PROPERTIES, INC. CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2000 AND 1999 (dollars in thousands) ASSETS

The accompanying notes are an integral part of these consolidated statements. 55 56 SPIEKER PROPERTIES, INC. CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2000 AND 1999 (dollars in thousands, except share data) LIABILITIES AND STOCKHOLDERS' EQUITY

The accompanying notes are an integral part of these consolidated statements. 56 57 SPIEKER PROPERTIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (dollars in thousands, except per share amounts)

The accompanying notes are an integral part of these consolidated statements. 57 58 SPIEKER PROPERTIES, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (dollars in thousands)

The accompanying notes are an integral part of these consolidated statements. 58 59 SPIEKER PROPERTIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (dollars in thousands)

The accompanying notes are an integral part of these consolidated statements. 59 60 SPIEKER PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 (dollars in thousands, except share data) 1. ORGANIZATION AND BASIS OF PRESENTATION As used herein, the terms "we", "us", "our", or the "Company" refer collectively to Spieker Properties, Inc., Spieker Properties, L.P. (the "Operating Partnership") and consolidated entities. We were organized in the state of Maryland on August 20, 1993, and commenced operations effective with the completion of our initial public offering on November 18, 1993. We qualify as a real estate investment trust, or REIT, under the Internal Revenue Code of 1986, as amended. As of December 31, 2000, Spieker Properties, Inc. owned an approximate 88.2 percent general and limited partnership interest in the Operating Partnership. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Consolidation Our consolidated financial statements include the consolidated financial position of the Operating Partnership and its subsidiaries as of December 31, 2000 and 1999, and its consolidated results of operations and cash flows for the years ended December 31, 2000, 1999 and 1998. Our investment in Spieker Northwest, Inc., an unconsolidated Preferred Stock subsidiary of the Company, and our investment in Spieker Griffin/W9 Associates, LLC, are accounted for under the equity method. All significant intercompany balances and transactions have been eliminated in the consolidated financial statements. Properties Properties are recorded at cost and are depreciated using the straight-line method over the estimated useful lives of the properties. The estimated lives are as follows: Land improvements and leasehold interests 18 to 40 years Buildings and improvements 10 to 40 years Tenant improvements Term of the related lease

The cost of buildings and improvements includes the purchase price of the property or interests in the property, and associated legal fees, acquisition costs, capitalized interest, property taxes and other costs incurred during the period of construction. All acquisitions are recorded using the purchase method of accounting. Expenditures for maintenance and repairs are charged to operations as incurred. Significant renovations or betterments, which extend the economic useful life of assets, are capitalized. Investments in real estate are stated at the lower of depreciated cost or estimated fair value. We periodically evaluate fair value for financial reporting purposes on a property by property basis using undiscounted cash flow. Impairment is recognized when estimated expected future cash flows (undiscounted and without interest charges) are less than the carrying amount of the property. To the extent that the carrying value exceeds the estimated fair value, a provision for decrease in net realizable value is recorded. Estimated fair value is not necessarily an indication of a property's current value or the amount that will be realized upon the ultimate disposition of the property. As of December 31, 2000 and 1999, none of the carrying values of the properties exceeded their estimated fair values. As of December 31, 2000 and 1999, the properties are located primarily in California and the Pacific Northwest. As a result of this geographic concentration, the operations of these properties could be adversely affected by a recession or general economic downturn where these properties are located. We own mortgage loans that are secured by real estate. Certain loans are with an affiliate of ours (see Note 4). We assess possible impairment of these loans by reviewing the fair value of the underlying real estate. As of 60 61 December 31, 2000, the estimated fair value of the underlying real estate was in excess of our book value of the mortgage loans. Construction in Progress Project costs clearly associated with the development and construction of a real estate project are capitalized as construction in progress. In addition, interest, real estate taxes and other costs are capitalized during the period in which the property is under construction and until all costs related to the property's development are complete. Land Held for Investment Construction in progress costs related to land parcels that are either held for investment or are in the design and approval process as of December 31, 2000, were approximately $21.7 million. Property Held for Disposition We include in property held for disposition certain properties that do not have a strategic fit and which management has decided to sell. Included in the value of the properties are all costs associated with acquiring the property, any construction in progress, less any direct assessments and the accumulated depreciation. Cash and Cash Equivalents Highly liquid investments with an original maturity of three months or less when purchased are classified as cash equivalents. Deferred Financing and Leasing Costs Costs incurred in connection with financing or leasing are capitalized and amortized on a straight-line basis over the term of the related loan or lease. Unamortized financing and leasing costs are charged to expense upon the early payoff of financing or upon the early termination of the lease. Fair Value of Financial Instruments Based on the borrowing rates currently available to us, the carrying amount of debt approximates fair value (see Note 6 for further discussion). Cash and cash equivalents consist of demand deposits, certificates of deposit and overnight repurchase agreements with financial institutions. The carrying amount of cash and cash equivalents approximates fair value. New Accounting Pronouncements In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative Instruments and Hedging Activities," which establishes new standards for reporting derivative and hedging information. SFAS 133 requires that all derivatives be recognized as either assets or liabilities, at fair value, in the balance sheet. Derivatives that are not hedges must be adjusted to fair value through current earnings. Gains and losses on any derivative designated as part of a hedge transaction will either offset the income statement effect of the change in fair value of the hedged item, or be recognized in other comprehensive income, depending on the nature of the hedge. In June 1999, the FASB issued SFAS 137, "Accounting for Derivative Instruments and Hedging Activities -- Deferral of the Effective Date of FASB Statement No. 133," which deferred the effective date of SFAS 133 until fiscal years beginning after June 15, 2000. We will adopt SFAS 133 as of January 1, 2001. We do not believe the effect of adopting SFAS 133 will be material to the consolidated financial statements. In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial Statements." SAB 101 provides guidance on applying generally accepted accounting principles to revenue recognition issues in financial statements. We have adopted SAB 101 as required in 2000. SAB 101 did not have a material impact on our consolidated financial statements. 61 62 Minority Interest Our minority interests include the limited partners' interest in the Operating Partnership of approximately 11.8% at December 31, 2000, and 12.0% at December 31, 1999. Minority interests also include $75,000 of Preferred Series D units as of December 31, 2000 and 1999. Revenues All leases are classified as operating leases. Rental revenues are recognized on the straight-line basis over the terms of the leases. Deferred rent receivable represents the excess of rental revenue recognized on a straight-line basis over cash received under the applicable lease provisions. Reimbursements from tenants for real estate taxes and other recoverable operating expenses are recognized as revenue in the period the applicable expenses are incurred. Differences between estimated and actual amounts are recognized in the subsequent year. Interest and Other Income Interest and other income includes interest income on cash, cash equivalents, and investment in mortgages and management fee income. Net Income Per Share of Common Stock Per share amounts are computed using the weighted average common shares outstanding (including Class B and Class C Common Stock) during the period. The Class B Common Stock was converted into Common Stock during the third and fourth quarters of 1998. The Class C Common Stock was converted into Common Stock during the first quarter of 1999. Additionally, earnings used in the calculation are reduced by dividends owed to preferred stockholders. The diluted weighted average common shares outstanding include the dilutive effect of outstanding stock options, using the Treasury Stock method, and Series A Preferred Stock. Series A Preferred Stock was dilutive during the year ended December 31, 2000, and during the last quarter of the year ended December 31, 1999, and antidilutive during the year ended December 31, 1998. The basic and diluted weighted average common shares outstanding for the years ended December 31, 2000, 1999 and 1998 are as follows:

Reclassifications Certain items in the 1999 and 1998 financial statements have been reclassified to conform to the 2000 presentation with no effect on results of operations. Use of Estimates The preparation of financial statements, in conformity with accounting principles generally accepted in the United States, 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 period. Actual results could differ from those estimates. 62 63 3. ACQUISITIONS AND DISPOSITIONS We acquired the following properties (the "2000 Acquisitions") during the year ended December 31, 2000:

(1) O - Office. (2) Represents the initial acquisition costs of the properties, excluding any additional repositioning costs. (3) All acquisitions were recorded using the purchase method of accounting. During 2000, in addition to the projects listed above, we acquired an asset to be redeveloped in Southern California at an initial cost of $11,500, and we acquired two parcels of land for development at an initial cost of $16,503. During 1999, we acquired 807,037 square feet of office property (252,449 in Southern California and 554,588 in the Pacific Northwest) at an initial cost of $129,191. We also acquired five land parcels (three are located in Northern California, one is in Southern California and one is in Oregon) at an initial cost of $48,800 to be used for future development. During 1998, we acquired 6,257,233 square feet of office and industrial property at an initial cost of $847,680. We disposed of the following properties, referred to as the Dispositions, during the year ended December 31, 2000:

(1) I - Industrial, L - Land. (2) Represents sale of approximately .8 acres. (3) Represents sale of approximately 4.7 acres. 63 64

(1) I - Industrial, O - Office, L - Land. (4) Represents sale of approximately 6.2 acres. (5) Represents sale of approximately 6.8 acres. (6) Represents sale of approximately 6.8 acres. (7) Represents sale of approximately 2.9 acres. (8) Represents sale of approximately 2.1 acres. (9) Represents the continued disposition of projects in our Benicia Industrial Park property. Cash proceeds, net of closing costs, received from the dispositions were $382,043 for the year ended December 31, 2000. These proceeds were used to fund our recent acquisitions and our existing development pipeline. Gain recognized on disposition of real estate was $140,051 for the year ended December 31, 2000. During the year ended December 31, 1999, we disposed of one office property, fourteen industrial properties and two land parcels for total proceeds of $184,788. In addition to the disposition of land and properties, there were $5,170 of condemnation proceeds and $15,031 of proceeds on a mortgage held by us which was repaid by the borrower in the year ended December 31, 1999. During the year ended December 31, 1998, we disposed of one retail property, two office properties, four industrial properties, and two land parcels for total net proceeds of $75,357. 64 65 4. TRANSACTIONS WITH AFFILIATES Revenues and Expenses We received $1,030 in 2000, $1,178 in 1999 and $2,848 in 1998, for management services provided to certain properties that are controlled and operated by either Spieker Northwest, Inc., or SNI, Spieker Griffin/W9 Associates, LLC, or Spieker Partners. Certain of our officers are partners in Spieker Partners. Receivable from Affiliates The $327 receivable from affiliates at December 31, 2000, and the $144 at December 31, 1999, represent management fees and reimbursements due from SNI, Spieker Griffin/W9 Associates, LLC and Spieker Partners. Investment in Mortgages Investment in mortgages of $8,827 at December 31, 2000, and $18,725 at December 31, 1999, are loans to SNI. The loans are secured by deeds of trust on real property, bear interest at 8.5% to 9.5%, and mature in 2012. Interest income on the notes of $1,122 for 2000, $1,369 for 1999, and $10,748 for 1998 is included in interest and other income. Investments in Affiliates The investments in affiliates include an investment in SNI. We own 95% of the non-voting Preferred Stock of SNI. Certain senior officers and one former officer of ours own 100% of the voting stock of SNI. At December 31, 2000, SNI owned 85,114 square feet of office and industrial property located in California. In addition to property ownership, SNI provides property management services to certain properties owned by Spieker Partners. Summarized condensed financial information of SNI is presented as follows:

Additionally, investments in affiliates include the 50.0% common interest in Spieker Griffin/W9 Associates, LLC. During 2000, our 37.5% preferred interest in Spieker Griffin/W9 Associates, LLC was converted to common interest. Spieker Griffin/W9 Associates, LLC owns a 535,000 square foot office complex, located in Orange County, California, which we manage. 65 66 5. PROPERTY HELD FOR DISPOSITION We continue to review our portfolio and our long-term strategy for properties. Over time we will dispose of assets that do not have a strategic fit in the portfolio. Included in properties held for disposition of $197,602 at December 31, 2000, are thirty properties representing 6,116,975 square feet of industrial property and 242,932 square feet of office property, and four land parcels representing 18.1 acres. One land parcel, one office property, and eighteen industrial properties are located in the Pacific Northwest. One land parcel is located in Southern California. Two land parcels, one office property, and ten industrial properties are located in Northern California. Property held for disposition at December 31, 1999, of $89,220 consisted of one office property and six industrial properties located in the Pacific Northwest, one land parcel and two industrial properties in Northern California, and one land parcel and one industrial property in Southern California. The following summarizes the condensed results of operations of the properties held for disposition at December 31, 2000, for the years ended December 31, 2000, 1999 and 1998. Some properties held for disposition were acquired during the periods presented, therefore the net operating income for these periods presented may not be comparable.

(1) Property Operating Expenses include property related rental expenses and real estate taxes. 6. DEBT As of December 31, 2000 and 1999, debt consists of the following:

(1) Mortgage loans generally require monthly principal and interest payments. Short-term borrowings include a $400,000 unsecured credit facility, which matures in November 2003, with an option to extend one year at our election. The credit facility carries interest at the London Interbank Offering Rate, referred to as LIBOR, plus 0.70%. The one-month LIBOR at December 31, 2000, was 6.57%. The credit facility also includes an annual administrative fee of $50 and an annual facility fee of 0.20%. As of December 31, 2000, we had no amounts outstanding under the facility. During 2000, the credit facility replaced the previous $250,000 unsecured credit facility, which carried interest at LIBOR plus 0.80%. As of December 31, 2000, the short-term borrowings also include a $100,000 secured development facility (including revolving commitments of $91,000 and $9,000) which matures in April 2003. The development facility carries interest at LIBOR plus 1.25% for $91,000 of the commitment and LIBOR plus 3.50% for the remaining $9,000 of the commitment. It also includes an annual administrative fee of $35 and an unused facility fee of 0.25%. As of December 31, 2000, the amount drawn on the development facility was $56,577 of the $91,000 commitment and $5,042 of the $9,000 commitment. The facilities are subject to financial covenants concerning leverage, interest coverage and certain other ratios. We are currently in compliance with all of the covenants on both facilities. 66 67 The mortgage loans are secured by deeds of trust on related properties. The gross book value of real estate assets pledged as collateral under deeds of trust for mortgage loans was $138,563 at December 31, 2000, and $210,030 at December 31, 1999. In December 2000, the Operating Partnership issued $200.0 million of investment grade rated unsecured notes at 7.65% due December 15, 2010, priced to yield 7.66%. Net proceeds of approximately $198.2 million were used to pay off $100.0 million of unsecured notes which matured in December 2000, to pay down the credit facility, and to fund development activity. Our unsecured investment grade notes are subject to financial covenants concerning leverage, interest coverage and certain other ratios. We are currently in compliance with all of the covenants in the unsecured note agreements governing this indebtedness. As of December 31, 2000, the estimated fair value of our fixed rate debt was approximately $1,994,000, and the carrying amount of our variable rate debt approximated fair value. The Company capitalized interest of $18,094 for the year ended December 31, 2000, $21,034 for 1999 and $16,482 for 1998. Future Minimum Debt Schedule The scheduled future minimum debt payments of all debt outstanding including short-term borrowings as of December 31, 2000, are as follows:

7. LEASING ACTIVITY Future minimum rentals due from tenants under non-cancelable operating leases in effect at December 31, 2000, are as follows:

In addition to minimum rental payments, tenants pay reimbursements for their pro rata share of specified operating expenses, which amounted to $188,169 for the year ended December 31, 2000, $166,826 in 1999, and $147,850 in 1998. These amounts are included as rental revenue and rental expense in the accompanying consolidated statements of operations. Certain of the leases also provide for the payment of additional rent based on a percentage of the tenant's revenues. Additional rents under these leases were $12 for the year ended December 31, 2000, $380 for 1999, and $528 for 1998. Certain leases contain options to renew. 67 68 8. DIVIDENDS AND DISTRIBUTIONS PAYABLE The dividends and distributions payable at December 31, 2000, and December 31, 1999, represent amounts payable to stockholders of record and distributions payable to minority interest holders as of the same dates. The stockholders of record and minority interest holders are as follows:

9. INCOME TAXES We have elected to be taxed as a REIT pursuant to Section 856(c)(1) of the Code. As a REIT, we generally will not be subject to federal income tax to the extent that we distribute at least 95 percent of our taxable income to our stockholders. Effective January 1, 2001, we must distribute at least 90 percent of our taxable income to our stockholders to qualify as a REIT. Additionally, REITs are subject to a number of organizational and operational requirements. If we fail to qualify as a REIT in any taxable year, we will be subject to federal and state income taxes (including any applicable alternative minimum taxes) based on our taxable income using respective corporate income tax rates. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income and property. We may also be subject to federal income and excise taxes on our undistributed taxable income. Taxable income allocable to us, excluding minority interests, was $208,200 for the year ended December 31, 2000, $194,956 for 1999, and $152,883 for 1998. The taxable income allocable to the preferred stockholders was $33,269 for the year ended December 31, 2000, $32,829 for 1999, and $29,234 for 1998. Differences between book and taxable income primarily result from temporary differences and permanent differences from deduction of non-cash compensation and stock option exercises. The temporary differences include depreciation of tenant improvements, unearned rental income and certain property dispositions structured as tax-deferred exchanges. For the years ended December 31, 2000, 1999 and 1998, approximately 2.25%, 2.87% and 0.28%, respectively, of the dividends paid represent dividends characterized as long-term capital gains, and approximately 1.65%, 1.28% and 0.07%, respectively, represent dividends characterized as Unrecaptured Section 1250 Gains. 10. STOCKHOLDERS' EQUITY Preferred Stock The 1,000,000 shares of Series A Cumulative Convertible Preferred Stock are convertible into and have voting rights equal to 1,219,512 shares of our Common Stock. The Series A Preferred Stock is redeemable, in whole or in part at our option, at the original issue price of $25.00 per share, plus accrued and unpaid dividends. The dividend per share, calculated on the converted number of shares, is equal to the Common Stock dividend per share, provided that the dividend yield on the preferred stock may not be less than the initial dividend rate thereof. Dividends are payable quarterly in arrears. With respect to the payments of dividends and amounts upon liquidation, the Series A Preferred Stock ranks in parity with our Series B, Series C and Series E Preferred Stocks and ranks senior to our Common Stock. 68 69 The Series B Preferred Stock dividends are payable quarterly in arrears at an annual rate of 9.45% of the initial liquidation preference of $106,250. The Series B Preferred Stock is redeemable at our option, in whole or in part, at a redemption price of $25.00 per share, plus accrued and unpaid dividends. With respect to the payments of dividends and amounts upon liquidation, the Series B Preferred Stock ranks in parity with our Series A, Series C and Series E Preferred Stocks and ranks senior to our Common Stock. The Series C Preferred Stock dividends are payable quarterly in arrears at an annual rate of 7.88% of the initial liquidation preference of $150,000. The Series C Preferred Stock is redeemable on or after October 10, 2002, at our option, in whole or in part, at a redemption price of $25.00 per share, plus accrued and unpaid dividends. With respect to the payments of dividends and amounts upon liquidation, the Series C Preferred Stock ranks in parity with our Series A, Series B and Series E Preferred Stocks and ranks senior to our Common Stock. In June 1998, we sold 4,000,000 shares of Series E Cumulative Redeemable Preferred Stock for $25.00 per share. Net proceeds of $96,800 were used principally to repay borrowings on the unsecured credit facility and to fund the ongoing acquisition and development of property. The Series E Preferred Stock dividends are payable quarterly in arrears at an annual rate of 8.00% of the initial liquidation preference of $100,000. The Series E Preferred Stock is redeemable on or after June 4, 2003, at our option, in whole or in part, at a redemption price of $25.00 per share, plus accrued and unpaid dividends. With respect to the payments of dividends and amounts upon liquidation, the Series E Preferred Stock ranks in parity with our Series A, Series B and Series C Preferred Stocks and ranks senior to our Common Stock. Class C Common Stock During the year ended December 31, 1999, all shares of Class C Common Stock outstanding were converted to 1,176,470 shares of Common Stock. Ownership Limitations To maintain our qualification as a REIT, not more than 50 percent of the value of our outstanding shares may be owned, directly or indirectly, by five or fewer individuals (defined to include certain entities), applying certain constructive ownership rules. To help ensure that we will not fail this test, our Charter provides for certain restrictions on the transfer of the Common Stock to prevent further concentration of stock ownership. Moreover, to evidence compliance with these requirements, we must maintain records that disclose the actual ownership of our outstanding Common Stock and will demand written statements each year from the record holders of designated percentages of our Common Stock disclosing the actual owners of such Common Stock. Stockholders' Rights Agreement On September 30, 1998, we paid a dividend of one right for each outstanding share of Common Stock held of record at the close of business on September 30, 1998, or issued thereafter prior to the Separation Time, as defined in the Rights Agreement referred to below. The rights were issued pursuant to the Stockholders' Protection Rights Agreement, dated as of September 30, 1998, between us and the Bank of New York, as Rights Agent. 11. EMPLOYMENT RETIREMENT AND STOCK PLANS Retirement Savings Plan Effective January 1, 1994, we adopted a retirement savings plan pursuant to Section 401(k) of the Internal Revenue Code, whereby participants may contribute a percentage of compensation, but not in excess of the maximum allowed under the Code. The plan provides for a matching contribution by us, which amounted to $1,132 for the year ended December 31, 2000, $840 for 1999 and $597 for 1998. In addition, we may make additional contributions at the discretion of management. Management authorized additional contributions of $1,068 for the year ended December 31, 2000, $853 for 1999 and $582 for 1998. 69 70 Stock Incentive Plan We have adopted the Spieker Properties, Inc. 1993 Stock Incentive Plan (the "Stock Incentive Plan") to provide incentives to attract and retain officers and key employees. Under the Plan as amended on May 22, 1996, the number of shares available for option grant is 9.9% of the number of shares of Common Stock, on a fully converted basis, outstanding as of the last day of the immediately preceding quarter, reduced by the number of shares of Common Stock reserved for issuance through our other stock compensation plans. The strike price on the shares granted is equal to the market price of our stock at the grant date. Shares granted under this plan vest over four or five years. Information relating to the employee Stock Incentive Plan from January 1, 1998, through December 31, 2000, is as follows:

Directors' Stock Option Plan On May 22, 1996, the Directors' Stock Option Plan was amended to increase the number of shares of Common Stock subject to automatic annual option grants to our independent directors from 500 shares to 4,000 shares, to increase the number of shares of Common Stock available for option grant from 30,000 to 150,000, and to provide that, in the event of a change in control, outstanding options will become fully vested. To date, 94,000 shares have been granted under the plan, and 14,000 shares have been exercised. Stock Options We apply APB 25 and related interpretations in accounting for our stock option plan. Accordingly, no compensation cost has been recognized, as the option price per share equaled the fair value of the common stock on the date of grant. Had compensation cost for the plan been determined based on the fair value at the grant dates for awards under the plan consistent with the method prescribed by Statement of Financial Accounting Standard ("SFAS") No. 123, "Accounting for Stock-Based Compensation," our pro forma net income available to common stockholders would have been reduced by $4,887, $2,761, and $2,090, and pro forma basic and diluted earnings per share would have been reduced to $4.54, $2.90, and $2.85 and $4.40, $2.05, and $2.04, respectively, for the years ended December 31, 2000, 1999, and 1998. For these disclosure purposes, the fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants in 2000, 1999 and 1998 respectively: dividend yield of 6.0%, 6.1% and 6.6%; expected volatility of 43.5%, 19.3% and 18.1%; expected lives of five, ten and six years; and risk-free interest rates of 5.0%, 5.8% and 4.6%. 70 71 Restricted Stock Effective June 9, 1999, the Board of Directors passed a resolution authorizing the issuance of up to 3,164,935 restricted shares of our common stock pursuant to restricted stock agreements, and immediately issued 201,610 of the newly authorized shares in exchange for previously outstanding unvested restricted shares granted in 1997, 1998 and 1999 under the Stock Incentive Plan. As of December 31, 2000, a total of 303,206 restricted shares have been issued. 12. COMMITMENTS AND CONTINGENCIES Environmental Matters We follow the policy of monitoring our properties for the presence of hazardous or toxic substances. We are not aware of any environmental liability with respect to the properties that would have a material adverse effect on our business, assets or results of operations. There can be no assurance that such a material environmental liability does not exist. The existence of any such material environmental liability would have an adverse effect on our results of operations and cash flows. Lease Commitments We have entered into operating ground leases on certain land parcels with periods ranging from 16 to 88 years. Future minimum rental payments required under non-cancelable operating ground leases in effect at December 31, 2000, are as follows:

The land on which three of our properties are located is owned by Stanford University and is subject to ground leases. The ground leases expire in 2039 and 2040, and unless the leases are extended, the use of the land, together with all improvements, will revert back to Stanford University. The former owners of the three properties prepaid the ground leases through 2011, 2012 and 2017; thereafter, we will be responsible for the ground lease payments, as defined under the terms of the leases. These ground lease payments have been segregated from the total purchase price of the properties, capitalized as leasehold interests in the accompanying consolidated balance sheets, and are being amortized ratably over the terms of the related prepayment periods (18 to 24 years). General Uninsured Losses We carry commercial general liability, fire, flood, extended coverage and rental loss insurance with policy specifications, limits and deductibles customarily carried for similar properties. There are, however, certain types of extraordinary losses, which may be either uninsurable, or not economically insurable. Should an uninsured loss occur, we could lose our investment in, and anticipated profits and cash flows from, a property. Certain of the properties are located in areas that are subject to earthquake activity; we have therefore obtained excess earthquake insurance for those properties in higher risk earthquake areas. In the event of an earthquake, we are insured for $300,000 of loss, less a deductible of 5% of total insured value per occurrence capped at $50,000. Any losses in excess of $300,000 will be borne by us. 71 72 Litigation In the normal course of business, from time to time, we are involved in legal actions relating to the ownership and operations of our properties. In our opinion, the liabilities, if any, that may ultimately result from such legal actions are not expected to have a materially adverse effect on our consolidated financial position, results of operations or cash flows. 13. SEGMENT INFORMATION We have five reportable segments or "regions": Pacific Northwest; East Bay/Sacramento, California; Peninsula/North Bay, California; Silicon Valley, California; and Southern California. Each region has a Regional President who is directly responsible for managing all phases of the region's operations including acquisition, development, leasing and property management. Each region includes both office and industrial properties, which are leased to tenants engaged in various types of businesses activities. The accounting policies for the five regions are the same as those described in the summary of significant accounting policies. We evaluate performance based upon the combined net operating income of the properties in each region. Each of the five operating regions consists of differing mixes of office and industrial properties. The rental revenues and net operating income for the regions are not comparable, given the differing mixes of properties within the regions. Effective January 1, 2000, the North-East Bay/Sacramento region was split into two regions. The two new regions are called East Bay/Sacramento and Peninsula/North Bay. The 1999 and 1998 rental revenues and net operating income disclosures below have been restated to reflect these two regions. Significant information for the reportable segments for the twelve months ended December 31, 2000, 1999 and 1998 is as follows:

(1) As of January 1, 2000, the basis of the assets re-allocated from the split of the North-East Bay/Sacramento region was approximately $803,710 to the East Bay/Sacramento region and $477,242 to the Peninsula/North Bay Region. (2) Net operating income for the properties is calculated by subtracting property related rental expenses and real estate taxes from rental revenues on the accompanying consolidated statements of operations. (3) See Note 3 to the consolidated financial statements for the related square footage by region of the additions and reductions to properties. (4) Represents the initial acquisition costs of the properties excluding any additional repositioning costs. (5) Calculated by taking net investments in real estate, adding back the accumulated depreciation and deducting the investment in mortgages on the accompanying Consolidated Balance Sheets. 72 73 14. SUPPLEMENTAL CASH FLOW INFORMATION

73 74 15. QUARTERLY FINANCIAL DATA (unaudited)

(1) The sum of quarterly financial data in 2000 and 1999 varies from the annual data due to rounding. 16. PENDING MERGER WITH EQUITY OFFICE PROPERTIES On February 22, 2001, Equity Office Properties Trust, a Maryland Corporation, EOP Operating Limited Partnership, a Delaware limited partnership of which Equity Office is the sole general partner, the Company and the Operating Partnership entered into an Agreement and Plan of Merger. The merger agreement provides for the merger of the Company with and into Equity Office and for the merger of a newly created limited liability company, all of the ownership interests of which are held by EOP Partnership, with and into the Operating Partnership. In the merger of the Company with and into Equity Office, holders of the Company's Common Stock will receive $13.50 in cash and 1.49586 Equity Office Common Shares for each share of the Company's Common Stock. Cash will be paid instead of the issuance of fractional shares. The exchange ratio is not subject to change and there is no "collar" or minimum trading price for the shares of the Company's Common Stock or the Equity Office Common Shares. The merger is subject to the approval of the stockholders of the Company and Equity Office. 74 75 SPIEKER PROPERTIES, INC. SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31, 2000

75 76 SPIEKER PROPERTIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31, 2000

76 77 SPIEKER PROPERTIES, INC. SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31, 2000

77 78 SPIEKER PROPERTIES, INC. SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31, 2000

78 79 SPIEKER PROPERTIES, INC. SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31, 2000

79 80 SPIEKER PROPERTIES, INC. SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31, 2000

80 81

81 82 REAL ESTATE AND ACCUMULATED DEPRECIATION SUMMARY A summary of activity for real estate and accumulated depreciation is as follows (in thousands):

The aggregate cost for federal income tax purposes of real estate as of December 31, 2000, was $4,199,013. 82 83 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SPIEKER PROPERTIES, INC. and SPIEKER PROPERTIES, L.P. (Registrant) Dated: March 23, 2001 /s/ Warren E. Spieker, Jr. ----------------------------------------- Warren E. Spieker, Jr. Chairman of the Board Dated: March 23, 2001 /s/ Dennis E. Singleton ----------------------------------------- Dennis E. Singleton Vice Chairman of the Board Dated: March 23, 2001 /s/ John K. French ----------------------------------------- John K. French Vice Chairman of the Board Dated: March 23, 2001 /s/ John A. Foster ----------------------------------------- John A. Foster Co-Chief Executive Officer Dated: March 23, 2001 /s/ Craig G. Vought ----------------------------------------- Craig G. Vought Co-Chief Executive Officer Dated: March 23, 2001 /s/ Stuart A. Rothstein ----------------------------------------- Stuart A. Rothstein Chief Financial Officer Dated: March 23, 2001 /s/ Harold M. Messmer ----------------------------------------- Harold M. Messmer Director Dated: March 23, 2001 /s/ Cary D. Anderson ----------------------------------------- Cary D. Anderson Vice President and Principal Accounting Officer 83 84 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in Menlo Park, California on the 23rd day of March, 2001. SPIEKER PROPERTIES, INC. and SPIEKER PROPERTIES, L.P. By: /s/ Cary D. Anderson -------------------------------------- Cary D. Anderson Vice President and Principal Accounting Officer 84 85

---------- * Indicates management contract or compensatory plan or arrangement. 87

SPIEKER PROPERTIES INC 10-K